A person interested in conserving their assets and conveying them to the next generation may have heard of the concept of asset protection. You will find it is not as simple as giving your assets to the kids and hoping for the best. The tools used vary greatly and one should consider the least costly and most efficient process after evaluation of all the possible solutions. The difficulty is that asset protection can mean a lot of different processes and legal tools, some simple and some very complex. This is an area where expert advice is absolutely required.
The general rule is that your assets should be available to satisfy your expenses and payment of your creditors. In order to shield assets from creditor claims, it is necessary to anticipate and plan in advance the transfer of title to assets before the claims arise. Otherwise, the transferring party has likely engaged in a fraudulent conveyance, which a court can reverse. The various forms in which asset protection can arise might be as simple as incorporation of improvements into personal residential property, placing property in a limited liability company, forming a family limited partnership, creating a domestic asset protection trust, (which is an irrevocable trust), or creating an offshore trust, held in a foreign country.
The complexity and cost of such transactions varies greatly. The right choice takes into consideration many factors, including your age, health, trustee selection, potential beneficiaries, potential liability sources, and goals. When done well, the party creating an asset protection plan can rest knowing that their goal of preservation of property has been accomplished.
In October of 1843, Charles Dickens began writing one of the English languages most beloved stories. What began as his attempt to supplement his family’s meager income has in excess of 170 years, become cherished by many with its tale of special spirits, warmth to others and much of the byproduct of Christmas.
One of my favorite scenes is the oft overlooked part in Chapter One where the “two portly gentlemen” are let into the miser’s counting house by his employee, Bob Cratchit. They engage Mr. Scrooge to solicit resources for the poor and destitute. He summarily does not like the entreaty and presses them on their perspective. I wonder: what are the legal implications of their presence in his office that fictitious night? The laws impacting the scene if it occurred today could include: premises liability (what if one slip and fell?); propriety of their solicitation (were they registered with the State? would the donation be tax deductible?); agency (did the employee have the right to let them in?); trespassing (Scrooge would argue it.); hostile work environment we would need to ask Bob Cratchit); employment (was Bob an “at will” employee, independent contractor or salaried under contract?); fraud (were the two guys honorable at all or something akin to the IRS phone scammers we have today?); and the list goes on.
As we consider our lives and how they are impacted by an almost innumerable number of regulations and laws (state, federal and international), we can know well that life can be a complex bag of rules, tensions, met and unmet expectations. I hope this Christmas season we can all understand in our heart of hearts the question put forth by the two portly gentlemen from the pen of Charles Dickens. “A few of us are endeavoring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for?”
It has been part of the cycle of life to do certain things in season. As we enter the fall, we see the farmers gathering the harvest, the boats of summer being put in storage, our furnace filters being replaced, leaves being raked and a host of other “fall” action items. The holidays and family-gatherings are just around the corner.
Fall is a good time to also get your affairs in order so you can spend a comfortable, content winter by the fire or go south. And everyone has a best way to do that – some with simple account registration changes, others with wills and powers-of-attorney, and some with trust arrangements. Each family situation is different and what is a good fit for one might be too complex or too expensive for someone else.
Yes, trusts are great and the best tool in some situations, but don’t buy the sales pitch “You need a trust” until you meet with us, to explain where trusts work best and whether it fits your situation. A Corvette is a great, fun car to drive but try driving to work in one through the snow. When you have the right vehicle, you save money.
We can survive the winter that is coming but it will be much easier if we prepare now.
“Aging in Place” has become a preference I often hear from clients. It is usually shorthand for a fear of spending last days in an institution like a nursing home.
The reality, as shown by joint study done by an investment firm and AgeWave, shows many seniors have already moved or planned to move to a place they will own – a newer home with modern appliance, no steps, and much less maintenance, such as a condominium. And why are they moving? As reported by Caring Right At Home, a major supplier of home health care, many move to be closer to family (29%), reducing home expenses (26%) and because of changes in their health (17%).
It is not just “downsizing” but what I call “right sizing”, as people realize the large house with stairs and a lawn to maintain isn’t necessary after the kids have left. Because of modern medicine, we are living longer and tend to be more active – not just my grandparents sitting on the porch in a rocking chair. Why spend the time maintaining a home?
Regardless of location, the majority of seniors want long-term care in their home for as long as they are able, so watch for the continued growth of the home care agency. Since, in Ohio, licensing is not required, check out carefully the experience and customer satisfaction stats for any potential caregiver, or see us about making a family member that designated person. Live until you die!
Many seniors come to us for advice as they see their friends going into long-term custodial facilities and spending their life savings for care. They want to leave their estate to their children. Frequently, they have heard on the street that they should give their house to the kids now so it won’t count for Medicaid. WRONG! –generally.
