What Can I Do When My Aging Parent Refuses to Give Up Control? – Annapolis and Towson Estate Planning

It’s a common problem for families when a parent in charge of finances develops cognitive impairment and needs help managing the family trust and his own spending. It can be financially dangerous with a stubborn parent.

Forbes’ recent article asks, “What Can You Do When A Stubborn Aging Parent Refuses To Give Up Control?” The article explains what it took one family to get an aging parent out of the position as trustee and to permit the successor, the adult daughter, to take over.

The family saw signs of dementia and a family member’s financial abuse.

The trust provided that the parent could be removed as trustee, if two physicians declared him to be incapacitated for handling his own finances. In that case, a judge’s decision wasn’t required. The doctors verified that the elderly parent was incapacitated to safely handle his money. However, all this takes time.

A parent’s failure to listen to reason and their stubborn refusal to resign as trustee when asked, can cost his children dearly. In that situation, a family may have to engage an attorney to resolve the problem.

Remember that even if your aging parents are fine, there’s no time like the present to ask them to review their estate planning documents with you. Look at the terms that define what happens in the event of “incapacity.” Be sure that all of you understand what would happen, if impaired parents are unwilling to give up financial control and you have to institute the proscribed process to remove control from them.

Those who are named in a trust as the “successor trustee,” must know what that means and how much responsibility is involved. The family needs to recognize that financial elder abuse is a huge problem in our country, and family members are frequently the abusers. If you see abuse, and your elderly parent can’t resist the pressure to give money to any dishonest person, an elder law attorney will be able to give you worthwhile advice on the best approach, as well as the law.

Lastly, in the event your aging parent never created an estate plan, work with an experienced estate planning attorney and ask your parent to get going for the family’s sake. You don’t want to live through the situation described above, with no legal means to stop an impaired parent from financial ruin.

Reference: Forbes (May 7, 2019) “What Can You Do When A Stubborn Aging Parent Refuses To Give Up Control?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Are Some Advantages of Making Lifetime Gifts? – Annapolis and Towson Estate Planning

There are several non-tax advantages of making lifetime gifts. One is that you’re able to see the recipient or “donee” enjoy your gift. It might give you satisfaction to help your children achieve financial independence or have fewer financial concerns.

WMUR’s recent article, “Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

At your death, your property may go through probate. Lifetime giving will help reduce probate and administration costs, since lifetime gifts are typically not included in your probate estate at death.  Unlike probate, lifetime gifts are private.

Let’s discuss some of the tax advantages. First, a properly structured gifting program can save income and estate taxes. A gift isn’t taxable income to the donee, but any income earned by the gift property or capital gain subsequent to the gift usually is taxable. The donor must pay state and/or federal transfer taxes on the gift. There may be state gift tax, state generation-skipping transfer tax, federal gift and estate taxes, as well as federal generation-skipping transfer (GST) tax.

A big reason for lifetime giving is to remove appreciating assets from your estate (i.e., one that’s expected to increase in value over time). If you give the asset away, any future appreciation in value is removed from your estate. The taxes today may be significantly less than what they would be in the future after the asset’s value has increased. Note that lifetime giving results in the carryover of your basis in the property to the donee. If the asset is left to the donee at your death, it will usually receive a step-up in value to a new basis (usually the fair market value at the date of your death). Therefore, if the donee plans to sell the asset, she may have a smaller gain by inheriting it at your death, rather than as a gift during your life.

You can also give by paying tuition to an education institution or medical expenses to a medical care provider directly on behalf of the donee. These transfers are exempt from any federal gift and estate tax.

Remember that the federal annual gift tax exclusion lets you to give $15,000 (for the 2019 year) per donee to an unlimited number of donees without any federal gift and estate tax or federal GST tax (it applies only to gifts of present interest).

Prior to making a gift, discuss your strategy with an estate planning attorney to be sure that it matches your estate plan goals.

Reference: WMUR (April 18, 2019) “Money Matters: Lifetime non-charitable giving”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Do I Need to Know About ABLE Accounts? – Annapolis and Towson Estate Planning

Millions of Americans with disabilities and their families depend on public benefits to help provide income, health care, food and housing assistance. Eligibility for assistance through Supplemental Security Income, SNAP and Medicaid is based upon a resource test, so disabled individuals seeking benefits are typically limited to no more than $2,000 in savings or assets. This can present a difficult problem.

The Achieving a Better Life Experience Act (ABLE) was created as a way to create a tax-advantaged savings tool for individuals with disabilities and their families.

nj.com’s article, “ABLE accounts–A tax advantaged tool for special needs planning,” advises that when used correctly, this overlooked savings account may allow families to build a small nest egg, without affecting eligibility for public program benefits.

An ABLE 529 account is designed to be a savings or investment account to supplement public benefits. It can be a powerful strategy for individuals, who previously were unable to build supplemental funds outside of a trust for their needs. An ABLE account is funded with after-tax contributions that can grow tax-free, when used for a qualified disability expense. The account owner is also the beneficiary and contributions can be made from any person including the account beneficiary, friends, and family.

The ABLE account is available to individuals with significant disabilities, whose age of onset of disability was before they turned 26. A person could be over the age of 26 but must have had an age of onset before their 26th birthday.

Contributions are restricted to $15,000 per year. Because the ABLE account is connected to the 529 plan for education, the total contribution limit is based upon the individual state’s limit for 529 plans. Individuals can have up to $100,000 in an ABLE account, without impacting SSI eligibility. The first $100,000 also does not count toward the $2,000 resource restriction.

A frequently asked question is whether to use an ABLE account or a Special Needs Trust for planning purposes. ABLE are subject to certain limitations that make it impossible, or at least ill advised, to use them instead of a Special Needs Trust. Remember that ABLE accounts can only receive $15,000 in deposits each year, but, in most cases, Special Needs Trusts can receive much larger contributions in a year, once they are funded. This is an important difference for parents who want to leave more substantial assets to their child when they die but don’t want to jeopardize the child’s eligibility for critical services. In that situation, a Special Needs Trust may be more desirable.

When the beneficiary of the ABLE account passes away, any leftover funds in the account are typically reimbursed to the state to defray the costs of providing services during the beneficiary’s life. However, that’s different than a properly drafted Special Needs Trust.

In 2019, ABLE account owners who work but don’t have an employer-sponsored retirement account, can now save up to $12,140 in additional savings from their earnings.

Ask your estate planning attorney about possibly coordinating an ABLE account with a Special Needs Trust.

Reference: nj.com (April 20, 2019) “ABLE accounts – A tax advantaged tool for special needs planning”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys