Estates and Trusts

How A Special Needs Trust Can Help Your Family

January 23, 2020 By wrlaw

Families with special needs members have more options today than ever before. As caretakers age and special needs family members reach adulthood, it’s critical to plan for the well being of all family members. Fortunately, you have many options at your disposal.

Your loved one with special needs may qualify for important government benefits. While it’s important to set funds aside for your loved one’s care, it’s also important to structure the funds in a way that your loved one doesn’t lose eligibility for government benefits.

U.S. and North Carolina law allow you to do just that. If you have a special needs family member, you can create a special needs trust that can help your loved one get the help that they need while they remain eligible for government assistance programs. Here’s how a special needs trust can help your family:

What is a special needs trust?

A special needs trust is when you set property aside in a separate legal entity. One person manages the assets in the trust for someone else’s benefit. The funds are the property of the trust, and the trustee uses them for the good of the beneficiary. The person who manages the assets in the trust is called the trustee. The person who receives distributions of property from the trust is called the beneficiary.

In the case of a special needs trust, the trust exists to help someone who lacks the ability to manage their own finances. Because of a physical or mental disability, the beneficiary needs help providing for their basic needs and managing their finances. A special needs trust is the primary way that families arrange finances to care for someone who is unable to care for themselves.

What can a special needs trust cover?

You can tailor a special needs trust to meet the needs of the beneficiary. The trust can provide for the needs of daily living, or it can provide for supplemental care like vacations, education, vocational training, recreation and more. You may create the trust to be very generic or specific depending on the needs of your loved one.

How do you structure a special needs trust to keep the beneficiary eligible for government benefits?

One of the primary purposes of a special needs trust is to ensure that your loved one remains eligible for government assistance. When you have a loved one who has special needs, there’s a good chance that they qualify for government assistance programs like Medicaid, housing or cash benefits. Medicaid can be a welcome relief for a person who may have unique and extensive medical care needs. When you set up your trust, you want to make sure that the trust doesn’t impact their eligibility for benefits.

If a person receives assets directly in their name, these assets count against them when the government determines eligibility for assistance programs. The government requires them to spend their own funds first before they’re eligible for public help. By placing the funds in a separate trust with a separate legal entity, the funds are not the property of the beneficiary. They don’t count against the beneficiary when the government looks at their assets in order to determine eligibility for assistance programs. A special needs trust is an important way that families can make sure that what they set aside for their loved ones truly goes to help their loved one and enhance their quality of life.

As you prepare the special needs trust, it’s important to pay attention to the language that you use. The trust should state that it provides supplemental care beyond what government resources already provide. You should state that the trust is not intended to provide basic support. Your trust should reference relevant portions of U.S. law that are required to protect government benefits and make your intentions clear.

What if I don’t think my loved one needs government benefits?

Even if you don’t think that your loved one needs government benefits, you never know what might happen in the future. It’s likely a good idea to structure the trust in a way that leaves the door open if they need government help in the future. Special needs trusts are an important and common wealth-management tool for people of all economic groups. An experienced special needs trust attorney can help you examine your situation to determine the best path for your family.

Who can serve as trustee of a special needs trust?

Family members can serve as trustees, or you can work with a professional third party to manage the trust. There are pros and cons to each choice. A special needs trust is often a labor-intensive asset to manage. Family members may quickly tire of all of the work involved in managing the trust. On the other hand, a professional third party may charge fees for their services that can quickly add up.

There may be restrictions on who can serve as a trustee depending on who stands to receive the trust’s funds when the beneficiary dies. If the trustees are the beneficiaries, it might create a conflict of interest. In addition to these options, you might join a pooled trust where you join with other families to pool your resources under one management company. If you use a pooled trust, you still have your separate account, but you share management expenses and fees.

Can the beneficiary fund the trust with their own property?

If the beneficiary plans to fund the trust with their own property, there are a few special things to be aware of. Yes, it’s possible for the beneficiary to fund the trust with their own resources. In most cases, a self-funded trust must provide for reimbursing the government for Medicaid expenditures when the beneficiary dies.

When the beneficiary dies, the remaining trust property goes to the government to reimburse them for their medical expenditures through Medicaid coverage. In addition to the Medicaid reimbursement requirement, a self-settled trust is only an option when the beneficiary is disabled under the government definition of disabled.

