OUR FOCUS
Wills
Although nobody wants to think about death or disability, creating an estate plan is one of the most important things you can do to protect yourself and your loved ones. Proper planning not only puts you in charge of the legacy you leave behind, it can spare your loved ones a great deal of unnecessary stress, expense and delay in managing your affairs when you pass away.
If you die without a will, your assets will be distributed according to state law. Although many people think their assets will simply pass to their spouse automatically, this is not always the case. In Georgia, if you are married and have children, your surviving spouse will share equally with your children, and your spouse may receive only a minimum one-third share. So, for example, if a young married father dies with no will, his wife and two children would each receive one-third of his assets. Before his wife could access his accounts or benefit from her share of his estate, she would have to petition the probate court for proper authority and wait for a month or more while notice is published in the newspaper. Even worse, to access the children’s shares if they were minors, the wife would have to petition the probate court to be appointed conservator of their shares and purchase a surety bond to guarantee that she will manage the assets on their behalf. She would have to file reports with the court for every penny she spends, and obtain court permission for almost any transaction. When the children reached age 18, she would have to turn over the balance to them directly. If the children were adults, they could demand their share and force the wife to sell the marital house or liquidate accounts, leaving her in a very difficult financial situation.
Creating a will puts you in charge of the distribution of your own assets. Anyone who does not create a will forfeits that ability - which means that, if you are unmarried and have no children, the estranged brother you haven’t seen since you were 20 could become your sole heir. Fortunately, the process of creating a will is simple, quick, and surprisingly inexpensive in most cases. It is one of the most worthwhile investments you can make because it creates peace of mind, both for you and for your loved ones.
Trusts
Trusts are a powerful tool for accomplishing a wide range of goals. By creating a trust and funding it with your assets during your lifetime, you can ensure that your family never has to go through the probate process - and this is especially important if you own property in multiple states, as probate is often required in each and every state where your assets are located. Although the probate process is usually relatively inexpensive in Georgia, it is quite costly in many other states, and it is always time-consuming and open to public review no matter where you are located.
Trusts can also help you control the distribution and use of your assets not just at the time of your death, but for some period of time afterward. For example, a trust can ensure that your children have access to their inheritance for basic needs, like health and education, but that your children do not receive a lump sum distribution until they are old enough to manage it wisely. Keeping a child’s inheritance in trust can also protect those assets from your child’s creditors or a divorce settlement during the child’s lifetime, or simply from the child’s poor financial judgment. You can also set aside funds in trust for the lifetime care of a disabled spouse or family member, or even for the care of your pets during their lifetimes..
Trusts can also be used as a tax planning measure. Whether there will be any federal estate tax due upon your death depends on the size of your estate and the type of planning you have created. If estate tax is a potential concern, a trust can be formed that will help ensure that you maximize the tax exemptions available to your heirs upon your death.
No two families are the same, and a trust is an excellent way to customize your estate plan to care for your family according to its specific needs. Through the use of a trust, we ca help you to control not only the distribution of your assets, but also the way those assets are used by the recipient.
Special Needs Trusts
Family members of a person receiving benefits from a disability-based government program (or who might be eligible for such benefits in the future) must pay careful attention to their estate planning. The best option to provide financially for a person with special needs is often a Special Needs Trust.
What is a Special Needs Trust?
A Trust is a legal entity that holds assets for someone’s benefit. The creator of the Trust puts property into the Trust and names a Trustee to manage the property and distribute it to the beneficiary according to the provisions in the Trust. A Special Needs Trust places limitations on the types of distributions that the trustee can make, so that trust distributions will not disqualify the beneficiary from eligibility for government programs.
Special Needs Trust Distributions
To protect the assets in a Special Needs Trust from being counted as a resource in determining the beneficiary’s eligibility for needs based programs, a Special Needs Trust directs the Trustee not to pay for services provided for by a government agency. The Trust authorizes distributions only for the beneficiary’s special or supplemental needs. Examples of distributions that might be made for a beneficiary’s special needs include specialized therapies, dental care, exercise equipment, computers, cable tv, cultural events, athletic contests, movies, and the services of a care manager. Improper distributions from a Special Needs Trust can cause the loss of public benefits. For example, if a beneficiary receives SSI and Medicaid, cash distributions from the Special Needs Trust to the beneficiary will reduce the Beneficiary’s SSI. If the cash distributions exceed the monthly SSI payment, the beneficiary will lose SSI. If Medicaid qualification was based on receiving SSI, the beneficiary will also lose Medicaid.
Who Should be Trustee of a Special Needs Trust?
Because of the importance of making proper distributions, the Trustee should be someone who either already knows or is willing and able to learn the requirements of the government programs that provide benefits to the beneficiary. The Trustee could be a family member or a financial institution. Often people will name a family member and a financial institution as co-Trustees, because the family member knows the beneficiary and understands his or her special needs, while the financial institution has the expertise to manage the assets and follow the distribution rules.
Financial Power of Attorney
A financial power of attorney, or durable general power of attorney, is a simple and inexpensive way to permit someone to manage your finances if you are unable to make decisions for yourself. It can be drafted so it takes effect as soon as you sign it, or you can specify that it does not become effective unless your doctor certifies that you have become incapacitated. If you are unable to handle financial decisions for some period of time, whether due to a temporary illness or as a result of a long-term mental disability, the document will give your agent broad authority to step in and manage financial decisions for you.
Using the financial power of attorney, your agent can immediately access your bank accounts, investment and retirement accounts in order to pay your bills and handle transactions; buy, sell, mortgage, and maintain any real estate you own; collect Medicare, Social Security, or other benefits to which you are entitled; file and pay your taxes; operate your small business; create a trust; make gifts to your family members; and hire attorneys, accountants, or other professionals as needed to represent you. Your agent is required to act in your best interest at all times, and to maintain accurate records of all decisions.
Without a valid financial power of attorney, your family members will be required to file a court action for conservatorship of your assets in order to be able to manage your financial affairs - and such an action is not only costly and time-consuming, it also requires your conservator to file periodic reports with the court on an ongoing basis. Creating a simple power of attorney helps your family to avoid unnecessary stress and expense, and it also ensures that you are able to choose the person who will serve as your agent.
Advance Directives for Health Care
An advance directive for health care, also known as a living will or health care power of attorney, is a set of instructions specifying what actions should be taken for your health care and medical treatment in the event that you are no longer able to make or communicate your preferences due to illness or incapacity. It is a way of making yourself heard when you can no longer speak to your doctor directly. The document allows you to name a person you trust - a family member or close friend - who is authorized to make those decisions on your behalf, and it also provides that person with the information they will need to be able to fulfill your wishes.
An advance directive does not mean “do not treat my illness.” Instead, your advance directive addresses situations where you have a “terminal condition” - meaning you are incurable and medical treatment will only prolong the dying process - or in a “persistent vegetative state,” such as a permanent coma where you are unaware of your surroundings and there is no expectation of recovery. An advance directive also does not mean “let me suffer” - it specifically allows for pain medication to be administered whenever appropriate to make you as comfortable as possible. As long as you are able to make decisions for yourself, your advance directive has no effect.
If you do not have an advance directive, you will receive medical treatment to the fullest extent available for your condition - which means there is a chance that you will receive more treatment or procedures than you would choose for yourself. Also, if you are over 18 years old and do not have an advance directive authorizing your medical provider to discuss your treatment with your agent, your doctor may be prohibited by law from discussing your treatment with anyone - even your spouse or parent.
Surveys show that one-third of Americans say they’ve had to make decisions about end-of-life medical care for a loved one, and also that 70-95% of people would rather refuse aggressive medical treatment than have their lives medically prolonged in an incompetent or terminal state. The burden of enduring the poor quality of life of a loved one, both emotional and financial, is substantial for family members as well. Taking a few moments to create an advance directive is not only the best way to make sure you receive the kind of care you want, it is also one of the kindest things you can do to help your family take care of you.
Guardianships and Conservatorships
A Guardian is appointed by the Probate Court to make personal decisions for a minor child or incapacitated adult. The Guardian is authorized to make decisions regarding medical treatment, hospitalization, and residence.
A Conservator is appointed by the Probate Court to manage the assets of a minor child or incapacitated adult.
The same person can be appointed to both roles, or different people can be appointed for each.
The minor child or incapacitated adult is called the ward. The ward is under the protection of the court, and the Guardian and Conservator must report to the Court.
When filing for Guardianship of an incapacitated adult, the Petition must show that the proposed ward lacks sufficient capacity to make or communicate significant responsible decisions concerning health or safety. The Petition for Conservatorship must show that the proposed ward lacks sufficient capacity to make or communicate significant responsible decisions concerning the management of his or her property.
