With Consideration for Those
Living With Chronic Illness
By: Martin M. Shenkman, CPA, MBA, PFS, AEP, JD
Caveats
Nothing in these slides or any accompanying presentation is to
be considered tax, legal, investment or other professional
advice. The information is merely provided for educational
purposes and no action should be taken without the individual
consulting his or her own tax, estate, legal, financial,
investment, insurance and other advisers.
The hosts and sponsors of this program are NOT
responsible for its content or accuracy
Revocable Living Trusts Introduction
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What is this powerful document?
What is a Revocable
Living Trust?
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Also called “Living Trust,” “Loving Trust,” or
“Inter-Vivos Revocable Trust”
Revocable – you can change it anytime
Can be used to avoid probate but this
popular goal is not the key benefit of this
technique
Use to consolidate and manage your assets
during disability
It is the most powerful tool to manage
assets if you cannot do so
Tips: Revocable Living Trust
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Your will and power of attorney must be
coordinated
Boilerplate trusts designed to avoid probate won’t
accomplish your goals
Focus of document should be protecting you and
communicating your wishes as your disease
progresses
Tailor trustee replacement, disability and other
provisions to the nuances of your anticipated
disease course
Assets must be transferred to the trust to gain the
most benefit – but some assets should not be
transferred (e.g., IRA).
Tailor your Revocable Trust
Planning to Your Needs
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Every person is unique – it has to be your plan,
your trust, and address your challenges
Reflect your personal wishes and circumstances
Tailor the document to address your unique assets
(e.g. a closely held business)
Chronic Illness is Common –
“Trust” Now Don’t Wait
120 million Americans are living with chronic illness or
disability
By 2020, about 157 million Americans will be afflicted by
chronic illnesses
26% of those ages 65-74 have had their lives significantly
impacted by chronic illness
50% of those age 85 and older have had some cognitive
impairment
9 million people are cancer survivors with various side
effects from treatment
A living trust plan created early after your diagnosis with a
chronic illness can protect you and your loved ones
Watch Out For Hyperbole
and Sales Pitches
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There are many hucksters pushing living trusts to
play on peoples fears of probate and taxes
Only 5,600 estates a year will pay a federal estate
tax – few are affected (but state estate tax may still
bite)
Tax savings can be accomplished in a will or by
planning, a living trust is not necessary for this
Probate is not as costly, difficult or ‘evil’ as often
portrayed by those hustling trusts
The above detract from the most powerful use of a
living trust – namely managing assets in disability
Revocable Living Trusts –
Plan your Trust Agreement
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How to plan your trust document
Create Your Revocable
Living Trust
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Establish a personalized (not boilerplate) living trust
Include provisions to address your specific health
issues
Avoid probate and intestacy
Manage assets during disability or illness
Living Trust – What do
you Need
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Trust agreement – a contract between you
and the trustee (which might be you, but
read on)
Tax identification number (but check with
your CPA)
Documents to transfer assets to your living
trust once signed
Paperwork to open a trust bank account
Living Trust – Naming
Trustees
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Who should be trustee?
Should you name two co-trustees at
inception?
Should you be a trustee?
Who should be successor trustees?
When should successor trustees step
in?
Living Trust – Different
Time Periods to Address
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Your living trust might have different
provisions to address different time periods
more specifically
#1 You’re alive and well – you might be a
sole or co-trustee and simply manage assets
in the trust name
#2 You’re disabled – a co-trustee and
successor might take over
#3 After death – it will function like a will
disposing of your assets
Living Trust – Special
Trustee Provisions for
Chronic Illness
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Perhaps you should remain a co-trustee to
stay in control of your finances but have a
co-trustee that can act if you have an attack
or are hospitalized
Standard language removing a trustee who
is “disabled” may not suffice perhaps the
co-trustee can be authorized to take certain
actions alone if you cannot act
Consider a 30 day disability period so a
short hospitalization won’t affect it
Living Trust – Special
Distribution Provisions for
Chronic Illness
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Include details as to the care and other
decisions you want to guide or control the
trustees when you are not able to serve
Direct the trustee to pay for medical care
decisions authorized or directed by your
health care agent (to avoid conflicts)
If you should not serve as trustee consider
a small dollar bank account outside the trust
to enable you to shop and spend reasonably
without jeopardizing the trust assets
Living Trusts – Hire a
Lawyer
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Be very wary of internet forms – they are limited in
how they can be tailored and won’t address your
special circumstances (e.g. chronic illness)
You can fill out forms cheap on line but even if the
forms were good – you can’t get a website or
cheap form to substitute for decades + of real
experience
Hire an attorney in your state that devotes a
substantial portion of his or her practice to estate
and trust planning
If the attorney cannot tell you reasons not to use a
trust, as well as reasons to use a trust, go
elsewhere – no decisions are absolute
RV Tips – Planning Your Living
Trust
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Hire a lawyer in the state you claim is where you reside and
are domiciled – that is a tie to that state to support your
position (but alone will never be enough, its just one factor)
Rv’ers, or anyone who facing tax uncertainty as to which state
they reside in (or in which they are domiciled), should
consider the address designated in their trust and which state
law is indicated to apply
Where are the assets are that will be transferred to the trust
Where should you sign your trust – in the state you claim is
your residence and domicile
Can you use formalities for your trust that are more likely to
be accepted in other states (e.g., 3 witnesses and a notary)
Revocable Living Trusts –
Get Organized
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Keeping the confusing names of legal
documents clear
Organize Emergency, Financial,
Information and Advisors
Information
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Without organization your trust will be
of marginal help
Contact People (names, numbers)
Financial Information (account
information)
Passwords and Security Codes
Documents (Estate planning documents,
legal documents, and more)
Budget and Plan
Financial Information is Critical
to Organize for your Trust to
Succeed
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Title to Accounts
• Change appropriate
assets to your trust
• Don’t transfer IRAs,
professional practices
and other
inappropriate assets
Account Management
• Duplicate statements
• Consolidation and
simplification
Beneficiary designations
• Coordinate with trust
beneficiary provisions for
assets transferred
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Automation
• Organizing records
• On line payments
• Automatic deposits
• A trust without more
is not enough
RV Tips on Organizing Financial
Info and Using Living Trusts
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Rv’ers, or anyone who travels extensively, should take extra
precautions to make sure information is available when
needed
When determining where to keep accounts consider tax issues
of residency/domicile
Consider transferring all permitted (appropriate) assets to
your living trust but retaining a bank account in your own
name in the state where you believe you are domiciled
Ask an attorney in the state where you own real estate or
tangible property (collectibles) if transferring the assets to
your trust will be sufficient to cut tax ties to that state (it may
avoid probate but not solve your state income or estate tax
issue)
Revocable Living Trusts –
Relationship to Other
Documents
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Keeping the confusing names of legal
documents clear
Overview of Estate Planning
and Living Trusts
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Powers of Attorney
• Only relevant to assets not
transferred to your living trust
• Why standard forms aren’t
suffice
• Special provisions to include to
coordinate with living trust
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Living Wills
•Health Proxies
• Selecting agent
• What is different for you if you
live with chronic illness
•Trustee should follow agent’s
health care directions
•Revocable Living Trusts
• Trustee of living trust might fund
medical bills
• Often the keystone of your
plan
• Address specific health issues
• Experimental procedures
• Boilerplate forms rarely
address nuances needed
• Organ and tissue donations
• Coordinate with other
documents
How does a living trust
compare to a will and power
of attorney?
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Will – disposes of your assets after death
Power of attorney gives an agent authority
to handle certain legal and tax matters while
you are alive and often while you are
disabled
Living trust can address both and catch
gaps in the other documents – trustee holds
legal title to your assets and may be able to
act more quickly and with less issues than
an agent under a power of attorney
Will: Consider a Pour
Over Will
Revocable Living Trusts –
Ancillary Steps
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Follow up steps must be addressed to
make your living trust plan works
RV Tips for Living Trusts
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Using a living trust can consolidate assets, minimize the
likelihood of other states claiming that their law applies, and
make management of your assets easier by a family member
or friend who lives at a distance from where you are – but
you have to get assets transferred to the trust (watch which
ones) to accomplish this
Living trusts alone will not suffice for many planning needs -you might benefit from a limited liability company to own real
estate or tangibles – consult a lawyer in the state where the
assets are located, in addition to the lawyer you hire in the
state you claim is your domicile
Insurance Coverage May
Have to Be Updated
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Property, casualty, liability insurance
If assets are transferred to your trust
update coverage
Insurance Coverage
Considerations
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Don’t make assumptions – get every
insurance coverage reviewed before
transferring an asset to your trust, and
at least every 2 years
You might need to name the trustee
and trust as owner of your home to
assure proper coverage
Beneficiary Designations May Need
Updating
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Consider all beneficiary designations for
assets transferred to your living trust – the
trust is a new account and you’ll need forms
Obtain copies of the forms you file and keep
them with trust records
Note: IRA, pension (and often life
insurance) should generally not be
transferred to your trust
Revocable Living Trusts –
Consider Everyone Affected
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Family, loved ones, trustees must all be
considered to make your living trust plan
work
Provide for Loved Ones
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While the discussions above focused on
using a living trust to protect you, also be
sure to provide for your loved ones
Communicate
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Educate and inform your fiduciaries
Preparation of beneficiaries
Communication Tips
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Explain your finances, family, care, disease,
and so forth to your advisers – tell all so
they can help properly
Discuss with family, friends or others
involved in your life what help you might
need
Can the trustee you named really be
counted on? Have alternatives
Express your wishes in face to face
meetings and then confirm key points in
writing
Revocable Living Trusts –
It’s a Process
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Monitor, review and revise regularly
Review, Revisit, Revise
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Nothing remains static
– Tax and property laws
– Family situations
– Assets and net worth
– Health
Revocable Living Trusts –
Get Started
Planning is great – but implement!