How long does a special needs trust last?

A special needs trust typically lasts until the beneficiary dies or the funds run out. You can arrange for additional transfers of property to the trust in a way that doesn’t hurt your loved one’s eligibility for government benefits.

You can structure the trust to provide whatever your loved one might need including vocational training, recreation and vacations, communication equipment, accountants, attorneys and animal service. An experienced estate planning attorney can help you create a trust that meets your loved one’s needs and gives you the peace of mind to know that your loved one is cared for in the years to come.

How Do I Contest A Will In North Carolina?

September 6, 2019 By wrlaw

In North Carolina, there’s a process to challenge the validity of a will. North Carolina laws are in place to give interested parties the opportunity to question a will. A will challenge, or will caveat, has specific procedures that need to be followed. Here’s what you need to know about how to contest a will in North Carolina:

You must have the standing to challenge the will

Only an interested party may challenge a will. A person with standing is any person who stands to gain or lose from the probate of the will. If you’re a family member who would inherit if the will isn’t valid, you have standing. In addition, any person or entity named in the current will or named in any prior wills also has standing. If you have an interest in the outcome, you can file a caveat to challenge the will.

To challenge a will, you must file your caveat with the clerk of court

Challenging a will in North Carolina begins with filing the will caveat with the clerk of superior court. It’s important to file the caveat with the appropriate clerk and in the right court. The court can dismiss a caveat that isn’t appropriately filed. Once you file the caveat, the other interested parties have a chance to respond and participate in the proceedings.

You must notify all interested parties

It’s up to you to notify all of the other interested parties that you’re contesting the will. You must serve them with a copy of the caveat paperwork. Providing service of the paperwork ensures that all of the parties have the opportunity to access the courts and participate in the proceedings.

There are a few legal grounds to challenge a will

There are only a few grounds to challenge the sufficiency of a will. They include:

Lack of capacity

Lack of capacity means that the person who makes the will doesn’t understand what they’re doing when they make the will. It means that they don’t understand their decisions and the impacts of their decisions on the disposition of their estate. There’s a presumption that a person who makes a will has the capacity to understand the choices they’re making. Even a person with some mental difficulties may understand the situation long enough to make an effective will.

Undue influence

The other common ground for a will challenge is undue influence. To demonstrate undue influence, the person who files the will must show that the will creator was open to influence. They must show that a person with access to the will creator tried to exert influence over them. Finally, the person who challenges the will must show the result of the influence is that the will is different than it may have been without the person’s influence.

To decide if undue influence impacts the result of the will, the jury may consider a number of factors. These factors include:

The age of the person who makes the will
Physical and mental vulnerabilities of the will creator
Whether the beneficiary lives with the will creator
If the beneficiary supervises the will creator
Attempts by the beneficiary to isolate the will creator
Revocations of prior wills
Changes from prior wills
Bequests to someone without blood ties
Disinheriting blood relatives
Whether the beneficiary helps create the will

A jury decides the case

It’s up to a jury to decide whether the will represents the wishes of the creator. The parties can’t agree to waive the jury. They also can’t stipulate to any facts. A judge can award summary disposition and dismiss the will challenge if the case is clear, but summary disposition in a will case is very rare.

The burden of proof

The jury decides the case by the greater weight of the evidence. That means they decide if the will more likely than not represents the wishes of the will’s creator. Essentially, the jury sides with the person that they think is more likely to be correct.

You may mediate the case with other interested parties

If you’re a party to a will caveat, you may mediate the case with other interested parties. You can agree on a resolution to the case that follows the terms of the will, or you can settle on different terms that you create with the other parties. Not all will caveats use mediation as a case resolution tool. You have the right to reject mediation and try your case before a jury.

You have three years to bring a will challenge

If you think a will may be invalid, you have only a limited amount of time to challenge it. You have three years from the time that probate begins in the case. If you’re under a disability, a minor or in prison, you have three years from the time your disability ends.

Practically, it’s important to bring your will contest as soon as possible. When you file your will contest, distribution of the estate stops until the contest resolves. If you don’t file your caveat until distribution is underway, you risk the added difficulty of needing to find and retrieve assets that have already been distributed to third parties.

