Terminology & Reference Articles
Wills and Estate Planning
Do you have a plan for the future? Is it the right plan for you? Does it fit your needs and your life circumstances? Will it work effectively when you need it? These questions are essential to ask and answer. If you don’t have a workable, sound plan, now is the time to act. Elder Law of East Tennessee can help. We take what is often a complex and confusing process and offer a plan that will work for you and an explanation so that you can understand. We strive to give you as much flexibility as possible while handling things straightforward and simple.
It is essential for everyone to prepare by establishing an Estate Plan, regardless of financial situation, age, or health. Wills and trusts distribute your assets and pay your debts at your death. The last will or trust can also protect assets for a surviving spouse or disabled child. These legal documents also ensure that your final wishes are carried out in the manner you decide.
What kinds of wills are legal in Tennessee? Tennessee recognizes three kinds of wills: traditional wills, which are typewritten, witnessed, properly attested, and notarized; holographic wills, which are handwritten wills; and nuncupative wills, which are oral wills.
Anyone age 18 or over can make a will so long as he or she is of sound mind. Your will should contain the following basic provisions:
Names and relationships of your immediate family members;
Directions to pay taxes and debts;
Directions about what to do with your personal belongings;
Directions about what to do with all of your other property, such as land, house, and money or investments;
Naming a person to be in charge of the estate and carry out your instructions (sometimes referred to as the Personal Representative);
Naming the guardian of any minor children;
Listing the powers of your Personal Representative, including the power to sell real estate;
Provisions for bond, inventory, or accountings by the Personal Representative; and
An affidavit of attesting witnesses.
Of course, your will can include many other terms, including specific instructions about what to do with special items of furniture, jewelry, artwork, or family heirlooms. Your will can also create life estates in property. Testamentary Trusts can be included in your will to protect a spouse or child.
Importantly, a will is not binding until the death of the Testator (the person making the will). Wills are revocable. Sometimes a will is revoked by operation of law or by an act of the Testator. Marriage and divorce, for example, will revoke a will by law. A Testator may revoke a will by defacing it in the presence of witnesses, among other methods. If someone is named in a will, he or she has only an expectation of receiving property at the death of the Testator. It is not a right. It is only an expectation.
Typewritten wills must be properly drafted and witnessed to be effective. In Tennessee, there must be at least two witnesses to the signing of a will. Both witnesses must be in the presence of the Testator and within the sight and hearing of the Testator and each other. An affidavit of attesting witnesses serves to start probate proceedings easily and quickly without going to the effort of trying to locate witnesses and bring them to court.
You should be aware that a will does not control the passing of property that has a beneficiary or pay on death designation. Assets with pay on death or beneficiary designations or joint owners, such as a bank account or an IRA, will pass according to the contract between the account owner and the financial institution holding the funds. Life insurance, also, typically passes according to a beneficiary designation. It is important that you check your beneficiary designations to be sure they provide for your intention because your Last Will and Testament does not control those assets. Your will does not control the title of real estate that is deeded with a joint owner (not a tenant in common), such as a deed to husband and wife, or a deed reserving a life estate. These types of deeds create ownership that vests immediately upon death. We suggest that you keep your will in a safe place and that you tell your Personal Representative where you keep it.
At Elder Law of East Tennessee we tailor your will to your specific needs. We strive to fully understand your objectives and to offer you options in planning to most effectively accomplish your goals. If you already have a Will, we can review it for you. If changes are needed or wanted, sometimes we can simply do an amendment to your will called a Codicil.
Durable Health Care Power of Attorney & Living Wills
Have you encountered a situation where a critically ill family member is faced with life-threatening decisions and is not able to communicate his wishes? The family gathers together and is faced with making tough decisions during times of intense emotional stress. The doctors ask what treatment should be provided or withheld. The ill family member never talked about her feelings regarding life support or end-of-life treatment. The family has little guidance and may feel burdened by the responsibility of making such a decision.
A Living Will is your directive to your family, health care providers, religious leader, friends and community about what end-of-life medical treatment you desire to have or refuse. It speaks for you when you cannot. It is a gift to those who love you. It is your opportunity to stay in control of your medical treatment when you cannot make or communicate decisions yourself.
