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“It’s Better Than the Alternative!” (Planning for the health care and financial needs in our aging) (2 hours L/H credit):

C.E. Solutions Tracy Young, CLU, HIA, ALHC 913-980-CE4U(2348) “It’s Better Than the Alternative!” (Planning for the health care and financial needs in our aging) (2 hours L/H credit)

It’s Better than the Alternative!:

2 It’s Better than the Alternative! Review and study this course at your leisure. Once the course is completed, enter the exam through the ClassMarker link at the end of the exam. You must receive a score of 70% or better to pass. You may retake the test at no additional cost as needed. The Insurance Department requires that all exams be taken in the presence of an approved disinterested 3 rd party monitor. Course Certificate will be faxed and sent electronically to the insurance department when notification of a passing score and an affidavit signed by the person monitoring the test is received.

Course Objective :

3 Course Objective We will focus on some of the issues that face an aging population. These concerns may affect your clients, your parents and/or yourselves. We will examine the Durable Power of Attorney, Federal Programs, revocable living trusts and some basic elements of estate planning.

Planning for the Aging (& disabled):

4 Planning for the Aging (& disabled) What kind of decisions must be made in this “time of transition”? Provision for management of the financial affairs of the client or dependent in the event they are unable to do so themselves. Durable powers of attorney. Revocable living trusts. Nominations of persons the individual would want to serve as a guardian or conservator in the event he needs someone to manage his affairs.

Slide 5:

5 www.agingkansas.org/kdoa/senior_info What is an Advance Directive? “A written document that tells doctors and health care providers how you would want medical decisions you have made to be carried out. An Advance Directive will allow you to make decisions about your future health care if you are not able to make those decisions at the time treatment is recommended. It also tells your doctor and loved ones what treatment you want or do not want. There are two basic kinds of advance directives: living wills and durable power of attorney for health care decisions.”

Slide 6:

6 www.agingkansas.org/kdoa/senior_info What happens if I die without a Will? “If you die without a valid will, which is called dying intestate , all of your property, other than what is held jointly, will be distributed among your surviving relatives according to Kansas laws. Your estate will be divided into various portions depending on whether a spouse, child(ren), parent(s) or other categories of relatives survive.”

Planning for the Aging:

7 Planning for the Aging What options are available in providing for support of individuals who are no longer self-supporting (due to age and/or health), and have not accumulated sufficient assets to provide for their cost of living? Health Insurance (Medigap, prescription drug coverage, Long Term Care Insurance). Disability Insurance (Short term, long term, Waiver of Premium benefits). Federal Programs.

Planning for the Aging:

8 Planning for the Aging How can you protect property from claims of the state or federal government? Wills (keeping the property out of probate). Transfer of property (Estate Planning). Charitable Contributions. Freezing Techniques. Generation-Skipping Transfers.

Planning for the Aging:

9 Planning for the Aging When should planning take place? This planning should take place when, or preferably before, there is a real possibility the individual will become mentally or physically incapacitated with age or deteriorating health. The need for this planning will be speculative , as most elderly and disabled persons are able to function without special assistance.

Planning for the Aging:

10 Planning for the Aging What are some tax benefits available to the elderly? From the IRS web page www.irs.gov there is a Tax Counseling for the Elderly (TCE) Program which offers FREE tax help to individuals who are age 60 or older. Last year AARP Tax-Aide helped nearly 1.85 million individuals prepare and file their federal income taxes.

Planning for the Aging:

11 Planning for the Aging What are some tax benefits available to the elderly? Persons over 65 & those who are disabled are entitled to an increase in their standard deduction in filing their income tax returns. Widow & widowers may use joint income tax only in the year their spouse died. Taxpayers who are supporting dependent family members may be entitled to additional dependency exemptions on their income tax returns.

Planning for the Aging:

12 Planning for the Aging What are some tax benefits available to the elderly? Dependent care credit available for certain employment related expenses. Taxpayers (of any age) who sell their personal residences are entitled to exclusion once every two years for up to $250,000 ($500,000 if married filing jointly) of the gain realized on the sale.

Federal Programs:

13 Federal Programs What federal programs are available to assist in providing health care for the elderly and disabled? Social Security Disability Benefits. Supplemental Security Income (SSI). Medicare. Medicaid.

Social Security Disability:

14 Social Security Disability Social Security disability benefits pays when an "insured" individual (meaning that you worked long enough and paid Social Security taxes) determines you to be disabled. Social Security’s definition of disability for adults is different from the definition in other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability . This is a strict definition of disability. www.ssa.gov

Social Security Disability:

15 Social Security Disability Disability under Social Security is based on your inability to work because of a medical condition.  They consider you disabled if: You cannot do work you did before and they decide that you cannot adjust to other work because of a medical condition(s). Your disability must last or be expected to last for at least a year or result in death . Your disability benefits will continue as long as your medical condition has not improved and you cannot work.  Your case will be reviewed at regular intervals to make sure you are still disabled . www.ssa.gov

Social Security Disability:

16 Social Security Disability “Social Security disability benefits begin after you have been disabled for 5 full months .  These 5 months are called the "waiting period ." The length of time it takes to receive a decision on your disability claim is from 3 to 5 months.  It can vary depending on several factors, but primarily on: The nature of your disability; How quickly we obtain medical evidence from your doctor or other medical source; Whether it is necessary to send you for a medical examination in order to obtain evidence to support your claim; and If your claim is randomly selected for quality assurance review of the decision.” www.ssa.gov

Supplemental Security Income:

17 Supplemental Security Income Supplemental Security Income (SSI) is a program financed through general revenues. SSI disability benefits are payable to adults or children who are disabled or blind, have limited income and resources, meet the living arrangement requirements, and are otherwise eligible. The monthly payment varies up to the maximum federal benefit rate, which may be supplemented by the State or decreased by countable income and resources. www.ssa.gov

Medicare:

18 Medicare Medicare - The federal health insurance program for: people 65 years of age or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure with dialysis or a transplant, sometimes called ESRD). www.medicare.gov

Medicare:

19 Medicare Medicare health plans provide different ways to get your health care coverage in the Medicare program. The Medicare health plan that you choose affects many things like cost, benefits, doctor choice, convenience, and quality. Your Medicare health plan choices include: The Original Medicare Plan Medicare Advantage (formerly Medicare + Choice) Plans. If you have one of these plans, you don’t need a Medigap policy. Medicare Advantage Plans include: Medicare Managed Care Plans Medicare Preferred Provider Organization Plans (PPO) Medicare Private Fee-for-Service Plans Medicare Specialty Plans www.medicare.gov

Medicare:

20 Medicare The amount of your coverage is also dependent on whether you have coverage under Medicare Part A, Medicare Part B, or both. Medicare Part A typically pays for your inpatient hospital expenses at no cost except for deductible ($1,156 in 2012) & coinsurance amounts. Part A also provides limited skilled nursing facility, hospice, or post-hospital home health services. www.medicare.gov

Medicare:

21 Medicare Part A For each benefit period you pay: A total of $1,156 for a hospital stay of 1-60 days. $289 per day for days 61-90 of a hospital stay. $566 per day for days 91-150 of a hospital stay (Lifetime Reserve Days). All costs for each day beyond 150 days Skilled Nursing Facility Coinsurance $144.50 per day for days 21 through 100 each benefit period. www.medicare.gov

Medicare:

22 Medicare Medicare Part B (Medical Insurance) helps cover your doctors' services, outpatient hospital care, and some other medical services that Part A does not cover, such as some of the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary . In 2012, Medicare Part B premium is $99.00 per month and the deductible is $140.00 per year (it actually went down)! www.medicare.gov

Medicare:

23 Medicare What is not paid for by Medicare Part A and Part B: The Original Medicare Plan does not cover everything. Health care costs not covered by Medicare will include, but are not limited to: Acupuncture. Deductibles, coinsurance, or copayments when you get health care services. Dental care and dentures (in most cases). Cosmetic surgery. www.medicare.gov

Medicare:

24 Medicare What is not paid for by Medicare Part A and Part B: Custodial care (help with bathing, dressing, using the bathroom, and eating) at home or in a nursing home. Health care you get while traveling outside of the United States (except in limited cases). Hearing aids and hearing exams. Orthopedic shoes. Outpatient prescription drugs (with only a few exceptions). www.medicare.gov

Medicare:

25 Medicare What is not paid for by Medicare Part A and Part B: Routine foot care (with only a few exceptions). Routine eye care and most eyeglasses (see exception above for one pair of standard frames after cataract surgery with an intraocular lens). Routine or yearly physical exams. Screening tests except those listed in Medicare Preventive Services to Keep You Healthy. Shots (vaccinations) except those listed in Medicare Preventive Services to Keep You Healthy. www.medicare.gov

Medicare:

26 Medicare Medicare Preventive Services to Keep You Healthy. One-time “Welcome to Medicare Physical”. Cardiovascular screening (Doctor-recommended) Breast cancer screening Cervical & vaginal cancer screening Colorectal cancer screening Prostate cancer screening Shots (flu, pneumococcal, Hepatitis B) Bone mass measurement for osteoporosis Diabetes screening, supplies & self-management training Glaucoma tests www.medicare.gov

Medicare Supplement:

27 Medicare Supplement What is medigap insurance? A Medigap policy (Medicare Supplement) is a health insurance policy sold by private insurance companies to fill the “gaps” in the Original Medicare Plan. Medigap policies help you pay some of the health care costs that the Original Medicare Plan doesn’t cover. If you are in the Original Medicare Plan and have a Medigap policy, then Medicare will pay its share and your Medigap policy will pay its share of your health care costs. www.medicare.gov

