Category Archives: Estate Planning

Baby Steps

Baby Steps

If you stopped by to see us in 2016, no doubt you met Dominic, our legal assistant Laura’s son and Williger Legal Group’s resident baby. Dominic has been bringing smiles and fun to our office since March when Laura came back to work. It’s been amazing to watch him grow and even more astounding to see Laura hold him in one arm while typing with the other. But Dominic is now on his feet, hands free to explore, and no longer content to sit and watch.

A new child brings many new responsibilities. One of these responsibilities is making sure the child is protected in the event something happens to the parents. Here are a few tips for young families to consider when creating or updating their estate plan:

Who will raise your child if you can’t?

  • Nominate a guardian for your minor children in your will. Also, name a back-up in case that person is unwilling or unable to serve. The guardian will have legal custody of your child. Choose someone who is willing to take on the responsibility and has a similar child rearing philosophy. Also consider the age, health and location of the guardian as well as his or her stability and family situation.

What will the child’s financial needs will be?

  • Young families should consider life insurance to supplement inheritance and social security death benefits. Level term premiums are usually the least expensive option.
  • Consider using a trust to name someone responsible to manage the money while your child is young. The trustee can use the money for the child’s health, education, maintenance and support. You can designate how you would like the money to be used as well as the age at which the child should receive the money. Some families feel that 25 is a more appropriate age to receive a lump sum than 18.

Do you need to change your beneficiary designations?

  • Not all assets pass by your will or trust. Make sure the beneficiaries named on your life insurance policies, retirement accounts, annuities, and other assets match the intent of your will or trust. If properly titled, your beneficiaries may be able to “stretch” IRA’s to continue to enjoy deferred tax benefits.
  • How would you care for your child if you couldn’t care for yourself?
  • Create Health Care and Financial Powers of Attorney. If you become incapacitated your powers of attorney give your agent the ability to help you with medical decisions and make sure your bills get paid. Without these documents, the only alternative may be a court appointed guardian.

How will your family find information?

  • Keep an Inventory of your assets and key documents as well as contact information for your attorney, doctor, insurance agent, broker, and other trusted advisors. Make it easy for your agent, executor or trustee to determine what you have and what you owe. Don’t forget to include digital assets, and those precious digital photos, keep a master list of accounts, insurance policies, important legal documents and passwords.

How can you make sure the plan will work?

  • Review your plan every year to be sure it is kept up to date. Update your plan as your life changes. Are there any new family members? Is anyone named in the document no longer appropriate to serve in the role you have given them? Has your net worth changed?
  • Consult an attorney. Each state has specific requirements as to how a will and other legal documents must be executed. Be sure that yours comply.

Power’s of Attorney – Stepping Up & Stepping In

Powers of Attorney
Stepping Up & Stepping In

            It is a great honor to be named Agent for another person in a Power of Attorney. It means that that person (the Principal) trusts you enough to make decisions for her in the most important areas of her life – her health or her wealth. With great power comes great responsibility. How do you know when to Step Up to the job and when to Step In to make decisions?

Ohio law provides for two types of power of attorney: Power of Attorney for Health Care and Power of Attorney for Finances.

A Health Care Power of Attorney names the person or persons who can make decisions about medical treatment. This includes choice of doctors, placement in a rehab or nursing home, specific procedures and medications, as well as, do not resuscitate orders and other end of life decisions. The Agent under a Power of Attorney for Health Care can only act, however, if the Principal is incapacitated to the point where she is unable to make decisions for herself.

An Agent under a Financial Power of Attorney (sometimes simply called a “Durable Power of Attorney”) may be authorized to handle bank and brokerage accounts, IRA’s, contracts, sale or purchase of cars or real estate, life insurance and other financial matters. The agent is limited to only those matters specified in the document. The Financial Power of Attorney generally allows the Agent to handle these matters even if the Principal is still capable of doing it herself.

An Agent is bound to do what the Principal reasonably expects, to act in good faith and always in the Principal’s best interest. When acting as the Agent, you should disclose your identity as well as the Principal’s signing (“Principal’s Name”) by (“Agent’s Signature”) POA.