The Living Will, at a minimum, should address several factors: (1) terminal illness; (2) persistent vegetative state, including coma; and (3) artificial nutrition and hydration. Many also include a statement of spiritual or religious convictions and provisions on organ donation.
A Durable Health Care Power of Attorney is an equally important document that gives you an element of control when you are incapacitated and cannot make or communicate decisions. The Durable Health Care Power of Attorney appoints an Agent to act for you and on your behalf in your best interest. The Agent is directed to follow the directives of your Living Will. The Health Care Power of Attorney should be a Durable power, which means it stays in effect even though you become incapacitated or incompetent. It should grant your Agent permission to talk with your doctors, make decisions for you, consent or withdraw consent for treatment, access your medical records, and arrange for your care at home or in a facility. The powers granted to your Agent can be broad or limited, according to your desire and need. With recent federal privacy laws, health care providers do not communicate with a third party about a patient without a Durable Health Care Power of Attorney.
The Living Will and Durable Health Care Power of Attorney are essential planning documents for people of all ages and life circumstances. Take the time to do your planning and talk with your family about what you would want if faced with a serious illness. Communicate your decisions to your family and give your Agent the legal authority to enforce them.
Durable General Power of Attorney
A Durable General Power of Attorney is a written document that authorizes an “Attorney in Fact” to act on your behalf. This document is different from a Durable Health Care Power of Attorney because this document concerns property and contract rights not health care or matters related to your person. The Durable General Power of Attorney conveys to your Attorney in Fact the powers and authority to handle all kinds of transactions on your behalf regarding your property, contracts, and benefits. The kinds of transactions an Attorney in Fact may conduct include paying monthly bills, collecting rents, voting stocks, running a business, buying or selling real estate, or negotiating the terms governing hiring caregivers or admission to a nursing home.
A power of attorney is “durable” when the power remains effective even if you are incompetent or unable to communicate. That means, the document is designed to continue to be effective when you are disabled or no longer mentally competent and you cannot act on your own. The Power of Attorney must contain specific language in order to qualify under Tennessee law as “durable.”
THINGS TO THINK ABOUT
A Durable General Power of Attorney is a very important part of planning. The most crucial choice may be who to name as your Attorney in Fact. The person you choose should be trustworthy, conscientious about record keeping, organized, responsible, and reliable. You should consider naming a successor Attorney in Fact as a back-up. Bond typically is not required but having your Attorney in Fact account to another person is recommended. Compensation for services as Attorney in Fact is optional and should be set forth in the document.
POWERS THAT ARE OPTIONAL OR EXTRAORDINARY
Our statute has a long list of powers that your Attorney in Fact will require in order to effectively manage property. These are the default powers, such as dealing with money, filing tax returns, and entering contracts. Some special powers to consider adding to the general ones include: making gifts; exercising powers you may have over income or principal of a trust or fiduciary positions occupied by you; changing beneficiary designations on bank accounts or life insurance policies; changing right of survivorship designations on real or personal property; disclaiming property; exercising rights of elective share; and making health care decisions.
REVOKING POWER OF ATTORNEY
The way your documents are written affects the process for changing them. Often you can revoke a Durable Power of Attorney by giving written notice to your Agent or Attorney in Fact. You may also want to notify your financial institutions where your Agent or Attorney in Fact conducted normal business on your behalf and file the revocation with the Register’s Office in the county where you live.
BEING A FIDUCIARY
If you are named as an Attorney in Fact under a Durable General Power of Attorney, you are considered to be a fiduciary. A fiduciary is in essence a trustee. A fiduciary is a person who is entrusted with a duty or undertaking and must act primarily for another person’s benefit in all matters connected with the undertaking. Scrupulous good faith and candor are required. Be sure you have thoroughly read and understood the Power of Attorney that nominates you to serve as Attorney in Fact. If the document contains language that you do not understand or if you are uncertain about carrying out your duties, you should get legal advice. Often the Power of Attorney will provide for payment of reasonable and necessary attorney fees from the assets of the person you are assisting. Getting sound advice before acting can avoid problems down the road.