A person appointed as a Guardian is required to see that the ward is adequately fed, clothed, sheltered and cared for, and receives all necessary medical attention. The Guardian must file a report with the Court each year, describing the ward’s living situation and health, and what circumstances have changed.
A person appointed as Conservator is required to file an inventory of the ward’s property and a plan for managing, expending, and distributing the property on the ward’s behalf. The Conservator may not spend any of the ward’s funds for any purpose except as set forth in the Court approved budget, without getting an Order from the Court. Each year the Conservator must file an annual return with the Court.
Prenuptial Agreements
When a couple marries, rights are created that continue after the marriage ends. A prenuptial agreement is a contract that is signed before the marriage takes place, in which the couple agrees to change some of the rights that would otherwise be created.
The laws regarding prenuptial agreements vary from state to state. Georgia recognizes the general validity of such agreements, but whether a prenuptial agreement is enforced is in the discretion of the court. Georgia has a three prong test for prenuptials:
- Was the agreement obtained through fraud, duress, mistake, misrepresentation or nondisclosure?
- Is the agreement unconscionable?
- Have facts and circumstances changed since the agreement was entered so as to make its enforcement unfair and unreasonable?
It is important that each of the parties be represented by an attorney, that the agreement be signed well in advance of the wedding, and that both parties fully disclose all their finances.
Prenuptial Agreements commonly provide that property owned before the marriage remains each party’s separate property, while assets accumulated through the efforts of the parties during marriage become marital property.
Most couples enter into marriage expecting that it will last a lifetime, but given the high percentage of marriages that end in divorce, prenuptial agreements provide important legal protection.
Asset Protection
Asset protection planning involves the review of a client’s personal and professional behavior with a focus on good risk management and asset allocation. A strong asset protection plan shields a portion of a person’s assets from the claims of certain creditors by creating walls between unrelated assets. It also provides peace of mind and can save significant sums of money in a variety of circumstances.
Asset protection looks not only inward at what assets are meant to be protected, but also outward at the possible claims to which those assets are exposed. For example, renting out a second home means that the tenant, the tenant’s guests, and anybody injured by the tenant or a guest could all be potential plaintiffs against the homeowner. One step in this situation might be to form a business entity, such as a limited liability company (LLC), and transfer the rented home into the LLC. This step would help keep a client’s other investments or personal residence from being subject to the claims of these potential plaintiffs.
Worthwhile asset protection also means good recordkeeping, robust insurance policies that cover all the risks faced by a client, and the recognition that business assets can and should be owned separately from personal assets.
Estate Administration
If the deceased left a Will, the person named in the Will as Executor must file a Petition with the Probate Court requesting that the Court issue Letters Testamentary, granting authority to administer the Estate.
If there is no Will, the heirs can nominate someone to serve as the Administrator. Unless all the heirs consent to waiving certain requirements and granting full powers, the Administrator will be required to file an Inventory of the assets, as well as annual accountings, and will have to get a Court order to sell Estate assets.
The Executor or Administrator (the term “Personal Representative” includes both) is responsible for locating, identifying and taking possession of the deceased’s probate assets. This is called “marshaling the assets.” Probate assets can include bank accounts, investments, personal effects, and real estate. Certain assets, such as life insurance or retirement accounts that designate beneficiaries, payable on death accounts, or property owned jointly with right of survivorship, are not part of the probate estate.
The Personal Representative is required to notify creditors, and pay the debts. Georgia law sets out the order in which estate debts are to be paid. If there are not enough assets to pay all the creditors, those lower on the list of priorities are not paid.
When all creditors, expenses of administration and taxes have been paid or provided for, the Personal Representative may make distributions to the beneficiaries according to the provisions of the Will, or to the heirs according to the rules of intestacy.
When the estate has been completely administered, the Personal Representative should apply to the Probate Court for discharge from office and all liability.
Estate Tax Returns
In 2011 and 2012, Executors are only required to prepare and file an federal estate tax return if a Decedent’s gross estate is more than $5 million, which is the current federal estate tax exemption. Georgia does not impose a state level estate tax regardless of the Decedent’s net worth.
However, an Executor needs to know all the elements that go into calculating a person’s estate, and make sure that the estate falls within the exemption. Jointly owned assets, retirement accounts, assets held in trust, and life insurance proceeds all might be transferred outside of probate, but for tax purposes, they count against the exemption. At the time an Executor sells or distributes the assets of an estate, the Executor will often need to certify that no estate tax is due. Having someone familiar with the rules review the facts of your case provides peace of mind and can also save thousands of dollars in interest and penalties.
There are also several reasons why an Executor might want to take the time to appraise the assets of a deceased loved one and report those values on a tax return even if the estate is less than $5 million. The first reason is to establish the tax basis of inherited assets, because any capital gain or appreciation that has built up during a decedent’s lifetime should not get taxed if the basis is properly documented at the time a person inherits the asset.
The second reason is that recent changes in the estate tax law allow the estate of a deceased spouse to transfer any unused exemption to a surviving spouse. In other words, a widow can boost her own estate tax exemption if she prepares and timely files an estate tax return at the time her husband passes away. The estate tax return comes due just nine months after the death, so it is important to sit down promptly with a specialist in estate planning and estate administration to decide if the benefits of filing outweigh the costs.
The lawyers at Robinson & Miller focus their practice on mapping out the best strategies to transfer wealth from one generation to the next, and can help Georgia executors carry out their responsibilities with a minimum of fuss and expense.
Incorporations/LLC Formations
The old saying “Good fences make good neighbors” means a lot when it comes to setting up a corporation or a limited liability company (sometimes called an LLC). Creating a new business entity is much like building a fence between your business life and your family’s assets. Several differences exist between a corporation and a limited liability company, and it’s good to have someone help you choose the best format for your new company.
Many discount incorporation services file the necessary documents to set up a business with the Secretary of State, but they fall short of giving you the tools to operate your new business wisely. A good lawyer will coach you through properly opening a new bank account, gathering any necessary licenses, and deciding how best to create contracts with suppliers and customers.
Some types of businesses, like physician practice groups and health care service organizations, can benefit from a structure with multiple layers, and to maximize the liability protection afforded by Georgia law. Extra attention is needed to make sure that the governing documents for those companies properly address the specific issues that arise with multiple entities.
Small Business Sales/Acquisitions
Entrepreneurs face many issues when they decide to take over the operations of an existing company.
- Should they simply buy the stock of a business from its existing owner, or should they pay for the assets that make the business run, such as its equipment and intellectual property?
- Should they buy the accounts receivable and step right into the shoes of the existing management, or should they let the seller stay responsible for collecting outstanding invoices?
- What types of financing are available to help leverage the purchase of an existing business, and how does one know what is reasonable?
Likewise, business owners address the same types of issues when they negotiate the sale of their companies. Certain documents should be at the ready to persuade a buyer that professionalism and common sense have guided the company to this point. Brokers know that a business managed in a tax-efficient way does not always look the most attractive to a purchaser looking for high returns on its capital investment. Common ways to make the transition of the business to its new management as smooth as possible are also up for negotiation. Perhaps a seller could offer his or her consulting services after the sale. Maybe the buyer could pay the seller a portion of the transaction price over time.
The lawyers of Robinson & Miller have the experience and creativity needed to advise these business-owners and visionary entrepreneurs with a reasonable and thoughtful approach. From tying down the language in a letter of intent to tucking in the corners on a transaction already put to bed, ensuring that a client’s interests are protected is the primary goal.
Veterans Benefits for Long Term Care
Veterans or widow(er)s of veterans may be entitled to a non-service connected monthly pension to offset long term health care costs such as home health care, assisted living or nursing homes.
The main requirements for a pension for a veteran or widow(er) are:
- the veteran served at least 90 days of consecutive active duty service, one day of which was during a war-time period;
- the veteran’s discharge was not dishonorable;
- the claimant’s income and assets are under certain limits; and
- the claimant has a permanent and total disability.
There is no specified limit on the amount of assets, but the VA will look at whether a claimant has sufficient means to pay for health care, taking into account the annual health care costs, and the claimant’s life expectancy. Assets that will not be counted in the analysis are the home, car and personal belongings.
The claimant’s annual medical expenses should exceed or be close to the amount of annual income. Medical expenses include health insurance premiums, prescription costs, caregivers, home health aides and the cost of an assisted living facility or nursing home. If the claimant is a married veteran, the medical expenses of both the veteran and the spouse will be counted.
The maximum non-service connected pension is called Aid and Attendance, and is available to a veteran or widow(er) who is either blind, living in a nursing home, or in need of assistance to manage the activities of daily living.
