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Anyone with assets can benefit from an estate plan. We offer options for people from all walks of life. Estate planning can save your loved ones from making difficult decisions after you pass away or if you become unable to make your own decisions. It can also ensure that your wishes for both your assets and your care will be met.
At The Dayton Law Firm, P.C., our team of San Jose estate planning attorneys is compassionate to families and individuals. We aim to help answer questions about your long-term planning options. We help with a variety of estate needs, including:
Why Choose Us?
We focus on our clients. While some firms seek the highest-value cases with disregard for the clients’ needs, we focus solely on what techniques are going to help you most.
Our firm is located in San Jose and serves the entire Bay Area. We also serve clients throughout California.
Our Recent Blogs
Spending time in a residential care facility after retirement is becoming increasingly common nationwide. As of 2018, 2.1% of adults over 65 used nursing home services at least part of the year, while a further 1.6% of this population spent time in a residential care community.
With almost one in every 25 adults over retirement age requiring residential care, it is important to acknowledge that this may be in your future. One of the most valuable ways to plan ahead is by considering how residential facility costs could affect your estate.
The Risks Nursing Homes Pose to Your Estate
Residential care facilities like nursing homes can be crucial to maintaining your health and quality of life as you age. However, these facilities are costly. According to AARP, the average monthly cost of residential facilities ranges from $5295 for assisted living to $11,573 for private nursing homes. That is a significant amount for anyone to cover, especially post-retirement adults.
Many people cannot or choose not to pay for their nursing home out of pocket. Instead, they use Medicaid to help cover the costs. Federal regulations require state Medicaid programs to provide nursing facility care to those in need. The specific requirements vary by state. In California, adults are eligible for the Medi-Cal program if they are over 65 and fall below certain income criteria.
While Medi-Cal allows adults who need care to receive treatment with minimal out-of-pocket expenses, it comes with drawbacks. In particular, the state reserves the right of “estate recovery.” This is the process of claiming funds or assets from a deceased person’s estate to cover the cost of the Medi-Cal services they received while alive.
This can put assets like your home at risk. If you do not protect your house in your estate plan, it could be claimed by Medicaid to cover the costs of your residential care, preventing your beneficiaries from inheriting it.
Using Your Estate Plan to Protect Your Assets From Medicaid
You do not have to accept the loss of your family home as the cost of receiving necessary medical care. There are several strategies you may consider to protect property from being “recovered” by the state after your death, such as:
- Placing property in a trust. One of the most effective ways to protect a home from Medicaid recovery is by placing it in a trust. Property placed in a trust becomes the property of that trust. As such, it is significantly less likely to be reclaimed to cover your costs after you pass. This strategy works best if the home is fully paid off, so no mortgage is involved. Meanwhile, you can continue living in your home until and unless you need residential support.
- Naming your beneficiary as a joint owner. If you have a specific person you want to receive your property, you may name them as a joint owner while you are still alive. Medicaid cannot seize ownership of a home during estate recovery if it is partly owned by someone else. Instead, it will place a lien on the property, which your beneficiary can cover through a mortgage or other assets from your estate. If you are comfortable sharing ownership, this can be an excellent way to pass on the property.
- Giving the property to your beneficiaries while you are alive. If you suspect spending time in a nursing home is unavoidable, you may gift your house to your heirs while you are alive. Once it is in their ownership, it is no longer subject to Medicaid recovery at all. However, the gift will count against your lifetime estate and gift tax limit. It will also remove your legal right to make decisions about the property. This option can be effective, but it is best reserved for when no other options work for your family.
Plan for Residential Facility Care With The Dayton Law Firm P.C.
Residential care is more common than many people realize. It’s also more expensive than ever before. Considering how time in a nursing home may affect your finances when planning your estate is crucial. At The Dayton Law Firm P.C., our attorneys have decades of experience helping clients navigate these concerns. Learn more about how we can help you plan for potential residential facility care by scheduling your consultation today.
Retirement funds are meant to be used. If you have an IRA or other retirement plan account, you most likely will be subject to required minimum distributions, or RMDs. These distributions ensure that you actually use the funds you accumulate in your defined contribution pension or retirement plan.
However, they can also make planning your estate more difficult. If you do not account for RMDs in your estate plan, you may leave behind a significantly different estate than anticipated. Below, we discuss when minimum distributions are required, how they are calculated, how they affect your estate, and how to account for them in your plan.
What Are Required Minimum Distributions?
An RMD is a mandatory payout from an IRA or similar profit-sharing or defined contribution plan. These distributions must begin when you turn 72, if you were born before 1950 or 73 if you were born in 1950 or later.
You may begin withdrawing from these accounts earlier, but it is not mandatory. Similarly, you may draw more than the minimum once you reach the required minimum distribution age of 72 or 73, but you may not withdraw less.
What is the minimum distribution for a retirement plan? That depends on the plan in question. The IRS provides the Uniform Lifetime Table to help account holders calculate the specific minimum distribution. How is a minimum pension distribution calculated? By comparing the balance in your account at the end of the year against this table.
Account holders are not the only people who are impacted by RMDs. These plans can be inherited by other parties. If so, the beneficiaries of the account are also subject to RMDs. The IRS provides similar tables for beneficiaries and spouses of account holders.
How Required Minimum Distributions Affect Estate Plans
An RMD can affect your estate plan in several ways. At a minimum, they prevent you from treating the account like any other investment. Instead of continuing to accrue funds indefinitely, your IRA or similar account will start paying out once you reach the age of eligibility. This will increase your liquid assets and reduce the amount available to be passed on to your beneficiaries.
Additionally, your beneficiaries will be required to continue taking RMDs. If this is not accounted for, they may face unwanted tax penalties. As such, accounting for RMDs in your estate plan is crucial.
3 Strategies for Accounting for RMDs in Your Estate Plan
When planning your estate, your best resource is your attorney. They will guide you on the best tactics to achieve your goals if you are required to take RMDs. Strategies they may recommend include:
Every IRA comes with its own RMD. By consolidating your IRAs into one account, you do not reduce the overall funds you need to withdraw. However, you simplify the process of keeping track of the amount you must withdraw.
Take In-Kind IRA Distributions
If you don’t want to sell assets in your IRA, you can take an in-kind distribution. This transfers investment assets like stocks from your IRA to a taxable investment account. You are not taxed on the transferred assets, but you will be taxed on the income they generate for you going forward. This allows you to maintain your acquired assets instead of being forced to sell them to achieve your RMD.
Consider Qualified Charitable Distributions
If you want to make charitable contributions, your RMD is an excellent way. You can use your RMD to make qualified charitable distributions (QCDs) and increase your after-tax income. The donated amount is not considered part of your gross income and does count against your RMD. This maximizes your giving power without impacting your gift and estate tax limits.
Account for RMDs With Expert Legal Counsel
Required minimum distributions can complicate your estate plan if not addressed correctly. The best way to ensure your RMDs are accounted for is by working with a skilled estate planning attorney like those at The Dayton Law Firm P.C. Our experienced lawyers are available to help you understand your retirement accounts, their effects on your plan, and the best ways to handle them. Get in touch today to learn more about how we can help you.
Every family has a black sheep or two. They’re people you love but whose behavior doesn’t align with your own beliefs. These family members can make estate planning more difficult, especially if you want to leave them something after you pass.
There are many ways someone may be a black sheep beneficiary. Maybe they don’t have the best track record of making good financial decisions. Perhaps they struggle with addiction. They may just make lifestyle choices you do not support.
Many myths about estate plans may cause you to think the only way to protect your assets from these black sheep is by disinheriting them. However, this isn’t true. Despite what you may think, there are ways to include them in your plan while keeping your assets secure from potential poor decisions.
Myths About Estate Planning and Wayward Beneficiaries
If you have not developed an estate plan before, you may believe some common myths about what you can and cannot do regarding the wild child in your family. Luckily, none of the following misconceptions are true:
- You have to split your assets equally. If you have multiple beneficiaries, you can divide your estate among them however you want. That includes leaving liquid assets to a beneficiary whose judgment is sound while leaving a carefully-controlled trust to someone else.
- Disinheriting and other estate decisions are permanent. Unless you set up an irrevocable trust, every decision you make can be changed in the future. You can disinherit or reduce the inheritance of one party while they are young, then reverse the decision down the road if they calm down.
- You have no control over your assets after you pass. With the proper use of trusts, it is possible to control your property even after you have passed away. Trusts can include a wide variety of terms and conditions that allow you to dictate how the assets are used and distributed in advance.
- Trusts are too complicated. While a trust must be carefully structured to accomplish your goals, they do not have to be complicated to administer. You can easily and effectively set up a self-sustaining trust to account for any black sheep in your family if you form it with skilled legal assistance and designate a professional trustee to manage it.
How to Plan to Protect Your Assets and Your Beneficiaries
With those myths out of the way, you can begin drafting your estate plan with prodigal relatives in mind. Since every family is different, no single strategy will work for everyone dealing with a black sheep. However, the process for developing an effective document remains the same:
- Consider your goals. Do you want to encourage your beneficiary to take certain actions or make better choices? Are you concerned they may waste money if they receive a large lump sum? Do you want to ensure they are supported when you’re gone? Determining your specific goals for your assets and beneficiaries is crucial to selecting the best way to include them in your plan.
- Work with a skilled estate planning lawyer. It is always important to discuss your needs with an attorney before drafting legal documents. However, professional legal counsel is even more necessary if you balance the demands of including a wayward relative in your estate plan. Your attorney will advise you on how to structure your plan to accomplish your goals while providing for your loved ones.
- Revise your plan regularly. Your beneficiary’s behavior may change over time. So may your own opinions and preferences. Routinely reviewing and updating your plan ensures it always reflects your current goals for your estate.
Prepare Your Estate Plan With the Dayton Law Firm, P.C.
Many factors, including your beneficiaries’ behavior, will shape a well-written estate plan. If you are trying to prepare a plan that accounts for the black sheep in your family, reach out to the Dayton Law Firm, P.C. Our skilled lawyers have decades of experience in estate planning for all circumstances. We can advise you on the best way to structure your plan to protect your assets while still supporting all of your loved ones. Learn more about how we can assist you by scheduling your consultation with our California law firm today.