The Montana Estate Lawyer

Wednesday, April 6, 2016

Cyber security. What can we do to protect ourselves?

Every day we hear about people losing money and having their privacy violated by criminals who steal financial information.  And the criminals don't just go after the "big guys."  They go after small businesses and individuals too. So, even though it may seem like a lot of work or a hassle to protect yourself, it's well worth it.

Local computer guru Brian Enseleit has helped us put together some suggestions for you.
Read more . . .

Tuesday, February 2, 2016

Third-Party Special Needs Trusts

I have previously posted a discussion of planning with special needs trusts (see my post of April 8, 2011) which focused on the two types of special needs trusts – – one created with the beneficiary’s money (self-settled or first-party trust), and one created with someone else's money, such as the disabled person’s immediate family, friends and other relatives (third-party trust).  Today, I want to focus specifically on third-party trusts.

A third-party special needs trust can be either a testamentary trust established under the Last Will and Testament of a decedent, such as the disabled person’s parent, or it can be a standalone special needs trust established by the grantor, typically the disabled person’s parent, during the parent’s lifetime.   The benefit of using a standalone trust is that the trust exists not only to retain assets upon the death of the grantor, but it can also be funded with gifts during the life of the grantor, either from the grantor, another person, or both.   In addition, the standalone third-party special needs trust can be named as a beneficiary to receive funds under a life insurance policy and other financial accounts through TOD (Transfer on Death) designations or POD (Pay on Death) designations.  It can also be named as the beneficiary of another person's estate plan, other than the parent, such as a grandparent or a friend.

Third party special needs trusts are not funded with the disabled person’s own assets, so there is no payback requirement to Medicaid.  Because a third-party special needs trust does not have to account for a Medicaid pay back, the funds can be used to benefit beneficiaries other than the disabled beneficiary, if the grantor so chooses.  Therefore, for example, a trustee could be granted the authority to pay the travel and entertainment costs of friends and other family members to encourage them to interact with the disabled beneficiary more frequently.

If a beneficiary of an estate or trust is receiving public benefits and the inheritance is not passed to a third-party special needs trust, the disabled beneficiary likely will be disqualified from means-tested public benefits.  Even though the disabled beneficiary may be able to shelter the funds in a first-party special needs trust, the first-party special needs trust must contain a payback provision.  Further, if the beneficiary is over the age of 65 when the trust is to be funded, the first-party special needs trust cannot be established because of the age restrictions imposed by federal law. Therefore, utilizing third-party special needs trusts in estate planning can be very advantageous to a beneficiary with special needs. 



Tuesday, December 8, 2015

Update on the Military's Survivor Benefit Plan and the Disabled Child

About four years ago I posted a blog noting that there was a dilemma for military families planning for a disabled child through the use of special needs trusts and the military's Survivor Benefit Plan (SBP).  At the time, it was a problem that could not be reconciled because the benefit could not be assigned to a special needs trust for a disabled child.  The only options were thus to elect to not name the disabled child at all as a beneficiary or to elect for the benefit to be paid directly to the child which would potentially interfere with the child’s eligibility for SSI and Medicaid.

I am pleased to report that Congress, with the passage of the Disabled Military Child Protection Act, has now authorized military members to name special needs trusts as beneficiaries of SBPs.   Members of the military can choose from several options to provide for a spouse or dependent child at the member’s retirement or death.  The SBP will pay up to 55% of the military member’s retirement pay to a spouse and/or dependent child.  The military member can elect between coverage for a spouse only, a spouse and children, or children only.  In addition the military member may now also elect to name a special needs trust as beneficiary of the SBP, allowing the funds to be used for the benefit of the disabled child without harming his or her access to SSI or Medicaid.  However, the funds must be assigned to a first-party or self-settled special needs trust that includes a "pay-back" provision to reimburse the state Medicaid program, upon the death of the disabled child, from the funds, if any, remaining in the trust at his or her death. This certainly is a welcome change for special needs planners.


Wednesday, July 8, 2015

Estate planning with a team-based approach

I recently finished the book, "The Boys in the Boat," by Daniel James Brown. The book tells the story of the University of Washington’s eight-oar crew team that won the gold medal at the 1936 Olympics hosted by Nazi Germany.  It is a story that ended in triumph up for the nine young men that made up the crew team, they being sons of loggers and other working-class families in the northwestern United States who when the team was first assembled were not expected to challenge the established rowing powers in the U.S., let alone those on the world stage.  What was most compelling about the story to me, however, was the fact that after much training, dedication and hard work each member of the team was in top shape and had become a superb oarsman in his own right, but the team as a whole did not achieve winning results until each member figured out and understood that it took the team working together as a team, coordinating their movements and roles within the team, and not just working individually, that their performance reached its highest level.

Good estate planning can often be like eight-oar boat crew.  It is not good enough that each member of the client’s advisory team be a good "oarsman "in his or her own right; the team members need to work together and be on the same page.  When advisors work with and advise the client independently of each other, they run the risk of, at the very least, confusing the client, or worse, competing purposes and agendas between advisory team members.  The result can be very poor for the client, both as to the plan that is put into effect and the client’s experience with the process.

Individual pieces of a client’s circumstances may not tell the whole picture.  When viewed from a team's perspective, the planning recommendation may take on a whole different light and focus.  For more complex planning, the advisory team may consist of an attorney, financial advisor, accountant, insurance professional and perhaps even family members and others.  Building a successful team requires aligning the right people with the right skills that, when working together for the mutual client, will result in the most effective plan that is uniquely tailored to the client.

Keith and I believe very strongly in team-based planning.  We enjoy working with our clients and fellow team members in a way that not only allows us to provide the most value to our clients, but is often an educational experience for all involved.


Tuesday, June 30, 2015

A Great Book about our Inadequate Healthcare System for the Elderly

I think a lot about the healthcare options we have in our "golden years."  I've just read a book on that subject that I highly recommend if you have the same concerns I do.  It is Being Mortal by Atul Gawande,  a Harvard Medical School professor.

This book discusses the issues facing us as we age, become frail and, for too many, end up in institutions where our quality-of-life is low.  Bottom line: our society - and healthcare industry -  have succumbed to a belief that, once we lose our physical independence, we no longer can expect a life of worth and freedom.

A keyword for all of us is home.   When you're home you get to decide how you spend your time, how you share your space and what happens to your possessions. Away from home you don't have any of this. This loss of freedom is what many people dread, the author says.

Just like anybody else, the elderly want freedom.  But what is our system set up to provide them?  Not freedom.  But safety. That may seem to make sense, but it presents the biggest problem for the elderly and frail.

In other words, safety has become everything.  We are institutionalizing our elderly in controlled and supervised situations all based on medically designed answers to solve problems that are never going to be solved.  So the elderly end up with a life that may be safe but is empty of anything they care about.

What do we, including the elderly, need to feel that life is worthwhile?  We have goals beyond simply prolonging our lives. It may be a cause beyond ourselves, something as small as taking care of a plant.  We also seek comfort and simple pleasures.  Surveys of the elderly show that their goals include avoiding suffering, strengthening relationships with family and friends, being mentally aware, not being a burden on others and achieving a sense that their life is complete.  I would add another word: dignity.

Our technological system of medical care totally fails to meet these needs.

The author describes facilities and experiments around the country where more is being done to meet the actual needs of the elderly and frail.  It gives you hope.  But, in the meantime, there is so much about our care for the elderly that is frustrating and just not acceptable.

Wednesday, May 13, 2015

Update – Montana has now implemented the ABLE Act

In my blog post of January 21, 2015, and in one of our firm's previous newsletters, we reported that in late 2014 the ABLE (" Achieving a Better Life Experience") Act was signed into law by Congress. You can refer to my previous post for more detail, but you will remember that the law is aimed at achieving a manner in which those with special needs can save money without losing needs based public benefits such as SSI or Medicaid. The federal law allows states to implement the Act to provide for a savings program for persons with disabilities that is modeled after the 529 college savings account program.

I am happy to report that Montana has now become the 10th state to implement and ABLE law with Governor Bullock’s signing of Senate Bill 399 on May 7, 2015.  Under the Montana ABLE Act, the disabled individual, or someone on his or her behalf, may set up a savings account to cover expenses associated with the person's disabilities that will not jeopardize the disabled person's public benefits.   Anyone can make a tax-deductible contribution of up to $3,000 each year to the account, whether or not a family member of the disabled individual, although the total annual amount that can be contributed by all persons into the account is limited to $14,000 per year.  The account can accumulate over time a maximum of $100,000 in contributions.

While the ABLE account does not replace other special needs planning tools, such as special needs trusts, it does add an important option for individuals with disabilities.


Tuesday, March 31, 2015

“Knowledgeable, Experienced and a Nice Guy.”

I recently had a personal injury lawyer refer a client to me for estate planning.  When I found out about the referral, I emailed the lawyer and thanked him and went about my day.  He, in turn, responded to me by copying a portion of an email he had sent to the person who had sought the referral: “I refer folks to Jon McCarty.  Knowledgeable, experienced and a nice guy.”

I was immediately struck by his comment.  To start with, he didn’t have to refer the prospective client to me in the first place and I was appreciative of his trust in me as a competent and capable estate planning attorney.  More than that, however, I was intrigued by his description of me as a “nice guy.”  I’m not one hundred percent sure what he meant by this, but it did cause me to think about what this means to me and, hopefully, my clients, and that is what I want to share with you.  I would also add that while the lawyer was referring to me personally, he could easily have been describing my law partner, Keith Tokerud, as well, because we share the same philosophy in our practice.

I’ll try to explain what I mean by this.  We strive to be knowledgeable and experienced in our practice, there is no doubt.  Our clients expect and deserve this.  But we also strive to be nice guys—to go above and beyond for our clients.  Why?  For Keith and me, to answer that question we need only ask ourselves why it is that we do what we do.  Is it because we want to be more knowledgeable and more experienced than other estate planning lawyers?  If it were all about us, we might be tempted to answer “yes” to such a question.  But that is not our purpose or our cause; it is not why we do what we do.  There is much more to it than that.  We enjoy working with people.  We desire to develop strong relationships with clients.  We take a genuine interest in their lives, goals and opportunities, as well as their fears, issues and concerns.  We work with our clients and their families in a helpful, productive manner to establish an estate plan that is well thought out and meets their unique needs and desires, and we have systems in place that we have developed to help ensure that the plan works as envisioned.  And this has not gone unnoticed by our clients and the people who refer them to us.  In the end, I would venture to state that a great many people come to Keith and me to assist them with their planning not just because of what we do, but rather, because of why we do it and the way we do it.  It is a very satisfying experience for both us and our clients. 


Tuesday, March 24, 2015

Simple estate planning

We all want to keep things simple.  What does that mean for your estate planning?

What it doesn’t  mean is how many pages your planning documents are. 

“Simple” means how easy to administer and effective your plan is when you need it to work, such as if you become disabled or you die.  A simple plan accomplishes your goals with the least time, expense and headache for you and your loved ones.  

A simple plan gives you and your family as much control and flexibility as possible.  So, it doesn’t tie your financial life into knots that limit your actions and frustrate you every time you try to do something.

Simple means you understand how the planning works, and you’re comfortable with it.  (Seems like a pretty obvious requirement, but all too often professionals do a poor job of explaining their recommendations and clients end up signing documents that they don’t understand.)

Good, simple planning starts with your taking the time to figure out how you want your affairs to be handled.  Then it’s reflected in documents that give the family the details they’ll need when questions arise that you’re not around to answer.

Simple, huh?

Wednesday, February 18, 2015

Giving to Charity

Next week I am going on a short vacation.  The first few days of my time away from the office will be spent in Whitefish as I tag along with my wife, Rhonda.  She will be there along with her colleagues at Special Olympics Montana, and the many volunteers and athletes, as they take in the Special Olympics Winter Games.  I spent some time there last year observing the athletes and was overwhelmed by seeing firsthand how excited they were to participate and compete, and how genuinely happy they were to be there.  What a positive, uplifting experience!

Shortly after my return to the office, I'll be blessed with the opportunity to work on an estate plan with a local professional and his wife.  What is so exciting and special about this is their desire to leave their entire sizable estate to charity and charitable purposes.  Their legacy will touch the lives of many others for years to come.

Thinking about all of this, I can't help but recall the classic movie, "It's a Wonderful Life," one of the greatest films ever made and which I saw once again this past holiday season.  You will all easily recall Jimmy Stewart as George Bailey, the compassionate but down on his luck businessman.   Through the film, George turns bitter, suicidal and abusive to his family, until he is shown by a guiding angel what life would have been if he never existed.   Unlike the Scrooge-like Mr. Potter, who sees money only as a means to self-prosperity, George comes to understand and appreciate that money can be a means to create happiness for others.   By doing just that, George is toasted as the "richest man in town."

My point in all of this is that by sharing of yourself – – donating money, whatever it might be that you can afford, and by giving some of your time and expertise to charity and charitable purposes, you enrich your own life and the lives of others by creating a happier, healthier and safer world.  Now that IS wonderful!


Wednesday, January 21, 2015

An Overview of the ABLE Act

What follows is an abbreviated version of our article that appeared in our firm’s most recent newsletter, the ElderCounselor.

 Late in 2014, the ABLE (“Achieving a Better Life Experience”) Act was signed into law. The law is aimed at achieving a manner in which those with special needs can save money without losing needs based public benefits such as SSI or Medicaid.  While an ABLE account does not replace other tools, like special needs trusts, it does add an option for individuals with special needs.

 The ABLE Act is a federal law that allows states to establish a savings program for persons with disabilities.  Montana has not yet implemented the program and we will need to continue to monitor its application in Montana.  The program is modeled after the 529 savings accounts.  ABLE accounts may be used to accumulate savings, with certain restrictions, for use by a beneficiary with a disability.  An ABLE account may be established by any contributor (a parent, friend, family member or the person with a disability) for the benefit of a beneficiary of any age so long as the beneficiary can establish that he or she met the disability criteria prior to age 26.   

 The Act imposes limits as to the amount of savings that can be held in an ABLE account.  The first such limitation deals with the annual total contribution amount, which may not exceed the annual gift-tax exclusion amount (currently $14,000).   This is not a per person contribution limit; it is the total amount that can be contributed to the account by all contributors.  In addition, ABLE accounts may only accumulate aggregate contributions up to the state’s limit on qualified tuition programs (i.e. 529 accounts), which in Montana currently is $396,000.  Finally, SSI exempts only the first $100,000 of an ABLE account. Therefore, if an individual receives SSI, his or her ABLE account may not exceed $100,000 and he/she may have other assets up to only $2,000. Otherwise, the individual will become ineligible to continue receiving SSI, but can remain eligible for Medicaid.

 It is important to note that the ABLE account is a “Medicaid Payback” account.  This means that the Act requires a provision in the account that upon the death of the beneficiary of the account, Medicaid payments made on behalf of the beneficiary subsequent to the establishment of the ABLE account must be reimbursed with any remaining funds.

 ABLE accounts have tax benefits similar to 529 accounts.  Qualified distributions from the account are not counted as taxable to either the contributor or the beneficiary.  Qualified distributions include expenses paid for the benefit of the beneficiary related to: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and any other expenses approved by the Secretary of Treasury.  In addition, earnings on the ABLE account are not taxable to the contributor or to the beneficiary.

 A person receiving needs-based government benefits often has a dilemma when it comes to saving, whether for education or for unexpected events, all while maintaining public benefits such as SSI.  In order to receive SSI, a person with a disability must have assets under $2,000. The ABLE Act makes saving possible…up to a point. Now the individual can remain on SSI and save a modest amount in an ABLE account (up to $14,000 per year).   Persons with disabilities who are employed may want to utilize an ABLE account to save a portion of their income while remaining qualified for SSI. In addition, families may want to contribute to an ABLE account for their loved ones with disabilities in smaller increments.  These same families may also desire to use other tools available such as Special Needs Trusts, which may be more flexible.  On the other hand, because of the limitations the ABLE account will not be useful, for instance, for people who have become disabled due to an accident and who are receiving a judgment or settlement for a significant amount, or for a person with special needs who is receiving a large inheritance.

 Every tool has its use and the ABLE account, when implemented by Montana, will be no exception.  We can walk you through the decision process of determining when it is an appropriate option for you or your loved one and when it is not.


Monday, December 29, 2014

A Time for Gratitude

Even for a Norwegian the Christmas holidays are a time of great emotion.  For me there’s been:  Sorrow -  the first Christmas without my mom.  Excitement - the first time I ever got everything on my Christmas list (3 books!).  Stress - too much going on.  

But the emotion that shines through is gratitude.

Read more . . .

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