Medicare Supplement:

28 Medicare Supplement Insurance companies can only sell you one of the standardized Medigap policies. Medigap policies are standardized so you can compare them easily. Two of the standardized Medigap policies may have a high deductible option. In addition, any standardized Medigap policy may be sold as a Medicare SELECT policy (except for Massachusetts, Minnesota, and Wisconsin). Medigap policies must offer the same benefits within Medigap plans. www.medicare.gov

Medicare Supplement:

29 Medicare Supplement MEDICARE SELECT Is a type of Medigap policy that may require you to use hospitals and, in some cases, doctors within its network to be eligible for full benefits. www.medicare.gov

Medicare Supplement:

30 Medicare Supplement You and your spouse must buy separate Medigap policies. Your Medigap policy won’t cover any health care costs for your spouse. As long as you pay your premium to the Medigap insurer, your Medigap policy is guaranteed renewable . This means it is automatically renewed each year. Your coverage will continue year after year as long as you pay your premium. www.medicare.gov

Medicare Supplement:

31 Medicare Supplement You have to purchase Medicare Part D (Prescription Drug Benefit) separately. You can buy your Prescription Drug Benefit from a different company than you buy your Medicare Supplement from. www.medicare.gov

Medicaid:

32 Medicaid Medicaid is a program that pays for medical assistance for certain individuals and families with low incomes and resources. This program became law in 1965 and is jointly funded by the Federal and State governments to assist States in providing medical long-term care assistance to people who meet certain eligibility criteria . Medicaid is the largest source of funding for medical and health-related services for people with limited income. www.cms.hhs.gov/medicaid

Medicaid:

33 Medicaid Many groups of people are covered by Medicaid. Even within these groups, though, certain requirements must be met. These may include your age, whether you are pregnant, disabled, blind, or aged; your income and resources (like bank accounts, real property, or other items that can be sold for cash); and whether you are a U.S. citizen or a lawfully admitted immigrant. www.cms.hhs.gov/medicaid

Medicaid:

34 Medicaid National data for 2000, indicate that Medicaid payments for services for 21.6 million children , 50% of all Medicaid beneficiaries, average about $1,290 per child (a relatively small average expenditure per person). For 9.6 million adults , who comprise 22% of beneficiaries, payments average about $1,930 per person. However, certain other specific groups have much larger per-person expenditures. Medicaid payments for services for 4.1 million aged , constituting 10 percent of all Medicaid beneficiaries, average about $11,345 per person; For 7.5 million disabled , who comprise 18 percent of beneficiaries, payments average about $10,040 per person. When expenditures for these high- and lower-cost beneficiaries are combined, the 2000 payments to health care vendors for 42.8 million Medicaid beneficiaries average $3,935 per person. www.cms.hhs.gov/medicaid

Medicaid:

35 Medicaid What are resources and how do they affect eligibility? The limit in cash and cashable assets for one person is $1,999 for KS, $999 for MO. Resources include checking accounts, savings bonds, stock, some jewelry, savings accounts and other valuables. When only one member of a couple resides in a Medicaid certified nursing facility or receives home and community based waiver services, other special resource rules apply. www.health.state.mo.us/Senior_Services

Medicaid :

36 Medicaid What resources are not counted? “Household equipment and furnishings, property (up to $500,000) used solely as a home, personal property, one vehicle (plus more if it is needed for employment, to obtain medical care, or is specially equipped for a handicapped person), life insurance having a face value of no more than $1,500 per person and resources designated for burial as approved by Division of Family Services are not counted.” www.health.state.mo.us/Senior_Services

Medicaid:

37 Medicaid What is “spend down”? Spend down is a Medicaid program in which you have an amount that you must pay or reach each month before you can have Medicaid coverage. It is similar to an insurance premium. How do I pay my spend down? There are three ways you can reach your spend down and get coverage. You must choose only 1 option. Option 1: You may send a payment (check, money order, or cashiers check) to the Division of Medical Services. www.dss.missouri.gov

Medicaid:

38 Medicaid How do I pay my spend down? There are three ways you can reach your spend down and get coverage. You must choose only 1 option. Option 2: You may have a payment taken out of your bank account each month by the Division of Medical Services to pay for your spend down. Option 3: You may get medical services to reach the spend down amount. When the amount of the services you get reaches your spend down amount, you must give the bills to your caseworker at your local Family Support Division office. www.dss.missouri.gov

Medicaid:

39 Medicaid Transfer of Assets: Congress does not want you to move into a nursing home on Monday, give all your money to your children on Tuesday, and qualify for Medicaid on Wednesday! So … they impose strict limits on transfers of assets to achieve Medicaid eligibility. The penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid.

Medicaid:

40 Medicaid Any assets transferred to a trust (no matter what the date) within the last 5 years are considered an available resource. Assets in a revocable trust are presumed available resources, regardless of when it was created. Assets in an irrevocable trust can be resources if payment could be made to the individual from the trust (5 year look-back would apply).

Medicaid:

41 Medicaid Nursing Home Care: A resident covered under this program is expected to use all available income to pay for care except for a personal needs standard (usually $60 per month). The recipient may also keep enough to pay medical insurance premiums. www.dss.mo.gov

Medicaid:

42 Medicaid THE FEDERAL SPOUSAL IMPOVERISHMENT PROVISIONS (5/04) The spousal impoverishment provisions of the Medicaid program permit a husband and wife to protect a portion or all of their combined income and resources when one of them requires long term care in an institutional or home-and community-based services setting. The amount protected is intended for the use of the person who remains at home. At the same time, these provisions help the spouse needing long term medical care to qualify for Medicaid benefits which can help in paying for that care. www.srskansas.org

Medicaid:

43 Medicaid THE FEDERAL SPOUSAL IMPOVERISHMENT PROVISIONS (2007) In regards to resources , the amount of the couple's nonexempt resources owned which can be protected is the greater of: $10,328, or ½ of the value of the couple's nonexempt resources owned at the time the husband or wife first entered long term care, not to exceed $101,640. Only nonexempt resources are considered. This would include such things as checking and savings accounts and land or buildings other than an exempted home. The protected resources must usually be transferred to the spouse in the community and are not considered in determining the eligibility of the person in long term care. The $10,328/$101,640 allowance limits are subject to change annually due to increases in the federal consumer price index. www.srskansas.org

Medicaid:

44 Medicaid What is a special needs trust? Established by clients who have children who are disabled and are receiving SSI benefits, or other forms of state or federal assistance. Permits the parents to furnish some economic benefits to their children without disqualifying them for public assistance. The device may also be used to provide for elderly persons who are disabled, such as a parent. Permits payments by the trustee to cover needs of the disabled person, which do not affect his eligibility for public assistance.

Medicaid:

45 Medicaid May an individual or his spouse waive or forfeit pension rights to become eligible for Medicaid? No. Any waiver of pension income, inheritances, or damage claims, as in personal injury suits is ineffective. Will amounts paid to family members who are furnishing personal care for an individual be counted as resources? While reasonable payments for personal care are not viewed as gifts for Medicaid purposes, payment for past services are viewed with suspicion.

Durable Power of Attorney:

46 Durable Power of Attorney From the ‘Lectric Law Library at www.lectlaw.com/files/est06.htm “Many of us feel a well-grounded fear that we may someday become seriously ill and unable to handle our own affairs. Who would act on our behalf to pay bills, make bank deposits, watch over investments and deal with the paperwork that accompanies collecting insurance and government benefits? Preparing a document called a durable power of attorney for finances is a simple, inexpensive and reliable way to ensure that your finances stay in the hands of a trusted person you choose. It's also a wonderful thing to do for your family members.”

Durable Power of Attorney:

47 Durable Power of Attorney Principal (A Competent Adult) Holder of the Power (Attorney-in-Fact) A power of attorney is a written document which one person (the principal) uses to empower another person (the attorney-in-fact or “holder” of the power) to act on his or her behalf.

Durable Power of Attorney :

48 Durable Power of Attorney From NC State University “Planning Your Estate” webpage http://www.ces.ncsu.edu/depts/fcs/estates/dpoa.html “You may name your spouse, an adult child, a relative, or trusted friend to be your agent. You should choose someone you trust completely. The actions of your agent authorized by your power of attorney are considered legally to be your actions.”

Durable Power of Attorney :

49 Durable Power of Attorney When would you need a Durable Power of Attorney? When the principal is aging and there is a significant chance that he will become senile. The use of a broadly drawn Durable Power of Attorney may keep you from receiving a court-appointed guardian to handle your assets. When an individual is suffering from a physical disability that could leave him incapacitated.

Durable Power of Attorney :

50 Durable Power of Attorney When might you need a Durable Power of Attorney? In all situations where an individual desires to provide for the continuity of the management of his or her assets. This could be in the event he is unable to manage his assets for a short or long durations of time because of physical or mental incapacity. It permits the individual, when competent, to make a determination of who will handle his affairs.

Durable Power of Attorney :

51 Durable Power of Attorney Other reasons for a Durable Power of Attorney… To provide for management of assets when out of country (Services, extended travel, etc.) As a temporary and expedient substitute for a living revocable trust. As an addition to the revocable living trust, to provide flexibility. To avoid the necessity of legal proceedings to establish a legal guardianship or conservatorship for an individual who may face short or long-term incapacity.