Stepping Up

How will you know when the Principal needs you to start acting and what you will need to do?

When you receive your paperwork, talk to the Principal about her health and/or wealth and expectations. Go through documents together, the bills she pays, the medications she takes, the names of her doctors, bankers, stockbrokers, insurance agents, etc. Let family, friends, and neighbors know to call you in an emergency.

If you are named as Health Care Agent, consider visiting doctors with your Principal and have her sign a HIPAA release so that you can ask the doctor questions and look at medical records even if your Principal is still able to make decisions for herself.

If you are named as Financial Agent, you might help your Principal sign up for automatic deposits and automatic payments of utilities and other regular bills. This will reduce the burden on her and allow her to continue managing her own business longer. Meet periodically to review statements and balance the checkbook or consider signing up to monitor her accounts electronically.

Stepping In

          You must keep contact with your Principal regularly to know when her capacity is diminished and it is time to Step In and make decisions. You may notice confusion, physical disability, or changes in mood, housekeeping habits, or hygiene. Missed appointments, unpaid bills, unfilled or untaken medication, weight loss, unexplained damage to the car, and falls are all signs that your Principal may need your help.

Check the refrigerator to be sure there is fresh food. You may need to help with the shopping or arrange for meals to be brought in. If your Principal can no longer use a stove safely, you may need to disable it.

When your Principal can no longer drive safely, you may need to talk with her doctor about having her license revoked or disabling or selling the vehicle. A Principal will often accept these restrictions more easily coming from her doctor rather than a relative or friend. If she continues to drive while impaired it is possible her insurance company will deny claims because of recklessness.

If your Principal is unable to drive, assist in arranging transportation. Isolation may become an issue. Regular phone communication, home health services and adult day care can help your Principal remain at home longer. If health care or other workers are in the home, check frequently to be sure your Principal is getting proper care and no items or money is missing. Be sure the workers are properly screened, bonded and insured.

When care at home is no longer possible, you will need to arrange placement in an Assisted Living Facility or Nursing Home. Visit facilities with your Principal if possible on multiple occasions and at different times of the day. Talk to residents and their families. Stay for a meal and a tour or consider a short respite stay to try it out.

If your Principal is resistant to a move, but unsafe at home, talk to the doctor. It is far easier to move to a facility upon doctor’s orders from a hospital or the doctor’s office than to attempt a direct placement from home by force or deceit. Later, when your Principal asks to go home, you can say with conviction that she can return home when her doctor says she can.

As Financial Agent, you will need to see that your Principal’s bills are paid and that her estate plan is followed if you know what that plan is. You must see that taxes are paid and that required minimum distributions are taken on IRA’s. You may need to make a claim on long term care insurance or Medicaid if necessary. Keep careful records of everything that you do on the Principal’s behalf.

Stepping In as agent can be a difficult and thankless job. If the Principal is unhappy with what you are doing – right or wrong – she can remove you since the power came from her in the first place. If this should happen and you feel your Principal is incapacitated and unsafe, your only resort may be to seek authority from the court in a guardianship proceeding. If you are in doubt as to your responsibilities or need assistance in understanding any of your duties as agent, seek the advice of a qualified elder law attorney.

Life Insurance and You

Life Insurance and You

Life Insurance can be an important part of your estate plan. Pull out your old policies every time you update your plan and ask yourself these important questions:

  1. Do I Need Life Insurance?
    As the breadwinner of a young family, life insurance is tremendously important. If you should die your insurance can pay for the funeral, pay off the mortgage, provide for the children’s education and help your spouse get back on his or her feet. But now that the children are grown, you are divorced or widowed or retired, the premium payments or accumulated cash value might be better spent maintaining your own lifestyle.
  2. Who is the beneficiary?
    When we review life insurance policies, it is not unusual to find that the only named beneficiary is a long dead parent, deceased spouse or worse—an ex-spouse. If the named beneficiary is deceased then the insurance company’s internal policy will determine if it will pay out to the insured’s next of kin or probate estate. Sometimes an estate must be opened just to receive the insurance proceeds.

