Using Utah Trust Funds To Purchase A Home

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As interest rates rise, more children of high-net-worth families are likely to tap into their trust funds to buy a home.

Buying a home in Salt Lake City or anywhere in Utah means chaining yourself to a mortgage and the financial institution holding it. This arrangement is oftentimes considered a necessary evil of adulthood. But then again, when there are trust funds available to help, buying a home might not be such a necessary evil at all.

Under the right circumstances, trusts may be tapped to assist you and your loved ones, even when it comes to bypassing the bankers and buying a home. This is more and more useful as interest rates rise.

Whether you are the beneficiary of a trust or just out to settle one, you will want to read a recent article in The Wall Street Journal titled “Tapping the Trusty Trust Fund to Buy a House.”

Essentially, a trust can operate in much the same manner as a bank, but without much of the onerous rates, rules, liens and stress. As a trust beneficiary, you can approach the trust for a “mortgage” in the form of a loan from the trust and the trustee can even grant the loan at little or no interest. Sometimes, you can even ask for a full distribution from the trust to finance the whole transaction.

In any event, your access to the trust funds is up to the trustee as guided by the rules of the trust itself. You see, some trusts are not designed to permit this for a variety of reasons, some known only to the person who established the trust. In addition, the trustee may have the interests of other trust beneficiaries to consider. Moreover, the fiduciary needs to consider the investment quality and profitability of the trust.  Nevertheless, if there are no such limitations, then having access to trust funds can be a great blessing.

Depending on the language of the trust and your unique circumstance, the trust itself may be engineered specifically to own the house. Properly structured, ownership by the trust can provide important asset protection from potential divorces, lawsuits and bankruptcies. Alternatively, Qualified Personal Residence Trusts (QPRTs) and Intentionally Defective Grantor Trusts (IDGTs) can be extremely valuable in this regard, even though normally we talk about them in the context of transferring the family home.

If you are ready to create a trust for your beneficiaries, or perhaps are looking for creative ways to help your loved ones buy their first home, these are some options to explore.

Reference: The Wall Street Journal (September 19, 2013) “Tapping the Trusty Trust Fund to Buy a House”

Debts And Death in Utah – What You Should Know

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Coping with the death of a loved one is difficult enough without the added pressure of creditors calling you to collect on the deceased person’s credit card debt. But can a bank collect a credit card debt owed by your deceased parent or spouse?

By and large, we talk about probate as an unfortunate process. True, probate can put some undo stress on an already stressful family situation, even when there is no disagreement regarding how assets of the decedent are to be distributed. That said, probate can be utterly necessary and even useful when there are debts in the estate picture.

For example, when a creditor makes calls to the decedent’s relatives, it is a simple matter to refer them to the personal representative of the decedent.  This will provide a platform for the sorting out of debts that are legitimate and those debts that are erroneous or simply incorrect.  The personal representative is granted time by the statute to do the sorting, thus relieving the pressure imposed by the collection agent.

So, how do you handle debts after death? It is a practical question, after all. Few of us leave this life without something lingering in our accounts payable. Unfortunately, too many families do not know which debts live on after their loved ones are gone.

Fortunately, MoneyTalkNews took up this matter in a recent article titled “Debt After Death: 10 Things You Need to Know.”

The central bit of wisdom to take away from the article is the difference between the one who took on certain debts (the decedent) and their heirs. Problems arise, however, when they have muddied that boundary. Generally, when the debtor passes away, their debts do not transfer to their heirs or family members. The debts fall to the estate and the probate process.

As a court proceeding, officially, probate varies in some respects. Nevertheless, probate is the proper forum to deal with debts after death. This is the period when creditors can make their claims.  The probate procedure in Utah allows for the publication of Notice to Creditors.  The notice is published in a newspaper of general circulation for three consecutive weeks.  The notice provides the name and address of the personal representative, the attorney for the personal representative and the court. If the creditor fails to present its claim within 90 days of the date of first publication of the Notice to Creditors, the creditors claim may be forever barred.  As a result, everything should be done to ensure that creditors get funneled into the probate process without disturbing the family.

More specifically, creditors should be pointed to the executor. In addition, all avenues of credit and credit reporting should be informed and closed off. Of course, there are certain types of assets when heirs really are on the hook, especially when it comes to assets for which the heirs have co-signed.

Take a look at the 10 tips in the original article and be sure to follow them, because creditors are not always honest. Some creditors are not ashamed to pester a grieving family.

Reference: MoneyTalkNews (October 7, 2013) “Debt After Death: 10 Things You Need to Know”

Talking To Your Adult Children About Your Finances

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Talking to your adult kids about your finances and how you plan to divvy up your money after your death may be one of the most important conversations you’ll ever have. It gives you the chance to tell the kids how you want your estate to be handled. It lets your kids know whether they need to worry about supporting you in your old age or whether they’ll get help paying for their children’s college education. And it sets them straight as to whether they will get a windfall, a topic that can be a huge disconnect between parents and children.

So, you have committed your estate plan to writing. It has been signed, witnessed and notarized. Done? Not so fast. Talking now with your kids and family is the best way to give life to your estate plans.

The heavy legal work of estate planning is done in ink and paper, often also in a banker’s ledger and insurance company’s books. However, the heart and even much of the practical work is done in conversation with your loved ones.  This is, along with the conversation about the birds and bees, is one of the most difficult conversations to have with your children.  So how do you start and go about this talk?

This is a difficult subject, but fortunately it is one for which there is much advice. Consider a recent Kiplinger article titled “The Family Money Talk You Must Have.”

That article gives both pithy advice and stories to back it up. The key lesson is to stop avoiding the topic, but to engage it head on. There are many reasons to avoid the family wealth and estate planning topic. Every family has its own dynamics.

Maybe you do not know how to say there is an “estate.” After all, you may have kept your financial condition close to the vest over the years. All the same, what is unknown cannot be planned, either by you (the one establishing the plan) or by the heirs who will receive it.

Well, how do you get there and how does the rest of the conversation go? Good questions to ponder. Remember, the answers depend almost entirely on you, your family, and the assets to discuss.

Reference: Kiplinger (November 2013) “The Family Money Talk You Must Have”

– See more at: http://blog.elder-care-lawyer.net/2013/10/talking-to-your-adult-children-about-your-finances-salt-lake-city-utah.html#sthash.WzUxD9gN.dpuf

Planning In Advance For Your Utah Advance Health Care Directive

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Nancy Wagner, a social worker at Monmouth Medical Center in Long Branch, N.J., encounters this frustration at least once a week: A patient arrives in the emergency room and tells the inquiring staff that yes, she has indeed prepared and signed an advance directive. But, well, she doesn’t have it with her.

An advance healthcare directive is a lot like a tire jack. When you get a flat, it is only useful when you bring it with you. This means you or your loved ones really need to ensure that the advance healthcare directive joins you on that trip to the hospital, since it does absolutely no good sitting on the shelf or in the safe.

The frustration of a directive left behind when it was needed is shared by family members and medical staff alike. In fact, this subject was discussed in the New Old Age Blog in a recent article titled “Where’s That Advance Care Directive?”

An advance healthcare directive exists to serve an important purpose. Unfortunately, the loved one appointed to make decisions cannot make them until the document is recovered or replaced, assuming the patient has the capacity to do so. In the meantime, everyone is left in the lurch and the very things you may have planned to avoid begin to fall into place against your wishes all the same.

How do you avoid this? For starters, ensure that you or a loved one keeps the document handy at all times. In addition, provide a copy to each of your physicians and request that it be maintained in your official medical records. Failing that, the important people in your life should know where to get it or whom to ask for a copy. For example, your estate planning attorney should have a hard copy in your client file.

Reference: The New York Times – The New Old Age (October 17, 2013) “Where’s That Advance Care Directive?“

Your Utah Medicare Enrollment Clock Is Ticking

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If you are covered by Medicare Part D and are not on an employer or group plan, this is critical information. Open enrollment for the Medicare Part D Drug plans started on October 15th. You have until December 7thto determine which is the best plan for you in 2014 and make the needed change. It could save you hundreds or thousands of dollars.

Have you heard the news? It is Medicare Open Enrollment time once again. However, do not wait until time runs out on December 7.

This is the season for distractions. With Thanksgiving in sight and the holidays not far behind, kicking the can when it comes to making your Medicare elections is easy to do. Resist the temptation!

Procrastination is never a prudent planning strategy. When it comes to Medicare Part D, you need to shop around and making comparisons can take time.

This important issue was the subject of a recent Forbes article titled “Shopping For New Medicare Part D Drug Plan Is Critical.”

Medicare plans change. What may have been the best plan for you last year may not be appropriate this year. For example, premiums go up, and so do deductibles, while coverage can waver or shift to the wrong pharmacies for you. In the meantime, perhaps your needs have changed, too.

The Article has a convenient link to the Medicare Plan finder.  You will need to have you list of medications and your current method of accessing Medicare, if any.  The website is easy to use and is in no way connected to the Affordable Care Act (Obamacare) website.

In short, there are many variables and you will live with the decisions next year that you make (or fail to make) this year. So, how do you go about evaluating your options? Check out some basic tips worth considering in the original article.

