Can't stress it enough... if you have kids, you MUST have a will.

The recent passing of the King of Pop, raises an issue that comes up again and again in estate planning, those with children need to have a will in place.

http://www.cnn.com/2009/SHOWBIZ/06/26/jackson.children.will/index.html

Not only can a will deal with some financial issues, as blogged in my July and August 2008 posts, but it can also be a vehicle to name who you want to serve as guardian for your children. A court may ignore a provision naming a guardian, if it does not serve the best interests of the child, such as if the other parent is living and fit to parent or if the named guardian poses some threat of endangerment. However, if you fail to prepare a will naming a guardian, you leave it entirely up to a judge who is a stranger to your family and may not place your children with the most appropriate caregiver.

If you have children and do not have a will, contact a licensed attorney.

Special Needs and Supplemental Needs Trusts

I realized I skipped last month. I'll try not to do a cop-out by talking about two, very related, topics: Special Needs Trusts and Supplemental Needs Trusts.

Typically, state and federal governments will ignore trusts and include amounts in trusts as an asset of the beneficiary for purposes of determining eligibility for state benefits. Two exceptions are Special Needs Trusts and Supplemental Needs Trusts. Both trusts are vehicles to allow a person who is recieving disability benefits, additional income and assets to meet needs beyond what the government benefits cover. Essentially, these trusts allow disabled persons to have a lifestyle beyond what the government benefits provide, without jeopardizing their ability to receive those benefits.

Special Needs Trusts are funded by the individual’s own assets. Supplemental Needs Trusts are funded by a third party’s assets. There are strict rules on how these trusts are established, funded and what types of expenses can be paid for by the trust. If you fail to meet these rules, the trust will be disregarded and the trust assets could be counted against the beneficiary. The rules surrounding these trusts are very specific, ridgid and highly technical. If the trust provisions violates an applicable federal or state law, the trust is disregarded. If a Special Needs Trust or Supplemental Needs Trust might be right for your loved one, it is very important that you work with a licensed attorney.

Life Estates

Something that I've referred to in previous posts is a form of ownership called a life estate. Life estates occur when an owner sells or gives away real property to another, but reserves the right to live on the property for the remainder of his or her life. The person who receives the property has, what's known as, a remainder interest.

Life estates can be useful tools in the estate planning process. This type of ownership can allow the property to be transferred upon death without going through the probate process, because the person who has the remainder interest already owns the property.

Life estates can also have tax benefits. The basis of the property will be the market value at the death, rather than at the time of the gift, which will generally result in a tax savings when the property is later sold.

Life estates can have some benefit for medical assistance planning. Theoretically, medical assistance liens placed on the property for benefits expended for the grantor should disappear upon their death. However, the Minnesota legislature enacted a statute in 2003 which allows medical liens to remain on the property after the grantor's death. Life estates no longer allow property to pass free and clear from any medical liens. However, a life estate may reduce the amount of value of the property that a medical can attach to.

If a life estate seems like a form of ownership that may address some of your estate planning concerns, contact a licensed attorney.

Estate Planning Documents and HIPAA Waivers

As a part of many estate planning documents, individuals are called on to get medical information about another. The main example is a health care directive which states who is to make health care decisions for you in case you're incapacitated. That person will need to have full access to your medical records in order to make an informed decision. Another document is a trust that states that a certain action will be triggered upon disability as decided by a medical doctor. In order for the trustee to know if the individual is disabled, they will need to have access to medical records and information from the individual's doctor. However, HIPAA can impede these individuals from getting access.

HIPAA, or Health Insurance Portability and Accountability Act of 1996, is a federal law that was enacted to standardize data gathering and sharing in the medical field. A part of this act protects an individuals' health care information from being disclosed. Individuals acting in the capacity as a "personal representative", such as under a health care directive, are specifically allowed to have access to medical information. However, there have been many anecdotal reports of medical providers refusing to release information to the personal representative, citing HIPAA concerns, even in spite of what the federal regulations state. Additionally, there is no exception for trustees, attempting to determine the status of an individual for purposes of the trust.

These problems can be avoided through a HIPAA waiver, signed by the individual. It is a single page document that need not be made a part of the trust or directive, but can be provided to a trustee or personal representative to prevent HIPAA issues.

If you are contemplating a trust or health care directive or already have one in place, which doesn't address HIPAA, contact a licensed attorney.

Will the Nursing Home Take My Farm? The role of medical assitance planning.

As we get older, the possibility of entering a nursing home, and the concern for how to pay for it, becomes an increased worry for many people. If one requires medical assistance from the state to pay for nursing home care, the state can recuperate what they can by placing liens on certain assets held by the individual, including homestead and farm property. Accordingly, many people worry about what the government can or cannot take and how they can go about it.


First, the state government evaluates whether someone is eligible for medical assistance both by looking at their monthly income and the amount of assets they have. If the state determines they are eligible, the state will pay for the nursing home care. If individuals have made prior gifts during what's called the look back period, the state will "look back" and impute the income to the individual. The state won't go to the recipients of the gifts to recuperate the costs, they just may not find the individual eligible for assistance. Additionally, in many instances, if the individual is otherwise eligible but owns real property, the state may find that person eligible and give assistance, but will place a lien on the property to recuperate the money spent on the care.


Planning ahead is the key for medicare assistance planning. Working with both a licensed attorney in the state that you plan to receive care in and a financial advisor can help you prevent a situation where you need assistance, but either are found ineligible or have your real property incur a state medical lien.

What happens if I don't have a will?

I'm often approached by people who say they want a will so their property doesn't go to the government. While there's many reasons to have a will (probably a smoother probate and smoother family relations is just one of many reasons), the risk of having the government "take" your stuff merely because you don't have a will is very unusual. So, what happens when there is no will?

When someone dies without a will, it's stated that the individual died "intestate". All states, including Minnesota, have intestacy laws which give a specific order as to who gets how much of the estate. In general terms, a spouse gets first. If there's no spouse, then the children get and so forth. If the decedent died without a spouse or descendants, the parents get first and if no parents, the siblings get and so forth. If there is no spouse or descendants, parents or siblings, then the grandparents get or aunts and uncles if no grandparents and so forth. The main point is that the state of Minnesota is the last resort. If there are no relatives around to claim the estate, only then does the estate go, or escheat, to Minnesota.

There are many reasons to have a will, but probably one of the most minor reasons is to prevent Minnesota from getting your stuff.

What do you mean by an estate plan?

An estate plan is an umbrella term that refers to a plan as to what happens when someone dies or is incapacitated. Issues to consider are where your stuff will go, who will take care of your kids, who will make my decisions if you can't make them, how to make the probate process quicker and less expensive, continuation of a family farm or business, and what the effect of taxes and state liens will be.

There can be many pieces of an estate plan depending on the needs of an individual. Something that just about everyone should have is a will. Without a will, the state will apply the fallback provisions in state law to determine who gets your property, which may or may not follow your intent. Additionally, dying without a will which can specifically call for an expedient probate process, can cause a longer, more expensive probate process.

Also, everyone should have a health care directive, which states who makes the health care decisions for you in the event of your incapacitation and gives direction as to your wishes. This health care directive needs to include a HIPAA waiver to allow the hospital to release protected medical information to this person.

In the same vein, everyone should consider a power of attorney who can deal with your financial affairs in case of your incapacitation. However, once created, that person has as much right to your finances as you do and you should only execute a power of attorney if you have a trusted individual in place.

Besides these documents, other documents can be executed, trusts established, and business entities created which address your specific needs. This is why it is so important to contact a licensed attorney to look at all of your circumstances to craft an estate plan to fit your needs.