The court may order the estate to pay attorneys fees

A will party may be costly for the estate. In most cases, the court charges the cost of the will caveat to the estate. That means the prevailing party’s award is reduced by the costs of attorney fees to all of the parties involved. If the caveat has no merits, the court can refuse to order payment of attorney fees. In addition, the court may order the person who files the caveat to pay a bond that can cover the costs of the caveat in the event that the caveat has no merits.

Each case is different, and will caveat cases are often complex. An experienced will caveat attorney will be able to help you navigate through all the requirements to get the best outcome for you and your family. For a consultation to learn more about will caveats in North Carolina, call our office today at 919-787-7711 or fill out our contact form.

Planning For An Aging Parent In North Carolina

August 23, 2019 By wrlaw

Planning for one’s own potential long-term care needs is something few of us do, and typically only when it comes time that either mom or dad can’t live by themselves do we then try and figure out how to handle that dilemma. While there may be no easy choices, it is far better to be proactive and ahead of the curve than try and play catch up after the fact.

Communication is the Key

Since this issue impacts all members of the family across generations, everyone has a strong interest in addressing the specifics. Who initiates the discussion is far less important than the fact it becomes a topic of discussion. A couple of good questions to address are:

Have your parents made any long range plans?
Are there financial resources available from your parents? How about from you or your siblings?
Is staying in their home an option with either daily or live-in care?
Can your home accommodate one or both of your parents if necessary?

These are just some of the questions that must be answered, and as indicated, the sooner the better. A threshold issue is understanding the finances involved in elder care.

The Numbers

Since 2004, the Genworth Cost of Care Survey has studied long term planning costs. The most current data for monthly costs of various care options:

Home health care – around $4000
Adult day care – around $1500
Assisted living facility – between $3000 – $4000
Nursing home care – between $7000 – $8000

The Options

Insurance – It can truly be said of insurance that it is something you need to have but hope to never have to use. For long term care insurance, the earlier a policy is taken out and the healthier the applicant is, the lower the costs. One option to consider is if mom and dad cannot afford the premiums, perhaps the kids can. This is certainly a less expensive option than the monthly out-of-pocket costs as indicated above.
Public programs – Unfortunately, Medicare does not offer long term care as part of its program. For those with very limited income and few assets, Medicaid may be an option. For those who have honorably served our country, the Veteran’s Administration has certain benefits available.
The Family – Unfortunately, for too many people, the burden of long term care falls on the family. It’s not so much the individuals offering the care don’t want to help, more often it’s the high cost borne by the caregiver. Caregivers often need to reduce their own hours of work or stop altogether, which can have a long range negative impact on their own retirement security.

An estate planning attorney can assist you not only in financial matters involving the disposition of your estate after you pass, but also in establishing and maintaining a high quality of life in your sunset years.

Seven Things You May Not Know About Trusts

March 8, 2019 By wrlaw

As estate planning attorneys, we know the misconceptions that most people have about trusts. Many people are surprised when we suggest a trust as part of their estate plan. Trusts aren’t just for the wealthy. They can be a useful and important resource management tool for a variety of reasons. If you’re going to use a trust effectively, it’s important to understand how a trust works. Here’s an introduction to trusts from our team of wills and trusts attorneys:

What is a trust?

A trust is a legal entity for the management of assets. A person puts assets in the trust for the benefit of a third party. The trust owns the assets. The person or people who manage the trust make decisions about how to manage the assets, and there can be rules about when and how the trustees distribute trust property to the beneficiaries.

How does a trust work?

A trust works by placing money or property into ownership by the trust. Instead of a person owning the property, the trust owns the property. The trust is set up for a specific purpose. The person who originally owns the property that goes into the trust can be a beneficiary of the trust. A person or people who are in charge of the trust make decisions about when to distribute property to the trust beneficiaries. Each trust has its own rules about who the trust benefits and what kinds of things the trust can provide for.

The trust is its own legal entity. The trust is the owner of the property in the trust. Placing property in a trust can be beneficial for several reasons. First, when you’re using a trust to transfer assets after someone passes away, the property may transfer faster and easier to the third party using a trust than using a traditional will. In addition, when the trust owns the property, instead of an individual owning the property, the property may be out of reach from third-party lawsuits and other claims. Also, when a trust beneficiary has special needs, trust property doesn’t count as the property of the beneficiary so the beneficiary may still qualify for means-tested public assistance programs.

A trust can provide for financial privacy

When a will goes through probate, it becomes a part of the public record. A will is a public proceeding. If a person uses a will to transfer assets, there’s no way to stop anyone from going to court, accessing the court record and sharing it with others. When you have a trust, the terms of the trust may not become public record. There are many reasons that the parties involved in asset management may want financial privacy. Placing property into a trust can provide the privacy that a will cannot provide.

Is a trust a financial investment? What kind of financial return can I expect on a trust?

A trust is not necessarily a financial investment. You can invest the property that’s placed in a trust, but the trust in and of itself isn’t like purchasing an investment. The financial return on the property in a trust depends on the property that’s in the trust and how the trustees choose to invest it.

Each trust is different. Just like other investments, you can evaluate your risks and choose what’s in the best interests of the trust beneficiaries. It’s important to understand the risks associated with any type of investment including investments made with trust property.

Who can be trustee of my trust?

You can name anyone to be the trustee. You can even name yourself the trustee of a trust. Actually, when you’re the person transferring the property and the beneficiary of the trust, naming yourself trustee is the most common choice. When you’re the trustee of your own trust, you retain control over the assets for your lifetime. You have the legal protections of a trust while maintaining control over how you spend the trust assets.

There are also other options for naming a trustee. Managing a trust can be complex. You may consider using a professional trustee. When you choose a professional, they have experience with accounting, taxation and asset investment. You can also name any other party that you like. Multiple parties can even serve as co-trustees. It’s important to consider the skills that you need in a trustee as well as their personal knowledge of the trust beneficiaries and the amount of control that you may want to retain over trust assets.

Not all trusts are created equal

As you consider whether a trust is right for your estate planning, it’s important to understand that there are a variety of kinds of trusts. The kind that you use depends on your assets and your goals. For example, you may create a trust that you can revoke during your lifetime. In other scenarios, it may make the most sense not to reserve any right to revoke the trust. You may use a trust to donate to charity, or you may use a trust in order to protect certain assets from creditors. A special needs trust provides for a loved one with physical, mental or emotional challenges. A spendthrift trust doesn’t allow the trust beneficiary to dissipate assets except under the terms of the trust.

It’s important to consider the needs of the family as you begin to think about your estate plan. Once you know your needs and goals, you can evaluate the different types of trusts. The person who creates the trust has a great deal of control over the terms of the trust. You can work with an experienced trust attorney in order to set up the trust in the best possible way. There are ways you can customize your trust in order to have the maximum benefits for your trust beneficiaries.

Is a trust right for me?

When you’re considering your financial planning, it’s important to understand both the risks and benefits of a trust. A trust is a versatile financial planning tool that can protect your assets and ensure that they’re used for a particular purpose. You can create a trust that’s effective immediately, or you can create a trust that begins in the event of your passing. If you think a trust may be right for you, it’s important to sit down with an experienced trust attorney in order to consider your options. You can explore what a trust can do for you and for your loved ones and create an estate plan that meets all of your goals.

2019 Changes To Retirement Plan Contributions

January 12, 2019 By wrlaw

There are some key retirement plan contribution changes going into effect in 2019. While major tax reform went into effect last year, there are some changes that hit retirement contributions in 2019. Looking at the changes and making adjustments now can help you make the most of the coming year – most workers can save more across all income levels. Here’s what’s changing for 2019 401k contribution limits and other 2019 retirement contribution changes:

How much can you put in a 401k in 2019?

You can put up to $19,000 in a 401k in 2019. That’s up from $500 from last year’s limits. While it’s only a slight increase, for workers who want to make the most of their retirement savings or get caught up, every little bit makes a difference. In addition, lower-income earners can claim a savings tax credit in addition to the tax deduction that everyone gets for contributing to a 401k.

The contribution changes apply not only to 401ks, but also to 403b plans, many 457 plans and the Thrift Savings Plan for government workers. You can adjust your monthly contributions to add another $500, or you can make the additional contribution all at once. If you make the contributions monthly, it’s an extra $42 per month.

