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Trust Funding Essentials

April 18, 2016

by David Zumpano with No Comment Asset Protection David J. Zumpano

We as attorneys, and sometimes even our clients, hear so much about trust funding, but rarely is it truly understood. I would like to outline a few essentials when doing trust funding to ensure that the underlying estate plan works as intended.

The first key step in any trust funding strategy is to identify what type of estate plan the client is pursuing. A traditional revocable living trust is an estate plan wherein the client identifies who gets to benefit from the client's assets when the client is well, disabled, and after death. A critically important point to funding a revocable living trust is if all assets funded in the trust are still 100 percent available to creditors, predators, and long-term care costs of the grantor while alive. The assets can continue to be made available to the creditors and predators of the beneficiary after the death of the grantor without proper planning (more on that later). In the alternative, if a client has opted to do an irrevocable trust for asset protection and/or current or future benefits eligibility (we call these IPUG® trusts) then funding is much more important, because assets are not protected from third-party predators until funded, and they're not protected from long-term care costs until funded and any related penalty period for the conveyance of the trust has expired.

Therefore, funding in asset protection or benefits eligibility is significantly different. Finally, if the client has done a trust predominantly for estate tax planning to ensure that assets are not included in the grantor's taxable estate, or to minimize the taxes on them, funding takes on yet another unique importance. Finally, regardless of what type of planning, we also need to look at the types of assets we are funding. For example, funding a home has several options as well as funding an IRA or other tax-qualified assets. So examine the differences and determine how to fund properly.

The first questions we must ask are, what type of planning has the client done and what type of assets is the client funding? If a client has done a revocable living trust, then funding is important to ensure that the trustee actually has the authority over the client's assets to administer them in the manner that has been identified by the client in the trust. If funding is not completed or properly done, a "pow will" usually cleans up any missed items at death by ensuring that any assets not funded that go through probate name the trust as beneficiary. Unfortunately, if the client doesn’t die but instead becomes incapacitated, failure to fund a revocable trust has more dire consequences. In addition, failure to fund assets to the trust does not eliminate probate, one of the primary benefits of having a revocable living trust to ensure the plan is carried out without the excess costs, delays and frustrations of probate to the client’s family.

In stark contrast to revocable trust planning, when planning for asset protection or benefits eligibility, funding becomes the most critical element to which all protection occurs. For example, if an asset is funded into an irrevocable asset protection trust today, it is protected from any and all claims that arise after the funding. More definitive, if planning for benefits eligibility, the funding of the last asset becomes most critical, as all assets funded to a trust will be subject to Medicaid's review of that transfer for up to 60 months. At Lawyers with Purpose, we call this the "look forward™" period. When funding an irrevocable trust for benefits planning, the look forward on the final conveyed assets will trigger protection of the assets. For example, if a client has $500,000 to fund and only funds $450,000 of it, and two years later remembers to finally fund the last $50,000, the $450,000 conveyed initially will have a 60‑month look forward, but the $50,000 conveyed two years later will have its own separate 60-month look forward that will extend years beyond the expiration of the previous trust transfer. That is why it's essential when benefits eligibility planning that funding be done in a timely and effective manner to ensure that the look forward is minimized.

For estate tax planning, obviously the funding of assets becomes critical by use of the Crummey power if life insurance or any gift-discounting techniques are being used, since the funding must be used to pay the insurance premium and must specifically relate to any special valuations that are obtained at the time of funding.

Although funding is a critical element in each type of planning, what can complicate it further is the type of assets being funded. For example, let's consider funding a home. For a typical revocable living trust, the funding of the home ensures that there will be no probate on the home but still makes the home available to creditors (if not protected by some other state statute while tenancy by the entirety), or it can become a recoverable asset after death if Medicaid benefits are received. While the home is exempt for married and single applicants, it can be subject to estate recovery after death for all funds paid on behalf of the applicant during their lifetime. See my related article on Estate Recovery - What Can (And Can't) They Get. Finally, a recent case in Massachusetts suggests that having a trust that allows the grantor to reside in the house makes the entire value of the house an available resource in determining the client's eligibility for benefits. See my post on Nadeau v. Thorne – No Reason To Fear. This adds additional complications in funding, since attorneys may now choose to reserve a life estate in the deed rather than fund the entire property to the trust and risk its loss as an available resource. Finally, transferring a house or second home to a qualified personal residence trust is a gift-discounting technique often utilized by those subject to estate tax. Again, the funding of these properties into the trust, and the subsequent survival of the grantor during the term in which the interest is held, is essential to maximize the estate tax reduction.

The other major asset to be considered in funding is the IRA. The Supreme Court in Clark v. Rameker decided in June 2014 that IRAs are not protected for those who inherit them. There is an obvious exception for an IRA that names a spouse beneficiary, who then combines it with an existing IRA. While this ensures IRA protection from general creditors, an IRA is not exempt in determining one's eligibility for Medicaid, and therefore, leaving an IRA to a spouse can expose the entire IRA balance to the surviving spouse's nursing home costs. Federal Medicaid laws are absolute: an IRA is an available resource, unless it is annuitized. Although some states have liberalized the interpretation of annuitization (i.e. many states deem they were payouts of RMD to satisfy the annuity executor) it is not the federal law, but merely state policy, which could be changed at any time without notice. Over the last few years, several states have changed their policy, thus making assets that were presumed to have been protected immediately available for long-term care costs.

The naming of a beneficiary of an IRA and other qualified or beneficiary designated accounts to the trust is now essential to maintain the asset protection intended. For example, even for a young couple with no assets, a $250,000 life insurance policy that pays to the spouse at death could be a catastrophe, as young people often get remarried or make unwise decisions. One should be cautious and ensure that all or part of a life insurance policy for a young couple names a separate share trust under a will for the benefit of the minor children, so as to ensure that the surviving spouse does not squander the proceeds, and that they are used as intended by the client. Finally, as we look at trust funding, it is essential to have a key system in place to ensure that your funding is done in a timely and appropriate manner. How assets are funded, the timing of assets funding, and the beneficiary designation utilized in funding for after death, are essential to ensure that the underlying goals of the client are achieved.

To have learn more about the support and systems to fund clients' plans properly, contact Lawyers with Purpose now. If you want to learn more about who we are consider joining our FREE webinar this Thursday, April 21st. Discover how to build a thriving Estate, Elder and Asset Protection practice that attracts higher quality clients, generates an endless supply of referrals and continuous exposure in the community … without working 80 hours a week or breaking the bank! Reserve your spot today, just click here now.

David J. Zumpano, Co-founder – Lawyers With Purpose

Crime Bill Introduced to Protect Veterans

April 5, 2016

by Lawyers With Purpose with No Comment VA

Congressmen Tom Rooney (R-FL) and Ted Deutch (D-FL) introduced the “Preventing Crimes Against Veterans Act of 2016” on March 2. Rooney, an Army veteran, is a member of the House Appropriations Subcommittee on Veterans Affairs.

Rep. Rooney asserts that veterans in his district have brought to his attention that individuals are promising to expedite veterans’ claims through the horrendously backlogged system. After charging an exorbitant fee, the individual can no longer be found. Rooney has not stated whether these individuals are accredited by the Veterans Administration or not.

The bill would be an additional tool to prevent fraud against veterans. It would impose fines, imprisonment for up to five years, or both for anyone who “knowingly engages in any scheme or artifice to defraud a veteran of veterans’ benefits, or in connection with obtaining veteran’s benefits for that veteran.”

Rep. Rooney was involved in introducing the three-year look back penalties for veterans who transferred assets for less than fair market value. It is unclear whether this bill is intended to extend to practitioners who provide veterans benefits planning and long-term care planning advice to wartime veterans seeking pension benefits. This topic does not come up in his one-minute speech to Congress when introducing the bill, which can be seen here: https://rooney.house.gov/media-center/videos/preventing-crimes-against-veterans-act-one-minute. It can be argued that it will, given that the bill uses the generic language of “and for other purposes.”

Here is the text of the entire bill as it was introduced:

HR. 4676

To amend title 18, United States Code, to provide an additional tool to prevent certain frauds against veterans, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

March 2, 2016

Mr. Rooney of Florida (for himself and Mr. Deutch) introduced the following bill; which was referred to the Committee on the Judiciary

A BILL

To amend title 18, United States Code, to provide an additional tool to prevent certain frauds against veterans, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Preventing Crimes Against Veterans Act of 2016”.

SEC. 2. ADDITIONAL TOOL TO PREVENT CERTAIN FRAUDS AGAINST VETERANS.

(a) In General.—Chapter 47 of title 18, United States Code, is amended by adding at the end the following:

“§ 1041. Frauds regarding veterans’ benefits.

“(a) Whoever knowingly engages in any scheme or artifice to defraud a veteran of veterans’ benefits, or in connection with obtaining veteran’s benefits for that veteran, shall be fined under this title, imprisoned not more than five years, or both.

“(b) In this section—

“(1) the term ‘veteran’ has the meaning given that term in section 101 of title 38; and

“(2) the term ‘veterans’ benefits’ means any benefit provided by Federal law for a veteran.”.

(b) Clerical Amendment.—The table of sections at the beginning of chapter 47 of title 18, United States Code, is amended by adding at the end the following new item:

If you would like to learn more about adding Veteran Benefits Planning to your estate or elder law practice join our free webinar on Thursday, April 21st at 8EST. Just click here to reserve your spot today.

This is a FREE training webinar designed for attorneys who wish to add Estate Planning, Asset Protection, Medicaid, or VA Planning to their practice, or signifcantly improve on their existing business using our PROVEN and paint-by-number strategies for:

Attracting higher quality clients who insist on working only with your firm (…and demanding their friends and family do the same!)
Generating countless referrals from respected professionals and colleagues in the community.
Automating and systematizing your practice in such a way that allows for higher volume…without work falling through the cracks, balls dropping, or having to work 80 hours a week just to keep up!

Victoria L. Collier, Co-Founder, Lawyers with Purpose, LLC, Certified Elder Law Attorney through the National Elder Law Foundation; Fellow of the National Academy of Elder Law Attorneys; Founder and Managing Attorney of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Veterans Advocates Group of America; Entrepreneur; Author; and nationally renowned Presenter.

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The ILIT / TAP Distinction

April 3, 2016

by David Zumpano with One Comment Asset Protection David J. Zumpano Estate Planning Drafting Software

Many people commonly use Irrevocable Life Insurance Trusts (ILIT) to ensure that life insurance owned by an individual is not included in their taxable estate at death. While an ILIT is a useful trust, you could accomplish far more with a TAP™ trust. So let's review an ILIT and distinguish how a TAP enhances the benefits often sought by ILITs. An ILIT is an irrevocable trust wherein the grantor retains no rights to modify the trust, benefit from the trust or control the trust. Retention of any of these rights will trigger estate tax inclusion under Internal Revenue Code Sections 2036 through 2042. An Irrevocable Life Insurance Trust may be a non-grantor trust or grantor trust, depending upon the attorney's drafting choice.

