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           If you wanted to cross a bridge and someone told you that the bridge had a 70% chance of collapsing, would you cross it? No. You are a reasonable person and you would create an alternative plan to reach your destination. Unfortunately, you face the same odds for a similarly catastrophic event and most have not prepared for it.

           If you are over the age of 65, you have a 70% chance of needing some sort of long-term care—whether it’s in home, assisted living, or skilled nursing level care. If you do end up needing long-term care (LTC), which you likely will, you’ll need to figure out how you’re going to pay for it. You may receive Medicare and a Medicare supplement but that will not cover the cost of LTC. Medicare will only cover up to 80 days of care but only if you are improving. If your progress hits a plateau, you will need to find an alternative means of paying.

           LTC can be extremely expensive. Depending on the level of care, you can expect to pay anywhere from $5,000 to $10,000 a month or more. Most do not have the cash on hand to pay out that kind of money for the long-term. If you do end up paying out of pocket, you will likely need to liquidate your assets (home, care, retirement accounts, and investments) to cover the bill. Paying out of pocket, for most, means that they will not be leaving anything for their loved ones when they die. Everything they own goes to cover the cost of care.

           Luckily, there are alternatives out there. Medicaid is one alternative which I have written about at length in other articles. Medicaid may be a viable and beneficial option for you. Check out my other articles to learn more.

           Another alternative is long-term care insurance. LTC insurance is much like life insurance, car insurance, or any other type of insurance in that you pay monthly premiums, and, upon the occurrence of a triggering event, the policy pays out. For car insurance, the triggering even is a wreck. For life insurance, its death of the insured. For LTC insurance, it’s the need for long-term care.

           LTC insurance premiums do present a monthly obligation. They can cost anywhere between $1700 to $2300 per year. However, that amount pales in comparison to the cost of LTC out of pocket. With LTC insurance, you will pay, in a year, less than half of what you’d pay in a month without the policy.

           Another benefit is the variety of policies available. This allows you to pick the plan that will ensure a return on your investment. For example, some LTC insurance policies have a chronic care rider. This means that the policy will pay out if you have the need for care beyond what Medicare will pay for but not to the level where you need assisted living or nursing home care. Thus, even if you are a part of the lucky minority who never needs LTC, LTC insurance can still benefit you.

           If you have questions about long-term care insurance or your estate plan, the attorneys at McIntyre Elder Law are ready to help. Contact us at 704-259-7040.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

Greg McIntyre

I asked my staff what I should talk about today and one of them said, people have to know how important estate planning is…

I see people every day who didn’t plan ahead, and it can make life very hard for them, so I wanted to go over a few points to show why you should engage in estate planning.

Whether the time is right to start estate planning or not, you should stop what you’re doing and think about if you’ve properly planned to protect your hard-earned money, property and your family.

So why is estate planning important?

First, Protect Your Home.

I love my home, I’m working to pay for design changes and upgrades, and it’s going to take me thirty years to pay off my mortgage. My home is important to me. I invest a lot of time, money and energy into my home and for a lot of Americans, it is the biggest asset they have.

You want to protect that asset, right?

Here is why you should put in place your estate plan to protect your home.

·      It will help you stay in control of your home for the rest of your life.

·      It will help protect your home if the state tries to take it to pay for a health care situation.

·      Your home can be part of the legacy you pass on to your children.

It can be simple to protect your home. A Ladybird Deed is one way. 

Second, Protect Your Family.

I love my wife and my kids. If a situation occurs where a catastrophic health care situation happens and I need long term care, I would want long term care insurance in place. By having this insurance, all my assets do not have to be spent down and used to pay for that health care. I don’t want my wife and kids to live in poverty, so I need to put an estate plan in place. That’s very important to me.

A person who has long term care insurance is protecting everything they have worked for, including their home. Even if you do have long term care insurance in place, you still want to set up your other foundational documents.

·      General Durable Power of Attorney

You should have a document that allows your spouse to act as you financially, as long as you trust them.