    Update your beneficiaries regularly and consider naming contingent beneficiaries to receive the claim should the primary beneficiary die before you.

  3. What Type of Insurance Policy Do I Have?
    All life insurance is not created equally. Each type has its own pros and cons.
  • Term Insurance– Term Life Insurance is the most straight forward and most economical type of insurance. You pay your premium for the month, quarter, or year and you are insured for the full amount of the insurance if your die within that period of time. Stop paying the premium and the insurance stops at the end of the term. As you get older, you are more likely to die during the term and the premium goes up. You can elect to make level term payments for a period of years so that you know the price will be fixed for that period.
  • Whole Life Insurance– Whole Life Insurance has a savings component as well as the premium. The cash value accumulates in the early years of the policy. At some point, the cash value approaches the death value payout of the policy and the policy is “paid up”. After that time no more premiums are due. Some whole life policies have an “endowment” at a certain age. If the insured reaches the endowment age, the cash value is paid out to the insured and the insurance ends.
  • Universal Life Insurance – Universal Life Insurance is a combination of Term and Whole Life Policies. The early payments go towards a low premium and a large cash value deposit. As the years go on the premiums increase and the cash value deposits are less and less. When the cost of the premiums for the insurance exceeds the payment due, the funds in the cash value are used to supplement the premium payments. At some point, the cash value will be exhausted by the ever increasing premiums. At that point, the insured can either begin paying the now much higher premiums or allow the policy to lapse.
  • Group Term Insurance – Some employers offer life insurance as a perk to their employees or retirees. Because premiums are paid in bulk, the cost to the employer is far lower than a private term policy would be.
  • Accidental Death and Dismemberment (AD&D) – This insurance is sometimes offered as a bonus by a bank, credit card provider or AAA. This is a group term insurance, but it only pays out if there is an accidental death. If the insured dies of cancer or some other illness or non-covered injury, no payout will be made.
  • Credit Life Insurance – This insurance only pays out to cover the creditor involved. Some credit card providers and mortgage brokers offer this life insurance to insure the loan will be paid off should you pass away. This insurance may or may not be less expensive than a standard term insurance policy, but it will only pay to cover the one debt to the extent that debt is still owed at your death.
  1. Does My Life Insurance Meet My Goals?
    Think of life insurance as a tool used to meet your specific goals. Whether it is to cover the cost of your burial, support your dependent spouse, finance your children’s education, or provide liquidity to your estate choosing the right type and amount of life insurance is critical to your plan’s success.

Who Can I Trust With My Trust

Who Can I Trust with my Trust

       Trusts are extremely versatile and efficient estate planning tools which allow for the effective management of assets both during the Settlor’s lifetime and after his death.  In establishing a trust the Settlor (creator of the trust) names a Trustee to manage the assets for the Beneficiaries.  The Settlor can be as specific or as flexible as he desires in directing how and when the assets are to be used.

Choosing the right Trustees can be the difference between the achievement of all of the Settlor’s goals and a catastrophe of financial mismanagement and family discord.  So whom should you choose?  Let’s look at the options.

You – Most people choose to name themselves as the initial trustee of a revocable trust.  This allows them to have complete control over their assets.  You would then name one or more Successor Trustees to take over management of the Trust assets when you become too ill to manage them for yourself or you pass away.

Your Spouse – Married couples will often name each other as Successor Trustees of their individual trusts.  They also frequently name both spouses as Co-Trustees of their individual or joint trusts.  This way, either spouse may manage assets just as they have always done with their joint accounts.  Of course, in the case of separation, divorce or incapacity, the spouse should be removed and replaced.

You and Another Person – Although spouses are the most common co-trustees, you may want to consider naming someone else, as you age or if you have lost your co-trustee spouse.  While having a Successor Trustee serves as a safety net in case you become ill or pass away, having a Co-Trustee is more like having a parachute.  During periods of intermittent illness or times you are traveling, your Co-Trustee can handle things.  If you develop a progressive illness or infirmity, your Co-Trustee can begin by acquainting himself with the assets and viewing transactions and monthly statements.  Then as you are able to do less and less your Co-Trustee can step up and do more and more. This allows you the advantage of seeing a sample of the Co-Trustee’s management style and avoids the potential conflict and distress of a declaration of incompetency.  It also allows the Co-Trustee time to familiarize himself with the assets and their management while you are still available to advise and explain.  This makes it far more likely that your goals and wishes will be achieved, than if the Successor must take over knowing nothing at a time when he may be grieving your illness or death.