Triggering a provision of Internal Revenue Code Sections 671 through 679 will cause the inclusion of all income from the ILIT to be included in the personal income tax return of the grantor. While the grantor retains no rights to modify, control, or benefit from the trust, the grantor may be taxed on its income if a grantor trust provision is triggered. The most common of these grantor trust provisions is to allow the grantor to substitute assets of equal value, or make loans to the grantor without adequate security. By choosing grantor trust status, it essentially serves as an additional gift without having to utilize the annual gift tax exclusion, because the income taxes are paid from the grantor, rather than the trust. As a result, those additional sums are retained in the trust, thus providing additional assets to the intended beneficiaries that otherwise would have been used to pay the taxes.

One of the core elements of an ILIT is ensuring the use of Crummey powers. Crummey powers are based on the landmark case Crummey v. the Commissioner wherein the U.S. Tax Court held that granting someone the right to withdraw money funded to a trust immediately but limited to a short period of time (i.e. 30 days) was sufficient timing to deem the contribution a "present interest" and thereby trigger the annual gift tax exclusion for the contribution. A Crummey power is essential to ensure that the annual gift tax exclusions are utilized so as not to reduce the grantor's overall lifetime estate and gift tax exemption. One critical restriction under the current power, however, is that Section of the Internal Revenue Code limits the annual exclusion made to trusts to the greater of 5 percent of trust assets or $5,000. Therefore, it is essential to have a "hanging power" to ensure any contributions in excess of $5,000 or 5 percent are not deemed to be taxable gifts.

These hanging powers allow the Crummey beneficiary to continue to have the right to withdraw this excess amount, even beyond the 30-day period. For example, if a grantor contributes $42,000 to a trust for three Crummey beneficiaries and the $42,000 is the only asset of the trust and it was utilized to pay the insurance premium, then 5 percent of the trust assets only equals $2,000. Obviously, $5,000 would be greater, so $5,000 of each $14,000 contribution would be deemed to be a present interest gift and $9,000 of the contribution would "hang" until no contributions are made in a given year. At that time, an additional allocation of the annual gift would occur based on the $5,000 or 5 percent trust value limitation. Obviously, this could be problematic if these powers hang and one of your Crummey beneficiaries becomes subject to lawsuits, divorce or long-term care costs.

Another consideration with the Crummey power is to have straw Crummey beneficiaries. This is typically done by adding beneficiaries to the lifetime trust, which operates during the grantor's lifetime and provides the names of people who are not residuary beneficiaries. For example, one straw Crummey beneficiary might include spouses or other remote relatives who are willing to be a Crummey beneficiary, understanding that they are not likely to be an ultimate beneficiary. This allows additional payments each year to be contributed within the annual exclusion limit. Both ILITs and TAP trusts have Crummey provisions with hanging powers.

Neither ILITs nor TAPs are user friendly to individuals with estates less than $5,450,000, or $10,900,000 if married. These excessive restrictions need not be applied in circumstances where the total estate of the grantor plus the life insurance benefits does not exceed the estate tax limit. Obviously, the only other consideration would be if your state had an estate tax at a lower limit. If estate tax is a concern, a primary benefit of the TAP trust over the ILIT is that a TAP trust stands for Tax All Purpose trust, which means its intended benefit is far beyond the holding of life insurance. The TAP trust will typically hold life insurance policies, stocks, bonds, and other assets and/or business interests that the grantor would like to get passed on to the trust beneficiaries after death. This is especially helpful, as it will ensure that there are other assets in the trust other than the life insurance policy to accumulate assets of more than $280,000 to ensure that the entire Crummey contribution can be utilized each year with no hanging powers. In addition, the TAP trust has extensive provisions for lifetime and residuary trusts to the individuals or classes of people.

For example, sometimes a grantor will create a family-type trust that takes effect after death for the benefit of the surviving spouse and children, and upon the death of the surviving spouse, it provides separate residuary trusts for each child. Other times, clients may want to create a benefit for a class of their children for their lifetime, and at the death of the last child the balance is allocated to their then-surviving children in separate share trusts. TAP trusts are extremely flexible and powerful in ensuring that whatever assets are passed through them (life insurance, stocks, bonds, business interests, etc.) are passed on to their loved ones fully asset-protected in separate asset protection trusts or common trusts, depending on the client's goal. One of the critical distinctions in asset protection trusts after death is to ensure that the trustee is an independent trustee under Internal Revenue Code Section 672(c). One distinction to resolve the concern of naming the child beneficiary as the trustee without violating Section 672(c) is to ensure that you name a co-trustee who is adverse, a strategy far too few lawyers utilize. For example, after the death of a grantor, the surviving spouse can be the trustee with a co-trustee of one of their children. While this would be considered under the family attribution rules to be a controlled trustee, the adverse party interest ensures that the Internal Revenue Code distinctions are met. For example, if a child was a co-trustee with the spouse and approved a payment to the spouse during a family trust administration, that would be adverse to the child's residuary interest and thus satisfy the restrictions within 672(c).

The other exciting element of a TAP trust is the allowance of the spouse or trust protector to have a power of appointment to modify the beneficiaries within a class of people identified by the grantor. This can ensure that the family is able to adjust for changing circumstances after the death of the grantor to cover his or her overall planning intentions. One of the key distinctions of a TAP trust is also specific language that authorizes the accumulation of income but specifically requires the trustee to account separately for income that is accumulated and converted to principal, so as to ensure no portion of that is utilized to pay insurance premiums on the grantor. While the trust ensures that all the proper legal language is included, to be legally proper it is incumbent upon the attorney to educate the client to understand how to properly administer a trust so as not to violate that provision.

So, as you look at the distinctions between an ILIT and a TAP, it's important to note that everything an ILIT is is included in the TAP trust, but not everything in a TAP trust is included in an ILIT, so a TAP is a far more expansive trust that allows much more flexibility and use by a client. If you want to learn more about becoming a Lawyers with Purpose member to discover how the TAP trust can benefit you in your practice and, more importantly, benefit your clients consider joining our FREE webinar "The Four Essentials For A Profitable Practice" on Thursday, April 21st at 8EST. Click here to register now.

This is a FREE training webinar designed for attorneys who wish to add Estate Planning, Asset Protection, Medicaid, or VA Planning to their practice, or significantly improve on their existing business using our PROVEN and paint-by-number strategies. Reserve your spot now!

David J. Zumpano, Co-founder – Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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VA Health Benefits

March 31, 2016

by Lawyers With Purpose with One Comment Legal Technical VA

Given how much the Veterans Health Administration (VHA) has been in the news for unnecessary wait times and inappropriate scheduling practices that have negatively impacted many veterans, you may not see any value in educating your clients regarding potential VA health benefits. However, VA health benefits might offer more economical health care and/or may be an option for your clients who are underinsured. Another advantage is greater access to health care nationwide, as you may seek care at any VA health care facility once enrolled in the VA health care system.

What are they exactly?

When you enroll in VA health care, you are eligible for what is termed a Medical Benefits Package. This package consists of hospital, outpatient, and extended care services providing basic and preventive care, as well as prescription drugs, emergency care and even in some cases, services like: rehabilitative services; professional counseling and mental health services; durable medical equipment, including eyeglasses and hearing aids; home health services; reconstructive (plastic) surgery; hospice care; and dental care. What exactly is available to the recipient of VA health benefits will depend on the veteran’s unique eligibility status and whether such care or services are deemed medically necessary by VA health care providers. You receive a booklet called the Veterans Health Benefits Handbook after enrollment that gives you the specifics of your individual Medical Benefits Package.

Who qualifies for them?

If your client served in the active military, naval or air service and was discharged under any condition other than dishonorable, the client may qualify for VA health care benefits. There is a minimum duty requirement for veterans who enlisted after September 7, 1980, but there are also many exceptions both before and after this date, so you should consult 38 CFR §17.31 Duty periods defined for the definitions of duty periods applicable to eligibility for medical benefits.

Although family members, with very limited exception, cannot access the VA health care system, family members of veterans may be eligible for CHAMPVA. This is a program that provides health insurance coverage to dependents of a qualifying sponsor who is, or was at the time of death, rated permanently and totally disabled due to a service-connected disability or who died of a service-connected disability.

How do you enroll?

You can apply for VA health care by completing VA Form 10-10EZ Application for Health Benefits and submitting it in person or by mail to the enrollment coordinator at any VA Medical Center. The 10-10EZ form has sections to complete with information about military service, health insurance, and finances. Private health care insurance does not affect eligibility for VA health care. The instructions for the financial section specify that only non-service-connected and service-connected veterans rated at 0% must provide this financial information. However, they go on to state that those receiving VA pension or compensation and/or Medicaid benefits, among others, are not required to disclose financial information. In fact, after a claimant is approved for non-service-connected pension, he/she should be automatically mailed enrollment information for the VA health care system. The financial information is used to determine eligibility and copay responsibility for VA Health Benefits and – with the exceptions noted above – may be a requirement of enrollment.

More information

As part of enrollment, the applicant is assigned to a Priority Group based on the severity and nature of the applicant’s disability and/or income. There are eight Priority Groups for enrollment, from highest priority at #1 to the lowest at #8:

Veterans with service-connected disabilities 50% or more disabling, or those unemployable due to service-connected conditions;
Veterans with service-connected disabilities 30% or 40% disabling;
Veterans who were Prisoners of War (POWs), were awarded the Purple Heart or Medal of Honor, whose discharge was for a service-connected disability, with service-connected disabilities 10% or 20% disabling, or special eligibility under Title 38, U.S.C. § 1151;
Veterans receiving aid and attendance or housebound VA benefits or who have been determined by the VA to be catastrophically disabled;
Non-service-connected veterans and non-compensable service-connected veterans rated 0% disabled with annual income below the VA’s and geographically (based on your resident ZIP code) adjusted income limits, veterans receiving VA base pension benefits, or eligible for Medicaid programs;
Compensable service-connected veterans rated at 0% and various categories of veterans whose military service meets certain requirements;
Veterans with gross household income below the geographically adjusted income limits (GMT) for their resident location;
Veterans with gross household income above the VA and the geographically adjusted income limits for their resident location.

The Priority Group assignment will determine what the VA Health Benefits enrollee will pay, if anything, in copayments for their health benefits. Generally, the cost of care is free when related to service-connected disabilities, but there may be a copay for all other services, to include prescriptions.

Despite the fact that, when the VHA makes headlines, it’s often not for a good reason, the news isn’t all bad. The VA has taken corrective action to identify and resolve the issues that have plagued the VHA, including requesting the VHA to conduct an audit which then led to the Accelerating Access to Care Initiative. The VA also publishes comprehensive monthly updates detailing pending and completed appointments and average wait times that allow for oversight, and also allow a beneficiary to select a VA Medical Center with lower wait times when there is more than one in their area. For further information on Veterans Health Benefits beyond this overview, consult the website of the Veterans Health Administration at http://www.va.gov/health/.