·      General Healthcare Power of Attorney

·      Living Will

·      Will

These documents allow someone you trust to act as you if something happens to you and you’re unable to act for yourself.

It is simple to put these documents in place.

Third, Protect Your Finances.

A great way to protect your finances is through Trusts.

Let’s say you have a large amount of money, but you don’t want it all going to a grandchild in one lump sum when they reach eighteen. We use Trusts to protect that money for you and your grandchild by assigning a Trustee. This could be one of your children, someone you trust. That money could help them through college, or a trade school. Then, after they matured a little, maybe at twenty-five, the Trust could distribute a larger portion of the funds to them over time, say ten percent a year, so they don’t get it all in one go.

Fourth, Flexibility with Benefits.

Let’s say you already have in place long term care insurance. If something occurs, such as you miss a payment, by estate planning and having in place your foundational documents, can allow a spouse or one of your children to come in and do some planning for you, if you are unable to do so yourself. They can organize your assets so that you qualify for long term care Medicaid benefits or a veteran’s benefit.

Fifth, Flexibility and Planning.

Who wants a car with no reverse?

No one wants that, and planning is no different.

You want to build flexibility with plans. A General Durable Power of Attorney provides a reverse. It allows someone you trust to come in and do what’s needed. Let’s say you have backed into a corner with benefits planning, and your wife needs to take over and protect some assets another way. As long as your spouse has been appointed to handle your finances, they could do that. That helps you and your family. This allows for a reverse in the plan if needed.

When we put together a comprehensive estate plan, we try to see every avenue, and anticipate every turn, but as much as I think about those things, I’m not a fortune teller, which is why we need to plan. 

We want to provide flexibility in the planning because of the unforeseen. These are the reasons estate planning is so important.

If you have any questions please call our office, 704-259-7040, or visit our website mcelderlaw.com. Our team will be ready to help you. I’m Greg McIntyre of McIntyre Elder Law and I’m here to protect your assets and legacy.

Regards,

Greg McIntyre

Elder Law Attorney

@lawyergreg

      Considering that 70% of individuals over the age of 65 will need some type of long-term care in the future, it is important to plan for how you might pay for your care. The simplest way is to pay out of pocket. However, with long term care costs ranging anywhere from $50,000 to $100,000 per year, paying out of pocket is not an option for most—at least not long term.

Planning to Preserve

           An alternative solution that will allow you to cover your cost of care is Medicaid. Long-term care Medicaid can be a life saver; but you have to meet its strict asset threshold. For example, the person who is in need of care (“the applicant”) can only have $2,000 worth of assets in their name for Medicaid Purposes (note: Medicaid does not count the applicant’s primary residence or the applicant’s vehicle). If the applicant is married, their spouse can have up to $126,400 worth of assets in the spouse’s name (minus the home and cars for the couple).

           Those individuals who are over resourced (have more than the asset threshold) are put at a disadvantage. Many have more than the threshold but are by no means wealthy or able to pay out of pocket for care. Furthermore, the notion of spending all of your hard-earned assets for costly long-term care is a rather dim prospect for most. So, what are those who are over-resourced to do? Spending down the money is one option. This is a regular planning tool to preserve the value of the assets while simultaneously qualifying the individual. However, depending on the nature and amount of the assets, this may not be the best approach. For example, some individuals are so over-resourced that a spend-down includes spending some of the assets on the cost of care instead of preserving it (because it would otherwise count as an asset).

           Another option is getting your assets out of your name. This is a great option if done correctly and strategically, because it can allow you to preserve all of your assets while allowing you to also receive Medicaid. You’d ideally want to gift away the amount of asset that are putting you over the threshold. (e.g. if you have $200,000 worth of assets, you’d give away $73,600 to reach the limit of $126,400). This will no doubt get you under the asset threshold. However, gifting the property—to an individual or irrevocable trust—will trigger the lookback period. The lookback period is where Medicaid looks back 3 to 5 years from the date of application (3 years for assisted living—5 years for nursing home care) to see if you gave any assets away. If the see that you have, they assume that the purpose of the gift was to artificially lower your asset level to qualify for Medicaid, which results in a penalty. The penalty is a period where—although you qualify for Medicaid—they force you to pay out of pocket for a period of time before Medicaid kicks in (currently, every $6,300 given is a month of penalty e.g. if you gave away $12,600, your penalty would be 2-months).

           Getting the assets out of your name is an option for many who plan far ahead. If you do not contemplate needing care for the next 3 to 5 years, then triggering the lookback period can be a strategic move that puts you at a great advantage if you were to need care past after the lookback period has run. The issue with this strategy is that it’s a bit of a gamble. Many individuals cannot effectively guess when their health will decline. Further, many individuals wait to plan for the need for long-term care until they start to see their health decline. Thus, many don’t have the luxury of waiting for the lookback period to run.

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Eliminating the Lookback Period

           So, how do you manage to preserve all your assets and not suffer the effects of the lookback period? The answer is long-term care insurance (“LTC insurance”). Long-term care insurance is like health insurance that will cover the cost of your long-term care based on the policy you purchase. Like health insurance, long-term care insurance has premiums that you pay monthly. However, the price of the premiums are not cumbersome and are cheap in comparison with cost of long-term care (one month of long-term care commonly costs more than a year of LTC insurance premiums).

           Many LTC insurance policies are term policies that range 3 to 5 years. This is perfect for planning purposes. Let me illustrate. Let’s say you purchase a 3-year LTC insurance policy today. You also simultaneously get your excess assets out of your name by putting it in an irrevocable trust (and triggering the lookback period). A couple days later, you suffer a stroke and immediately need to go to an assisted living facility. You can’t get Medicaid to cover the cost of care because you triggered the lookback period with the transfer to the irrevocable trust. However, you have a policy that will cover your cost of care for 3 years (the same time as the lookback period). Your LTC insurance will pay for your care for three years, thereafter you will qualify for Medicaid to cover the remainder of your costs because you’ve gotten the assets out of your name and the lookback period has run its course. We call that having your cake and eating it too. 

Conclusion

           The strategic use of an irrevocable trust and LTC insurance can allow you to preserve all of your assets and receive Medicaid down the road, while protecting you from the dreaded lookback period. If you have question about Long-term care insurance or planning for long-term care, we can help. Call McIntyre Elder Law at (704) 259-7040.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

            An effective estate plan will be multifunctional and flexible enough to adapt to unknown future events. A good way of creating a flexible estate plan is through the use of a trust. However, that begs the question: if I have a trust, do I still need a will? To understand the answer to this question, you must first understand how your property passes whether you use a will or a trust.

 

Will

            Any asset you own, whether it is real or personal property, will pass through your will, unless you have the ability to assign a beneficiary. For example, you can assign a beneficiary to a bank account, retirement account, life insurance policy etc. Whatever you do not assign a beneficiary to will pass through your last will and testament.

            If your property is passing through your will, it will be subjected to the probate process. Probate is method by which the wishes of the testator/decedent (the maker of the will) are carried out any creditors of the decedent’s estate are paid, and the property is distributed to the legal heirs. This process can be lengthy, complicated, expensive, and open to creditors. A good estate plan looks to avoid probate because of the inefficiency and liability it presents.

 

Trust

            The use of a trust is a great method to avoid probate. Any property you put into the trust will automatically pass to the beneficiary upon death. There is no lengthy process for the beneficiary to receive their inheritance. By avoiding probate, the trust also side-steps the risk of lengthy probate litigation.

            Additionally, whatever you put into the trust will pass through the terms of the trust. The terms of the trust can be as creative as you want them to be. This is an effective way of creating generational wealth because it allows you to have a proverbial hand outside the grave, controlling the property for generations long in the future. Let’s say that you may leave a certain amount of money in a trust to your children. You could put terms in the trust that instructs the trustee to invest and grow that money. The terms could also instruct the trustee to only pay out for the education of the beneficiaries or their children. That way, if your goal is that future generations have the opportunity to get a quality education, a trust will help you accomplish that goal.