Reference: Forbes (October 17, 2013) “Shopping For New Medicare Part D Drug Plan Is Critical”

Caregiving Challenges Of Blended Families in Utah

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Every year, nearly a half-million adults over age 65 remarry, and a growing proportion of these spouses — usually the wives — eventually will become primary caregivers. Many will look for aid from those with whom their ties may not be particularly strong: their partners’ adult children. New research suggests the caregivers may be in for bitter disappointment.

There are a lot of “blended families” in the United States. Whether following a divorce or the death of a spouse, this fact of life can raise serious caregiving issues later in life. For example, if you are caring for your elderly husband now, what kind of assistance can you expect from his adult children (and their spouses). Perhaps not much.

As reported in a recent New York Times article titled “Study Finds Wives Often Struggle With Stepchildren Over Caregiving,” a study published by the Journal of Marriage and Family, found that all is not well with older Americans who have formed blended families. There is an unfortunate breakdown occurring in families, often to the detriment of the elderly family member and, at least as poignantly, for the elderly spouse left to care for them without other family assistance. The breakdown falls between the spouses from late-in-life marriages – statistically, the wives – and the adult stepchildren.

Late-in-life-healthcare has simply become a greater burden on elderly persons and their families. This largely is due to the increased costs of care effecting everyone, but especially those with late-in-life conditions like Alzheimer’s or dementia. At the same time, late-in-life marriage has become more and more common and that changes the dynamics of family. Sometimes these changes are positive, but other times they can be less so.

When there is a rift between adult children and a step-parent, what happens when the chips are down and an elderly parent/spouse grows ill or begins to suffer from dementia? What happens when the family does not pull together, but rather pulls apart? The latter scenario is a very real possibility in many families. Accordingly, some advance planning would be advisable, so all parties involved can come up with an agreed game plan before a crisis strikes.

What if it is too late and the family is in crisis mode? The best approach may be to mediate and remediate. As the original article points out, family meetings are a very important tool in some circumstances unless the family is already fractured beyond repair. For example, it can be a difficulty to get everyone to even show up and talk.

There might not be a silver-bullet plan that is a one-size-fits-all, but if you engage the issues now you might be able to work through them later.

Reference: The New York Times – The New Old Age Blog (October 15, 2013) “Study Finds Wives Often Struggle With Stepchildren Over Caregiving“

Donor-Advised Funds – Convenient Giving Tool for Utah

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Selecting a charity that will use your money wisely and effectively isn’t easy, particularly during this hectic time of year. Donor-advised funds are one solution.

Sometimes you can have your cake and eat it too. However, sometimes you can even have your cake and eat it whenever you feel like it; a definite improvement on an already ideal scenario. When it comes to charitable giving, and making good things happen while working out the right tax implications, having your cake and eating it whenever you want comes in the form of the donor-advised fund.

If you are unfamiliar with the tool, read all about it in a recent Kiplinger article titled “Donor-Advised Funds: Contribute Now, Donate Later.” The process is to set up a donor-advised account at a brokerage such as Fidelity or Schwab. The account is part of a designated “donor-advised fund”.  This fund is denominated as a charitable fund from which you can at some time in future designate the transfer of funds to your named charity. Using this devise, You can make a completed charitable contribution to your donor-advised fund this year and secure the tax deduction benefit while you investigate the charity or charities to ultimately receive the contribution even next year or beyond.

Like all things in life, a donor-advised fund is not a perfect solution for a few reasons – the fund makes the decision, ultimately, and the cost of running the fund can eat into donations much like a bureaucracy in a large charity. Nevertheless, this charitable giving option is available and can be very powerful.

Reference: Kiplinger (November 2013) “Donor-Advised Funds: Contribute Now, Donate Later”

Medicaid Dilemma – Sell Or Keep Your Utah Home?

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My mother went from private pay to Medicaid pay in her nursing home January 1, 2013. She now has zero money and all of her Social Security goes to the nursing home … Should I sell [her] home and effectively turn all of the assets over for her care or wait until her death, at which point Medicaid will take the proceeds from the sale of the home anyway?

The move to a nursing home is a big step. It is a major life transition for all family members. Your loved one will no longer be living in their own comfortable and familiar home. In addition, there is the issue regarding whether to retain or keep the home given the unpleasant knowledge that the home may ultimately pay for nursing home care either way.

This dilemma was the focus of a recent Q&A in ElderLawAnswers via the question, “Is It Better to Sell a Medicaid Recipient’s Home Now or Wait Until Her Death?”

Essentially, by receiving Medicaid you make certain agreements as to costs and, in the case of nursing home care, the deal often hinges on that most valuable of all assets an elderly person is likely to own: their home. True, it is possible to liquidate and sell the house just to pay for the nursing home care. Although this often reduces or eliminates the costs for maintaining and insuring an empty house, this also means giving up Medicaid benefits until the sale proceeds have been expended for care.

On the other hand, Medicaid will remember your choice whether you sell the home and private pay until spend down or if you to continue receiving benefits in lieu of such sale. If a family member attempts to sell the house after the Medicaid recipient loved one passes, then Medicaid has a lien on the sale proceeds (limited to the amount Medicaid paid for the care of the Medicaid recipient). Either way, the home is subject to pay for nursing home care or to reimburse Medicaid for the cost of care.

The answer to the question posed to ElderLawAnswers hinges on more than a few factors. That said, in most cases Medicaid payments will be less than private pay, sometimes a great deal less. Consequently, the resulting lien may be less of a burden than selling the house outright!

Is there something else at work, however? Notably, is the family home worth keeping in the family? These are situations that require some delicacy.

Reference: ElderLawAnswers (updated October 17, 2013) “Is It Better to Sell a Medicaid Recipient’s Home Now or Wait Until Her Death?“

Think of a Utah Trust– Not Just For The Well-To-Do

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When most people think about trust funds, they envision spoiled rich kids and wealthy families trying to dodge taxes on their piles of money. But what they might not realize is that trust funds can be an incredibly useful—even vital—tool for middle class families, as well.

Despite much maligning and misunderstanding in the public imagination, “trust funds” are not as exotic or blue-blood exclusive as they are made out to be. In fact, the misunderstanding is an unfortunate one, and trusts are quite the powerful tool for the middle class to employ as well.

Ready for a crash course in “trusts”? If yes, then check out a recent article in Fox Business titled “Is a Trust Right for You?” So is a trust right for you?

Depending on your needs and the needs of your family, trusts can be as malleable as they are powerful. You can make a trust conform to just about any goal you can set. Think of it like this: a business entity, whether a corporation or a limited liability company (LLC), is something different than the owner or the manager. This is so the business entity can accomplish business goals higher and apart from the individual.

Similarly, a trust is its own kind of entity, legally distinct from the one who sets it up (the settlor), the one that runs it (the trustee), and even those who receive from it (the beneficiaries). Why? Because the trust serves a singular purpose (or purposes) as determined by the settlor and carried out by the trustee. The major difference between a business entity and a trust is the focus – business or personal?

So what goal(s) can move you to create this entity, the trust? There are many commonly shared goals and the original article covers the basics, to include these seven:

  1. You Don’t Want Your Kids to Inherit at Age 18
  2. You Want to Protect Against Creditors
  3. You Want Someone Else at the Helm
  4. You Have a Complicated Family Situation
  5. You Want to Avoid the Probate Process
  6. You Want to Take Care of a Disabled Child
  7. You Want to Safeguard Your Privacy

How do you accomplish these goals with a trust? Read more about it in the original article, and then put your pen to paper for a personal brainstorming session.

The more you know the better you can plan for yourself and your loved ones.

Reference: FoxBusiness (October 25, 2013) “Is a Trust Right for You?“

Interesting Indexing – The Estate And Gift Tax Exemption in Utah

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As many estate planners anticipated, the Internal Revenue Service has raised the limit on tax-free transfers during life or at death. Starting in 2014 that amount, known as the basic exclusion, will go up to $5.34 million per person, from $5.25 million this year.

Did you know 2013 is rapidly coming to a close? It is. While there is still much to enjoy, especially in terms of holidays, it is not too early to think about your financial and estate plans for 2014.

Surprise! The IRS is already looking forward to 2014, to include the estate and gift tax exemption.

So what will estate and gift planning be like in 2014? Fortunately, as noted in a recent Forbes article, the number will be a bit more generous. According to the article, titled “IRS Raises Limit On Tax-Free Lifetime Gifts,” the basic exclusion (or unified exclusion), has been $5.25 million for 2013, but it is set to shimmy up to $5.34 million for 2014. Remember, this is the amount an individual can transfer to their loved ones without fear of taxation, either in life as a gift free from gift tax or in death as a bequest free from estate tax. Utah does not currently collect estate or gift tax.  Please see my previous blog on August 13, 2013.

Unfortunately, the basic/unified exclusion increase does not mean an increase to the annual gift exclusion. That is the amount you can gift per year to an individual without affecting the basic/unified exclusion. Currently you can give $14,000 per person per year, and it will be no different in 2014.

Again, with time still remaining on the 2013 clock, there is still time to maximize your gifting before the year ends. That noted, check out a companion article titled “The 2013 Limits On Tax-Free Gifts: What You Need To Know.”

Reference: Forbes (October 31, 2013) “IRS Raises Limit On Tax-Free Lifetime Gifts”

Forbes (November 1, 2013) “The 2013 Limits On Tax-Free Gifts: What You Need To Know”