If you aren't a Lawyers With Purpose member and want to learn more about how we can help you in your estate or elder law practice, click here and join our FREE webinar on Thursday, April 21st at 8 EST "Four Essentials For A Profitable Practice". On this one hour webinar, you'll discover:

How to turn the complexity of Medicaid and Asset Protection Laws into simple value creation that is easy for clients to identify, allowing you to enroll more prospects into paying clients.
Proven ways to get to YES faster and EASIER…with less "selling," pressure, or having to later overcome buyer's remorse.
Why a confused or overwhelmed client will always say NO, and how to instead "show the law" (not TEACH IT) to more effectively earn new business.
The key "stories" you must tell during the initial meeting (or workshop) so that clients can relate and deeply understand the value you provide (…even when your services cost 5X more than the competition down the street!).
How to implement time management secrets of successful entrepreneurs, so that you are able to do more in your practice in less time, and have free time left over to do what you love.
Effective ways for working on the business (not in the business) in order to master lead generation, lead conversion, and serve your clients to create consistent cash flow.
Discover the key metrics that should be the sole focus of managing your practice…and how successful estate planning and elder law attorneys leverage tracking and reporting to reach their goals.
Discover the five essential roles that you and your staff must fill to achieve a consistently profitable practice.

Click here to register and reserve your spot now.

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

Is the VA Opportunity Dying?

March 28, 2016

by Lawyers With Purpose with One Comment VA

As the Veterans Administration plans to implement new laws that would impose a three-year look back for gifts, creating penalties of up to 10 years for both transfers of assets and purchase of annuities, lawyers frequently ask me, “Are we going to be able to do any planning and help wartime veterans and their widows anymore?” What they are really asking is, “Will these changes hurt my law firm?” and “Do I need to stop doing VA benefits planning?”

The simple, candid answers are: “Yes, possibly” and “No, the clients need you now more than ever.”
There is no doubt that the current way of doing things will change. For example, “crisis” VA planning (where an individual could do planning one month and be eligible for benefits the next month) will be reduced to those clients who have limited funds who seek only pre-application consultative advice. Thus, instead of being able to charge for a plan of eligibility, the lawyer may only charge a consultation fee. As always, no one will be able to charge to assist with the completion and filing of an application for benefits.

Even though crisis VA planning will be virtually dead, a new age of pre-planning will emerge. Like Medicaid planning, wherein people structure five-year “wait and see” asset protection plans, veterans will need to construct three-year planning options. This will lead to a new opportunity for advocates to create excellent estate plans that address traditional estate planning and death distribution desires, as well as VA benefits and future Medicaid benefits. This will also lead to the opportunity for licensed insurance brokers to reposition assets into three- to five-year immediate annuities to create guaranteed income streams to pay for the client’s living expenses and health care needs during the look back period. Instead of competing for business, lawyers and financial advisors should work together to create a solid long-term care plan, or, if permissible in your state, the lawyer should consider obtaining a license to sell insurance products to keep the plan under one roof and bolster income at the same time.

The look back and resulting penalties are not the only proposed law changes. The VA also plans to limit not only the acreage that applicants may have attached to their home place, but also the deductibility of certain medical expenses, etc. With all of the changes and the remaining ambiguity in the processing of the claims due to the language of the changes, clients will need lawyers to assist with appeals. Lawyers can charge reasonable fees, as approved by the VA, after a notice of disagreement has been filed. Presumably not many lawyers will want to do appellate work, leaving the field wide open for those who do.

If you want to learn more about Lawyers With Purpose and what we have to offer our members join our FREE WEBINAR on Thursday, April 21st at 8 EST / 5 PST titled "Four Essentials For A Profitable Practice". Click here to join us. Here is just some of what you'll get:

Discover the Four Essentials for a Profitable Practice - Turn the complexity of Medicaid and asset protection laws into simple value creation that is easy for clients to identify.
Get Access to the Time Management Secrets of Successful Entrepreneurs - Spend your time working on the business (not in the business)…master lead generation and lead conversion and serve your clients to create consistent cash flow.
Discover the Key Metrics that Should be the Sole Focus of Managing Your Practice - Learn how successful estate planning and elder law attorneys leverage tracking and reporting to reach their goals.
Discover the Five Essential Roles You and Your Staff Must Fill to Achieve a Consistently Profitable Practice - And much, much more….

Click here to reserve you're spot today.

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In Defense of My Smartphone – By a Generation Xer

March 16, 2016

by Lawyers With Purpose with No Comment Team Building

On the second day of the Lawyers with Purpose Tri-Annual Practice Enhancement Retreat in Orlando, there was a focus session on the Infrastructure Track called “Bridging the Generation Gap,” presented by Susan Hunter. My presence there was mandatory, as I had been assigned to administrative duties as an employee of Lawyers with Purpose. However, it was also my treat, because I am a big fan of Susan’s presentations and knew I was in for an informative and humorous session – and I was right. Susan talked about the three generations that make up her law firm team: The Baby Boomers, Generation X, and the Millennials. She also explored the challenges and opportunities that may occur when working with someone not from your own generation, as well as the growth mindset needed to bridge this gap.

