PBM
Teenagers off to College?
Patricia Bloom-McDonald • Jun 17, 2021

This time of year is always so exciting for parents and their graduating teenagers. Proms. Parties. Pictures. Graduations. Prepping for college. But before you do all that, there is something else parents should consider for your high school graduate: their estate plan .

You are asking . . . “why would my high school graduate need estate planning if he/she is physically healthy and otherwise, financially destitute?” Well, because in the eyes of the law, your newly minted 18-year-old high school graduate, is a legal adult who is responsible for their own medical and financial decisions . Which is a very hard concept to accept by every Mom and Dad because their teenager can’t seem to remember to clean their own room. But, indeed this fact is true. Just imagine if your son or daughter is away at school and he/she has an accident, becomes ill or even incapacitated. A hospital, doctor or nurse, cannot, by law, disclose any information to you about your own child’s medical condition without the proper legal documents in place. The federal Health Insurance Portability and Accountability Act (HIPAA) Law, makes it illegal for any medical personnel or hospital to disclose or discuss private medical information with anyone that you have not given consent to. Additionally, the university or college that you are footing the bill for, is likewise forbidden to disclose any information. The same hold true for financial institutions. Due to privacy laws and fraud protection, banks, credit card companies, cell phone companies, etc. will not talk with anyone that has not been authorized by the account holder.

What is a parent to do? Before your son or daughter goes off to college you need to set up an appointment with Attorney Patricia Bloom-McDonald who will advise you that prior to leaving for college, every person 18 years-old or older should sign three basic legal documents: 1) a HIPAA release; and 2) a healthcare proxy; and 3) a durable power of attorney document. These three legal documents, will enable parents to get the information they need to make legal and medical decisions for their son or daughter should they not be able to make the medical and legal decisions for themselves.

Health Care Proxy (HCP ) – This is a legal document in which you designate a person [an agent] to make your medical decisions, if you are unable to make them yourself. It is only effective if the person is unable to articulate their own needs or when a doctor indicates in that you are incapable of making medical decisions. Every HCP should have a primary agent and an alternate agent.

HIPAA Release – The Health Insurance Portability and Accountability Act (HIPAA) preserves the privacy of your medical information. It prohibits access to your private medical information. Without this legal document, medical providers are prohibited from disclosing medical information to family members so they can assist each other with medical issues such as insurance, finding out about test results, speaking to a doctor or pharmacy about a prescription. In a HIPAA Release, you authorize the people listed on the document to have access to his/her medical information. The HIPAA agent can fax or give a copy of the HIPAA Release to the medical provider and then the medical provider will be allowed to speak with that person.

Durable Power of Attorney (DPOA) – This is a legal document in which you designate who you want to make legal and financial decisions for you if you cannot make them yourself. A DPOA should be extremely comprehensive. It should allow the agent to handle essentially all legal and financial matter that may arise. It is very important that you only pick people whom you trust to be your agent. It is also important that the DPOA have a primary agent and an alternate agent who acts only if the primary agent is unable.

Therefore, between the last graduation party and the first trip to the stores for college supplies, be sure to call Attorney Patricia Bloom-McDonald, (508) 646-9888 to set an appointment for your College Student to discuss these legal documents, their ramifications, and answer any questions the student and his/her parents may have.

The post Teenagers off to College? appeared first on .

Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
Share by: