Medicaid is a government program that helps various Americans with the cost of their medical needs if they qualify to receive assistance under the program. Elderly Americans who qualify may use Medicaid funds to pay for long term nursing home care and avoid having to pay for the cost of that out of their estates. Medicaid has limitations on the value of assets a person receiving Medicaid can own and still receive Medicaid, and therefore, some planning is necessary if a person is planning on using Medicaid to pay for long term care.

When receiving Medicaid as a senior, one of the requirements is that the recipient does not receive income or own assets over a certain amount. If a person has assets over the Medicaid asset limit, the person can spend down those assets in order to meet the eligibility requirement. For some people, the spending down may involve paying for nursing home costs or other medical care, others may try to meet the eligibility requirement by gifting away the assets to friends or family members.

Unfortunately, if these transfers or gifts are made within five years of filing for Medicaid, the person applying for assistance may face penalties or have the application denied. The applicant may also be deemed ineligible for Medicaid for a certain period of time. This five-year period is known as the look back period. There are certain steps that an applicant can take to ensure that gifts given during this period do not result in a penalty.

Homes that are owned and occupied by the Medicaid applicant or his spouse are not usually subject to the limitations on asset transfers. Transfers of assets to spouses also do not count because a spouse’s income is also considered in determining eligibility. Additionally, parents can transfer their home and other assets to children with disabilities or to trusts established for the benefit of those children. Transfers can also be made to an adult child who lives with the Medicaid applicant and provides care and assistance to the applicant.

There are additional ways to transfer assets without incurring penalties, and people with significant estates should speak to an experienced attorney to figure out the best approach. Applicants should be careful because many of the methods applicants used in the past to transfer assets and avoid Medicaid penalties are no longer valid.

Note that a penalty under Medicaid for gifts or transfers of assets during the look back period is different from tax penalties from the IRS. Even if the gifts given in a tax year fit within the gift allowance, the gift giver may still face a Medicaid penalty for simply making the gift.

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If you are in the process of planning for your long term care and how the assets comprising your estate will be distributed to your heirs, you should speak with an experienced estate planning attorney to ensure that you and your heirs are not negatively affected by the plan you put in place to transfer assets. For a consultation to discuss your estate plan, contact Resnick Law, P.C., to talk to knowledgeable estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Hush Naidoo)

When a person dies, his or her debt does not always die, too. This can be a major concern for a person with a large amount of debt and who does not want his or her heirs to inherit this debt upon his or her death. The person may own few assets and not want those assets to be reached by creditors, preferring instead to leave them to deserving heirs.

Even when a debt is owned by a spouse, it does not mean that the surviving spouse will automatically be responsible for paying off the debt. A spouse would be responsible for the debt if the debt is jointly owned by both spouses, such as if the spouses jointly took out a mortgage loan. Additionally, if a person co-signs on a loan, the co-signer acts as a guarantor and would likely be required to pay off the debt if the person who took out the loan dies.

If the surviving spouse was only an authorized user on a credit card or a line of credit, the surviving spouse would not be held responsible for that debt upon the death of the spouse who was the primary account holder. There is a difference between being an authorized user and a joint owner on a debt. Therefore, the surviving spouse should ensure that he or she reads all the paperwork related to the debt in order to figure out whether he or she will be responsible for the debt after a spouse’s death.

In most cases, a person’s estate is responsible for paying off debts with any assets left within the estate before the assets can be transferred to heirs. The executor or administrator of the deceased’s estate usually has to locate and inventory all the debts owed by the deceased, and then apply all the assets remaining in the deceased’s estate to pay the debts. There are some situations in which the estate administrator may be able to use non-probate assets in order to pay the debts of the estate.

If a debt is secured by an asset, such as a house or a car, the creditor can repossess the asset after the death of the debtor in order to pay off the balance of the debt. Therefore, even if the family members of a deceased debtor do not have to be responsible for paying the debt, they may not have the benefit of inheriting the asset either. Some creditors may work with heirs who wish to pay off the balance of a loan in order keep the assets that would otherwise be repossessed.

If you are no longer able to pay your debts and have no options for additional income, it may be time to consider filing for bankruptcy. However, depending on the nature of your debt and what assets you own, there may be other ways to avoid filing for bankruptcy and still take care of your debts.

Contact Our Experienced Attorneys

If you have significant debt and are worried about how this debt will affect your family members after your death, you should contact an experienced estate planning attorney for more information. Call us to speak to our experienced estate planning attorneys, or our experienced bankruptcy attorneys at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan for a consultation to discuss your specific situation.

(image courtesy of Benedicto de Jesus)

With both a revocable and an irrevocable trust, the person setting up the trust, who is known as grantor or settlor, executes a legal document creating a trust and then transfers assets to the trust. How much access the settlor retains to the assets transferred to the trust determines how the trust is characterized.

In a revocable trust, once the trust is set up, the settlor still has the ability to terminate the trust or revoke it. That means that the settlor still has control over the assets in the trust because if the settlor wants to take the property from the trust, he or she can do so, and simply revoke the trust thereafter. Inter vivos trusts, or living trusts, are trusts created during the settlor’s life. These kinds of trusts can either be revocable or irrevocable.

Irrevocable trusts operate in the opposite way. Once the settlor creates an irrevocable trust and transfers assets to the trust, he cannot access the assets again or terminate the trust. The assets in the trust belong to the trust, and can be distributed to the beneficiaries of the trust according to the trust document. Trusts that are created through a person’s will are known as testamentary trusts, and are always irrevocable because the settlor is deceased by the time the trusts comes into existence.

In some cases, a settlor can create a revocable trust, with a provision in the trust documents to convert the trust into an irrevocable trust if the settlor becomes incapacitated. This can help keep the settlor’s wishes regarding the trust and its assets in place even when the settlor can no longer express those wishes.

A settlor can name him or herself as the beneficiary under either a revocable or an irrevocable trust. Trusts that are sometimes used to hold a settlor’s assets in order for the settlor to qualify for some government assistance, such as Medicaid, are usually required to be irrevocable in nature. If a settlor wishes to create a trust in order to avoid estate taxes, then the trust generally has to be an irrevocable trust. If the trust is created as a revocable trust, the settlor never quite loses control of the assets in the trust and those assets are still able to be considered a part of the person’s assets for tax purposes.

Contact an Experienced Estate Planning Attorney

There are many reasons to use a trust, including as part of your estate plan. If you need to use a trust, it is important to discuss the various trusts that may be most advantageous in your situation. To put together an estate plan that includes the use of trusts, and addresses your individual needs and wishes, contact Resnick Law, P.C., to consult the experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

(image courtesy fo Aidan Bartos)

When multiple people own a property as joint owners with the right of survivorship, it means that when one person dies, the other owner automatically receives the deceased person’s share in the property. The deceased person’s share does not go through probate and does not become a part of the person’s estate to be distributed to heirs and other beneficiaries.

A property that is owned by multiple parties as joint owners with right of survivorship has to be transferred to all the owners at the same time. Joint owners generally own equal shares to the property and have the same ownership rights.

If one of the joint owners sells his or her interest in the property to someone else, it does not terminate the other owner’s right to survivorship. Once the person sells the share, the new owner can only own an interest in the property for the life of the seller. Once the seller dies, the other owner inherits the property as a whole.

Once one of the joint owners dies, the other owner who inherits the deceased’s share should clear the title by filing certain forms. Clearing the title ensures that the title to the property indicates that the property is owned by one person. If the surviving owner fails to immediately file papers to clear the title, he or she can still do so later. It does not void the survivorship right.

Under Michigan law, the transfer of title through survivorship only happens if the person to inherit the deceased’s share outlives the deceased for more than 120 hours. This can become an issue when the two owners are involved in the same accident. If one of the owners dies, the other inherits his or her share only if he or she lives longer than the other owner by 120 hours. If the person survives longer than this, the deceased owner’s share transfers to him or her; if not, then each owner’s share is transferred into each owner’s estate. If there is another document, such as a will, that addresses how the property is to be divided if both owners die together or one shortly after the other, that document will be followed.

Joint ownership with right of survivorship is not restricted to real estate ownership. In some cases, bank accounts, cars, brokerage accounts, and other assets can also be owned jointly with the right of survivorship.

Contact Us for Legal Assistance

Estate planning can get complicated depending on the assets included in the estate and the goals and wishes of the individuals involved. To find out more about how you can plan your estate to take care of your loved ones after your passing, contact Resnick Law, P.C., to consult the skilled estate planning attorneys in Bloomfield Hills and Detroit, Michigan.

(image courtesy of Tim Evans)

Naturally, for those who own a home, Homeowners Insurance is essential and designed to protect property, possessions and shield you from liability for accidents. Below is Resnick Law’s “Quick 7” question check-up to make sure you and your assets are properly insured:

     1. Your Risks Have Changed?

You may be paying for insurance you no longer need. On the other hand, you may need more coverage based on your current life. For example, do you have coverage for the current value of your home? Most homes in our area have gone up in value in recent years. (If something happens, insurance that is based on what you originally paid may fall short of what you need.

     2. Review Policy Exclusions

Many people with Homeowners Insurance are devastated when they discover their policy doesn’t cover their particular disaster. For example, hurricane coverage relates to damage from high winds, not high water. If you are flooded, without special flood insurance, you are not covered. (As many homeowners of Oakland County discovered in the summer flooding in 2014.)

     3. Analyze Your Deductible

If you’ve been in your home for awhile, you may be in a position to raise the cash to make common repairs. A well-stocked emergency fund may be a better place to put your money because higher deductibles mean lower insurance rates.

     4. Your Life Has Changed?

If you get married, divorced, have children or send the children out on their own — each of these life events may impact the insurance coverage you need.

     5. Do You Have More Stuff?

Most insurance policies provide some coverage for personal possessions. Take a look around your home and inventory everything you own. Good advice on several fronts, including if a disaster were to occur, but it may also reveal you need higher limits on those personal possessions. Some items, like cash, jewelry and firearms may not be covered at all.

