ESTATE PLANNING, PROBATE AND ELDER LAW

WILLS AND TRUSTS
What is a Will?

An individual can still control what they want to accomplish in their estate plan and who they want to enjoy their hard earned assets. Many individuals put off estate planning because it is either an area they do not want to think about or believe they are too young. You are never too young to have an estate plan because unforeseen circumstances happen to individuals of all ages. Skeeters, Bennett, Wilson, & Pike has been helping and assisting individuals with their estate planning for over 35 years. Our attorneys are competent in all areas of estate planning including wills and trusts. We will also help you form family limited partnerships and family limited liability companies when appropriate to carry out your estate plan. To assist our clients with their estate planning, we work with trust officers, insurance agents, and accountants to complete our clients plan.

We draft and prepare various trust agreements in an effort to carry out our clients wishes including irrevocable life insurance trusts, family trusts, marital deduction and credit shelter trusts, qualified personal residents trusts, and trusts for challenged children and adults. Please contact our attorneys for a consultation to discuss this very important and private area of your life.

ADVANTAGES AND DISADVANTAGES OF REVOCABLE LIVING TRUSTS

The revocable living trust has become such a popular estate planning tool that there is a danger that people are establishing them without thoroughly understanding all of the consequences of doing so.

Advantages: A revocable living trust entails an individual’s transfer of assets to a trustee who is appointed in the trust instrument. The individual retains the powers to revoke or amend the trust, and he will normally receive the income generated by the trust for the period of his life.  The chief advantages of such a trust are that (1) it establishes an estate plan for the individual (“settler”) while he is still living, thus securing professional management of his assets during his life, with a smooth transition at his death since, at that time, the trust will serve as the equivalent of a will; and (2) the cost and delay of probate are avoided because, unlike assets passing under a will, assets passing at death under a revocable living trust are not subject to probate. At the settlor’s death, the trustee of a revocable living trust can continue his management of the assets without interruption and can start carrying out the trust’s post-death directions without the need for notice or court approval.

Another advantage is gained if any individual owns real property outside of his home state and transfers it to a revocable living trust. If the individual died owning such property without having transferred it to a revocable trust, it would almost certainly be necessary for his executor to open what is known as an ancillary administration in the proper court of the state in which the out-of-state realty is located. Such action is not needed if the realty has been transferred to a revocable trust.

Steady management of the settlor’s assets can be maintained where the settlor, who typically is the initial trustee, becomes incapacitated. The revocable trust can provide that the successor trustee is to assume his trustee status upon the settlor’s incapacity. Such a provision can eliminate the need for a court proceeding and the appointment of a guardian.  After the settlor’s death, there would be no delay in the transfer of assets to the ultimate trust beneficiaries. Therefore, there would be no need for the beneficiaries to take actions such as hiring an attorney, filing court papers, or petitioning the court for temporary living expenses pending probate.

Disadvantages: Disadvantages associated with a revocable living trust primarily involve the formal changes that must be made in order to fund the trust. Because legal title to all of the property to be transferred to the trust must be in the trustee’s name, stocks must be reregistered and title to promissory notes, real estate, partnership interest, and any other assets must be placed in the trustee’s name even where the settler is the initial trustee.  Such a process can be burdensome.

Because the trust will be operated both during the settlor’s life and after his death, it is likely that the total cost of an estate plan centered on a revocable living trust will exceed an estate plan that takes effect only at death.  A professional trustee will usually charge on an annual basis, while an executor’s fee will normally be a one-time charge. Of course, if the settler acts as the sole initial trustee, trustee’s fees could be greatly reduced.

A revocable trust does not alter the tax liability of the settler or his estate. Since the settler will normally be the income beneficiary of the trust, he will be taxed on that income. The settlor's power of revocation will cause the trust fund to be included in the settlor’s estate for federal estate tax purposes. Thus taxation is a neutral factor in deciding whether to execute a revocable living trust. Still, the numerous factors that do affect such a choice must be weighed carefully. The assistance of a skilled attorney is recommended.

Alternative Solutions: In Kentucky, a revocable living trust in most cases is not necessary. In the northeastern States, the court charges a probate fee based on a percentage of the total assets of the probatable estate. These percentages range between 5% and 15%. Therefore, on a $100,000.00 estate, a 10% probate fee would be $10,000.00, which would be paid to the court.  In Kentucky we do not have a probate fee based on the percentage of the probatable estate. At the present time the probate fee paid to the court is approximately $80.00.  Therefore, it is not necessary in Kentucky to have a revocable living trust to avoid large court probate fees. Revocable living trusts are recommended in special circumstances such as couples with challenged children. To solve the problem of owning real estate out of State and having to have ancillary probate in that State, the out of State property can be placed in joint names and probate is not necessary. If an individual becomes incapacitated, then that problem can be solved by a power of attorney given to a spouse or children prior to the incapacity.  In most cases, the costs of preparing a living trust and transferring all of the property into the trust is more expensive than the costs of probating an estate. 