Durable Power of Attorney :

52 Durable Power of Attorney What are the Requirements? The principal (the one giving the Power) must be of legal age and competent at the time the power is given. The attorney in fact (the one receiving the Power) must be of legal age at the time the power is exercised . The Power of Attorney must include the words “this Power of Attorney shall not be affected by subsequent disability or incapacity of the principal” … Or similar words showing the principal’s intent that the authority is “durable” and given regardless of whether or not he subsequently becomes disabled or incapacitated.

Durable Power of Attorney :

53 Durable Power of Attorney What powers can be given in a broadly drawn Durable Power of Attorney? The right to execute all tax returns on behalf of the principal, including income and gift tax returns. The power to make gifts on behalf of the principal (thereby possibly reducing the principal’s estate for Federal Estate Tax purposes) The right to elect to treat gifts made by the competent spouse as split between the competent spouse and the incompetent principal for federal gift tax purposes.

Durable Power of Attorney :

54 Durable Power of Attorney What powers can be given in a broadly drawn Durable Power of Attorney? The right to buy or sell real estate. The right to invest in stocks, bonds or other securities. The right to sue on behalf of the principal. There are a few powers, however, that the principal may not delegate. For example, the agent cannot prepare a will, vote, or seek a divorce on the principal's behalf.

Durable Power of Attorney :

55 Durable Power of Attorney Can there be more than one attorney-in-fact under a Durable Power of Attorney? Yes, but be careful in drafting the Power of Attorney. If it is written John Doe and Mary Roe as the holders of the Power, then both must act together in order to operate. If written John Doe or Mary Roe, either of them to act in place of the principal … then each person can act independently. Power of Attorney should provide for successor “attorneys-in-fact” in the event of the primary attorney’s death or inability to serve.

Durable Power of Attorney :

56 Durable Power of Attorney Does a Power of Attorney terminate upon disability? A Power of Attorney, which is not a “ Durable Power of Attorney”, terminates upon disability. Actions taken by the attorney-in-fact when he is unaware of the principal’s disability are binding upon the principal. A Durable Power of Attorney by its very definition survives and continues and is not affected by subsequent disability or incapacity of the principal.

Durable Power of Attorney :

57 Durable Power of Attorney Does the death of the principal terminate a Durable Power of Attorney? Yes. However, if the attorney-in-fact has not had notice of the death of his principal, any actions taken under the Power are binding.

Durable Power of Attorney :

58 Durable Power of Attorney How do you revoke your Durable Power of Attorney? Your death revokes your power of attorney. You may provide a method for revoking it in your power of attorney. You may destroy the power of attorney if you are competent. If you are competent, you may revoke your durable power of attorney by a written document that is signed, notarized, and sent to your agent by certified or registered mail. If you have registered the Durable Power of Attorney, you may revoke your durable power of attorney by filing a written revocation in the register of deeds office where you filed your power of attorney. You must serve notice of the revocation on your agent.

Durable Power of Attorney :

59 Durable Power of Attorney What is the relationship between the “ attorney-in-fact ” under a Durable Power of Attorney and a court appointed guardian for the incompetent? The Durable Power of Attorney continues in operation even if there is an appointment of a guardian for the incompetent. However, the guardian of the incompetent appointed by the Court has the same rights as the principal and can terminate the Durable Power of Attorney on behalf of his ward, the incompetent.

Durable Power of Attorney :

60 Durable Power of Attorney What is a “springing” power of attorney? Four-fifths of the states (including Kansas & Missouri) recognize a particular form of durable power of attorney known as the “springing power”. The typical durable power of attorney takes effect upon execution. Clients who are reluctant to grant another person wide powers to act at a time when the principal is capable of acting may prefer to use a springing power. A springing power becomes effective upon the occurrence of a specified event such as physical or mental incapacity or disappearance.

Durable Power of Attorney :

61 Durable Power of Attorney What are the drawbacks to a “springing” power of attorney? A springing power of attorney needs a method for determining if you are incapacitated so that third parties know they can rely upon your agent's authority. It can be difficult in establishing when the principal is incompetent. Clear and precise language in the instrument defining the contingency and creating an objective mechanism for determining whether it has actually occurred is necessary. Reluctance on the part of banks, hospitals and other organizations to accept a document granting broad powers over property if that document was executed a number of years prior to the date when it “springs”. All powers of attorney should be revised at least every three years.

Durable Power of Attorney :

62 Durable Power of Attorney What is durable power of attorney for health care? A document in which the principal gives the attorney-in-fact the power to make health care decisions for the principal in the event the principal is not legally competent. The extent of the permissible powers varies according to state law. Usually, it authorizes the attorney-in-fact to consent to medical treatment, including surgical procedures. In Kansas & Missouri, both powers can be contained in the same document. Because these two documents convey such divergent authority to one person, many seniors choose a different person for each of these powers.