     6. Consider Replacement Costs

Insuring for replacement cost varies from one company to the next. Most require you insure your property up to or at 80-100 percent of the replacement cost. To keep current with the requirement, you must look at the cost of rebuilding frequently. Remember, in the case of a major catastrophe, materials and labor costs will surge, adding to the expense of replacing.

     7. Learn About Open and Named Perils

Generally, your homeowner’s policy covers open perils. In other words, you’re covered for any reason not specifically “excluded” from the policy. On the other hand, named perils provide for specific situations such as fire, explosion, windstorm, theft, vandalism or others.

The time to learn about your insurance coverage is before you experience a disaster. One way to ensure you understand your insurance coverage is to get a check up each year. We are here to help you–ask your Resnick advisor to read through your declaration pages and make sure your assets are properly covered.

It is advisable to consult an attorney for help with your estate plan and your digital footprint. However, here are seven tips for how to prepare now for the handling of your digital assets after death.:

1. Create an Inventory: Create inventories of your electronic data, with log-on IDs and passwords will ensure that anything you own online is accounted for and can be managed. Like other sensitive data, you need to keep that information somewhere safe; and keep it current and secure.

2. Use a Password Manager: Programs like LastPass allow you to inventory and share access information with your executor without having to disclose the information in a public document like a will. By having one password that catalogs your digital assets and how to access them, it’s like having a master key and digital net worth statement all in one.

3. Consider an Online Vault: Cloud services like Dropbox or Everplans will allow your executor to have access to all your digital estate planning documents, insurance planning documents, tax returns, etc., in one place. It makes the executor’s job much easier.

4. Get Specific: Write your digital-asset plan into your estate documents. Be very clear about it rather than relying on the generic powers of an executor or a general definition of assets to assume that includes digital assets. The more specific you are about your intent and that you want your executor to have access, the better.

5. Detail and Parcel Out: Consider writing both a broad statement of intent for digital assets as well as specific directions for each account. Create a memorandum addressed to your executor and heirs indicating the intentions regarding specific digital accounts. However, to avoid the problem of forgetting to include an account, you need two statements, because technology is dynamic — and because you may have several accounts unaccounted for in your plans — it’s recommended that you include a general statement of intention to encompass all other accounts — past, present, and future — belonging to the decedent.

6. Specificity and Consideration: Think carefully and be specific about what you want your executor to have access to. Do you want him to have the ability to read all of your email messages? If not, be clear about it.

7. Pick your Executor Carefully: Consider who you are choosing to grant information to as they’ll have access to your online accounts. Remember, also, that they’ll need at least some tech savvy to deal with those accounts because they’re going to have access to some very personal information.

For more information on incorporating digital assets into your estate plans, contact the Estate Planning attorneys at Resnick Law online or by calling (248) 642-5400.

On the most basic level, tracking down your digital assets may be difficult without a full accounting, which could ultimately mean your assets may simply be lost in the ether. It could also put your estate at risk for hacking or fraud since many digital financial accounts, like PayPal, are directly tied to your bank account. If your executor doesn’t know to look at Amazon, they may never know a potential security breach could be a mouse click away.

Complicating matters — from an estate-planning perspective — is that most of these accounts are governed by “terms-of-service” agreements that you agreed to abide by when establishing the account. (Whether or not you bothered to read the fine print is a different blog post.) These types of agreements, in addition to state and federal privacy laws, as well as laws that criminalize unauthorized access to computers, all tend to limit access to online accounts.

The good news is that a growing number of states have begun enacting legislation that helps clarify the rules for how executors and others can access and manage the online accounts of someone who has died.

The revised Uniform Fiduciary Access to Digital Assets Act — which has been adopted in 18 states and introduced in at least 12 others — lays out the rules under which an executor can manage a decedent’s digital accounts. Michigan enacted legislation last March granting executor access to digital accounts. The law took effect on June 27, 2016.

There are restrictions written into the law designed to protect the privacy of the decedent. For example, in general, an executor can manage digital property but he or she won’t necessarily be able to read the contents of email messages and the like.

The law adopts a three-tiered approach to determine how access to online accounts is handled after death: The first tier says that if a service provider offers an online mechanism for the user to dictate his or her post-death wishes — one example is Google’s “inactive account manager” — then the account owner’s use of that tool determines what happens to his account.

The second tier states that if the service provider doesn’t offer any kind of online tool dictating what happens to digital assets after the account owner’s death, or if the account owner doesn’t use the tool, then the account owner’s directions in a will or other legal document prevails.

The third tier further clarifies chain of custody by stating that, absent either of the first two situations, then the terms of service agreement — that online form you likely didn’t read when you open your account — determines how your digital assets are dealt with after you die. In general, those agreements curtail access to anyone who isn’t an account owner and so failure to plan ahead means heirs are left hanging in the wind.

However, as long as you use the online tool offered by your service provider — if one is offered — and you also detail your wishes in your will, your digital assets should be accessible, per your wishes.

If you need counsel on incorporating your digital assets into your estate plans, contact Resnick Law online or call (248) 642-5400 to discuss your options.

This is the first of a two-part blog series on custody of digital assets after one dies. Next week, we’ll offer several tips on how to effectively plan ahead to prevent one’s online life from outliving the person.