401k catch-up contributions for older workers

While the contribution limits for general 401k contributions have gone up a little bit, the 401k catch-up limit has not changed. Employees 50 and older can contribute more to their 401k than the annual limit. The extra contribution is called a catch-up contribution, but it’s really just a higher limit for older workers.

The 401k catch-up contribution in 2019 is $6,000. That means if you’re 50 or older, you can contribute an extra $6,000 to your 401k account. If you’re 50 or older, you can contribute a total of $25,000 to your 401k in 2019.

What is the IRA contribution limit in 2019?

In addition to 401k contribution limit changes in 2019, there are also changes to IRA contribution limits. An IRA allows you to save for retirement on a tax-free or tax-deferred basis. Like the 401k contribution limit, the IRA limit is also inching up by $500 in 2019. It’s the first time the IRA contribution limit has gone up since 2013. There’s also an IRA catch-up contribution limit, but it’s unchanged for 2019 at $1,000.

Income limits for retirement savings in 2019

In 2019, there are limits to IRA contributions based on your income. There are a few things to keep in mind when you’re sorting out whether the income limits apply to you. First, if you don’t get a 401k through your employer, you can contribute to the IRA no matter how much you earn. Even if you earn over the income limits, the limits don’t apply to you because you can’t do an employer-sponsored plan. Your filing status matters, too, so if you’re filing joint, you may have a higher income limit than if you file single.

Even if you can’t deduct your IRA contributions from your income, there may be benefits to you of contributing to an IRA. Your contributions may still grow with tax-deferred status. You can still come out ahead even if you can’t take the tax deduction on your 2019 taxes.

There are a lot of moving parts when it comes to determining whether you qualify to contribute to an IRA and whether you can take a 2019 tax deduction for your contribution. Your income and whether you have an employer-sponsored 401k are both factors that might change your IRA tax deductions. If you have an employer-sponsored 401k, you can still take tax deductions in 2019 for an IRA if you earn $74,000 or less as an individual. The joint income cut-off for IRA contributions in 2019 is $123,000. These limits represent a $1,000 and $2,000 increase from 2018. There are also phase-outs which start at $64,000 for a single and $103,000 for a couple. There are different phase-out limits that apply if one spouse can do a 401k through work and the other spouse can’t.

2019 Roth IRA contribution income limits

In 2019, the income limits are going up for Roth IRA contributions. A Roth IRA is a special kind of IRA where you pay the taxes up front when you make the deposits. Later on, you get to withdraw your contributions tax-free. The income limit for Roth contributions goes up $2,000 for singles in 2019 and $4,000 for couples.

The cut-off in 2019 is $203,000 for a married couple and $137,000 for a single. If you make over these amounts, you can’t contribute to a Roth at all. If you make $122,000 as a single or $193,000 as a couple, you can still contribute some to a Roth account, but there are phase-outs that apply to what you can contribute. Because withdraws in retirement aren’t taxed from a Roth account, a Roth can be a fantastic savings vehicle for people who qualify.

Saver’s credits in 2019

In addition to other 2019 retirement contribution changes, there are also increases to saving tax credits for lower-income workers. Workers who earn $32,000 or less as individuals and $64,000 as married couples get an additional 10-50 percent deduction from their 2019 taxes for 401k and IRA contributions. The limit is up to a $2,000 credit for singles and $4,000 for couples.

Retirement savers with the lowest incomes are eligible for the biggest tax credit which can be worth as much as $1,000 for individuals and $2,000 for couples. The saver’s credit can be claimed in addition to the tax deferral for saving in a traditional retirement account. The workers with the lowest incomes get to claim the highest percent deductions.

Retirement contributions and estate planning in 2019

Addressing retirement contributions should be part of your estate planning in 2019. Estate planning is so much more than just drafting a will. As you plan for your future and for your loved ones, maximizing tax benefits and determining optimum retirement contributions is an important consideration. One of our experienced estate planning attorneys can help people of all income levels maximize their retirement benefits and overall estate planning strategy in 2019.