Among the various characteristics of the Millennials noted was their hyper-ease with technology, especially social media, predominantly via smartphones. It was cited that 98% of Millennials have a smartphone. And it is the smartphone that is usually blamed for promoting isolation and the decrease in face-to-face interactions in real time – not FaceTime. But, in defense of my smartphone, I found that I related more to the Millennials who work in our firm during this trip because of it than I think I would have otherwise. Don’t get me wrong, there was also plenty of good, old-fashioned team building in the form of conversations, brainstorming, card and board games, as well as one night with a home-cooked meal prepared by team members. However, I must confess that our smartphones did play an important part in bringing us together as a team.

My use – excuse me – our use of the smartphone during our road trip from Atlanta to Orlando as well as during the retreat was interactive. First and foremost, we used it to get information like researching recommended places to eat along I-75 or finding the cheapest gas when it was time to refuel. We also used the mapping capabilities of the smartphone extensively to direct us on our route, avoid traffic, and keep us up to date on our ETA despite the pit stops. Then there is what may be the default use of the smartphone: communication. Our firm stayed at a timeshare condo a few minutes from the hotel where the retreat occurred, and this required some coordination to accommodate the needs of all nine team members. We relied on text messages and calls to remain in contact and synchronize needed rides. During the road trip, we would also send regular text messages to Victoria, our supervisor, to give her status updates on our arrival both to Orlando and Atlanta.

Another way we communicated via smartphone was by sharing photos the team took. This included sharing funny pictures of Goofy and the team at the reception, but they also served to document our team’s work at the retreat, like the photo we shared of our completed, collaborative Brainstorming Sprints sheet. Lawyers with Purpose even provided a smartphone app called EventBoard for the retreat and the Practice with Purpose program. The app provides an interactive conference event guide with the schedule, speaker information, sponsors and their websites, floor plans, and online evaluation forms. I really like how the events grayed out on the schedule as the day went on so you could immediately see the highlighted current and upcoming sessions. Sure, there were technical difficulties. When I first opened the application, no details loaded for the sessions and the evaluation forms were blank. However, once I closed the other 20 apps that I was unconsciously, simultaneously running on my iPhone, EventBoard worked quite well.

I will confess that my first sight of some of the Millennials in our firm on any given morning during the retreat was in bed by the light of a smartphone furiously typing. Perhaps they were well on their way to the 50 or more text messages that 50% of Millennials surveyed will send in a day. But I can’t blame them, as the first thing I did every night and every morning while away was to text my family to say “Hi.”

Finally, we used our smartphones to play music enjoyed by the team as a whole. We took turns depending on who had a particular song we wanted to hear. No one had brought a portable speaker, and the van’s stereo system had no speakers in the passenger area, thus we had to improvise with one of those pairs of giant headphones that Millennials often sport to broadcast the music for all to hear. As a result, the music was a little tinny and not as loud as I would have liked. Nonetheless, it relieved the monotony of the road trip as we sang, hummed, and/or danced to music from all three generations and, more importantly I think, moved in harmony as a great team should.

If you want to learn more about Lawyers With Purpose and in particular what it takes to have a successful practice, click here and download our FREE eBook "The Five Essential Roles for A Successful Practice".

Here Is Just Some of What We'll Reveal:

Discover the Five Key Roles that must be fulfilled to truly have a successful law firm.
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… and so much more!

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

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Utilizing the New LWP-CCS Personal Services Agreement

March 8, 2016

by David Zumpano with No Comment Estate Planning Drafting Software Legal Technical

Personal service agreements, or personal care agreements, are typically agreements between a family member providing care and another needing care. These agreements act as a legal contract between the two parties regarding the range of care one party is providing to the other. As a Medicaid and/or VA planning tool, a personal service agreements may act as a method of spend-down while making sure your elderly client is provided the services needed and is appropriately compensating a family member who is making personal and professional sacrifices to provide the services.

We are excited to share that the LWP Client-Centered Software is now providing a comprehensive Personal Services Agreement that thoroughly addresses the many issues that Medicaid will consider when analyzing a care plan. The care plan also offers the language you will need if a client starts receiving VA benefits and plans to pay those to a child or family member to provide care.

First, the software incorporates all parties involved in the plan and requires that all parties sign the plan.

Medicaid wants to make sure that the compensation offered to the caregiver is reasonable in the area of the country where the services are provided. The LWPCCS incorporates the hourly rates of court-appointed guardians, geriatric-care professionals and general-service providers to justify the hourly rate paid to the caregiver. If you opt to do so, the software can calculate the hourly rate of the caregiver as the average of the rates provided for the professionals mentioned above.

Medicaid will want to know where the care is provided. This can be especially important if the child is moving in with the parent to provide care in lieu of nursing care, as they may later qualify for the child caregiver exemption. The software assumes the care is at the home of the person needing care. However, with the click of a button you can choose another place of care, be it in the child’s home, an assisted living facility, an independent living facility or a nursing home.

The terms of the agreement are an important part of creating a valid contract and meeting Medicaid requirements. The LWPCCS allows you to determine the start date of the agreement, the term of the agreement (lifetime, term of years or term of weeks), how often the caregiver will be paid, and the hourly rate the caregiver receives. Another important note: When the caregiver agreement is produced, it defines the caregiver’s role as that of a general contractor and eliminates any tax liability for the person receiving care, providing additional protections for your client.

The feature of the software that allows you to specify which activities of daily living (ADLs) the person needs assistance with can help with Medicaid guidelines and VA guidelines as well.

Finally, alternate caregivers are named for any time periods during which the caregiver is unable to perform the tasks, due to personal illness, vacation, other employment or any other reason.

You can find the new personal services agreement in the LWPCCS under the Medicaid Qualification folder, since we see it as a critical part of Medicaid planning. Incorporating the new LWP Personal Care Agreement into your practice is yet another layer of solid legal planning and documentation we provide for our clients as LWP attorneys.

