Estate Planning For The 21st Century

1. Estate Planning For The 21st Century Presenter’s Name Event Date

2. IMPORTANT SLIDE INFORMATION • NAELA Members • The following slides were graciously provided by NAELA Member Rajiv Nagaich from Washington state. NAELA members have permission to reuse these slides for their own firm’s purpose. • Use of the NAELA logo is limited to active NAELA members only. • The slides were created to provide a foundation for presenting information on Estate Planning and Long Term Care Planning and MAY NOT provide accurate or current information for your specific state • To ensure the accuracy of your presentation, you MUST review and update the contents of the slides with your state’s legal requirements

3. Traditional Notions of Estate Planning Who gets what when I die Who manages my checkbook and health needs when I can no longer attend to those needs myself Do I want to be kept alive if I am comatose and cannot communicate

4. ASSUMPTIONS • Go to sleep and not wake up • My agents will know what to do • Biggest issues are: • Providing for quality of life • Avoiding probate • Avoiding estate taxes • Making it easy for beneficiaries

5. Assumptions do not apply today • We are living longer – but not necessarily living healthier • One out of eight Americans over 65 dependent on others for day-to-day living activities • One out of every two Americans over 85 dependent on others for day-to-day living activities Source: Alzheimer’s Disease Facts and Figures, 2007, Alzheimer’s Association

6. Issues Created • Financing health care costs, many of which may not be covered by Medicare or health insurance • Managing Quality of Life

7. Financing Long Term Care • Medicare / Health Insurance • Cover acute care needs • Do not cover chronic care needs • Unless . . . • Where Medicare or Health Insurance leave off: • Private assets (including Long Term Care Insurance) • VA • Medicaid

8. Limitations Long Term Care Insurance is NOT widely embraced VA and Medicaid benefits are limited

9. VA Benefits • Aid and Attendance – non-service connected disability is dependent upon your qualification* up to: • Veteran: $1,645 per month • Spouse of Veteran: $1,057 per month • Married Veteran: $1,945 per month *http://www.canhr.org/factsheets/misc_fs/html/fs_aid_&_attendance.htm

10. Medicaid Benefits • Food, shelter and medicine • Income used as deductible towards care costs; $55.45 / $60.78 /$90.00 per month personal needs allowance [state specific, changes annually – please update with your state’s requirements] • All clients treated the same • DME • Semiprivate rooms • Limited personal care needs What is missing?

11. - Eligibility is Not Automatic Estate Planning

12. VA Eligibility • Service Requirements • 90 days in active duty with 1 day in war time period • World War I: April 6, 1917, through November 11, 1918 • World War II: December 7, 1941, through December 31, 1946 • Korean War: June 27, 1950, through January 31, 1955 • Vietnam War: August 5, 1964 (February 28, 1961, for veterans who served "in country" before August 5, 1964), through May 7, 1975 • Persian Gulf War: August 2, 1990, through a date to be set by Presidential Proclamation or Law. • 24 months if enlisted after September 7, 1980

13. VA Eligibility • 65 years old or permanently disabled • Income less unreimbursed medical expenses less than: • $1,945 for married veteran • $1,645 for single veteran • $1,057 for spouse of veteran

14. VA Eligibility • Net Worth: • Unfortunately, there is no asset limit set by law, and the determination of eligibility can be made at the discretion of a VA caseworker. • All personal goods are exempt from the net worth and include: • the home in which claimant lives; • a vehicle used for the care of the claimant; and • household goods and personal effects such as clothes, jewelry and furniture.

15. Resource Test [state specific, changed every year – please update with your state’s requirements] • Single Applicant: • $2,000 • House (with equity of up to $500,000 [$750,000 in some statee]) • One automobile (any value) • Prepaid funeral plan (irrevocable and of reasonable value) – burial plots for family members • $1,500 cash value in life policy • Personal property (any value) • BUT- Assets subject to state Medicaid lien • Married Applicant: • $2,000 • Spouse of Applicant • House (any value) • One automobile (any value) • Between $74,820 and $109,560 • Prepaid funeral plan (irrevocable and of reasonable value) – burial plots for family members • $1,500 cash value in life policy • Personal property (any value)

16. Who Should Worry? • Middle class Americans • Between $50,000 and $1,500,000 in assets

17. Estate Planning Solutions • Pre-crisis options • Crisis planning options

18. Pre-Crisis Planning • Utilize Special Needs Trusts • Utilize Income Only Trusts

19. Typical Estate Plan (married) Decedent’s share Surviving Spouse’s share Surviving spouse owns all assets Entire estate subject to spend down to access.

20. Way Around the Problem Decedent’s share Surviving spouse’s share To Testamentary Special Needs Trust for surviving spouse Surviving spouse owns only half estate Surviving spouse’s share subject to spend down Special Needs Trust protected

21. Typical Estate Plan (unmarried) Decedent’s estate Assets owned by testator during life Nearly entire estate must be spent down to access VA or Medicaid benefits

22. Way Around the Problem Gift of some assets to irrevocable trust or trusted individual Settlor cannot be a beneficiary of the principal Trustee can provide funds to beneficiary, who can use funds as beneficiary sees fit. Assets in irrevocable trust or Safe Harbor Trust protected (subject to look back period)

23. Pre-Crisis Planning • Update Community Property Agreements (only in community property states) • Revocable by one party • Update Powers of Attorney • Gifting Powers • Care Management mandate • No authority to enter into arbitration agreements • Living Wills • Update Living Wills after Terry Shiavo • Update Health Care Proxy in states where they are separately required

24. Pre-Crisis Planning Discuss your plan with named fiduciaries

25. Crisis Planning • Financing the costs • Medicare • VA • Medicaid • Develop plan to address quality of life issues • Address Estate Planning issues