Durable Power of Attorney :

63 Durable Power of Attorney What is durable power of attorney for health care? A controversial aspect is the extent to which it authorizes the termination of treatment or life support where the principal is terminally ill or is in a “persistent vegetative state”. Some states have it a separate legal document and require more formality in execution than the durable power for management of property requires. Other states combine the two powers in a single document.

Durable Power of Attorney :

64 Durable Power of Attorney The attorney-in-fact can make gifts on behalf of the principal (this issue causes the most tax and family controversy). Usually, the principal is elderly &/or seriously ill and not legally competent. The attorney-in-fact may propose to make a series of gifts that fall within the annual exclusion ($12,000) to reduce the principal’s taxable estate.

Durable Power of Attorney :

65 Durable Power of Attorney Making a gift as Durable Power of Attorney… The IRS requires that gift-giving be clearly authorized in the power of attorney itself, or under state law pertaining to the durable powers, the gifts are incomplete for federal tax purposes and still included in the taxable estate of the principal. If the durable power of attorney is drafted to permit the attorney-in-fact to make gifts, consideration should be given to whether or not the power holder can make gifts to himself. If it’s a close family member, and he can make gifts to himself, the power could be deemed a general power of appointment for federal tax purposes, and the failure to exercise the power could be a taxable gift!

Revocable Trust:

66 Revocable Trust What is an inter vivos trust? A living trust is a relationship, created during the lifetime of the grantor (the person establishing the trust) … One party (the trustee) holds property for the benefit of another (the beneficiary).

Revocable Trust:

67 Revocable Trust “You might think of a (revocable) trust as being like a bucket into which you place your various assets. You continue to own all of the assets in the bucket and can remove them at anytime. Another analogy might be to compare the trust with a house. The assets which you place into the trust are similar to the furniture that you place in the house. While you are alive, you are the owner of the house and are free to put items in and take items out at will. Another analogy might be to compare the trust to a company in which you own all the stock and serve as president.” www.estateplanningoffice.com

Revocable Trust:

68 Revocable Trust How long does an inter vivos trust last? A limited period of time … Until an occurrence or nonoccurrence of a specific event … or It may continue after the death of the grantor.

Revocable Trust :

69 Revocable Trust What makes a “revocable” trust unique? The grantor retains the right to revoke the trust, or change its terms. The grantor may regain possession of the property in the trust.

Revocable Trust :

70 Revocable Trust When does a revocable trust become irrevocable? When the grantor, during his lifetime, relinquishes title to property placed in the trust. When the grantor gives up all right to revoke, amend, alter or terminate the trust. When the grantor dies.

Revocable Trust - Why would you use one?:

71 Revocable Trust - Why would you use one? Delegate management responsibility. Continuity of management and income flow of a business or other assets. Secure investment advice. Protection against his own or his beneficiary’s legal incompetence or physical incapacity. Privacy in the handling and administration of assets during lifetime and at death. Minimize estate administration costs and delay at death. See the trust (and the trustee) in operation. Avoid administration of assets situated in other states by placing title in the trustee. Reduce the potential for an election against, or contest of the will. Select the state law under which the provisions of the trust will be governed.

Revocable Trust :

72 Revocable Trust Must be legally competent … also known as a settlor or trustor … Any person who transfers property to and dictates the terms of a trust. Grantor:

Revocable Trust :

73 Revocable Trust Must be legally competent. A party to whom property is transferred by the grantor, who receives legal title to the property placed in the trust … Who generally manages and distributes income according to the terms of a formal written agreement (a trust instrument) between the grantor and the trustee. Trustee:

Revocable Trust :

74 Revocable Trust A party for whose benefit the trust is created and who will receive the direct or indirect benefit of the use of income from &/or principal of the trust property. Beneficiary:

Revocable Trust :

75 Revocable Trust (Also called Principal or Trust Estate) This is the property held under the terms of the Trust. For example, if you transfer $1,000 into a Trust, the $1,000 is the corpus, principal or Trust estate. Corpus

Revocable Trust :

76 Revocable Trust Income Beneficiary The beneficiary who receives income, generally for life or for a fixed period of years or until the occurrence or nonoccurrence of a particular event. Remainder Person The ultimate beneficiary of trust property. Can also be for the specified period of time the “income beneficiary”.

Revocable Trust :

77 Revocable Trust How is the trust taxed? For Federal income tax purposes, all income is taxed to the grantor at his tax rate, since he is considered owner of the trust corpus. No gift tax is generated by establishing or funding a revocable trust since the gift is not completed until the trust becomes irrevocable . Since the grantor has not irrevocably disposed of any assets, the entire trust corpus will be included in the grantor’s estate for federal estate tax purposes.

Revocable Trust :

78 Revocable Trust Creating a revocable trust will avoid probate only when the title of assets are transferred to the trust. Create the trust, but follow-through by changing the beneficiary of life policies, investments, and other policies to be in the name of the trust.

