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COVERING THE BASICS

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Often times in this space we take something for granted. We assume that our readers are interested in estate planning, so they must know what an estate plan is. That is our mistake. Many people do not really know what an estate plan is. With this post we hope to make up for that by telling those readers what an estate plan actually is. An estate plan is a collection of legal documents that are created for one of three basic purposes. Let’s look at those purposes.

1) To determine how a person’s property will be distributed after he or she passes away. This is the oldest purpose of estate planning and what is usually thought about when people hear the term. There are many ways that an estate plan can serve this purpose.

2) To determine how a person’s financial and healthcare affairs will be protected if he or she is incapacitated. This is a much newer purpose of estate planning, but it is equally important.

3) To determine who will care for a person’s minor children if the parents pass away. Not all estate plans serve this purpose as not everyone has minor children.

That’s it. An estate plan is a collection of legal documents that serve one of those three purposes.

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When you are doing your estate planning research you will frequently hear mention of the fact that the population of the United States is getting older and the senior population is rising. A very interesting dynamic emerges when you combine this demographic with the fact that medical science is advancing by leaps and bounds, fueled by amazing technological breakthroughs. More people are living longer, and it would seem as though this trend will continue as more becomes possible medically.

All of this has everything to do with long term planning because how you arrange your finances and set your goals is going to be relative to how long you can logically expect to live. The group of Americans who are 85-years-old and older are the fastest growing demographic subset, and if this is any indication it is probably prudent to prepare for the possibility of living into your late eighties and beyond.

This increased longevity is invariably going to add to the numbers of people living in assisted living communities and nursing homes. The costs of these facilities are already very high, they are rising, and experts say that they will continue to increase. A MetLife study reveals the fact that the cost of a private room in a nursing home in America in 2009 was $219 a day or $79,935 per year; in 2010 it had increased by 4.6% to $229 a day or $83,585 per year.

The rates for living in an assisted living community grew at an even quicker pace. In 2009 the average annual cost was $3,131 a month, which works out to $37,572 annually. These figures shot up to $3,293 per month and $39,516 per year in 2010, an increase of 5.2%.

In the state of New York the costs associated with long-term care are quite a bit higher than the national averages as you might expect. The annual cost of a private room in a nursing home in New York in 2010 was $127,750.

When you stop and think about a $130,000 annual expense coming in at the end of your life it is clear that some advance preparations are probably going to be necessary. The prudent course of action is to discuss the matter with an elder law attorney and do what it takes to address the possibility of a stay in a nursing home or assisted living community.

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I do not need to tell my readers in the New York area about the devastation that Hurricane Sandy has brought to our homes and neighbors. If you can help someone in person, I implore you to do so. If not, please follow this link to learn about other ways to help.

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Many people who create Trusts do not have a family member who is an appropriate person to appoint to serve as a Trustee. The person who serves as a Trustee should be financially responsible and someone who will not be tempted to administer the Trust for his or her own benefit instead of the benefit of the Trust beneficiaries. Ideally, the person should also be someone who the beneficiaries respect enough to defer to in decision-making without unnecessary challenges.

Many people do have responsible and respected family members who can act as Trustees, but those who don’t have to look for other options. Some people choose to use professionals. Banks and Trust Companies will act as Trustees for a fee. They can both be excellent options. Another option is to hire an attorney to act as a Trustee. Because of the professional ethics demanded of attorneys, they will act for the benefit of the Trust. Yet another option is to appoint the best family member that you can and hire an attorney to act as an advisor to the family member Trustee when the need arises for professional advice.

Talk to your estate planning attorney about who you should appoint to serve as a Trustee for the Trusts that you create and whether you would benefit from a professional as a Trustee.

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Many people are often concerned that after they spend their money in retirement, they will not have anything left over to leave to their families. It can be a difficult problem simply because people are living longer and longer thanks to advances in medical science. Many people will need more money in their retirement years than they planned for. However, with proper planning, you can make sure that you have something to leave behind for your loved ones.

Whatever your retirement plan is, make sure that you tell your estate planning attorney about it. You estate plan can take it into consideration and your attorney can craft a plan that is tailored for the retirement plan that you have. In some cases, you might need to change your retirement plan slightly, and you attorney might be able to help you with that too or suggest another professional who can.

Whatever you do, do not make the mistake of thinking that you do not need an estate plan because you are going to spend it all before you pass away. While people are living longer and longer in general, not everyone is. Make sure that you have a plan in place even if you do not think you need one.

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ome big changes in your life are easy to recognize. When you have your first child, for example, you know that your life has dramatically changed. At these times, it is easy to see why you need to update your estate plan to reflect the changes.

However, there are other changes in your life that are harder to recognize because they occur gradually. For example, in your career, you will probably have many different raises and promotions. Each one individually is not a big change, but cumulatively the change can be quite dramatic. Because the change in income has taken place over such a long period of time, it is easy to downplay its significance. However, if you think about the change in income from the beginning of your career to now, you might see that it is very significant.

Income is just one thing in your life that you can gradually change over time. Think about other ways that your life has changed over time, especially since the last time that you updated your estate plan. If there have been significant changes, contact an experienced estate planning attorney and get an updated estate plan that takes those changes into account.

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Do you know what your parents’ plans are to pay for long term care in a nursing home? Do your parents even have plans for the possibility? These are questions that you need to know the answers to. I’m sure you are aware that you can be forced by law to pay for the care for your children. What you might not know is that 29 states have laws that can force you to pay for the long term care of your parents, even if you do not live in those states.

Known as Filial Support laws, these laws have provisions that allow nursing homes to seek reimbursement from relatives of those in the nursing homes’ care. Some courts have ruled that nursing homes can recover from relatives who live out of state. The important thing is where the nursing home is located, not where the relatives live.

Long term care in a nursing home is exceedingly expensive. Make sure that your parents have a plan in place to afford the care. If they do not then you could be responsible. While you are at it, make sure that you have a plan to pay for your long term care, if you ever need it. Do not stick your children with your nursing home bills.

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Many people make the mistake of thinking that estate planning is just about protecting wealth and distributing property. Those are often important goals of estate planning, but they are not the only reasons to have an estate plan. There are other reasons to have an estate plan and other goals that you can accomplish with an estate plan. In fact, the other goals are often far more important than wealth and property.

If you have children, you can use an estate plan to determine who should have guardianship over your children in case something happens to you. Whose custody you leave your children in is usually far more important than how much money you leave your children. However, if you do not have an estate plan, you will not be the person to decide who will take care of your children.

An estate plan also sets out who takes care of you and your property if you become incapacitated. If you are in the hospital, for example, someone might need to make health care decisions for you. As part of your overall estate plan, you can decide who has the authority to do so.

Do not make the mistake of thinking that just because you do not have a lot of property you do not need an estate plan. Property is important to estate planning, but it is not the most important thing.

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If you are in surgery and unable to make an important decision concerning your care, have you considered who you want to make the decision for you? Have you discussed it with the person you would designate so that he or she knows what you would want done? Have you created the appropriate legal framework for the person you designate to make those decisions? A Health Care Proxy is a document that you can use to legally appoint another person to make medical decisions on your behalf when you are incapacitated and unable to make them on your own.

Doctors and other health care workers have to follow strict legal rules and procedures when discussing your health and care with other people. To protect your privacy, they are not allowed to discuss your care with other people in most cases. That means that if a decision regarding your care needs to be made quickly, the doctors will have to make it themselves. What they choose to do might not be what you would want done. A Health Care Proxy allows you to designate someone who doctors can legally discuss your health with and someone who can tell doctors what you want. Talk to an attorney about getting one today.