Taking Fear Out of 
Estate Planning

Many times the greatest obstacle that people encounter in Asset/Estate Protection Planning is wondering what they are getting into. When they decide they would like to look into meeting with an attorney to start an asset protection plan, they are reluctant to initially make the call. That's usually because they don't know what its going to cost in time and money. Taking the fear and confusion out of estate planing what to ask. That is also why it is very important to work with an experienced estate planning advisor when it comes to protecting your life time of savings and choices so you can maintain the best possible quality of life. 

Steps of Estate Planning

Let me start by explaining each step that is involved. 

What to Bring to Appointment

I recommend bringing any existing legal papers, wills, trust, deeds, a list of assets, if possible and also last year’s income tax form.  These documents allow the attorney to assess the exposures and present tax situation.  Sometimes it is difficult to locate all of these documents; however you should not get overwhelmed.  Just bring yourself, even if you don't have the other information. The attorney will help you. 

 Who Should Come 

 For a married couple it is important to have the husband and wife present. If you feel it necessary, bring any children whom you feel should know about your financial and legal matters financial and legal matters. 

Your Objectives

 The attorney will ask you important questions about your current financial situation. By sharing your goals in terms of tax savings and probate avoidance you help the attorney to understand your needs and special concerns for your family. 

 Your Estate Exposures Explained

 Next the estate planning attorney will explain your exposures presently, in the future. “Exposures” are those things that make you or your estate vulnerable to financial loss or disaster. Next the attorney will review the options available for you to better protect your financial security currently and the financial security of your heirs. 

 Legal Strategies Explained

 The attorney will next tell you exactly what legal documents are needed, and what kind of insurance you should consider. You may wish to have your insurance representative with you to provide you with a quote at the same time the attorney is present. Then you can decide if it is realistic to include such insurance as part of your estate plan. If not, then the attorney can advise you as to the options which may not protect you as good, but certainly lead to a more financially secure situation than you may be in presently. 

 Legal Fees Discussed 

 I recommend charging a flat fee for legal documents. This takes the unknown out of the way so that they can make a better decision for what they want to do next. Fees relate directly with the family and tax situation so that way the most appropriate tax and probate avoidance legal provisions will be part of the legal estate plan. An estate planning attorney will know right away what legal work will be involved. Then the insurance agent can meet with the insured again at a later date to review insurability and start any insurance applications as well. This process should not be made into a ‘Federal Case’. 

 Legal Documents Prepared

 The attorney should be able to have the legal documents ready within 1-2 weeks after the initial meeting. It is not wise to delay the legal document process. It is not comforting to know your exposures and leave matters undone for any length of time. I believe people want peace of mind, and that is estate planning is all about. The ultimate goals are peace of mind, financial security, the pursuit of financial liberty, and happiness. 

 Execution of Legal Documents

 Next the couple or individual will meet with the attorney again, and the legal documents will be executed (signed, and made alive and effective). 

 Putting Assets in the Trust 

 The next step is the most important step when trusts are involved. The assets need to be transferred into the trust. This step is the most misunderstood, yet easiest of all. While assets are in the Trust, you totally control them. You can buy and sell anything you want. Anything new that you buy will be put into the trust. If you sell something and receive cash, all you need to do is  put the money in the bank or money market fund titled in the name of the trust. The attorney will prepare a new deed to your home and you simply file it at your county deeds office just as you filled your current deed. The recording fee is usually $20. A letter of instruction is prepared for you to mail to your investment and banking institutions requesting that they transfer and change the ownership of your assets to the name of your trust. For example: Will assets be listed under the John and Mary Doe Revocable Living Trust. Those institutions will than either make the change or send you a letter of confirmation, or have you sign their form that they will send you in the mail. That's it. You have completed the transfer process. The whole thing from beginning to end takes about 6 working hours - less time then it takes to prepare and eat a Thanksgiving dinner.  It is also imperative that if insurance is to be a part of your individualized estate plan that you follow through as advised by the attorney as quickly as possible.  You never know if the doctor will diagnose something as common as high blood pressure or something else, which may cause your insurance to be more expensive, or cause you to be uninsurable. You are never as young and healthy or insurable as you are today. Don't risk letting time taking that away from you. 

Possible Future Exciting Steps 

There are additional steps for some 
people which I recommend after they have completed the first stage. The other steps involve big tax saving strategies for estates over $300,000, and some enjoyable and creative ways to actually create more retirement income, and or bail out of IRAs and other tax shelter investments tax free.  Other advanced strategies include protecting your assets from the devastation of a nursing home stay. This expense is rapidly creating financial devastation to many senior generation families. I addressed some of those ideas in the previous two issues of this publication. Remember to take care of first things first. To wait and procrastinate, or worse, not to plan at all, could result in totally wiping out even the smallest estate. For these people estate planning is survival planning. 

