In the past four years, the amount of money administered by South Dakota trust companies has tripled to $121 billion, almost all of it from out of state, according to the state’s Division of Banking.

Some states may have better trust laws when it comes to creating “dynasty trusts.” Knowing the differences between dynasty trust-friendly states can make all the difference if you want to engage in dynasty trust planning for your estate. Believe it or not, sleepy South Dakota is right up there amongst the best dynasty trust jurisdictions. Even if you are not a South Dakotan, did you know that trusts, like businesses, can be set up across state lines with a bit of structuring?

South Dakota has been slowly and quietly building itself up as a trust haven over the years. Those efforts have not gone unnoticed and the secret is out. To learn more about this success story, turn to a recent article in Businessweek titled “South Dakota, Little Tax Haven on the Prairie.”

Not all trusts operate by the same laws because each state has its very own set of trust laws, for a variety of reasons. The South Dakota trust laws are special. Unlike the majority of states, South Dakota does not impose a limit to the duration of a trust. Utah’s “dynasty Trust” is limited to a period of 1,000 years.  Most other state trust laws limit the lifetime of a trust to the lifetime of a living heir plus a period of 21 years. Translation: under the trust laws of most states a well-formed and well-funded trust can allow one generation to help the one immediately below and also leave a bit extra for the second generation (grandparent to parent to grandchild), escaping estate taxation on that amount of those two transfers.

Take away the duration limit and you are not just talking about two transfers, but an intergenerational wealth transfer boon to the family. Instead, you are talking about a true dynastic transfer of wealth, potentially escaping the estate tax at every successive transfer. That is the power a “dynasty trust” provides.

In the end, it may be well worth your time to learn more about the Utah dynasty trust and, perhaps, about South Dakota as a place for settling your family trust (there are a few more advantages to the state).

Before you leap onto a dynasty trust bandwagon, however, carefully consider what you need your trust to accomplish and then investigate whether a state outside your own may be required. States differ, trusts can do different things, and your family is unique. Plan accordingly.

Reference: Bloomberg Businessweek (January 9, 2014) “South Dakota, Little Tax Haven on the Prairie”

Every year, thousands of Medicare patients who spend time in the hospital for observation but are not officially admitted find they are not eligible for nursing home coverage after discharge. A Medicare beneficiary must spend three consecutive midnights in the hospital — not counting the day of discharge — as an admitted patient in order to qualify for subsequent nursing-home coverage.

When is a patient not a patient? Answer: when they are not “admitted,” but just “under observation.” The distinction is critical when it comes to whether care is covered by Medicare. This is especially true when it comes to whether your elderly loved one will have nursing home coverage after discharge from the hospital.

Understanding the meaning of observation status is essential. Once you do, then you will need to learn all the administrative tricks, twists and turns – and, yes, even to know how to fight it.

If you are only starting to look into the world of Medicare and this most precarious transition from hospital to nursing home, then you will want to read a recent New Old Age Blog article titled “Fighting ‘Observation’ Status.” In a rush? Here is what you need to know: to qualify for Medicare nursing home coverage after a stay in a hospital, the patient has to have stayed as an admitted patient for three consecutive midnights, not including the day of discharge. In addition, that is “midnights” not “days,” “admitted” not “under observation,” and a number of additional technical rules the patient, the hospital, and Medicare have to get right.

Anyone with an elderly loved one should understand these Medicare and hospital rules, as well as their rights, in advance of hospitalization. If you are looking for further information beyond the original article, then the Center for Medicare Advocacy is a great resource with free information like their digital “self help packet.”

Reference: The New York Times – The New Old Age Blog (January 10, 2014) “Fighting ‘Observation’ Status”

The number of Americans owning pets is at a record high, and more people are making provisions in their wills to provide for these animals after they’re gone. But to ensure your pet is cared for as you intend, it’s important to set up a pet trust—an arrangement that 46 states permit.

According to the numbers, more and more people are taking in a pet. In fact, from 2010 to 2012, the number of pet-owning households increased from 62% to 68%. Interestingly, more and more people are taking their pets into consideration when it comes to their estate planning.

Maybe you have heard the term “pet trust” before. Utah has a statutory provision authorizing pet trusts under “Honorary Trusts”.  Even if you have, The Wall Street Journal has provided the latest information on planning for your pet and some noteworthy statistics in a recent article titled “More Americans Are Writing Their Pets Into Their Wills.”

You see, with human family members, you can take care of them by giving them an inheritance. On the other hand, you cannot give property to your pet because your pet is property. Nevertheless, you can provide financially for your pet with a pet trust.

After all, the needs of a pet can be simple, but someone needs to care for them. A pet trust is a legal vehicle that can be designed to be there for your pet when you are not, providing a caretaker and financial resources according to your instructions.

Reference: The Wall Street Journal (January 12, 2014) “More Americans Are Writing Their Pets Into Their Wills”

Add this to the scary but improbable things people are hearing could happen because of the new federal health-care law: After you die, the state could come after your house. The concern arises from a long-standing but little-known aspect of Medicaid, the state-federal program that provides health coverage to millions of low-income Americans. In certain cases, a state can recoup its medical costs by putting a claim on a deceased person’s assets.

Medicaid is an important social safety net for those who truly need it. Nevertheless, it is not without its drawbacks and should be understood before using it. For example, “Medicaid Asset Recovery” is one drawback many are just now discovering as the program is expanding under Obamacare.

So, what is “Medicaid Asset Recovery”? In layman’s terms: after you pass away the government can recoup the benefits you received from Medicaid by taking from your remaining assets, which usually means your house.

The Washington Post recently touched upon the new anxiety about the Medicaid Estate Recovery program in an article titled “Little-known aspect of Medicaid now causing people to avoid coverage.” Bottom line: Medicaid Asset Recovery is an important reality for families to understand.

Now, asset recovery has been a part of the Utah Medicaid program since 1985. It has been the means by which the government recoups costs for expensive Medicaid coverage for long-term care, at least when there was no surviving spouse or minor, blind or disabled child involved. However, the law has expanded so states can recoup losses for any Medicaid benefits provided after age 55.

Since it is “Medicaid” (a shared Federal-State program), states vary in their use and tolerance of the asset recovery procedure. Utah Office of Recovery Services successfully recovered almost $17 million of its $2.1 billion dollar Medicaid expenditures through spend down and other collections (such as lien foreclosure) efforts to recover Medicaid costs in 2013.  Nevertheless, as a family member caring for an elderly loved one it does present a potential dilemma between receiving Medicaid benefits and keeping the house. If the house is actually a “home” with sentimental value to the family, or even if it is a valuable property worth bequeathing, then there are many factors to consider and maybe even more alternatives to explore.

In the end, however, the care of an elderly loved one is never less important than their house or some of their other assets. On the other hand, this is a prime example of when your family should consult with an elder law attorney sooner to plan for the best financial and legal solution for your family later on.

Reference: The Washington Post (January 23, 2014) “Little-known aspect of Medicaid now causing people to avoid coverage”