Clients often come into our office to do "estate planning" for them, which could mean a variety of services. Here is how we divide up the services that most clients may need at one point or another in their lives:
Estate Plan. This type of planning relates mostly to disposition of a person's property. The primary goal is ensure that a client's assets pass to the appropriate persons upon the client's death. Considerations often include the ability of the anticipated beneficiaries to receive such property, children from multiple marriages, and inheritance tax implications for the anticipated disposition scheme. Common questions to this sort of planning include:
1. Who do you want to be your Executor?
2. To whom do you want your property to pass after you die, and in what proportions?
3. Can all of your beneficiaries receive distributions outright?
4. If any of your intended beneficiaries were to predecease you, to whom would you want that share to go in the event of the beneficiary's death (i.e., grandchildren, charity, etc.)?
For example, Bob desires to leave his property to his two sons, equally. However, one of his sons is unable to inherit property due to receiving certain means-tested government benefits. As such, Bob needs a Will which clearly states that his property is to be divided equally, but his Will may also include a support trust, which allows his other son to act as trustee and use those funds for the other son's benefit, without exposing the assets to creditors or otherwise disrupting public benefits.
Long-Term Care Plan. This type of plan involves discussion about the health care supports and services that would be used if the client were to lose some of his or her independence. This discussion is based primarily on the seven (7) activities of daily living, commonly used when evaluating persons with diminished independence. Each family needs at least a rough outline for what kind of care preferences are to be applied if a client becomes less independent. Common questions to this sort of planning include:
1. If you were to become unable to bathe/dress yourself, would you want to employ in-home caregivers or would you desire an intermediate care setting such as personal care or assisted living?
2. If you became unable to transfer yourself within the home, would you desire to move-in with a child or have a child move-in with you?
3. If you could no longer drive, how would you approach obtaining food and meal preparation?
4. Is it your desire to remain at home at all costs, or would you seek an intermediate level of care, such as a personal care home or an assisted living home?
5. If you had to enter a personal care home or assisted living home or skilled nursing home, what would your preference be?
6. What person(s) do you wish to serve as your financial Power of Attorney agent or health care Power of Attorney agent if you were to become less independent?
For example, Bob and Janet now live independently in their home, but they wish to establish some outline now of what will happen if Bob's early stage dementia worsens. They discuss options with their children about moving in with them, or financing an addition to a child's home. They also set up Powers of Attorney documents to ensure that person(s) whom they trust can act as decision-makers if they are unable to act on their own behalves. They discuss these plans with their children so that any transition in the future is handled in a more orderly manner (as opposed to making these decisions once an instigating health event requires them to be made right away).
Wealth Transfer Plan. This type of planning involves the transfer of a client's assets to other persons during the client's life. There can be many reasons for transferring property during life, including (1) avoiding consumption of those assets by long-term care costs; (2) avoiding inheritance taxes; and (3) ensuring certainty of disposition of those items. Common questions to this sort of planning include:
1. What is the property you desire to transfer and to whom do you wish it transferred?
2. What is the reason for transferring the property your child/relative/other?
3. Are you aware of the risks of such transfer (including Medicaid 5-year look-back rule, loss of control, death or bankruptcy of the recipient of the gift)?
For example, Bob desires to transfer his house to his son because Bob is concerned that he may need long-term nursing home care in the future. Issues to be discussed with him are current health, due to potential imposition of the 5-year look-back rule if he were to apply for Medicaid within 5 years. Also discussed are the loss of control of his real estate and potential issues created if Bob's son predeceased him or is sued or declares bankruptcy. After some discussion, Bob decides that an irrevocable trust, as opposed to an outright transfer of the house, is the best option for him.
In conclusion, all clients need some sort of estate plan, aging clients should have some sort of long-term care plan, and some clients may desire a wealth transfer plan. Thinking of the various forms of planning in this context can assist families in dividing up some difficult concepts for consideration.