Medicaid Benefits
Medicaid is health insurance for low-income individuals or individuals with long-term disabilities who have not been able to work long enough to be eligible for Medicare. It is administered at the state level, so each state determines exactly what is covered and establishes the qualifying income/asset guidelines.
Families often come to Elder Law of East Tennessee when they struggle to understand how to pay for the care needs of an elder or disabled loved one. Accessing Medicaid benefits to pay for long-term nursing home care or in-home care is a large focus of our planning process.
Just like other public benefit programs, Medicaid benefits change frequently. We stay on top of it all. We help clients structure their legal and financial affairs so they can qualify for Medicaid as soon as possible while preserving hard-earned resources to the greatest extent feasible.
Before you become convinced you can’t afford the care you need or will lose the home and resources you’ve worked so hard to accumulate, talk to us at Elder Law of East Tennessee. Or click through to read more about Medicaid benefits for Tennessee nursing home residents or in-home/assisted living care through the CHOICES program.
When it comes to managing your long-term healthcare needs, you can see how important it is to understand when and the right time to apply for Medicaid. Let Elder Law of East Tennessee help ease your mind and put a plan in place that assures you will get the best care when you need it without worrying about how it will be paid for.
Trusts
A trust is a part of your estate plan that controls how you use your property during your life and after your death. Think of it as a container that can hold assets with a manager to oversee investments, distributions, and taxes. Different kinds of trusts achieve very different estate planning goals, but they share some things.
A trust is created by a “trust maker” whose money and property fund the trust. It is designed to achieve one or more specific estate planning objectives and has terms that help ensure that goals are reached. The terms are in a trust declaration document and the Tennessee Uniform Trust Code. These terms govern who benefits from the trust assets now and in the future. A trust is overseen by a trustee, who manages the investments and must follow the terms outlined in the trust and our law. The trust preserves and protects property for a beneficiary, who will eventually receive part or all of that property or the benefit of the assets. Sometimes, the trustmaker and the beneficiary may be the same person.
Trusts can help people achieve many different goals. Not all trusts are the same, so choosing the right kind to suit your particular circumstances and meet your specific goals is very important. There are two general types of trusts: revocable and irrevocable trusts.
Revocable Living Trusts
The revocable living trust is a wonderfully flexible tool for estate planning, particularly if you own real estate in other states besides Tennessee. This kind of trust can make your assets easier to manage, particularly if you become incapacitated or disabled during your life, and can reduce the inconvenience and expense of probate administration at your death. Assets properly titled to the trust pass through this trust rather than your probate estate when you die. You have the added protection of asset management and high levels of fiduciary duty under a trust if you become ill or otherwise disabled. Living trusts are revocable and amendable. Separate tax returns are not required as long as the trust remains revocable, and there is generally no tax consequence to using the revocable living trust. Often, in living trusts, the trustee and the beneficiary are the same person (or husband and wife).
Benefits of a Revocable Living Trust:
Control your property, perhaps years after your death
Amend the trust easily
Manage assets while you are living, mainly if disability arises
Avoid probate and its costs, delays, and publicity
Protect families with children by prior marriages
Limitations of a Revocable Living Trust:
It does not help to qualify for Medicaid, Veterans Assistance, or other public benefits programs
Does not protect assets from claims of creditors
Irrevocable Trusts
Irrevocable trusts serve different purposes than revocable trusts. There are various irrevocable trusts, each of which achieves specific goals. In elder law, irrevocable trusts are typically used to assist an individual in qualifying for public benefits, such as Medicaid, TennCare, SSI, or VA Aid and Attendance. These include special needs trusts, qualified income or “Miller” trusts, and asset protection trusts. Irrevocable trusts allow the trustmaker to preserve funds for his or her care or to pass a legacy to their loved ones. Below are the irrevocable trusts commonly used in planning for public benefits.
Special Needs Trusts
Two main types of special needs trusts (SNTs) can be established to benefit an individual with a disability – third-party and first-party trusts. Third-party trusts contain money or assets of a third party for the benefit of a person who is disabled. First-party trusts contain money or assets belonging to the person with the disability. Below is a brief description of some SNTs we often use for our clients at Elder Law of East Tennessee.