POWERS OF ATTORNEY AND LIVING WILLS

In our present world where individuals can be kept alive indefinitely through medical advances, it is important for everyone to have advanced medical directives. At Skeeters, Bennett, Wilson, & Pike we can prepare for you general durable powers of attorney, health care surrogate powers of attorney, and living wills. An advance health care directive must be in writing and must be signed by witnesses other than relatives, heirs to your estate, hospital or nursing home employees, doctors, or other health care providers. A health care surrogate has the power to make any medical decision that you could make for yourself including the withholding or stopping of artificial nutrition and hydration if death is eminent. Health surrogates must honor your wishes outlined in your health surrogate power of attorney and must consult with doctors concerning your directives.

PROBATE, ESTATE AND TRUST ADMINISTRATION

Skeeters, Bennett, Wilson, & Pike offers both counseling and probate court representation in the areas of probate, estates, and trust administration. We assist in the administration of a decedent's estate by preparing probate documents and court pleadings, the preparation of federal and state estate inheritance tax returns, assisting with the valuation and appraisal of estate assets, advice and documentation concerning asset transfers, and after death tax planning. We also assist clients in administering trusts which may include the transfer of real estate assets, marketable securities, payment of bills, and preparing fiduciary income tax returns. We are committed to keep all beneficiaries informed as to their potential inheritance.

We also represent clients in both estate and trust litigation. The representation could include a will contest, will interpretation, trust litigation, and guardianships and powers of attorneys involving a breach of fiduciary duties.

ELDER LAW
Explanation of Medicare Insurance - KY Medicaid Eligibility guide for nursing home care

It is imperative that elder citizens be familiar with their rights and opportunities as it relates to elder law. Our attorneys will assist elder individuals in understanding Medicare coverage. We also assist our clients in understanding Medicaid benefits as it applies to residential care, home and community-based services, and hospital, outpatient and physician services. We assist elder clients in determining their Medicaid eligibility as far as income and resource eligibility is concerned. We also advise those clients concerning Medicaid estate recovery of their assets. We then develop an overall approach to carry out their wishes in a comprehensive plan. We explore the possibility of long-term care insurance and help clients choose what's best for them.

We assist our elder clients with their retirement planning as it relates to their individual retirement accounts and qualified retirement plans. We make recommendations concerning their retirement planning. We are always mindful that the final decision is the client's because it is the clients assets we are dealing with not ours.

We assist clients in the area of guardianships including representing individuals in contested guardianships. We also assist in the administration of guardianships through the court system. A guardianship is sometimes necessary when a person becomes incapable of making medical or financial decisions for themselves and they have not executed a power of attorney designating someone to handle their financial and medical affairs. We handle guardianships either by helping a family member become a guardian or by serving as a lawyer for a person who might need a guardian. We also serve as court appointed guardian ad litem for individuals who are incapable of representing themselves.

STRETCH YOUR IRA

The Individual Retirement Account (IRA) has long been established as a retirement investment vehicle for those who may not be participants in, or who wish to supplement, employer sponsored retirement plans. Two basic rules governing IRAs are: (1) an individual can contribute income to the IRA until age 701/2 without paying federal income tax on the amount in the year of contribution; and (2) the individual must begin to receive distributions from the IRA by April 1 of the year following his or her attainment of age 701/2 (income tax is payable on such distributions). Thus, the tax deferral under these rules is limited to the period of the individual’s life.

There are rules that allow the tax deferral on the IRA to extend beyond the lifetime of the individual who created the account.  An IRA having such an extended tax deferral period is known as a “multi-generational” or “stretch” IRA. There are variations on the structure of a stretch IRA, but the simplest example is for the individual to elect that, if he or she lives beyond age 701/2, the payments from the IRA are to be made to a beneficiary following the individual’s death. Typically, the beneficiary would be the individual’s child.  By naming a person from a younger generation as a beneficiary, the schedule of minimum payments is extended over the life expectancy of the beneficiary. This will lower the amount of the distributions that the individual will be forced to take after reaching the age of 701/2. More money will be left in the IRA in a tax-deferred status for a longer period of time, thereby insuring that a greater amount will reach the individual’s heirs.

A more complicated stretch IRA involves breaking up the IRA into several IRAs, each with its own beneficiary. The beneficiary under one of the new IRAs can be the individual’s spouse and tax deferral period of that IRA would, presumably, not be greatly extended because it would be measured by the joint life expectancies of the spouses). The other new IRAs could have the individual’s children and grandchildren as beneficiaries, thus achieving significantly longer deferral periods on those accounts.

It is extremely important that the desired structure of the stretch IRA be elected in a precise and correct manner. The election must be made by April 1 of the year after the individual turns 70 1/2. Given that the popularity of this estate planning technique is recent, not all professionals are experienced in establishing stretch IRAs. Make sure to seek out someone who is experienced in such planning.