In husband and wife situations, the marital home has protections that are lost if you give it to children. The structure of Medicaid is to protect a “community spouse” by not taking the home as long as the community spouse owns and lives there. In addition, the marital home is an investment that can be improved, using liquid assets that otherwise might be used for care of an institutionalized spouse and, with the step-up in basis on the death of the community spouse, results in a potentially greater transfer of value to the surviving children.
Another consideration is that transfer to the kids exposes the house to their creditors or their devious, unfaithful spouse in a divorce. You could end up on the street. There are several techniques that accomplish the goal of saving assets for children that don’t expose you to such risk.
It’s complicated. Come talk to us.
One thing you quickly realize in the elder law planning area is how complex the situations are and how many variables affect the decisions of our elder population. One thing I know: placing your head in the sand is not a good option. That option just places greater stress on other loved ones who then, by default, must make decisions for you.
I regularly correspond with other elder law attorneys and caregivers – always looking for better ideas. One article Dr. Caroline Dott recently submitted to ElderCareMatters, a cross-disciplinary group I belong to, had some real value. She recommended that we all need a “late-life plan” and need to discuss it with our family while we still have our mental faculties so we can enjoy the best possible late life stage. This is far better than defaulting in a crisis to the oldest daughter or son, who now, in the middle of raising his or her family, must make decisions for you.
Caroline recommended having discussion with your parents now. Begin by fantasizing what the most comfortable and fulfilling last stage of life would be like, and then ask for some details:
• Where and/or with whom will you live?
• What pleasurable, exciting activities will you participate in?
• Where and with whom will you travel?
• What experiences will you have to avoid any regrets at life’s end?
• How will you fund your plans for the rest of your life?
• When and how will you complete all legal transactions?
• Which family members/friends/experts will be responsible for managing your finances, medical/psychiatric, legal issues and funeral arrangements when you no longer can?
• After making the plan, notify all participating parties, providing them with copies of documents related to their responsibilities.
Well-made plans pay huge dividends to those that make them. Do it today.
1. Do you know what makes me feel secure? A smile
2. Did you ever consider? When you get uptight it makes me feel tense and uptight.
3. Instead of getting all bent out of shape when I do something that seems perfectly normal to me and perfectly NUTTY to you. Just smile at me it takes the edge off the situation.
4. Please try to understand and remember my short term memory is gone – don’t talk so fast, or use so many words.
5. When you use one of those long winded explanations of me- I’ll say No because I can’t tell what you are asking me to do. Keep your words few and simple so I can follow you.
6. Slow down. Don’t sneak up on me and start talking. Did I mention I like smiles?
7. Make sure you have my attention before you start blabbering away. If you don’t have my attention, I’ll be confused and say NO.
8. My attention span and ability to pay attention are not so good, please make eye contact with me before you start talking. A nice smile always gets my attention. Did I mention that before?
9. Sometimes you talk to me like I’m a child or idiot. How would you like it is I did that to you? Go to your room and think about this. Don’t come back and tell me you are sorry, I won’t know what you are talking about. Just stop doing it and we will get along.
10. You talk too much – instead try taking my hand and leading the way. I need a guide not a person to nag me.
Resource: Alzheimer’s Reading Room
If you work very long in the area of estate planning and asset preservation, you will see greed emerge among children after the passing of a parent, or now, while a parent is alive, misuse of a power of attorney. We advise our seniors to have an effective power of attorney but spend some time and effort to review who will be holding the power and what protections are necessary. Unfortunately, we have recently referred situations (not our planning) where children have stolen mom’s money while no one was looking. This is not an isolated case and, in communication with bankers, find it is happening with increased frequency.
Our goal is peace of mind and protection for our clients. That won’t happen by just filling in the blanks on a standard power of attorney. Proper planning requires careful discussion and experience. Look carefully and work with a professional who knows the risks.
The public is well-educated to think a will is important – IT IS! But with folks living into their 80’s, 90’s and beyond, the most important document and most used document we prepare as elder law attorneys is the durable financial power of attorney. When one gets sick, is injured, or just confused, bills and responsibilities continue. Where one has taken the time to prepare a durable financial power of attorney, personal business can continue without a bump. The alternative – guardianship- is expensive and certainly not flexible.
BEWARE, however – not all powers of attorney are the same. Some I see are like that old import car – a Yugo – where the floorboards were rusted out and you might get there – you might not. You can find those on your do-it-yourself racks in a drug store. Ours are customized and contain powers you would never think of on your own. If you have one, do you understand it? Give us a call. If you don’t, run to see us. Blessings, Tim