Jarvis Law Office

Ohio Estate Planning Lawyer: Four Threats to Your Assets and Wealth

An individual’s property and assets can be attacked in many different ways, all of which can have a serious detrimental impact on their wealth. A primary purpose of asset protection planning is to guard you from losing your wealth, as seen in the following examples.

Business Liabilities

Business liabilities can lead to attacks on your personal assets. If your business faces a problem and your personal assets are not properly shielded, you may find that both your business and personal assets can be at risk. LLCs and other business entities are typically created to separate business assets from personal assets, but a proper strategy and advanced planning are essential to make sure you have not left your personal assets open to any potential attacks.

Divorce

A divorce can be a dangerous threat to your asset protection plan. Without a proper prenuptial agreement in place, you may find that your wealth is up for grabs during divorce proceedings, even if you’ve only been married to your spouse for a short time. (Celebrity divorce cases, such as Paul McCartney and Heather Mills, immediately come to mind.) There are certain strategies that can be used to protect assets from divorce, but it’s best to consult with an Ohio estate planning attorney to determine which strategy is right for you.

Sickness

Medical bills that accrue due to an illness or long-term care could very easily drain your wealth. This is most true for senior citizens who are in need of nursing home care – and who mistakenly believe that Medicare and long-term care insurance will cover all of their medical bills. Asset protection trusts are often used to protect wealth from Medicaid and nursing homes, but they must be drafted a certain way by qualified elder law attorneys here in Ohio.

Automobile Accident

Being wealthy can unfortunately lead to a painted target on your back. If a person of fairly modest means caused a car accident and was found to be at fault, they most likely would not be pursued for a large sum of money. – The opposite is true for someone who possesses a large amount of wealth. Asset protection can be done before an accident happens to help shield your wealth, but this is not the case after the accident has occurred.  The earlier you can plan, the better.

If you have any questions about asset protection planning and strategies to shield your wealth, or if you’d like to review your current asset protection plan, please contact our Ohio estate and asset protection lawyers at 877-653-3450 to schedule an initial consultation.

When Is an Irrevocable Trusts Revocable?

Irrevocable trusts may no longer be truly irrevocable, according to Forbes in "Old Money, New Bottle: Decant If You Don't Like the Terms Of An Old Trust."

There can be a big drawback to irrevocable trusts because they are irrevocable. Once the trust is properly executed, it is supposed to be set in stone.

 As a result of this, many people have shied away. This is especially true of the young who can expect that things will change during their lifetime.

However, there are now 25 states that allow old trusts to be decanted.                         

This process entails taking all of the assets from an old trust and putting them in an entirely new trust with different terms. It is technically the trustee who is allowed to do this. It is supposed to be for the benefit of the trust beneficiaries.

Interestingly, the trustee does not need to have permission from a court and often does not even need to inform the beneficiaries. The different states that allow decanting have different rules about what trust terms can be changed in the new trust. You will, therefore, want to seek out experts to make sure you decant in a state that allows you to do so.

An estate planning attorney can guide you in creating an estate plan that fits your unique circumstances.  They can also explain your options with any plans or trusts you may now have.

Reference: Forbes (March 16, 2017) "Old Money, New Bottle: Decant If You Don't Like the Terms Of An Old Trust."

More States Allowing Asset Protection Trusts

Michigan recently became the 17th state to allow controversial asset protection trusts, according to Forbes in "Michigan Debuts The Latest State Asset Protection Trust."

Short of filing for bankruptcy, which requires that you have no assets, asset protection trusts are the best protection against creditors. They aren’t always popular, especially with creditors.

Asset protection trusts allow someone to transfer their assets into a trust that is controlled by an independent trustee. That trustee can then refuse to pay any creditors with trust assets.

To make this a little more fair for “current” creditors, suits against trust assets are allowed within a statute of limitations. These trusts are controversial enough when talking about institutional creditors, but they become even more controversial when they are used to shield assets from family law courts, which some states allow. These trusts allow people to protect assets from a spouse in a divorce.

Most states do have an exception for child support, but not all do.

Reference: Forbes (February 10, 2017) "Michigan Debuts The Latest State Asset Protection Trust."

