What Is Elder Law Estate Planning And Why Does It Matter?
Elder law estate planning includes two important legal aspects. The first is an estate planning and the second one is elder law. But what are the differences between these two legal terms? What should you know about them and why do they matter? Let’s take a look:
Estate planning is focused on an individual’s assets and how they should be dealt with while the client is living, but also after the client’s death. The estate plan determines how the assets will be divided and distributed to beneficiaries after the client passes. The plan also includes multiple tax-planning provisions and mechanisms designed to help the clients pay fewer taxes. Also, the plan includes specific beneficiaries for the assets and includes special guidelines on how the distribution should take place after the client passes. The options are various – a client can either create a will or a trust which will determine how and when the assets are distributed to the beneficiaries. If there is no estate plan, the assets of any individual who passes will be divided and distributed according to state law. This distribution often runs against the true wishes of the individual and can sometimes create further legal issues.
Elder law is a fairly broad field that focuses on many aspects of the law. Elder law is not focused just on the elderly. It also includes the processes required before an individual reaches old age. Simply put, elder law focuses on the plan that is designed to help an individual live comfortably and safely during old age. It includes provisions on living to one’s wishes, in good financial standing. The elder law plan is designed with the help of an elder law attorney and can include trusts, gifts to family members and guidance on insurance policies. Elder law Medicaid planning is another important aspect of elder law and includes provisions on how to be eligible for it.
Elder law also includes many estate planning tools, like trusts and will, the necessity of the power of attorney, which is needed in order to avoid the guardianship, in case of disability. Elder law estate planning should be comprehensive, holistic and should offer complete legal and financial protection for any individual. It should work as the ultimate protection mechanism for older individuals.
Major Issues Facing Seniors Today
The main objective of elder law estate planning is to create a plan that will help seniors avoid court proceedings in case of disability or upon death. There are multiple tools designed to help them, and they should be used in order to avoid such problems. These include trusts, which are often better than wills because they do not require court proceedings when settling the estate. Trusts are also good as they avoid the need for foreign probate proceedings for the property that is owned in another state. These advantages are very attractive for seniors and their families, as they will speed up the process of inheritance and asset distribution after death.
Another important issue that seniors often face is taxes. A good elder law estate planning professional can help clients avoid or minimize both federal and state taxes. This is very important for couples, where the two-trust strategy can be used. In this strategy, the assets are divided as evenly as possible between both parties, in two separate trusts. After the death of one person, the surviving spouse can enjoy the assets of the deceased spouse’s trust without having to pay additional federal or state taxes. After the surviving spouse dies, the assets go to the named beneficiaries, with minimal additional taxes. These two trusts are known as disclaimer trusts, and they cost clients tens of thousands of dollars in taxes, depending on the size of the estate. Furthermore, this method will avoid the probation process, which can be very time-consuming and expensive for the beneficiaries of the estate. Also, the taxes in case of probation, are much larger.
Assets can also be protected against depletion due to a nursing home or home care costs. For instance, elder law Medicaid planning deals with this aspect. The Medicaid asset protection trusts are important tools that can help seniors avoid this delicate legal issue. The trusts can be established whenever needed, and are subject to a five-year review period, during which your assets are protected against high costs of nursing home care. These provisions help protect assets in case the client does require nursing home care but doesn’t have a plan for this particular need. The trusts work similarly to a “gift and loan” strategy and help protect important assets against depletion.
The Estate Planning Documents
Estate planning also starts by reviewing the documents which must be provided by the client. For instance, if the client has a prior estate plan, a trust, a will or a power of attorney, all these documents must be reviewed. If not, the documentation required is smaller. Documents related to the general medical condition of the client is required for elder law Medicaid planning. There are also important questions that need to be addressed when creating an estate plan for senior citizens:
* Is the client a United States citizen? This aspect is important when dealing with both federal and state taxes. If the client is not an American citizen, the taxes can be difficult to estimate.
* Is the client expecting an inheritance? A successful estate plan should include both the existing assets and future assets. If there is an inheritance, the plan should also include this new asset.
* Does the client have any health or long-term care insurance? If the answer is yes, the attorney will need to review the policy and determine whether it is an asset that can be included in the estate plan. In some cases, inflation must be also taken into consideration before determining the amount.
* Does the client need a financial adviser? Estate planning often goes hand in hand with financial planning. If the estate is large and complex, a financial planner is a good choice for the client. The attorney can work together with the financial planner and create a better estate plan.