Another Person – In the case of an Irrevocable Trust or if the Settlor doesn’t wish to manage the assets, a friend or family member may be chosen as Trustee.  In choosing a Trustee, look for a person with integrity who manages his own life and assets well; someone with diplomacy, organizational skills and a large dose of common sense.  It’s helpful if your Trustee is geographically available and has plenty of time and energy to commit to the task because, done right, managing a trust is a lot of work.

            Think twice before naming two or more people, other than yourself, to serve as Co-Trustees.  When you name two, you either tie their hands together by making them work in concert or give them separate, but equal powers in which case the right hand may not know what the left hand is doing.

Also consider your own family dynamics in deciding whom you will name as Trustee and what you are expecting that person to do.  For example, your daughter may be the right person to choose to manage assets for you if you become ill, but it may be too much to expect her to manage funds for her seriously disabled nephew for the rest of his life.

Your Agent Under Power of Attorney – In a complete estate plan involving a trust you will name an agent under a Durable Power of Attorney (POA) for Finances to handle assets that cannot go into the trust such as IRA’s, 401K’s and certain annuities.  Many people name the same person who they chose as Successor Trustee.  The POA Agent, can also manage trust assets in the Settlor’s place so long as there are provisions both in the POA and in the Trust allowing him to do so.

A Professional Trustee – Bankers, Attorneys, and Accountants may make it part of their business to act as a Trustee.  Their experience can be beneficial when the terms of the trust are complicated or the investments are complex.  Their expertise is helpful in analyzing tax issues, brokerage statements and choosing appropriate investments.  Choosing a professional trustee can avoid family jealousies and emotionally charged issues.  Although their fees may be more than a friend or family member would charge, it may be worthwhile in certain situations.

In the end it is your plan, your trust and your choice.  Who would be the best Trustee to accomplish your goals?

Trust For Children

TRUSTS FOR CHILDREN

It is a parent’s job to raise and take care of their children. The question no one wants to think about is who would do that job if you were gone? Losing a parent is one of the hardest things emotionally a child can go through, but you can still take steps to provide for your children if you should die before they are grown. You can appoint a guardian in your will to raise your children, but you can also set up a trust to make sure the money is managed properly to provide for your children’s care.

A trust is like a basket. It is simply the vehicle for holding assets. The person who sets up the trust (the settlor) can customize the trust to handle things as she sees fit. She can name who will handle the money (the trustee), and name backup trustees in case the original trustee is unable to manage. The settlor can also name beneficiaries to the trust and decide what benefits they will receive from the trust. The settlor can also decide at what point the trust has served its purpose and will end, and when it ends who gets whatever assets may be left in the trust.

How to Spend the Money

The parent can make the trusts as strict, or as flexible as they like. Some parents choose to leave the trustee complete discretion. So if something like a trip to Europe for the child comes up, the trustee can choose to pay for it if they think it’s a good idea, or decline. Other times, the parents may say that the trust is only to be used for education, so if the same European trip came up, the trustee should pay for it only if it were deemed a study abroad educational expense.

Some parents may place conditions on what the child needs to do to inherit their share. They can say the child is entitled to inherit at age 25, or inherit at age 25 provided they have graduated from a state accredited college. If they do not graduate, they do not inherit.

The parent may say the money is to go to care for the family home so long as the youngest child is living in it, or it may simply lay out a general wish of how the settlor hopes the money will be used.

How to Hold the Money

Another question the settlor will have to decide is how the money is going to be “held.” If there is more than one child, the money may be divided into equal shares and each child has their own equal trust. When the child has used up the money in his own trust, it is gone and he cannot access his siblings’ trusts.

The other way is to set up a “Common Pot Trust” which puts all the money in one trust, and the spending on each child is based on need rather than on equivalency. In a common pot trust two beneficiaries may receive drastically different funding based on their needs. This is especially true for clients who have children born significant years apart and can help treat individual circumstances differently. There is no “primary” beneficiary so no child is required to receive any funds before or along with any other child.

Trusts are hard to think about in the abstract, so let’s look at an example:

The following illustration is for example purposes only:

Sally is a single mother, who is diagnosed with terminal cancer. She has four young children, Aiden (20), Becca (18), Carly (16), and Davey (4). Her main goal is to make sure her children are taken care of when she passes away. Her ex-husband, Matthew, is a good father, who Sally trusts to raise the children, but he is not good with money.

Sally doesn’t have much in assets when she passes away, but she did purchase a $500,000 life insurance policy for the kids when she got divorced, that she hopes will be used to care for her children’s wellbeing and education.

If She Does Not Set Up A Trust

If Sally names her minor children as beneficiaries of the Life Insurance Policy, the funds will be held by their legal guardian, and the children will have full access to their funds on their 18th birthday.

This means that Aiden and Becca would each inherit $125,000 immediately. Aiden takes a European vacation and buys a car. Becca uses some of the funds for college, but also pays for trips to the bar and shopping trips with her friends.

Carly and Davey’s share is held by their guardian, Matthew. Matthew uses the funds to care for the children, and there is some money left over when Carly turns 18, but not much. Davey’s share is spent before he is 18.

If She Sets Up Individual Funds

Sally names her sister as trustee for the funds, and sets up the trust with individual funds because she wants to treat her children “equally”. She says they can inherit when they turn 25.

Each child gets their own trust of $125,000. The trustee can only use funds from the child’s individual trust for their care and once they reach age 25 it is distributed to them.

Aiden is already in his third year of college when Sally passes. The trustee uses some of his trust to pay for his last year of college and helps with some incidental payments over the next few years but when he turns 25, he receives $100,000. He decides to take this money and go drink on a beach for a year.

Becca is just starting college, and decides she wants to go to Med school afterwards. The $125,000 is quickly spent on her undergraduate education and first year of medical school. She pays for the rest of medical school herself by going into debt, and there is nothing left to distribute when she turns 25.

Carly gets in a car accident when she is seventeen. Her trustee uses most of her funds to pay her medical bills and her rehabilitation funds. There are no funds left to help with her college.

Davey is the youngest. Over the years the trustee pays out so that he can have the same lifestyle his siblings had growing up, but the funds run out before he reaches 15.

Even though they each got equal shares of cash, equal doesn’t always mean fair. Davey was much younger than his siblings when his mother passed away, and the siblings all had mom’s support while she was alive. Sally may be rolling over in her grave at the thought of Aiden drinking his inheritance away on a beach while his siblings cannot afford to pay for their schooling or medical bills.

If She Sets Up a Common Pot Trust

If she set up the funds in a common pot trust, then the insurance money all goes into one pot of $500,000. The trustee has full discretion how to use this money. Sally can set up the direction or her wishes to the trustee to be as limited or as broad as she likes. Sally decides the primary use of the funds should be to raise Davey and for college educations. The trust will continue to provide for all four children until the youngest turns 25.

Aiden decides not to go to college. He buys a house and gets married but pays for everything himself, because the trust is intended to provide for education and Davey’s care.

Becca decides to go to college and then to med school. The trust pays $225,000 for her tuition and books over the years.

Carly decides to go to a year of culinary school. The trust pays $25,000 for her tuition.

Davey is only four when his mother passes away. The trustee pays an allowance to support Davey throughout his childhood, which costs about $210,000 until he turns 18. He decides to go to a local college with a scholarship. The trust pays $36,000 for this expense.

When Davey turns 25, there is only $4,000 left in the trust which is to be distributed equally to the four children. So they each get $1,000.

This may seem unfair to some. After all, Aiden only got $1,000 in inheritance from the trust, and Davey received $246,000. Becca and Carly both went to school for their careers but Becca received $200,000 more than Carly in tuition. On the other hand, if Sally’s main goals were to make sure Davey received the same opportunities as his siblings growing up and to provide for educational opportunities for her children, the trust accomplished it’s goal.