It Might Be Time to Rethink Your Retirement

A major problem facing the U.S. today is that even people who think they have saved more than enough for retirement, might need to evaluate their own plans and save more, according to The New York Times in "Rethinking Retirement for Longer Lives With Fewer Safety Nets."

Many recent studies report that the average American has saved far less than experts think they will need.

There are many reasons for this situation, but the reasons for not saving are not as important as what it means for future senior citizens.

The biggest issue is simply that people, on average, are living longer than ever before. That trend is expected to continue as medical science progresses. No one is certain just how long people will live after retirement in the future.

People who have planned to save for 20 years of retirement living might actually need to save for 30, 40 or even more years. This also creates problems for elderly safety nets.

Social Security, Medicare and Medicaid are already under financial stress because of the large number of Baby Boomers entering their retirement years. The longer people live, the more that those programs will need to pay out. Many people believe the programs will have to offer substantially fewer benefits in the future.

It may be time to take a fresh look at your retirement plans.

Reference: New York Times (Feb. 27, 2017) "Rethinking Retirement for Longer Lives With Fewer Safety Nets

Some Advice on Living Trusts

The goal of many estate plans is avoiding probate and a living trust is popular because of its flexibility. But, despite the ease of use and flexibility, people often get tripped up because they are totally unaware of what must be done so the trust works as intended.

The Wills, Trusts & Estates Prof Blog recently offered some advice about this important step in "Tips To Estate Planners To Avoid Probate With Living Trusts."

The tips include:

• Trusts can only be used to avoid probate when assets are transferred to the trust. That means that ownership must be transferred from the individual to the trust.
• Some property might be exempt from probate by state laws. Accordingly, it is a good idea to check the laws in your state. For example, if cars are exempt from probate in your state, then there is no need to transfer ownership of them to a trust.
• Retirement accounts do not need to be transferred to the trust. By law they will pass to the named beneficiary. Just make sure that the beneficiary designation is up to date.
• Get advice on trust creation from your estate planning attorney and accountant to ensure all relevant issues are addressed.

An estate planning attorney could be helpful in working through the process.

Reference: Wills, Trusts & Estates Prof Blog (Jan. 9, 2016) "Tips To Estate Planners To Avoid Probate With Living Trusts."

Number of Elderly Facing Poverty May Increase

Healthcare prolonged the average lifespan in the first decades of the 20th Century but there was also a considerable increase in elderly people living in poverty. Policies put into effect in the developing world reversed the trend. In the United States private pension plans, Social Security and convincing people to save for retirement have combined to make elderly poverty relatively rare.

That could change in the near future as the New York Times reports in "An Aging Society Changes the Story on Poverty for Retirees."

There are pressures on all three tools that helped lower elderly poverty.

Fewer and fewer people have private pension plans through their employers. People are not saving as much as they will need for retirement. Perhaps most importantly, an aging population creates stress on Social Security, which relies on current taxes on younger workers to make payments to the elderly. Fewer young workers per every hundred elderly people means there is less money in the system to meet obligations.

It would be a good idea to understand what these changes might mean for your own retirement and estate plans. If you want to leave money to your heirs, you need enough not only for your own retirement years, but also enough to leave in an estate.

An estate planning attorney could give you some insight into this issue.

Reference: New York Times (Dec. 22, 2015) in "An Aging Society Changes the Story on Poverty for Retirees."

A Headache Can Accompany Long-Term Care Insurance

The cost of nursing home care can be extreme and more and more people are looking at possible solutions to paying those costs. An industry arose to answer those concerns and insurers began offering policies to cover those costs. While it sounds like it might be a simple solution to a difficult problem, it appears the process isn't so simple.

Recently, The New York Times discussed the complexities in an article entitled "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

The key thing to understand is that 90% of the companies that offered long-term care policies in the past no longer do so. These companies discovered it is very difficult for insurers to make money on the policies.

Those companies still in the market offer a confusing array of policies with benefits and costs that are not always easily understood. It can be migraine-inducing for people to figure out what they are getting if they purchase a policy.

It can also be a complete waste of time for a couple of reasons.

First, 40% of people who apply for the policies are turned down for health reasons. Second, the policies do not offer life coverage. They are short term policies and if your need for coverage exceeds the policy term then the money spent on premiums is wasted.