Estate Planning Traps to Avoid 

The stakes are too high! 37-55%+ of an estate can be wiped out by estate (death) taxes, lawyers fees and probate costs. Be aware of the pitfalls and traps that keep you from properly planning your estate distribution. 

The following are some of the biggest pitfalls and solutions on how to avoid them: 

     1.  A Will Alone is NOT Estate Planning. A will is an invitation and a guarantee that an estate will have to be probated (if over $10,000). This can cause thousands of dollars and may require months if not years to settling the estate.  A Revocable Living Trust, in my opinion, is a far better estate planning document than simply a Will. Also, a Will only takes effect at death. It does nothing to protect your legal or health care affairs while you are alive. A Durable Power of Attorney, Health Care Power of Attorney and Living Wills are also essential. 

    2. Not Protecting BOTH Spouses' $675,000 (year 2000 and 2001) Exemptions. Most spouses think they are doing adequate estate planning by simply leaving all their property to each other. This is not the case. This mistaken strategy could result in up to $300,000 of totally unnecessary estate taxes and probate costs. If the couple would set up a Revocable Living Trust, then each spouse can take advantage of the Credit Shelter for their ($675,000 in assets allowance and $220,550 tax saving) credit Trust. They could pass up to $1,350,000 absolutely estate tax and probate free. The surviving spouse would be entitled to all of the trust income and necessary principal for as long as he or she lives. 

    3. Not Adequately Utilizing Life Insurance. Life insurance is an excellent method for building savings that will protect your loved ones. It will also prepare for the possibility of paying estate taxes and/or equalize an estate among family members all in one product.  A properly written permanent life insurance policy can also protect you for possible long term care as well. Again, you need to work with a very knowledgeable and experienced estate planning professional, when it comes to these matters. The other methods of trying to obtain funds such as depleting cash from the estate, loans, forced liquidation of assets and equity loans extract too heavy a financed toll on the family and the estate. I know of no better product or way to protect your family's present and future financial security, liberty and peace of mind than with life insurance. You are essentially buying discounted dollars at a fraction of its benefit face amount. Again you need to work with a team of professionals. It is also very important that the life insurance be written properly and also placed in an irrevocable trust to avoid the proceeds being included in the value of your gross estate for tax purposes. How do you think the rich and famous do it? You can take advantage of the very same strategies and tools they do. Remember not to make a decision is a decision. There is A Better Choice. That is to develop your estate plan and act on it right away. Procrastination and inaction is hazardous to your wealth. We all need to realize that no longer can we count on the government or others to take care of us. We have to have a plan. 

    4. Not planning for Lifetime Catastrophes.  An estate will not be worth much if a major loss occurs such as an uninsured disability, nursing home stay, automobile accident or serious damage your home. Any of these events could wipe out a small to medium size estate. Make sure you have adequate insurance coverage for these life crisis possibilities. 

    5. Thinking that Estate Planning is only for the Rich. This is the worst mistake of all. Not adequately planning for a middle-to-large estate will cause 37-55%+ of an estate to be lost. 100% of the entire smaller estate can be totally wiped out by not planning. I call estate planning for the smaller estate- less than $200,000 -survival planning because of the devastation to a life's work if proper planning is neglected. 

Planning For Long Term Care Financing 

With nursing home costs ranging from $35,000 - $90,000 and more a year, families are looking for financing solutions that won't result in the economic devastation of years of hard work. With the average nursing home stay now exceeding two years and the risk of a nursing home stay for people over age 65 and especially after age 75 over 40%, people must plan and plan quickly and soundly. The risk and cost stakes are too high not to do adequate planning. 

Possible Solutions

 The solutions for covering a potentially very expensive home health care or nursing home stay are (1) Savings, (2) Family Support, (3) Medicare, (4) Medicaid, (5) Legal Strategies and (6) Long Term Care Insurance. 

 Long Term Care and Savings 

Based on the average stay and costs, a family must be ready to come up with $75,000 -100,000 to cover this high risk, high cost occurrence. If a person using an IRA or other tax deferred savings vehicle saved $2,000 a year starting at age 60 and earned 8% a year, he would have $ 28,973 and at age 70, all of the distribution taxable income. That is not even enough to pay for one year of care.  Financial experts indicate that 1/3 of the middle class would have their existing savings wiped out in 13 weeks. Over 80% would be wiped out in one year You cannot save for this catastrophe; you must find other solutions. 

Can your Family Support You? 