First Party d4A Trust. A d4A trust gets its name from federal law 42 USC 1396p(d)(4)(A). This type of trust is limited to people under the age of 65. It must be established by a parent, grandparent, conservator, or court, not the individual with special needs. This type of trust is ideal for individuals with a disability who need to put assets into a trust to qualify for Supplemental Security Income, Medicaid/TennCare benefits, Qualified Medicare Beneficiary programs, and other benefit programs that are income and asset-tested. This kind of trust is self-settled, which means it is funded with the beneficiary’s money or assets (such as injury settlements or inheritances) rather than someone else’s assets.
First Party d4C/Pooled Trust. A pooled trust is ideal for individuals with a disability who need to put their assets into a trust to qualify for Medicaid benefits while preserving those assets for their use throughout their lifetime. This trust can be established by a parent, grandparent, conservator, court, or the individual with the disability and/or his attorney-in-fact. A pooled trust is usually self-settled (that is, funded with the beneficiary’s money, often money gained from an injury settlement or an inheritance). If a pooled trust is funded with money from someone other than the beneficiary, it is called a third-party SNT and is typically not subject to payback requirements. What makes a pooled trust different from other kinds is that the trustee is a nonprofit organization. When an individual joins a pooled trust, their trust, while maintaining a separate “identity,” is grouped with other people’s trusts for investment and management.
Third-Party Trust. A parent or grandparent typically creates the third-party trust for the benefit of a disabled dependent, child, or grandchild. The assets in the trust are provided by a third party during life or at death, and the beneficiary with a disability benefits from the trust for his or her lifetime. Because the trustee cannot be compelled to distribute to the beneficiary, the trust is not “countable” as an asset for the disabled party. Benefits should continue for the person with a disability without a problem when the trust is drafted correctly. At the beneficiary's death, if funds remain in the trust, the funds are passed to other beneficiaries either by the initial trustmaker’s instructions or by a power of appointment in the beneficiary. The state is not entitled to any payback from this type of trust.
Sole Benefit Trust. The sole benefit trust is another type of third-party trust, but it is for the benefit of both the third party and the unique needs beneficiary. This trust is generally established by a person who wishes to qualify for Medicaid/TennCare benefits and who has a child or grandchild with a disability. The elder can fund the trust for the family member and qualify for benefits without imposing a penalty. This is one of the third-party trusts that has a payback provision or will be paid out during the beneficiary’s lifetime, and that makes it unusual for a third-party trust.
Miller/Qualified Income Trust
A Miller Trust, also known as a Qualified Income Trust (QIT), is used by people trying to qualify immediately for Medicaid benefits but whose income is too high to meet the strict financial qualifications. The trust holds excess income so that the applicant can receive benefits. Funds held within a Miller Trust can only be used to pay for certain needs, including the medical expenses of the beneficiary, health insurance premiums, spousal support for a current spouse, and minimal monthly bank charges. This type of trust has a payback provision so that Medicaid/TennCare may reclaim all of the funds in the trust up to the amount that Medicaid ever spent on the beneficiary after his or her death.
Asset Protection Trusts for Public Benefits
For those who wish to plan ahead to meet the financial qualifications for Medicaid/TennCare or VA, two types of trusts can be used to achieve this goal. They are the Family Asset Protection Trust (FAPT) and Veterans Asset Protection Trust (VAPT). Both of these types of trusts require planning.
Family Asset Protection Trust (FAPT). A Family Asset Protection Trust (FAPT) is a type of trust used by people with resources who want to plan for the eventuality of needing Medicaid/TennCare benefits in the future but do not need to become immediately eligible. This kind of trust enables the individual to qualify for Medicaid/TennCare after a five-year waiting period for transfers of assets has passed. That means that a person who establishes a FAPT typically must wait five years after funding it before applying to become eligible for Medicaid/TennCare benefits. There are some exceptions to this approach, however.
A FAPT may hold various assets, including homes and all accounts except IRAs. All of the income generated by this trust is payable to the trust maker for life. The trustmaker will also have the lifetime right to reside in the trust-owned residence. Trust funds can be withdrawn by the other beneficiaries named in the trust, who are usually the trustmaker’s adult children.