If you are looking into long-term care insurance it might be wise to seek independent advice such as from an estate planning attorney or elder law attorney to be sure the policy is of value to you and what benefits you would actually receive.

Reference: The New York Times (Dec. 18, 2015) "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

An Incentive Trusts Can Presents Problems

There is often considerable concern about leaving large sums of money to heirs and people will often set up plans intended to help the recipient achieve success. Rather than risking the heir just living off the money people want to see their heirs go to good schools, get into professions and have families.

One popular response to this is to create incentive trusts. In these trusts beneficiaries receive distributions when they behave in a certain way or accomplish something, such as getting a college degree or getting a job.

While these trusts do often work well, as Investopedia points out in "Incentive Trust Pitfalls Advisors Should Know," there are two potential ways these trusts can become unworkable:

• The Trusts Are Too Inflexible – Sometimes things in the trust that seem like a good incentive generally do not work well for individual beneficiaries. For example, a trust might distribute money to a beneficiary upon receiving a college degree, but what if the beneficiary enters a profession that does not require a degree, such as the military, being a professional athlete, or being the next Bill Gates and founding a successful tech startup. If the trust language is too rigid, the trustee will not be able to distribute assets to these beneficiaries even if the person who created the trust would have wanted to.
• The Trusts Are Too Vague – On the other end of the spectrum some incentive trusts are too vague. For example a trust that distributes money to a beneficiary when the beneficiary enters a respectable profession or gets a good job might require the trustee to make difficult judgment calls about a good job or respectable profession.

Work closely with an estate planning attorney to create a trust that helps an heir achieve goals yet remains flexible.

Reference: Investopedia (Dec. 11, 2015) "Incentive Trust Pitfalls Advisors Should Know"

FDA Approves Testing of Anti-Aging Drug

Our individual cells may hold all the information needed to live longer and slow down if not halt the aging process. Some species are already in the position of sustaining their strength as they age.

However, the cells of human beings are continuously dividing and each division creates the possibility of more errors and damage. Eventually, enough damage has been done that the cells are no longer able to repair it all and we get weaker.

While the amount of time this takes is different for everyone, we plan our retirements and estates based upon when it happens for the average person. However, what would it mean for your retirement and estate plans if you could take a drug that would prolong your life for an additional 40 years?

As the National Post reports in "No more Alzheimer's? World's first anti-aging drug could let you live more than 120 years in good health," the FDA has approved human testing on a drug that might do just that.

The drug is already being used to treat diabetes and scientists have been able to use it to prolong the life of other animals. Anecdotal evidence exists that the drug has worked to prolong the lives of diabetes patients so there is good reason to believe it will work in testing.

Retirement and estate plans will certainly need to be modified if the testing of the anti-aging process goes well.

Reference: National Post (Nov. 30, 2015) "No more Alzheimer's? World's first anti-aging drug could let you live more than 120 years in good health"

Fight over Estate in UK Creates Interesting Battle

Two key facts are not under dispute in an estate battle in the United Kingdom. The facts are that Dorothy Whelan executed a will in 1982 leaving her £1.6 million estate to four charities and a second will was created in 1999 leaving the estate to Hazel Turner.

When Whelan passed away in 2012, the charities sued Turner claiming she created the second will fraudulently. Since she is now 95-years-old and incapacitated due to Alzheimer’s, her son is fighting the battle on her behalf.

The Turner side of the story is that Whelan and Turner were childhood friends and continued that friendship until Whelan passed away. According to this side, the 1982 will reflected the wishes of Whelan’s husband with whom she created mirror wills.

The husband wanted to support the charities, but when he passed away in 1989 Mrs. Whelan changed her mind and wanted to take care of her friend.

The charities, on the other hand, claim that the 1999 will was created under suspicious circumstances. They claim that Whelan may not have been competent at the time. The charities also claim that the alleged witnesses to the 1999 will have no recollection of seeing Whelan and that they thought they were witnessing a will for Mrs. Turner.

The Daily Mail has more on this story in “Charities in court battle with son of frail 95-year-old who 'tricked friend into signing over her £1.6million fortune in will'.”

The case has been taken under advisement by a court with a decision expected in the future. 

Reference: Daily Mail (Nov. 10, 2015) “Charities in court battle with son of frail 95-year-old who 'tricked friend into signing over her £1.6million fortune in will'.”