Revocable Trust :

79 Revocable Trust From moneycentral.msn.com “ The Basics Living trusts are hot, but you may not need one” By Ginger Applegarth “A word of caution: Many people set up revocable trusts but never get around to transferring assets into them -- the trust is merely an empty shell. Changing the name on an asset is easy. Leaving it unchanged if you don’t have a durable power of attorney is a huge financial mistake.”

Revocable Trust :

80 Revocable Trust “By avoiding probate, you may save upwards of 2% of your assets , or you may be able to use a family member or close friend who will charge very little or nothing. On the other hand, if you set up a living trust to avoid probate costs, you should check out the going rates for area law firms and professional executors. Consider possible expenses carefully: The cost of setting up the trust may be more than the probate costs that you would avoid.” From moneycentral.msn.com “ The Basics Living trusts are hot, but you may not need one” By Ginger Applegarth

Revocable Trust :

81 Revocable Trust What may happen to a revocable trust when the client dies? Assets may be paid directly & immediately to the named beneficiaries and the trust can be terminated. The trustee is individually responsible for payment of any estate tax if assets have been transferred out of the trust and there are not sufficient assets left to pay the estate tax. Many trustees require the retention of a certain amount to cover this.

Revocable Trust :

82 Revocable Trust … What may happen to a revocable trust when the client dies? The trust can continue, as an irrevocable trust, and serve as a receptacle to receive assets poured into it. Assets in the trust can be consolidated with another trust. Assets in the trust at death are subject to federal estate tax, which will be based on the value as of the date of death.

Revocable Trust :

83 Revocable Trust Disadvantages of a Revocable Living Trust Expense of planning — It is more complicated than a will to draft, and asset transfers can take time and result in various additional costs. Expense of administration — If you appoint a bank or trust company as trustee, you will have fees to pay (though these may take the place of investment advisory fees and other fees you are already paying); if you do not, someone will still have to take the time to maintain the trust, and under State law that person would be entitled to a reasonable fee. One way or the other, setting up a revocable living trust will mean significant professional fees in the future. www.wsba.org

Revocable Trust :

84 Revocable Trust Disadvantages of a Revocable Living Trust Inconvenience — Once the trust is established, you must be sure that trust books are maintained and that all assets continue to be registered to the trustee; persons dealing with the trustee (such as banks and title insurance companies) may want to review the trust instrument to check on the trustee's powers and duties. Protection of assets — If you are worried about litigation or creditors, a probate personal representative may be better able to protect your assets; the same applies to guardianship. www.wsba.org

Revocable Trust :

85 Revocable Trust Disadvantages of a Revocable Living Trust Unforeseen problems — Revocable living trusts can raise a variety of new problems regarding title insurance coverage, real estate in other countries, Subchapter S stock, and many other issues. Only a skilled attorney or other estate planning professional can tell you whether, on the whole, a revocable living trust is right for you, your family and your assets. www.wsba.org

Selecting a Trustee What factors should be considered in selecting a trustee? :

86 Selecting a Trustee What factors should be considered in selecting a trustee? Good business judgment. Honesty. Integrity. Able and willing to exercise a high degree of care over trust property. Stable & dependable. Legal capacity to contract (not a minor or incompetent). Avoid investment or acts which are likely to result in losses. Geographical considerations. Has the time & energy.

Selecting a Trustee What factors should be considered in selecting a trustee? :

87 Selecting a Trustee What factors should be considered in selecting a trustee? The type and size of assets to be placed into the trust as well as the client’s goals to consider. Investment skills. Relationship between trustee & beneficiaries. Prudence in dealing with the property. Administrative and legal skills. Knowledge. Accounting skills. Age & physical condition of individual.

Selecting a Trustee :

88 Selecting a Trustee What are the advantages of having a family member, close friend, or business associate be the trustee? They have working knowledge of the client, family, finances and the business. They may have a high degree of intimacy with the family's personal and financial status. They should be familiar with the workings of the small or closely-held business. They may serve without compensation. Hopefully, they have the respect of family members.

Selecting a Trustee :

89 Selecting a Trustee What are the disadvantages of having a family member, close friend, or business associate be the trustee? The individual trustee is human. Illness, personal or business problems and death can destroy the relationship. If the individual does not possess knowledge in key areas of trust administration, the fees of accountants, attorneys, and investment counsel could be more than the charges of a trust company. The family relative who serves as trustee could see his family relationship destroyed because of arguments over favoritism.

Selecting a Trustee :

90 Selecting a Trustee Because there may be conflicts of interest when a family member is the trustee, what questions should you ask? Will the trustee favor other beneficiaries at his own expense? Will the fees charged by a family member as trustee be understood and accepted without resentment, or will it cause conflict? Will the trustee’s “hard choices” injure family relationships? Is the trustee likely to show favoritism or be easily persuaded? Can an untrained individual deal with the functions of being a trustee?

