Estate Planning for the Modern Family

estate planning

The notion of a traditional family in America is hardly the norm these days as family structures become increasingly diverse. Legal planning must keep up with our changing family structures. Fill-in online or store-bought Wills suited for families such as the 1950’s TV Cleavers or 1970’s Cunninghams may result in life savings going to unintended beneficiaries, creditors, or in large amounts to state or federal taxing bureaus. Of course, if an individual who is unmarried but in a relationship passes away without a Will, his or her partner will not be considered for an inheritance. Also, a simple Will that leaves assets directly to beneficiaries does not protect an inheritance from creditors or from disqualifying a beneficiary from financial needs-based public benefits such as SSI or Medicaid.
All individuals over age 18 need to have a General Durable Power of Attorney, Advance Health Care Directive (or, Living Will) and Last Will and Testament to make administration of their affairs easier for their loved ones, if necessary, both during their lifetime and in the event they pass away. These documents should address the basic issues of who will make healthcare decisions or manage money and pay bills for an individual who cannot communicate his healthcare wishes.
Legal planners need to be attuned to their clients’ family dynamics to create a document that accomplishes the clients’ goals. Planners need to be creative in their drafting of various provisions in documents and also sensitive to tax consequences and the potential for ensuing challenges. When interviewing clients, planners should also be sensitive to cultural preferences. For example, in some cultures, parents may prefer to appoint a son as the primary agent under a Power of Attorney rather than a daughter. Other families may prioritize education and wish trust distributions to be dependent upon a beneficiary’s completion of an educational program.
Wills should also protect children’s inheritances from creditors and from their own irresponsible spending habits, protect eligibility for public benefits for beneficiaries with special needs, protect children from the spouses’ first marriage from being disinherited by a step-parent, and guard against New Jersey estate and inheritances taxes. Many individuals are unaware that New Jersey has an estate tax exemption of $675,000, which includes all accounts, the home, life insurance, and retirement accounts.

Estate planning is often used to minimize exposure to the tax and protect assets. Legal planning can also protect substantial assets from long-term care costs that stem from nursing homes, assisted livings and home care. Planning ahead can help older couples decide whether to marry in light of tax issues, health insurance, pension, long-term care and social security benefit concerns.
Because the law affords many legal advantages to married over nonmarried couples, couples may wish to consult a lawyer or other professional on the tax issues, health insurance, pension and social security benefit concerns that weigh heavily in the decision to marry. Unless there is a legally recognized marriage, a surviving partner would not be entitled to a deceased partner’s social security survivor benefits, pension survivor benefits, or health insurance coverage. The partners could not file joint income tax returns or transfer an unlimited amount of assets to one another upon death without triggering federal or state estate taxes, which is a deduction accorded married couples.

In addition, if one member of a couple requires long-term care and intends to apply for Medicaid benefits, because the Medicaid eligibility law treats married vs. unmarried couples so differently, the couple should investigate Medicaid law and consider the advantages and disadvantages of marriage.

Your legal plan must be customized to your specific situation. Failing to plan or using a generic plan for these situations can be a costly mistake for the entire family.

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About Dana Bookbinder

DANA E. BOOKBINDER, ESQ. is the Founder of Bookbinder Law, LLC and has been advising families throughout South Jersey for nearly two decades on legal issues concerning asset protection for long term care expenses, public benefits eligibility rules, disability planning, and estate planning. Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation.

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