If you don’t have an estate plan, Connecticut has one for you. Part I: Assets

Most people feel strongly that they want to control who may access their assets and what happens to their assets while they are alive; they limit who may view bank accounts, write checks, make investment decisions, or other important financial decisions. After all that hard work acquiring and protecting assets while you’re alive what happens to your assets after your death?

When given the choice, most people prefer to leave their assets to the people they choose, and in custody of people they trust, rather than having Connecticut laws decide for them.  An estate plan allows you to exercise that right to choose.

Estate planning gives you the opportunity to state who has access to your assets, who has the right to make decisions, and, ultimately, who receives your assets after your death.  If you are a Connecticut resident and you don’t have an estate plan (Will and/or Revocable Trust) stating who gets what, Connecticut statutes provide a plan for you. This statutory plan varies based on your family dynamics and may or may not match your actual wishes. It will apply to anything you own that does not have a joint owner or a designated beneficiary. Your estate will be called an “intestate estate”.

If you die survived by: Then:
Spouse and children (from you and that same spouse) Spouse inherits the first $100,000 plus ½ of the balance of your intestate property. Your children inherit the other ½
Spouse but no children or parents Spouse inherits everything
Children but no spouse Children inherit everything
Spouse and at least one child from you and someone other than your spouse Spouse inherits ½ of your intestate property. Your children inherit the other ½
Spouse and parents (no children) Spouse inherits the first $100,000 of your intestate property plus ¾ of the balance. Your parents inherit the other ¼
Parents but no spouse or children Parents inherit everything
Siblings but no spouse, children or parents Siblings inherit everything

 

The outcome of this Connecticut statutory asset distribution may have a major impact, with unintended results, on your surviving spouse or loved ones.

We encourage you to assess how your loved ones would be impacted if you died intestate. If the Connecticut statutory laws were followed to distribute your assets, would that accomplish what you want? If you are interested in learning more about how to exercise your right to control who gets your assets using an estate plan, please contact our office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

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April 16th is National Health Care Decisions Day

There may come a time when you are unable to make medical decisions for yourself due to injury, illness, or disease.  For that reason, it is important that you sign a document called “Health Care Instructions”. Everyone over the age of eighteen (18) should have Health Care Instructions.

To recognize the 11th Annual National Health Care Decisions Day, we invite you to review the website National Health Care Decisions Day and we want to remind you that:

  • You have the right to make decisions about the medical care you receive.
  • You have the right to tell your physician that you do not want certain medical treatments.
  • You have the right to name the person (or people) who will make health care decisions for you if you are unable to do so for yourself.
  • You have the right to pre-direct specific instructions about any aspect of your health care.
  • You have the right to have your wishes communicated in the event you no longer are able to express your own medical wishes.

Your rights can be preserved by signing Health Care Instructions.  Health Care Instructions are legal instructions to your physicians and family members that express your wishes pertaining to your medical care. These instructions will govern if you are unable to actively participate in your medical decision making or communicate your medical wishes.

Health Care Instructions allow you to:

  • Designate one or more individuals (“Health Care Representatives”) to make medical decisions on your behalf, in accordance with your wishes.
  • Authorize your Health Care Representatives to discuss your medical history and current medical status with your physicians.
  • Direct the withholding or withdrawing of mechanical life support systems if you are in a persistent vegetative state or the final stages of a terminal illness.
  • Name a person to serve as your Conservator (someone to manage your personal or financial matters) if you should ever be deemed incapable by the Probate Court.
  • Donate all or part of your body, following your death, for transplantation, therapy, education, or research if you wish to do so.

If you change your mind about any of the decisions you have made, you have the right to change or revoke your Health Care Instructions at any time while you are alive and mentally capable.

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Who gets the job?

One of the biggest decisions to make when drafting estate planning documents is selecting the people you trust to do the job of helping you if you cannot help yourself, or after your death.  Sometimes, it is an easy decision but other times it can be so difficult, as to even prevent someone from even drafting documents.  While there is no perfect checklist for choosing people to appoint in positions of trust, here are some things to consider:

  • Executor of your Estate:
    • Function: carries out the wishes you set forth in your Will, manages and distributes assets.
    • Considerations: someone who has time, can manage finances, is comfortable completing forms, or someone who will seek professional assistance to get the job done properly.
  • Agent under Durable Power of Attorney:
    • Function: makes financial decisions and carries out transactions if you are alive but unable to do so yourself.
    • Considerations: someone who has time, who can manage finances, and who will manage your assets as you would if you were capable.
  • Health Care Representative under Health Care Instructions:
    • Function: makes medical decisions and decisions about day-to-day affairs if you are alive but unable to do so yourself.
    • Considerations: someone who has time, someone who will listen to your medical wishes while you can still express them, and someone who is familiar with medical terminology.
  • Guardianship over minor children:
    • Function: person who will be legally responsible for any child under 18 years of age.
    • Considerations: someone who the child is comfortable with, who is involved in the child’s life, who may embody parenting styles that are important to you and/or similar to yours. Someone who’s current location is convenient (i.e. in the same or similar school district or close to other family members), or someone who would consider moving to where the child already lives.

If you are interested in learning more about the duties of the positions of trust and how to select the person or people you want to name to do the job, please contact our office.

 

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A New Year, New Numbers to Keep in Mind for 2019

Estate and Gift Tax:

  • The federal lifetime exemption for property passing to non-spouse beneficiaries has been increased to $11,400,000.00.
  • The Connecticut lifetime exemption for property passing to non-spouse beneficiaries has been increased to $3,600,000.00.
  • There is still an unlimited gift/estate deduction for property passing to a spouse; however, in order to qualify for the unlimited gift/estate tax deduction the spouse must be a U.S. citizen.
  • The amount that can be gifted to any one person without needing to file a gift tax return remains the same at $15,000.00 per recipient. Additional gifts can be made for qualified medical expenses and qualified education expenses without needing to file a gift tax return. 

Long Term Care in a Nursing Facility:

  • If one spouse is living in a nursing home and the other spouse remains at home (“Community Spouse”), the maximum amount of non-excluded assets the Community Spouse can keep has been increased to $126,420.00.
  • If one spouse is living in a nursing home, the minimum amount of non-excluded assets the Community Spouse can keep has been increased to $25,284.00.
  • If one spouse is living in a nursing home, the minimum amount of monthly income the Community Spouse can keep remains the same at $2,057.50, and the maximum amount it can be increased to, without an administrative hearing, has been increased to $3,160.50.
  • If one spouse is living at home and the other spouse is living in a nursing home, the maximum amount of equity in the family home that can be excluded has been increased to $878,000.00.

Long Term Care Provided in Your Home:

  • The amount of gross monthly income you can have and still be eligible for the Connecticut Home Care Program for Elders (CHCPE) has been increased to $2,313.00.
  • The amount of gross monthly income that triggers a co-pay requirement remains the same at $2,023.00.
  • Use of a pooled trust for excess income to establish eligibility or to avoid co-pays remains a viable option.

If you are interested in learning more about how these 2019 numbers affect you and your family please visit our website and read our blog for recent posts.  For advice specific to you or your family, please contact the office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

 

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More on the VA Pension Benefit Rules

In November of 2018, we wrote about the new VA Pension Benefit Rules that are now in place as of October 18, 2018. As stated in our last article, these new rules are designed to make it much clearer for claimants to understand the financial eligibility rules when applying for the VA benefit, specifically the VA Aid and Attendance Benefit, that assists eligible Veterans and their surviving spouses with paying for long-term care.

Last month, we highlighted the new Net Worth and Asset rules. In this article, we will cover the new Look-Back and Penalty Period.

Look-Back and Penalty Period:

In the past, an applicant applying for the VA Aid and Attendance benefit could transfer or gift assets, apply for the VA Aid and Attendance benefit, and become immediately financially eligible for benefits, despite the fact that he/she had recently given away assets in his/her name. The ability to transfer assets in this manner, without penalty, was very different than the Medicaid eligibility requirements, which currently have a five (5) year look back period.

The new rules have introduced a look-back and penalty period. The look back period is currently set at three (3) years. The look-back is triggered by the VA’s receipt of an original claim or new claim following period of non-entitlement. This means that if an applicant gives away or transfers assets within three (3) years prior to making an application then he/she will be deemed financially ineligible for the VA Aid and Attendance benefit (unless he/she cures the gift/transfer).

It is important to note that the new look-back and penalty period will not apply to transfers made prior to October 18, 2018. It is also important to note that the penalty period, or, the period of time for which an applicant will be deemed financially ineligible, will be maxed out at five (5) years.

The new penalty period will start the month after the transfer is made. To calculate the penalty period, the VA will determine the fair market value of the asset transferred, divide by the maximum annual pension rate, and then round down, if needed. In 2018, the maximum annual pension rate is $2,169.00.

Another new concept introduced by the rules is the term “covered assets.” A covered asset is any asset that is part of the applicant’s Net Worth that, had it not been transferred, would have caused the claimant’s assets to be over the Net Worth eligibility limit of $123,600. Therefore, if an applicant has a Net Worth of less than $123,600 and transfers some or all of those assets prior to making a claim for benefits then he/she will not be subject to a penalty period because he/she did not transfer a “covered asset.”

As with Medicaid, some transfers will not be penalized, such as transfers made to a trust exclusively for the benefit of an incapable child who is under the age of 18 or transfers as the result of fraud or unfair business practices (i.e. if the applicant purchases an improper financial product on the advice of a professional).

Finally, the new rules provide for a way for applicants to “cure” a gift or transfer. If the applicant had made a gift or transfer he/she may cure this by getting the asset back, provided that this “cure” must be done (1) before the claim is filed or (2) within sixty (60) days of being notified of the penalty. The applicant must provide evidence of the cure no later than 90 days after notice of the VA’s decision.

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New VA Pension Benefit Rules

As of October 18, 2018, the new VA Pension Benefit Rules are now in place. These new rules make it much clearer for claimants to understand the financial eligibility rules when applying for the VA benefit, specifically the VA Aid and Attendance Benefit, that assists eligible Veterans and their surviving spouses with paying for long-term care.

The stated intent of these new rules is “to maintain the integrity of the pension program” and respond to GAO recommendations, which specifically included making people more aware of the pension benefits. In this article, we will cover the new Net Worth rules. Next month, we will cover the new look-back and penalty period.

Net Worth and Transfer Rules:

In the past, unlike the federal Medicaid program, the VA pension program did not have definitive eligibility figures. With these new rules, there is finally an exact, maximum amount of assets that an applicant may own in order to be eligible for benefits. Net Worth for VA pension purposes will be equal to the maximum community spouse resource allowance (“CSRA”) amount, which is currently $123,600. The CSRA is scheduled to increase each year and follows the same increase as the Social Security benefit increase.

The new Net Worth CSRA of $123,600 is equivalent to the current Medicaid “Community Spouse Protected Amount” or “CSPA.” However, unlike Medicaid, for which the CSPA is the amount protected for the “Community Spouse,” for married couples, the CSRA applies to all applicants, regardless of marital status. This means that a single individual Veteran can have $123,600 of assets in his/her name and still be eligible for the VA Aid and Attendance benefit.

It is important to note how “Net Worth” is defined for VA purposes. Net Worth includes all income and assets. The term “assets” is defined as the fair market value of all property owned by claimant and any dependents minus any mortgages and other encumbrances. This means that the assets of any dependents, such as children or parents, will be counted when calculating Net Worth. Including the assets of dependent children and parents in the calculation of Assets is very different than the Medicaid program which does not include assets that do not belong to the applicant or applicant’s spouse.

The home that the applicant resides in will be excluded from the asset calculation and not considered part of the applicant’s Net Worth. Additionally, the applicant may keep a “reasonable lot area,” meaning, not more than 2 acres, unless the additional acreage is unmarketable. However, unmarketable is not defined in the new rules.

Also excluded from the calculation are personal effects and family transportation vehicles. Since “vehicles” (plural) is used, it seems that perhaps the applicant and dependents may be able to keep more than one vehicle without the value of the additional vehicles adding toward the total asset amount.

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Allison and Nicole named to Super Lawyers® Rising Star List

Allison DePaola-Drozd and Nicole Camporeale have again been named to the 2018 New England Super Lawyers Rising Stars list! Nicole has made the Rising Stars list for the second year in a row. Allison has been named to the Rising Stars list consecutively since 2015. Allison and Nicole were nominated by attorneys outside of our firm and qualified in the top 2.5% of New England attorneys under 40 years of age and in practice for 10 years or less. We also extend our congratulations to the other recipients. You can view the full list in Connecticut Magazine or online at www.digital.superlawers.com

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New VA Pension Benefit Rules

Effective as of October 18, 2018, the VA has made changes to the Pension Benefit Rules in an effort to “maintain the integrity of the pension program.” These changes will impact Veterans and their surviving spouse’s eligibility for the VA Pension and the Veteran’s Aid and Attendance benefit that helps Veterans and their surviving spouses with long-term care assistance. Here are some relevant changes to keep in mind if utilizing the VA Aid and Attendance benefit as part of a long-term care plan:

Net Worth: Net Worth includes all income and assets and now has a clear maximum cap of $123,600.00 in 2018.

Assets: An applicant’s assets will be calculated by using the fair market value of all property owned by the claimant and any dependents, less mortgages or other encumbrances.

Asset Exclusions: Specifically excluded from assets are: the home, plus two acres, and personal effects.

Look-Back Period: Prior to 10/18/18 there was no look-back period, meaning, an applicant could transfer assets and immediately apply for the VA benefit without penalty. Now, there will be a 36-month look-back period triggered by the receipt of an original claim or a new claim following a period of non-entitlement. However, this look-back period will not apply to transfers made prior to 10/18/18.

“Covered Asset” Transfers: Only “covered assets” that are transferred will be penalized. A covered asset is considered to be an asset that was part of the claimant’s net worth and, if not transferred, would have caused net worth to be over the limit.

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Is a Living Trust right for you?

We all have seen articles and advertisements in newspapers inviting the public to seminars to discuss something called a “Living Trust”. Often the article or the advertisement suggests that a Living Trust is an essential requirement of any estate plan. Although that sometimes is the case, it is not always the case.

Is a Living Trust right for me and my family? As with many legal questions the answer is an annoying “it depends.” It depends on your goals, your objectives, and the dynamics of your family. Here are 4 factors to consider when assessing whether a Living Trust is right for you.

Avoiding Probate. For many people “avoiding Probate” is important. Although administering an estate through the Probate Court usually moves smoothly when handled by someone who knows what to do, many people don’t want their family to have to deal with a Probate Court process.

So, if one of your goals is “avoiding the Probate Court” a Living Trust can help you accomplish that goal. Anything you put into the Living Trust while you are alive (called “funding” the Trust), can be controlled, administered, and transferred by your successor Trustee, after your death, without needing any help from the Probate Court to make that happen. Although your family still will need to file a Connecticut Estate Tax Return with the Probate Court (mandatory for any deaths occurring after January 1, 2005), they will not need help from the Probate Court to get control of the assets that are already in the Living Trust.

Privacy. Another reason people sometimes like a Living Trust is that it is not part of the public record on file with the Probate Court. This means that no nosy neighbor can check to see what you may have put into the Living Trust. It also makes it harder for a disgruntled family member to contest what you have done.

Incapacity Planning. Some people like the fact that the Living Trust provides more detailed restrictions and offers greater guidance for how to manage assets in the event of incapacity, as opposed to using a Durable Power of Attorney Instrument.

Avoiding “Ancillary Probate.” If you are a resident of Connecticut and own real property in another state, a Living Trust can be a useful tool for planning to avoid the time and expense associated with “ancillary” probate in another State.

As you can see, there is a lot to be said for the idea of using a properly funded Living Trust as one of your estate planning documents. However, sometimes what you want to accomplish, can be accomplished through easier, more cost-effective mechanisms. So, is a Living Trust right for you and your family? A knowledgeable advisor with information about you, your family, and your goals can help you determine what works best for you and your family.

If you are currently considering a Living Trust, and want more information to help you make an informed decision, feel free to call or email us at office@flomandepaola.com. We will send you a complimentary copy of our “7 Myths and Truths About Living Trusts.” We also would be happy to meet with you to help you make an informed decision. There is no charge for the initial meeting.

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Welcome, baby Austin!

Please join us in congratulating Allison and her husband, Scott, on the birth of their son, Austin Michael Drozd. Austin was born in September and is a healthy, happy baby. Please note that Allison has changed her last name to match Scott’s and baby Austin’s last name and will now be using Allison DePaola-Drozd.

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