Selecting a Trustee :

91 Selecting a Trustee When is a corporate trustee indicated? Where it is likely that the trust will span more than one generation. When the amount placed into the trust is large &/or will require skillful and constant attention If there is likelihood of family conflict.

Selecting a Trustee :

92 Selecting a Trustee What are the advantages to a corporate trustee? Guaranteed experience. Greater resources available at its disposal than individual. Does not get sick or go on vacation. Regulation internally and externally gives a level of assurance of the trustee's independence and honesty. Impartial decision making.

Selecting a Trustee :

93 Selecting a Trustee What are the disadvantages to a corporate trustee? Too expensive for smaller trusts. Trust officer may be unfamiliar with the special needs of a beneficiary. Does not possess the ability to manage closely-held businesses.

Revocable Trust :

94 Revocable Trust When would you NOT want a revocable living trust? When there is no specific reason to set it up other than to save probate and administration costs. When the client is not likely to follow through with the retitling of property and other prerequisites and operating procedures. Stock in a professional corporation cannot be transferred to a revocable trust, because of the prohibition against ownership by anyone other than a professional. The client’s estate is modest, the mortgage paid off and there is no reason to keep probate proceedings private. A less complex, less expensive durable power of attorney may satisfy the need.

Charitable Contributions:

95 Charitable Contributions Charitable Contributions … Gifts of property to charitable, religious, scientific, educational or other specified organizations that provide: Income tax deductions. Reduction in federal estate taxes. No federal gift tax. Charity pays no tax on gift, or income earned by the gift. Split-interest trust that gives to both charitable & non-charitable beneficiaries.

Charitable Contributions:

96 Charitable Contributions A charitable contribution is a donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting to get, anything of equal value. Qualified organizations . Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. Department of Treasury Publication 526 www.irs.gov

Charitable Contributions:

97 Charitable Contributions Deductible Charitable Contributions Money or property you give to: Churches, synagogues, temples, mosques, and other religious organizations. Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt). Nonprofit schools and hospitals. Public parks and recreation facilities. Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts, Girl Scouts, Boys and Girls Clubs of America, etc. War veterans’ groups. Expenses paid for a student living with you, sponsored by a qualified organization. Out-of-pocket expenses when you serve as a qualified organization as a volunteer. Department of Treasury Publication 526 www.irs.gov

Charitable Contributions:

98 Charitable Contributions NONDeductible Charitable Contributions … Money or property you give to: Civic leagues, social and sports clubs, labor unions, and chambers of commerce. Foreign organizations (except certain Canadian, Israeli, and Mexican charities). Groups that are run for personal profit. Groups whose purpose is to lobby for law changes. Homeowners’ associations. Individuals. Political groups or candidates for public office. Cost of raffle, bingo, or lottery tickets. Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups. Tuition. Value of your time or services. Value of blood given to a blood bank. Department of Treasury Publication 526 www.irs.gov

Charitable Contributions:

99 Charitable Contributions Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. Department of Treasury Publication 526 www.irs.gov

Charitable Contributions:

100 Charitable Contributions Athletic events. If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. In that case, subtract the price of the tickets from your payment. 80% of the remaining amount is a charitable contribution. Left click to proceed Department of Treasury Publication 526 www.irs.gov

Estate Planning:

101 Estate Planning Generation Skipping Transfers Utilizes the $5,12000,000 dollar exclusion (per donor/to a trust/once-in-a-lifetime only) to pass on wealth to a skip generation. This is in addition to the $13,000 annual exclusion. (Per donee/annual). There are no gift taxes paid . Saves Federal & estate tax by keeping property out of taxable estates of intermediate generation (Adult Child). Beneficiary can be trustee (Child) & enjoy income & control of property (as long as they do not have general power of appointment).

Reference Page:

102 Reference Page The Tools & Techniques of Estate Planning … Used with permission from the National Underwriter Company. Social Security web page www.ssa.gov Medicare web page www.medicare.gov The New England Journal of Medicine website www.content.nejm.org National Center for Health Statistics The Association for Advancement of Retired People www.aarp.org IRS web page www.irs.gov Kansas Dept of Social and Rehabilitation Services www.srskansas.org

Thank you!:

103 Thank you! At this time, you may enter the ClassMarker website at http ://www.authorstream.com/Presentation/cesolutions-1105757-online-it-s-better-than-the-alternative/ For password type: ces2010 Click on Enter. Provide the details requested on the following page. Click on “Start Test”. There is no time limit, however if you leave the test for some time, it may require you to begin again. It will show you (and I as the provider) your test results. Upon completion of the test, call me at 913-980-2348 , and I will have you fax your signed affidavit to me. My FAX number is 816-987-0461. Upon receipt, I will fax your certificate to you and file the results with the Insurance Department!

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