If you want to learn more about adding medicaid to your estate or elder law practice register for our FREE WEBINAR "Simplifying Medicaid Eligibility & Qualified Transfers" on Tuesday, March 15th at 2 EST. Click here to reserve your spot now.

Here's just some of what you'll discover…

Understanding the 12 Key terms of Medicaid
Learn the Qualification Standards: Does Client Meet Needs Tests?
Learn the Medicaid Terms of Art
Learn the Snap Shot, Look Back/Look Forward Distinction: And how to put it all together
At the end of the event receive an ALL STATES Medicaid Planning Resource Guide
…and much, much more!

Just register here to reserve your seat… it's 100% FREE!

Kimberly M. Brannon, Esq., Legal-Technical & Software Trainer, Lawyers With Purpose

Values vs. Valuables

March 6, 2016

by Lawyers With Purpose with No Comment Estate Planning Drafting Software Systems & Processes

A recent survey conducted by the Allianz Academy of Legacies asked Baby Boomers and their parents to rank priorities when leaving an inheritance.

Overwhelmingly, they preferred passing down their “values” vs. “valuables.”

Yet, only a small fraction of these generations has made provisions for this in their estate plans, mainly due to a lack of professional guidance and a practical legacy plan.

As such, the demand for providing a values solution is expected to increase dramatically in the coming years, and estate planners are in the most advantageous position to benefit.

Not only do families find it difficult to get professional advice on this matter, but also the professionals they consult with have few options to offer – until now.

Over the past decade, the team at Legacy Stories has provided senior care professionals with a life review program that has become an industry standard. Now the methods and technology have been reformatted to serve the estate planning and financial advisor community.

To that end, the “Legacy Values Plan” is designed specifically to be a comprehensive self-guided legacy-building solution that can attract new clients and increase client retention with no added staff or training.

This award-winning solution helps your clients preserve and pass down their life lessons, values and experiences as an essential part of today’s estate plan.

Lawyers with Purpose has made arrangements to offer its members this exceptional program at 20% off.

To learn more go to: https://www.legacystories.org/values

Apply this code for the discount: LWP20

Tom Cormier, Co-founder, LegacyStories.org

Roslyn Drotar, Online Marketing, Content & Social Strategist for Lawyers With Purpose

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House Bill 4351: Going After Pension Poachers

March 4, 2016

by Lawyers With Purpose with 3 Comments Asset Protection Legal Technical VA

House Bill 4351 should be stopped!

For the past several years, bills have been introduced for Congressional approval that would impose a three-year look back, and penalties up to 10 years, for veterans and their spouses who give away their assets and then apply for a pension program designed for indigent wartime veterans. The bills were limited to addressing the concerns of deliberate impoverishment by veterans with the help of lawyers, financial advisors, and others. The bills never passed.

In January 2015, the Veterans Administration published proposed changes to the laws in the Federal Register that would change Title 38 of the Code of Federal Regulations. The VA included penalties for transfers of assets, and used very broad definitions of transfers (i.e. the purchase of an annuity), just like the previous bills that had been introduced. However, the VA went much further, proposing to (1) extend beyond its Congressional authority and (2) extend beyond the scope of the perceived needed changes.

Beyond VA Authority.

Under the pension program for wartime veterans, the claimant must meet an income and asset standard. With regard to income, the VA deducts from gross income all permissible medical expenses. Home healthcare is a permissible medical expense. But the VA proposed to limit the deduction to the average cost of home healthcare based on a national average set two years prior to the proposed changes, which would be $21 per hour. The law is clear that if a medical expense is deductible, then the entire amount must be deducted, and a change of this nature is in violation of the Congressional right.

Beyond the Scope

The purpose of the bills introduced into Congress and the purpose of the proposed changes to the VA regulations is to prevent people from divesting themselves of assets, which they otherwise could use for themselves to pay for care, in order to qualify for tax-free income from the VA to pay for their care. The VA exceeded the purpose of these bills when they included in the proposed changes a limitation on the lot coverage for veteran’s home place. The home place and a reasonable lot area have always been exempt by the VA when applying for pension. A reasonable lot area has always been defined as the same or similar in size to those in the same community or neighborhood. Rather than keeping the long-standing laws, the VA wants to count any property value that exceeds two acres. This makes no sense under the purpose of the law changes to keep people from divesting themselves of assets. First, a 900-square-foot condo in New York City may be worth well over $1,000,000, but it would be an exempt resource under the proposed changes. Whereas, a house sitting on five acres in south Georgia would be a countable resource, even if its value is only $150,000. Moreover, the veterans may have been living in the house for 10, 20, 30 years or more and had no intention of ever filing for the VA pension when they bought the house. Thus, the change in the law has nothing to do with the perceived abuses of people trying to save their assets and qualify for benefits.

Congress has apparently given up on trying to pass a bill that specifically details a look back and penalties for wartime veterans who give money away to qualify for the pension. After all, this is an election year and that would not look very good.

Nonetheless, a few members have found a sneaky way to get the VA’s proposed changes passed by Congress without Congress necessarily knowing what they are actually passing. House Resolution 4351, submitted in the House of Representatives on January 8, was sponsored by Rep. Matt Cartwright of Pennsylvania and co-sponsored by Rep. Sanford Bishop of Georgia, Rep. Sheila Jackson Lee of Texas and Rep. Walter Jones of North Carolina. It has been referred to the Committee on Veteran’s Affairs.