 

Trust over Will?

            If you create a trust, you should plan on passing everything—that does not already have a beneficiary assign to it—through the trust. Whatever you can conveniently place into trust should be done shortly after creating the trust or obtaining the property. That way, everything of significant value passes through the terms of the trust and to the people whom you want to leave it to.

            However, the trust does not eliminate the need for a will. A will serves many functions. And, in conjunction with a trust, it can serve as a back-up document to pass assets. Let’s say that you put most everything into your trust, but you left a few assets of significant value floating out there. Or maybe you acquired property after you create the trust and you forget to put it into the trust. Your last will and testament will ensure that the property still goes to who it’s supposed to go to. In fact, many individuals who have trusts also have pour-over wills. A pour-over will ensures that any property not already in the trust goes into the trust upon death. The will thereby “pours” the property over into the trust. The property will then pass through the terms of the trust as if it had been put into the trust in the first place.

 

Conclusion

            A trust is a great way to pass property and avoid probate. However, just because you have a trust doesn’t mean you don’t need your will. If you have questions about trusts, will, probate, or any estate planning matters, the experienced attorneys at McIntyre Elder Law are ready to help.

 

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

 

          A guardianship is when the court adjudicates an individual incompetent and appoints another individual to act on their behalf for legal and financial, or healthcare purposes—or both. The individual bringing the petition is called the “petitioner”. The individual whom the petitioner is attempting to obtain guardianship over, is the “respondent”. If the respondent is found to be incompetent, they become known as the “ward”. If the petitioner is awarded power by the court to act on the ward’s behalf, they become known as the “guardian”. If the guardian is awarded power to act for financial and legal purposes, they are known as “guardian of the estate”. If the guardian is awarded power to act for healthcare purposes, they are known as “guardian of the person”. If they are awarded both, they are known as “general guardian”.

           To establish guardianship, there must be a hearing. The hearing is a necessary due process because part of the hearing is to determine whether or not the respondent is of sound mind. Adjudicating someone as incompetent is a deprivation of liberty because the state is saying that the individual is not competent to act for themselves—in whatever capacity the court determines. Thus, it must be proven by clear and convincing evidence that the respondent is not competent and is in need of a guardian. If the court determines that incompetency exists, they must also determine the level of incompetency in order to determine which type of guardianship is necessary.

           The second part of the hearing is to determine: 1) whether the petitioner is a fit and proper person to act as guardian; 2) whether the guardianship the petitioner is requesting is appropriate; and 3) what, if any, rights should be retained by the ward. Not every hearing proceeds as a two-part process. In fact, much of the evidence brought forth applies to each issue at once.

When is it Necessary?

           If an individual, minor or adult, is incompetent, is unable to act in a sufficient manner for themselves and has not established a general durable or healthcare power of attorney, then guardianship is likely necessary. Without a guardian, there is no one to protect the individual.

           If the individual has any sort of assets or income—including disability income—they require someone to help them manage their finances effectively. Otherwise, they risk losing their assets through scams, theft, or out wright improper management. They may also risk not having their basic needs met because the individual is unable to make consistent payments to fixed monthly bills.

           If the individual has any healthcare needs—which they will—then someone must be able to make healthcare decisions o=n their behalf. This is especially important if the individual is placed in a facility. The guardian can help protect the ward from caretaker neglect and otherwise improper treatment.

Conclusion

           A power of attorney is the best method for avoiding the headache of seeking guardianship. However, if your loved one is in need, guardianship is better than no power to act on their behalf. If you have questions about guardianship or power of attorney, the attorneys at McIntyre Elder Law can help.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

 

 

 

           Let’s say that a loved one has passed, and a family member is submitting their will for probate. The only issue is you don’t think that the will is valid. Maybe your loved one was incompetent when they signed the will. Maybe the will being submitted was fraudulently induced. Something is not right, and you want to challenge it. But how do you go about doing so? What legal grounds do you need to make such a challenge?