Which is better?

It depends on Sally’s goals. There is no one “right way” to make a trust because everyone has different goals for their children. Because of the customizable nature of trusts, saying “you have a trust” does not tell anyone what that trust does. Trusts are useful tools for accomplishing all sorts of different tasks. One very good use for a trust is for a parent to set one up to hold and manage money for young children if the parent should die before they are grown. This ensures that the parents can lay out rules and hopes for how the funds are to be used to care for their children, even after the parent is gone. Talk to a qualified estate planning attorney about how a trust could help care for your children.

Six Things to Consider When Writing Your Will

The first major hurdle in writing a Will is procrastination.  Just thinking about
death and dying makes some of us a little anxious.  Once past that obstacle, there are six things that you should consider to be sure that your Will meets your needs.

1.  Nonprobate Property:  Remember your Will controls only property that is
subject to transfer through the Probate Court.  Any property that you hold jointly with someone else may be “survivorship” property that passes automatically upon your death to the other owner or owners.  You may own property that is “payable on death” to another person.  Insurance proceeds, annuities and IRA’s usually go directly to the named beneficiary rather than passing through probate.  Now is a good time to review all your assets to be sure that however they are transferred at your death, they pass according to your plan and wishes.

2.  Specific Bequests:  A specific bequest is the gift of a particular thing or a
particular amount of money.  For example:  “My wedding ring to my daughter, Katy,” or “$200 to my nephew, Felix.”   When a specific bequest of an item is made, the law requires that item be appraised.  It is then subject to inheritance tax at the appraised value.  Depending on the value of the item, the appraiser’s fee and tax may not be justified.  Many people prefer to give gifts of sentimental value during their lifetime to share in the recipient’s joy and appreciation.

You might wish to make a specific bequest of cash as a token to grandchildren
or a specific charity.  In doing so, keep in mind that specific gifts are always paid first.  Depending on how large or small your estate is at your time of death, your specific bequest may be far more or less proportionately than you intended.  For example, suppose at the time you write your Will you have $500,000 in assets.  You leave $10,000 to each of your ten grandchildren and the remaining $400,000 to be divided between your two children.  Unfortunately, you fall ill and require nursing home care for the last years of your life.  Your estate is reduced to $100,000.  Your specific bequests are made first.  This leaves nothing for your children whom you had intended to inherit the bulk of your estate.

3.  Residual Gifts:  After specific bequests are made, you need to decide who
gets everything else.  Generally, if more than one person is to share the residuary, each person would receive an equal share or some percentage for each person would be named. (“to my children equally, share and share alike” or “forty percent to my Uncle Joe and ten percent to each of my six nieces and nephews”.)  In dividing up your residuary be sure to consider what you want to happen if one of your beneficiaries dies before you.  Would you want that person’s share to go to her children, to the other beneficiaries, or somewhere else entirely?

4.  Taxes:  Estate Taxes are no longer an issue for most people since the Ohio
Estate Tax was ended January 1, 2013.  Those with assets over $5,000,000 may be subject to federal estate tax.  Consider whether you want all the tax paid out of the probate estate or whether persons receiving non-probate assets should pay a
proportional part of the tax.

5.  Minor Beneficiaries:  If any of your beneficiaries could be under the age of 18, you may want to consider naming a trustee to hold the property until the child comes of age.  The person you name may or may not be the child’s parent.  You may choose to be quite explicit in your instructions to the trustee or simply choose someone you find trustworthy and leave the details to his discretion.

If your own children are young, you will want to name a guardian (and alternate
guardian) to care for and raise your children.  Your doing so can avoid much family turmoil in deciding with whom your child will live.  Be sure to choose someone who’s child raising ideas are similar to yours.  Use care in choosing grandparents as guardians.  While your 68 year old mother may seem the best choice to have your 5 year old, she may not be equipped at 78 to handle your 15 year old.

6.  Fiduciaries:  Your fiduciary is the person who will gather together all your
assets, pay your bills, then distribute the remainder of your estate as you direct in the Will.  The person you choose should be trustworthy, organized and patient.  Be sure to name an alternate fiduciary in case the person you name is unwilling or unable to handle your estate.

The law requires fiduciaries to post a “bond” (an insurance policy covering theft
or error) unless you say in your Will that you do not require one.  This is primarily protection for your other beneficiaries.  The size of the bond is determined by the amount of probate assets.  The cost of the bond is paid out of the estate.

Your fiduciary is entitled to payment for the service he performs.  The amount of
compensation is determined by the Court.  Fiduciaries will generally choose a lawyer to assist with the estate.

As your life situation changes, your Will should be revised to suit your needs and
desires.  It is generally a good idea to review your Will every five years to be sure it reflects your wishes.  Think about these six considerations each time you make a Will.  Your individual situation may raise additional issues and considerations that your attorney can address.

I Do, But I Don’t-Modifying Estate Plans in the Face of Catastrophic Illness

By far, the most popular estate plan that I draft is what I refer to as the “I Love You” plan.  Husband executes a will leaving everything to wife. Wife executes a will leaving everything to husband.  Everything is left to children in equal shares when both parents die. For good measure, we title the assets jointly with right of survivorship (house, bank accounts, stocks, bonds) or designate the spouse as beneficiary (IRA’s, life insurance, annuities) so that there isn’t even a probate estate when the first spouse dies. Simple, effective and so popular that the “I Love You” plan is the one chosen by Ohio’s descent and distribution statute for those who never got around to writing a will. Why is this plan so popular? It’s because that is what most people want.

The problem comes when one spouse becomes ill or debilitated to the point he cannot care for himself. The spouse may become so ill as to require nursing home care now or in  the  future,  especially  if  the  caregiver  spouse  passes  away  first.  Then,  the  “I  Love You” plan becomes the worst of all possible plans because leaving everything to the ill spouse,  in  essence,  means  leaving  everything  to  the  nursing  home  to  pay  for  the spouse’s care. Planning ahead is essential to protect assets for the family.

Even more important than a will, which distributes assets at death, each spouse should execute  health  care  and  financial  powers  of  attorney.    These  documents,  prepared when both spouses are competent, appoint someone (usually the husband or wife with children  named  as  backups)  to  direct  medical  care  and  manage  finances  when  an individual loses capacity.

In  planning  for  potential  nursing  home  placement,  it  is  important  to  give  the  financial agent the power to transfer assets within the rules of Medicaid. With such a document, assets  can  be  moved  into  the  name  of  the  healthy  spouse  as  required  for  Medicaid qualification. To  qualify  for Medicaid, a  nursing  home  patient  can keep  only  $1500  in countable  assets.  This  is  usually  kept  in  the  checking  account  where  the  patient’s pension  and  Social  Security  checks  are  deposited.  The  healthy  spouse  may  keep
considerably  more  countable  assets  (with  a  minimum  of  $20,328  and  a  maximum  of 101,640 in 2007). These assets should be placed in the name of the healthy spouse alone “payable on death” to the children.

As long as the healthy spouse continues to live in the house, it is an “exempt” asset for Medicaid purposes regardless of which spouse’s name is on the deed. However, if the ill  spouse  is  on  Medicaid  and  passes  away  with  an  interest  in  the  house,  his  or  her share will be subject to Medicaid Recovery. A lien will be placed on the house which will be collected upon the death of the healthy spouse. Placing the house in the name of the healthy  spouse  before  a  nursing  home  admission  or  application  for  Medicaid  home waiver program may protect the house from Medicaid Recovery.

Once the house is in the name of the healthy spouse, he or she should also execute a new  will  excluding  the  ill  spouse.  If  the  healthy  spouse  should  then  die  first,  the  ill spouse would be required to elect to take only that part of the estate available under the law, preserving at least a portion of the assets for the children.

It seems only natural for most married couples to establish an “I Love You” estate plan, but the financial burdens of a catastrophic illness can quickly change both our lives and our plans. Be prepared.  Review your estate plan with your attorney every two to five years and whenever you have a major life change such as a birth, death, divorce, major illness or disability in the family. It’s the best way to say “I Love You”.