Veterans Asset Protection Trust (VAPT). A Veterans Asset Protection Trust (VAPT) is similar to a FAPT, with only a few notable differences. The most significant difference is that it is more restrictive. The income from the trust is not paid to the trustmaker; it is paid to the income beneficiary, usually the adult child(ren). This permits the trust maker to exclude this trust as an asset for purposes of applying for a VA pension, including the Aid and Attendance allowance.
Unlike in the Medicaid/TennCare rules, there is currently no lookback period to qualify for VA benefits, although that may change at any time. That means that once a VAPT is established and fully funded, the applicant can immediately apply for VA benefits. However, this may change in the near future. The VA has proposed rules to introduce a three-year lookback for transfers of assets.
Before establishing a trust, it is vital to clearly understand your goals and ensure that creating the trust will not undermine your other estate planning objectives. Not all trusts are appropriate for all needs. If you need help getting started with your trust or thinking about which type of trust might be right for your unique situation, contact us at Elder Law of East Tennessee. We will guide you through setting up a trust to fit your unique circumstances and will ensure that it will work with your other estate planning documents to accomplish your goals.
Veterans Benefits
The Department of Veterans Affairs (VA) provides several programs to assist veterans. However, the VA can be an untapped resource for many senior citizens. There is a lack of good, accessible information about the programs and a maze of federal regulations that govern eligibility.
Two branches of the VA serve senior citizens (age 65 or older) with health care needs. The Veteran’s Health Administration primarily provides health care for prior service members. These programs include VA hospitals, VA nursing homes, prescription medication benefits, and other health care services. Waiting lists are shared. However, there is a ranking system to provide these benefits to veterans with greater levels of disability first. This is called a priority group. The priority is based on the veteran’s military service, medical disability, and financial need. Income verification and a co-pay may be required to receive some health-related services.
The second branch of the VA serving seniors is the Veterans Benefits Administration, which provides financial assistance with health care costs for eligible veterans. For veterans with a non-service-connected disability, there are three financial benefits under the Improved Pension program: Low-Income Pension, Housebound Benefits, and Aid and Attendance Benefits. These Improved Pension benefits are designed to help offset the cost of necessary health care. These benefits are available to veterans and widow(er)s of veterans who meet the following requirements:
The veteran must have served at least 90 days of consecutive active duty service, one day of which must have been during a wartime period.
The veteran must have received a discharge that was other than dishonorable.
The claimant must have limited income and assets available.
The claimant must have a permanent and total disability or be over age 65 at the time of the application.
The disability was caused without the wilful misconduct of the claimant.
The veteran or widow signs an application and provides it to the VA.
Housebound Benefits may provide additional financial benefits for the senior confined to the home.
Aid & Attendance Benefits are available for seniors who are blind or in a nursing home. They Are also available to seniors who live at home but cannot dress/undress, maintain hygiene, attend to other bodily functions, or have a physical or mental incapacity that puts them at risk of harm.
In 2009, the Low Income Pension, Housebound Benefits, and Aid & Attendance may provide from $7,933 per year up to $23,396 per year in tax-free income, depending on the claimant’s other assets, health care costs, and other factors.
There is more good news for veterans or widows (er)s of veterans over age 65 who want more information about these benefits. The VA now requires attorneys to have VA accreditation to advise clients on how to get VA benefits. Only VA-accredited attorneys can assist senior citizens with the preparation, presentation, and prosecution of claims for veterans bene’ benefits. You may search the VA’s Office of General Counsel website to find a VA-accredited attorney.
Attorney Amelia Crotwell is officially accredited by the VA and permitted to advise and plan for VA benefits. Ms. Crotwell is also a National Academy of Elder Law Attorneys member.
Take the First Step Towards Peace of Mind
Don’t wait until a crisis occurs. Start planning for the future today with Elder Law of East Tennessee. Our Life Care Planning services are designed to empower you and your loved ones, ensuring you have the support and resources needed to navigate the complexities of long-term care with confidence and peace of mind.