Its stated goal is “To protect individuals who are eligible for increased pension under laws administered by the Secretary of Veterans Affairs on the basis of need of regular aid and attendance from dishonest, predatory, or otherwise unlawful practices, and for other purposes.” The act would be titled, “Veterans Care Financial Protection Act of 2016.”

This sounds really good, because Congress is professing to protect veterans from financial predators. Second, the act does nothing more than mandate that the secretary of the VA work with the heads of federal agencies, states, and such experts as the secretary considers appropriate to “develop and implement Federal and State standards to protect individuals from dishonest, predatory, or otherwise unlawful practices.” The VA would then have 180 days to submit the standards to the Committee on Veterans’ Affairs of the Senate and of the House of Representatives. If this resolution passes, the VA can just hand over the proposed changes in the laws as the standards. The resolution does not say what the two committees are to do once they receive the standards from the VA.

The VA plans to finalize proposed changes (with modifications) by early summer. What is unclear is whether a passage of this “blind” resolution would immediately sanctify any changes the VA has made, or if the changes cannot take effect until after the two committees have taken some action of approval. What is clear is that advocates and veterans must once again push to make your political leaders, specifically those in the two Veterans’ Affairs committees, aware of these damaging changes that have no bearing on the purpose of the proposed changes – limiting home healthcare to an outdated national average and limiting the home place lot coverage to two acres instead of a reasonable lot for the area.

If you would like to know more about the VA Proposed 3 Year Lookback and Other Law Changes join our FREE WEBINAR on Wednesday, March 16th at 4EST. Click here to reserve your spot today.

Victoria L. Collier, Co-Founder, Lawyers with Purpose, LLC; Certified Elder Law Attorney through the National Elder Law Foundation; Fellow of the National Academy of Elder Law Attorneys; Founder and Managing Attorney of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Veterans Advocates Group of America; Entrepreneur; Author; and nationally renowned Presenter.

Who Should Be Trustee?

March 3, 2016

by David Zumpano with No Comment Asset Protection David J. Zumpano Estate Planning Drafting Software Legal Technical

There's a constant battle between lawyers as to who should be trustee of an irrevocable asset protection trust. The primary school of thought is that it should never be the grantor, and some schools of thought believe it should never be the beneficiary. At Lawyers with Purpose, we disagree with both of those positions, but we recognize the concerns and rely on sound principles of asset protection law in making the final determinations.

Let's first discuss the question of whether the grantor should be trustee. Many practitioners believe that allowing the grantor to be trustee makes the assets of an irrevocable trust available to the grantor's creditors. Such a proposition is ludicrous. The challenge with most lawyers is that they do not allow the grantor to be trustee of his or her irrevocable trust. When pushed to explain why, they typically assume that's the way it was always done. Few dig further to see why it was done that way. So let's examine why grantors were not traditionally named trustee. The most adverse impact is that, if the grantor is trustee, they're deemed to retain enough control to have the assets of the trust included in their taxable estate when they die. For many generations, this was the death knell? of an asset protection trust. But in the last 15 years it's become irrelevant because of the rise of the estate tax exemption. Today only two in a thousand Americans have a taxable estate, so preventing the grantor from being trustee because of a potential inclusion of the trust asset in the estate of the grantor is not relevant to 99.8 percent of Americans. So why hold them to that standard?

The next major argument is a theory that if the grantor has control of the trust, then he could direct it back to himself. Well, that depends. What does the trust say? If the trust says that the grantor is not a beneficiary, or similarly the grantor is not a principal beneficiary but is entitled to the income, does that mean that the grantor as trustee all of a sudden gains a super power to violate the terms of the trust and give himself the principal when it's not allowed for? Hardly. In fact, there is consistent case law throughout all of the states, including cases that lead all the way up to the Supreme Court, that supports the notion that a grantor as trustee has all of the same fiduciary obligations as any other trustee and by no means has authority to act outside the powers granted to trustee. I specifically refer you to my Law Review article, "The Irrevocable Pure Grantor Trust: The Estate Planning Landscape Has Changed" in the Syracuse Law Review. In this article, I go through in‑depth review of all of the case law nationwide, and I'm excited to say that it is sound law that a grantor can be a trustee without risking the assets to the creditors of the grantor. One caveat, however, is if the grantor does retain the right to the income, then absolutely the income will be available to the creditors of the grantor.

So are there circumstances when the grantor as trustee's trust is invaded? Absolutely, but in every single case the invasion was not due to the grantor being the trustee, but rather was due to the pattern of behavior by a grantor trustee who violated regularly the terms of the trust in favor of themselves, and the trust was thereafter deemed a sham. In such cases, I concur with any court that makes that decision based on people who try to defraud the system. Irrevocable trusts must be managed in an arm's length manner, and as lawyers we do not plan for someone to become fraudulent. They are fraudulent to their own peril. But a properly drawn trust when the trustee is the grantor in no way, shape or form creates any risk of loss of asset protection if the terms of the trust are followed, as they are required to be in every case whether the grantor is trustee or not.

So at Lawyers with Purpose we encourage our members to do good legal work based on sound law, not fear, conjecture or because that's the way it's always been done. In the end, the client wins. It is silly to deny thousands of clients that we serve the ability to manage and control their own assets for the benefit of their families, just because some rogue case in some rogue state from some vile fact pattern allowed the court to invade against the intentions of the grantor. Protect your clients. Teach your clients. Share with your clients how these work. They are very safe and a great planning tool.

If you want to learn more about Lawyers With Purpose you can find all the information about becoming a member by clicking here to download our Membership Brochure.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center