Lingo and Procedure   

           A challenge to a will in North Carolina is called a caveat proceeding. The person bringing the caveat is called the caveator. This person must be an interested party. An interested party is any person entitled under the will or interested in the estate. Thus, any person who has property or pecuniary interest in the decedent’s estate or any person who may be materially injured by the submission of the purported will to probate, may bring a caveat. The person who submits the purported will to probate is called the propounder. The propounder must be given notice of the proceeding and will be the adverse party to the caveator.  

           Notice must also be given to the heirs, legatees, and devisees i.e. any other person who is entitled under the will or who would be entitled to the decedent’s estate through intestate succession (typically next of kin). The caveator must, typically, bring the caveat proceeding within three years of the submission of the purported will to probate. Otherwise, the claim will be barred.

           In North Carolina, a challenge to a will cannot be brought until the testator—the person making the will—has passed away.

Grounds and Burden

           To successfully challenge a will in North Carolina, the caveator must prove to a jury, by the greater weight of the evidence, that the testator lacked testamentary capacity or that the will was created as a product of undue influence.

           Testamentary capacity means that the testator was of legal age and sound mind to make a will. In North Carolina, the legal age is 18 and up. Sound mind is a more amorphous topic. In simple terms, it means that the testator was competent at the time he executed the will. The legal standard for competence is: the testator must understand the nature and situation of his property and the also understand who will inherit such property. The testator must also know the manner in which he would like to distribute his property and the effect the making of the will is going to have on his estate. Thus, they have to know what they’ve got, who’s going to get it, how it’s going to get to them, and what that means for his estate as a whole.

           Undue influence means that: the testator was subject to influence; the influencer was in a position whereby they could exert influence upon the testator, and the will is a product of such influence. It is not enough that the influencer was persuasive. After all, simply persuading someone is not illegal. The influence must be “a fraudulent influence, or such an overpowering influence as amounts to a legal wrong.” In re Mcneil, 749 S.E.2d 499, 502 (N.C. Ct. App. 2013). In other words, “it is the substitution of the mind of the person exercising the influence for the mind of the testator, causing him to make a will which he otherwise would not have made.” Id.

           To determine whether there has been undue influence, the court looks at the following factors:

           1. Old age and physical and mental weakness;

           2. That the person signing the paper is in the home of the beneficiary and subject to his constant association and supervision;

           3. That others have little or no opportunity to see him;

           4. That the will is different from and revokes a prior will;

           5. That it is made in favor of one with whom there are no ties of blood;

           6. That it disinherits the natural objects of his bounty;

           7. That the beneficiary has procured its execution.

Id. at 503.

           Not all of the factors must be proven but if enough of the factors are met, the weight of the evidence will tip the scales in the caveator’s favor.

Conclusion

           If you think that your loved one lacked testamentary capacity or their will was a product of undue influence, do not hesitate to give McIntyre Elder Law a call. Our experienced attorneys are here to answer your questions.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

Preface

Below is a sneak peek look at a larger project I am conducting regarding elder exploitation. Stay tuned for much more information and enjoy the article below.

Introduction

In 2017, a white paper was released by the U.S. Security and Exchange Commission. This paper looked at the prevalence of elder exploitation in the United States. What they found was that up to 6.6 percent of seniors in the US were subjected to financial exploitation. However, they concluded that the figure was likely much larger. In doing so, they pointed to a study by New York State. The study showed that: “The overwhelming majority of incidents of elder financial exploitation go unreported to authorities. For every documented case of elder financial exploitation, 44 went unreported.” They also concluded that elder financial abuse is the foremost emerging form of elder abuse.

Currently, in 2018, individuals over the age of 60 make up 15 to 16 percent of the population . And according to the US Census Bureau, that number is growing . Thus, we can expect the emergence of elder financial abuse to continue to grow as the does our older population.

A Vulnerable Population

What makes the Elderly a good target for financial abuse? Many individuals over the age of 60 have worked most of their lives. As such, many of them have consistently saved for their retirements, creating a significant nest egg. They have also likely acquired some assets along the way that have been paid down or paid off. Many seniors are also receiving a steady income from pension or Social Security.