The days of being able to depend on family support have gone into American folklore along with the old Leave it to Beaver and The Walton TV shows. Most families today are either single parent or blended multi-marriage families scattered all over the country. Baby Boomers who are the children of senior parents requiring expensive health care are squeezed between the financial needs of their parents, their children and themselves. 
Their needy elderly parents maybe facing serious health concerns; their children in college add an annual tuition bill up to $25,000; plus the Baby Boomers have a need to save and plan for their own retirement. Further, most Baby Boomer children do not have the time with their own incredibly busy working lifestyle to actually provide the health care for their parents at home. Seniors are on their own. 


Contrary to an apparent widespread belief, Medicare does not pay for nursing home costs other than on a very limited basis of up to 100 days for approved skilled care only. Over 98% of care needed in a nursing home is only for custodial care bathing, dressing, eating, washing and toileting. None of those needs is paid for by Medicare or the related Medicare Supplement policies. The fastest growing cause of nursing home stays is due to Alzheimer Disease, which requires uncovered custodial care, which again is not covered by Medicare. 


 The rules to qualify for Medicaid - the medical program for the poor - has become extremely strict over the past few years because of the staggering cost of nursing home care on the government. Medicaid only pays for a little more than 40% of those receiving nursing home care. The rest comes from private paying patients. The waiting list is very long for Medicaid funding care and there is a very strong likelihood that the care will have to be provided a facility distant from the original home or visiting family. A middle class person must spend their assets down to $2,000 to qualify. Married couples can have somewhat more to protect the spouse still living at home but it’s financially ruinous for both single and married persons of the middle class. Further what assets they do have are subject to be recaptured later to compensate for the Medicaid payments by the state. It is so emotionally devastating for hard working middle class family to have to spend down and become poor to qualify for Medicaid.  What is worse and more tragic is, some people are even getting divorced to protect themselves financially. 

Legal Strategies

There are still legal and financial strategies to protect a family's assets against a nursing home stay. They are very strict and complicated. You should only work an attorney who is very knowledgeable in elderly law, estate planning and nursing home asset protection.  I do not recommend just giving assets away to your family – then try to qualify for family Medicaid. It is extremely important to work with an attorney very experienced and knowledgeable in elder law, long term care and estate planning

Long Term Care Insurance

The only way a family can absolutely protect itself from the staggering cost of nursing home care is with Long Term Care (LTC) insurance. You can purchase home health care and/or nursing home care.   The policies will pay the daily benefit selected to cover the cost you select. Premiums are based on age, health, daily benefit, and type of coverage (nursing home, home health care or both), waiting period and benefit period. These are essential, but highly complex products. You need to work with a professional knowledgeable and experienced with long term care insurance. 

There are many good reasons why you need to work with a specialist for estate planning. While some lawyers are regrettably opposed insurance, as an estate planning attorney and former Virginia Deputy Commissioner of Insurance, I strongly believe that insurance and estate planning go together hand in hand. 

When a person age 75 tells me the premium is too high and that they just can't save for it, I advise them of the very high risk they are taking and the cost of having to go to a nursing home. Even if they paid LTC premiums for 15 years until age 90 for a total of  $45,000 in premiums, it is still less than guessing wrong and having to pay just one year's cost for a nursing home stay. That is because the average stay is two years. 

Ball park figures for Nursing and Home Health Care 
Insurance Coverage 

Premiums, of course, vary as stated above but annual premium ballpark estimates are as follows: 

 $1,500 at age 60 
 $2,500 at age 65 
 $3,200 at age 70 and 
 $4,000 at age 75 

Rates should not increase once the policy is purchased. It is also advisable to have the daily coverage benefits increase with inflation as with an inflation guard protection. 

A Better Choice for 
Long Term Care Financing 
Asset Re-allocation 

If you have assets in savings or investments, or a life insurance policy that you have intended to cancel or cash in those assets could be re-allocated to provide a combination of tax deferred savings as well as to provide long term care coverage. The earlier you can start, ideally in your 40’s the less expensive long term care insurance will be.  For example at age 40 the LTC premium can be capped at less than a $500 a year.  At age 60 you can cap long term care around  $3,000 a year. Waiting until a person reaches their 70s increases the cost of any insurance and risks the possibility that the long legal waiting requirements to qualify for Medicaid asset protection won't be met, and again you can lose your insurability. It is never to early or late to start planning, however just trying to save for the un-savable cost of long term care could be the worse approach. Legal strategies with Long Term Care Insurance are clearly A Better Choice. 

I find that the greatest obstacle that people encounter is wondering what they are getting into when they decide they would like to look into meeting with an attorney to start an estate plan. They are reluctant to initially make the call because they don't know what its going to cost in time and money. Taking the fear and confusion out of estate planing involves educating folks to know what to ask. That is also why it is also very important to always work with Legal and Insurance Advisors when it comes to estate planning. 

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