Klitzman Law Group, PLLC

Not all Trusts are Living Trusts

When most people think of trusts, they think of living trusts. That is something that a person creates while they are alive and that has a written trust agreement. There is another type of trust.

Revocable living trusts are now so common that many people assume all trusts are just that – revocable living trusts. However, there are many different types of trusts.

Trusts can also be irrevocable.  In addition, not all trusts are living trusts.

A living trust merely refers to any trust agreement that a person makes during his or her lifetime. Another type of trust exists that people can make after death. It is called a testamentary trust. Many people have documents that create one, even if they are not aware of it, as NWI Times discusses in "Wills can create trusts."

It is very common for a will to create a testamentary trust, when the person making the will has minor children. The language of the will leaves assets to the child as held in trust by a third party. That third party becomes the trustee and assumes all of the normal responsibilities of a trustee.

You might even have these provisions in your will and not know about it, if you have not reviewed your will closely enough.

Whether your estate plan creates a trust for minor children under a revocable living trust or a will, make sure that you understand what it will do (and not do) to protect and manage the inheritance. A qualified estate planning attorney can help you, and even make adjustments as may be needed.

Reference: NWI Times (Feb. 19, 2017) "Wills can create trusts."

Suggested Key Words: Wills, Trusts

 

New Jersey Changes Student Loan Policy

The state of New Jersey has often been criticized for its policy of requiring parents who co-sign student loans for their children, to pay back the loans even if the child passes away. The state has now changed its policy.

Generally speaking, when a person passes away any of his or her outstanding creditors must be paid, if claims are made as required by law. There are very few exceptions to that general rule.

However, one of the biggest exceptions is with federal student loans.

If the student passes away with outstanding student loan debt, then the federal government discharges the debt. Even many private student loan companies do the same.

The state of New Jersey has always been different with its state run student loan program, as Financial Advisor discusses in "N.J. Discharging Loans For Families of Deceased Students."

Not only would New Jersey still expect payment from the estate, it would require co-signers to pay, if the estate was unable to do so. This left many families deep in debt over the unrepaid loans of their deceased children.

The policy was roundly criticized for the burden that it left on grieving parents.

Attempts had been made to change the law and the state's policy to no avail. However, the state legislature has recently reversed course and will now discharge the debt of deceased students.

If you have a loved one who has student loans and who has passed away, make sure that you talk to an estate planning attorney about how to properly discharge the debt. You can now do so, even in New Jersey.

Reference: Financial Advisor (Feb. 21, 2017) "N.J. Discharging Loans For Families of Deceased Students."

Suggested Key Words: Estate Law, Student Loanss

What Happens When You Do Not Update Insurance Beneficiaries

Estate planning attorneys repeatedly warn clients to review and update beneficiary designations on a regular basis. A recent case illustrates why.

Hopefully you have heard from your estate planning attorney about the need to update your estate plan, anytime that you have a significant change in your life circumstances. This includes going over your retirement accounts and life insurance policies to make sure beneficiary designations are up to date.

If you think that this is just a way for attorneys to get you back into their offices for more fees, then a recent story reported by the Wills, Trusts & Estates Prof Blog "Ex-Spouse Receives Bulk of Insurance Death Benefit" should change your mind.

A man named his wife as an 83% beneficiary on the group life insurance policy he received through his employer. His children were the other beneficiaries.

After he got divorced, he never updated the policy and the policy was not mentioned in his divorce proceedings.

When he passed away, his ex-wife refused to waive her status as a beneficiary. Under federal law, the ex-wife could only be removed from the policy, if a divorce decree mandated it.

State law was no more helpful in this case and the ex-wife received her share of the insurance money.

When an estate planning attorney warns you to review and update your estate plan, make sure that you listen and do so.

Reference: Wills, Trusts & Estates Prof Blog (Feb. 15, 2017) "Ex-Spouse Receives Bulk of Insurance Death Benefit."

Suggested Key Words: Estate Planning

 

Do You Need Long-Term Care Insurance?

How to pay for future nursing home care concerns many Americans as they get older. Many consider purchasing long-term care insurance, but it might not be the best option for everyone.

The costs of staying in a nursing home are already very expensive and they are expected to rise. Individual Americans have to figure out a way to afford a nursing home, if it is ever needed.

While it is true that Medicaid will pay for nursing home care, the government will not pay if you have plenty of your own assets. That means if you were planning on leaving a sizable estate to your children, you will likely be unable to do so, if Medicaid pays for your nursing home care.

Another option to consider, is to purchase long-term care insurance.

Recently, the Wills, Trusts & Estates Prof Blog discussed it in "Should You Buy Long-Term Care Insurance?"

One of the key questions to consider, is when you might need the insurance coverage. If you are unlikely to need nursing home care for a long time, then it is often a better idea to save enough money so you can self-insure against the possibility of needing long-term care.

On the other hand, some long-term care policies have waiting periods that need to be considered. If you are likely to require nursing home care before the end of the waiting period, then an insurance policy will not help you.

One thing is certain. Long-term care insurance policies are complex.

You should seek the advice of an elder law attorney before signing a policy.

Reference: Wills, Trusts & Estates Prof Blog (Feb. 16, 2017) "Should You Buy Long-Term Care Insurance?"

Suggested Key Words: Elder Law, Long-Term Care Insurance