Protecting Your Wishes With A Living Will

November 4, 2018 By wrlaw

Planning for the future is important for everyone. While you might know that it’s important to make a last will and testament, you may not know how important it is to also write down your wishes for medical treatment. You can create a legally binding document that details what medical care you want in the event that you’re unable to communicate your wishes. Making a living will keeps you in control. Here’s what you need to know about protecting your wishes with a living will:

How do I go about protecting my wishes with a living will?

A document that details what you want to happen with your medical care if you can’t take care of yourself is called a living will. Even though it’s called a will, it has to do with your wishes while you’re living. A living will writes down what medical care you’re okay with in the event that you’re unable to communicate your wishes. Generally, it states whether you want life-saving efforts like CPR and hydration or you don’t want those efforts. With a living will, you can decide what medical care you want ahead of time so that you can have your wishes followed if you’re incapacitated.

What are the rules for a living will?

Your living will has whatever rules you want to have. Your living will can state that you want all life-saving efforts, or it can state that you don’t want life-saving efforts. It’s up to you what you put in your living will. You can make your living will as general or specific as you’re looking for.

When you make a living will in North Carolina, you need to comply with a few things to make it effective under the law. Once you comply with North Carolina’s rules to make a living will, what you put in it is up to you. A living will makes it clear what you want to happen with your medical care, so you get to decide what you put in it.

How do you make a living will?

To make a living will, you list out how you want your medical care to go in the event that you’re unable to speak for yourself. You can decide what to include, but there are some things that you usually talk about like CPR and life-sustaining hydration. For your living will to be effective, you must follow the rules in your state. When you write out the medical care you want in a way that’s legally effective under the rules of your state, you create a living will.

What do I need to do to make an effective living will in North Carolina?

To make your living will effective in North Carolina, it must be signed by two witnesses and notarized. You must make sure that the witnesses aren’t related to you. The witnesses can’t be people that get paid for your medical care. It’s important to make sure that you talk about all of the important things in your living will in order to make sure that it has the effect that you’re looking for.

Is an advance directive different than a will in North Carolina?

An advance directive in North Carolina is the same as living will. An advance directive is what it sounds like: it writes out your wishes ahead of time. When you’re incapacitated and unable to speak for yourself, it determines what health care you’re going to receive according to your wishes. Essentially, advance directives and living wills are the same in North Carolina.

What is a patient advocate in a living will?

In a living will, you can name someone as your patient advocate. That’s the person who makes choices about your medical care. Their ability to make decisions for you begins when you’re unable to make decisions for yourself. You can tell your patient advocate they can override your written wishes, or you can make them follow the wishes that you set out. You may want to let your patient advocate make a different decision in case unforeseen circumstances arise, or you may want to make sure that everyone honors your wishes no matter what. In any event, the patient advocate is a person who speaks and acts on your behalf according to your wishes when you’re unable to communicate what you want to happen.

Who do I choose for my patient advocate as part of my living will?

For your patient advocate, you can choose anyone who wants the job. Most people choose a family member, but you can choose anyone you like. Be sure to choose someone that you trust, and talk to them about your wishes when you create your living will.

Why do I need a living will?

You need a living will in order to make sure that your wishes are honored when you’re unable to speak for yourself. Without a living will, someone else makes the decisions for you. A living will lets you stay in control and live the life that you choose. A living will can be flexible, and it gives you choices as you and your loved ones face difficult decisions.

What are some things that you should include in a living will?

In a living will you should talk about the major decisions that your loved ones may have to make for your care. Whether or not you want CPR is a good thing to talk about. Whether or not you want life-sustaining hydration and nutrition are also important directives. You should also say whether you want to be an organ donor. Your attorney can help you make sure that you address all of the important points when you make your living will.

Are there any times where a living will isn’t applicable?

There are times where a living will isn’t applicable. A living will applies when a person has health problems that are likely to bring death. In an emergency, a living will doesn’t apply. Emergency medical professionals have to give life-sustaining treatment like CPR. Usually, in cases of illness, a living will applies to carry out your wishes. In some emergency cases, health-care professionals must provide emergency treatment.

Protecting your interests with a living will

A living will works to honor your wishes. By creating a living will, you can have the peace of mind to know that your wishes are going to be honored if you’re unable to advocate for yourself. Our estate planning attorneys can help you create your living will in North Carolina, and can help you make sure that you prepare an effective living will that talks about all of the things that are most important to you.