Furthermore, the elderly tend to have a variety of health issues that render them somewhat dependent upon others. The most obvious of these health issues is some form of dementia. If an individual is suffering from dementia, they are in a particularly vulnerable position because it will be difficult for them to notice or report any sort of exploitation.

Somewhat less obvious is caretaker exploitation of even non-memory related health issues. A senior could require care such that they cannot live totally independently. This leaves them open the “insidious caretaker”. The insidious caretaker is a wolf in sheep’s clothing—and can very well be a relative. They may come into the caretaker relationship with good intentions and break bad when they see the opportunity to do a little elderly embezzlement.

They may just straight up steal from the senior. Or they may exert a pattern of undue influence to manipulate the senior into giving them what they want. Either way, they are in the perfect position to exploit—with, many times, none the wiser.

The more dependent a senior is upon others, the more at risk they are for financial exploitation. As they age, and their health deteriorates, so do the safeguards keeping away those who can effectively cheat seniors out of their hard-earned money.

The Tools of the Trade:

What documents are available to protect you from exploitation? Below is the list of the foundational documents you should have in place to ensure your protection.
– Will
– Living Will
– General Durable Power of Attorney
– Healthcare Power of Attorney
– Mental Health Advanced Directive

If you have any questions about how to protect you or your family from exploitation, the attorneys at McIntyre Elder Law are ready to help.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

A concern for many individuals who inherit real property is whether they are inheriting an asset or a money pit. There are a number of factors that play into whether inheriting a home is going to be worth the hassle. One of the big questions that clients frequently raise is whether their tax bill is going to increase as a result of their inheritance.

Property Taxes

Whether you inherit the property via will or otherwise, you become the new owner of the property. As such, you become liable for any state and local property taxes associated with the property. This is true even if the title to the property is still being passed through the probate estate.

In North Carolina, when a property owner dies, his or her property immediately vests in his or her heirs, regardless of whether they died with or without a will. If the property owner put the heirs name on the deed or put the home in trust, the property does not go through probate. As a result, the heir automatically gets the property and does not have to do anything further to receive title to it. However, if the decedent is passing the property through a will or he or she dies without a will, the property automatically vests in the heirs but the title to such property must pass through the probate estate.

If the property passes to you through deed or trust, you are the new owner and are liable for property taxes. The same is true if the property passes to you via will, even if the property is still in the probate process.

Gift/Inheritance Tax

As the receiver of the gift/inheritance, you will not be liable for any taxes with respect to receiving the property. The estate may be liable for federal estate tax—North Carolina currently has no inheritance tax—if the amount of the inheritance is above the estate tax threshold. Currently, the estate tax threshold is $11.18 million for an individual and double that for a couple. Thus, while this is likely to change in the future, the federal estate tax currently applies to a very small percentage of the population.

Capital Gains Tax

Capital gains tax will only apply if you sell the home subsequent to inheriting it. The amount of money you will pay tax on is determined by the difference between your tax basis and what you sell it for. In equation form it looks like this: Selling price – Basis = taxable gain (x applicable tax rate) = amount owed. So, this begs the question; what is your basis?

Typically, when you buy property the basis is whatever you pay for the property (see IRC § 1012 “cost basis”). However, when you inherit property you get a “stepped-up basis” (see IRC §1015). Your basis in inherited property is the FMV at the decedent’s date of death—this is typically much higher than the decedent’s original basis; hence the term “stepped-up”. Since capital gains tax applies to the difference between basis and selling price, the higher the basis the better.

Let’s look at an example: A bought a property in the ‘50s for $50,000. A’s basis in the property is $50,000. A dies in 2019 when the property value is $100,000, and leaves the property in his will to B. B receives the home with a basis equal to its fair market value at the date of A’s death ($100,000). B already has a home, so she decides to sell it to an extremely motivate buyer who pays $50,000 over its fair market value, for a grand total of $150,000. B’s taxable amount is the difference between her $100k stepped-up basis and the $150k selling price; so, $50k. To figure the amount of tax owed, B applies the applicable capital gains rate to the $50k taxable amount.

If B were to have sold the home for a value less than or equal to her stepped-up basis, she would owe no tax. Furthermore, if B made the home her primary residence after she inherited it and then sold it thereafter, she may not owe any tax at all.

Per IRC § 121, an individual can exclude up to $250,000 of the sale of their primary residence. Thus, if the gain (the difference between the basis and the selling price) is less than or equal to the $250,000 exclusion rate, then no tax will be owed.

Lastly, if B held the inherited home as an investment (i.e. did not make it her primary residence) she could defer any capital gains tax by rolling the proceeds from the sale of the home into a “like-kind” asset within 180 day of receiving such proceeds (see §1031). A “like-kind” asset must be a sufficient similar investment (e.g. property) within the United States. Note, that the like-kind asset must be identified within 45 days of the sale.

Conclusion

You should stay informed to be sure that your inheritance is a benefit and not a detriment. If you have any questions regarding inheritance taxes or any other estate matters, call McIntyre Elder Law at (704) 998- 5800.

Book Your Appointment Today!

Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165

So, you went to your lawyer and had her draft you a shiny new trust. What now? Now you need to put your assets into the trust. This is also known as funding the trust. So, how do you do that? Well, the answer, similar to any other answer you’ll get from a lawyer, is: it depends.

The manner in which you out a particular asset into a trust depends on the nature of that asset. Below are some of the more common assets along with a description of how they are placed in trust.

Real Property

Every piece of real property has some sort of deed associated with it. The type of deed depends upon how the property is owned. Most people own property outright. In that case, you would simply convey the property to the trust by executing a deed from you to the trust (in the name of the trust). If you do not own the property outright, you may deed whatever interest you hold to the trust; however, if you want to place all ownership interest in trust, you will need the signature of the other owners.

To convey the property to the trust, you can use a simple quitclaim deed. A general warranty deed is a deed that conveys property with a promise that there are no blemishes on the title of the property. These deeds are typically used in the sale of real property. Conversely, a quitclaim deed is a deed that conveys property with no guarantee as to the state of the property’s title. Since you already own the property and are using it to fund a trust, whether revocable or irrevocable, it is not necessary to use a general warranty deed.

One consideration that must be made when conveying property to a trust is whether it is encumbered by a mortgage. Most mortgages have a “due on sale” clause. This is a provision whereby if the property is transferred, the full amount of the loan will become immediately due and payable. However, not all transfers trigger the due on sale clause. One such transfer is a conveyance to a trust where the borrower is and remains a beneficiary. It is important to note that the borrower does not need to be the only beneficiary.

Investments

If you have stocks and bonds, then you have a transfer agent. This is the person who keeps track of the securities that you own. You need to request the permission of the transfer agent to transfer your securities into a trust. This can be done by filling out a securities assignment form. Note that if the securities are publicly traded, the stockholder’s signature will need to be guaranteed by a commercial bank—similar to a notarization.

Tangible Personal Property

Tangible personal property is personal property of a physical nature. E.g. vehicles, art, jewelry etc.

Pieces of personal property such as art and jewelry can be easily put into trust. You simply must draft an “assignment of personal property” document to the trust. Such document must name the trust and must specifically describe the item you wish to transfer. It must also be notarized.

Anything that has a title associated with it can also be easily transferred into the trust. For example, cars, tractors, RVs, and mobile homes (that have not been transferred to real property) all have titles. To put these items in trust you simple re-titled the property in the name of the trust.

Conclusions

There are very few things that cannot be put into trust. If you have questions about trust funding, the attorney at McIntyre Elder Law are happy to assist you.

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Regards,

Brenton S. Begley

Elder Law Attorney

McIntyre Elder Law

“We help seniors maintain their lifestyle and preserve their legacies.”

www.mcelderlaw.com

Phone: 704-259-7040

Fax: 866-908-1278

PO Box 165

Shelby, NC 28151-0165