Introducing: QuickPlan for Expedited Estate Planning

QuickPlan is here.

We are offering expedited estate planning services for a limited number of clients each month. Our QuickPlan service will move you through the estate planning process quickly so you can remove “will” or “trust” from your to-do list.

This service is primarily intended for health care providers, first responders (police/fire) and others workers who are facing challenges due to COVID-19 but realize the importance of having a plan in place right now.

We remain committed to providing comprehensive estate planning services, such as wills, trusts, powers of attorney and other critical estate planning vehicles. We are meeting with our clients by phone, video conference and, when critical, in person. We continue to take all necessary precautions to safeguard the health of our clients and our team. See our COVID-19 information page here.

Call us today at 401.272.6300 so we can design your plan.  

Partners Selected for RI Monthly Excellence in Law

Our partners, Kristen Moonan and Amy Stratton, are honored to be recognized by Rhode Island Monthly’s Excellence in the Law listing for the second year in a row! They were each noted for excellence in the category of “Wills, Trusts and Estates.”

Rhode Island’s top attorneys are chosen to receive the Rhode Island Monthly honor based upon attorney peer reviews, professional standing, feedback from related professionals, and other data collected by a third party survey and data company.

“We are thrilled to be included among the esteemed professionals honored by Rhode Island Monthly.”

How to Avoid Problems as a Trustee

Being a trustee is a big responsibility and if you don’t perform your duties properly, you could be personally liable. That’s why it’s important to hire the right people to guide you in this important role.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment.

A trustee’s duties include locating and protecting trust assets, investing assets prudently, distributing assets to beneficiaries, keeping track of income and expenditures, and filing taxes. As a trustee, you have a fiduciary duty to the beneficiaries of the trust, meaning that you have an obligation to act in the best interest of the beneficiaries at all times. It also means you will be held to a higher standard than if you were just dealing with your own finances.

A trustee is usually entitled to hire an attorney (and other professionals like an accountant) to assist in trust administration. The attorney’s fees will be paid from the trust funds. While hiring an attorney will cost money, not having an attorney at all could cost a trustee much more if errors are made.

A trust can be administered without court involvement, but that doesn’t mean that the administration is simple. There are many areas where problems can arise — for example, if assets aren’t invested properly, taxes are late, or if proper records aren’t kept. If something goes wrong during the administration of the trust, the trustee can be removed and held personally liable for any costs incurred or losses suffered. Even if a spouse is the trustee, he or she should still consult with an attorney. Many couples have so-called “AB” trusts to take advantage of the maximum estate tax exemption; these trusts require special knowledge to determine whether the trusts are properly funded and the taxes filed.

To learn more, contact Amy Stratton or Kristen Prull Moonan.

 

Prenuptial Agreements Can Be an Estate Planning Tool

As more and more people marry more than once, prenuptial agreements have become an important estate planning tool. Without a prenuptial agreement, your new spouse may be able to invalidate your existing estate plan. Such agreements are especially helpful if you have children from a previous marriage or important heirlooms that you want to keep on your side of the family.

A prenuptial agreement can be used in a second marriage when both parties have children. For example, suppose you get remarried and both you and your spouse have children from a prior marriage. You want your house to pass to your children, but without proper planning and an agreement in place, your spouse could inherit the house and then pass the house to her children when she dies.

It is important to make sure your prenuptial agreement is valid. Following are the major factors needed to ensure this:

  • In writing. To be valid, a prenuptial agreement must be in writing and signed by both spouses. A court will not enforce a verbal agreement.
  • No pressure. A prenuptial agreement will be invalid if one spouse is pressured into signing it by the other spouse.
  • Reading. Both spouses must read and understand the agreement. If a stack of papers is put in front of one spouse and he or she is asked to sign quickly without reading, the agreement can be invalidated. The spouse must be given time to read the document and consider it before signing it.
  • Truthful. Both spouses must fully disclose assets and liabilities. If either spouse lies or omits information about his or her finances, the agreement can be invalidated.
  • No invalid provisions. While the spouses can agree to most financial arrangements, a prenuptial agreement that modifies child support obligations is illegal. If an agreement contains an invalid provision, the court can either throw out the entire agreement or strike the invalid provision. Similarly, if the terms of the agreement are grossly unfair to one spouse, the agreement may be invalid.
  • Independent counsel. Some states require spouses to seek advice from separate attorneys before signing a prenuptial agreement. Regardless of whether it is required by state law, it is the best way to make sure each spouse’s interest is protected.

Though a prenuptial agreement is an agreement that is signed before marriage, sometimes similar agreements can be made after the wedding (called a post-nuptial agreement). To find out if a pre- or post-nuptial agreement is right for you, contact Amy Stratton or Kristen Prull Moonan.

Pandemic Relief: Retirement Account Owners Do Not Have to Take Required Distributions in 2020

Retirement account owners, many of whose retirement balances have been pummeled by a stock market drop due to the coronavirus pandemic, do not have to take mandatory withdrawals this year.

Federal law requires individuals who were age 70 1/2 before the end of 2019 to begin taking required minimum distributions (RMDs) from their retirement plan in April of the year after they turned 70. (Note that those who were younger than 70 ½ at the end of 2019 can wait until they turn 72 to take RMDs) The amount of the distribution is based on the value of the account at the end of the previous year, but the funds you withdraw are treated as taxable income in the year you take the distribution.

The coronavirus pandemic caused the stock market to tumble, depleting many retirement accounts. RMDs for this year would be based on the value of the account at the end of 2019, when the account likely had more money in it because the stock market was at a high point. Although the market has rallied somewhat, it still isn’t back to where it was at the end of 2019.

Recognizing this, the coronavirus relief bill known as the CARES Act waives the requirement that individuals take RMDs from their non-Roth IRAs and 401(k)s in 2020. This includes any 2019 distributions that would otherwise have to be taken in 2020.  Waiving RMDs will allow retirees to retain more of their savings. The waiver applies to individuals taking RMDs from their own retirement accounts as well as people who have inherited retirement accounts.

Generally, it is considered a good idea to not take a withdrawal if you do not need to because leaving the money in the account allows it to continue growing tax-deferred. Taking a withdrawal can also increase your 2020 tax burden. However, there are circumstances where it may make financial sense to take an RMD, for example if you need the money to live on. In addition, if you know you are going to be in a much lower tax bracket in 2020, but expect your tax bracket to increase next year, it might make sense to withdraw the money now so you can pay taxes on the withdrawal at a lower rate.

If you already took an RMD, you may have the option to return it to the account it came from or another retirement account. Usually RMDs cannot be rolled over into another account, but because the CARES Act waived RMDs, they are considered voluntary distributions. This means they can be redeposited or rolled over into a new retirement account (including a Roth account) as long as you do it within 60 days. The IRS has provided guidance, waiving the 60-day rule if you took an RMD between February 1 and May 15 as long as you roll over the RMD by July 15, 2020. This type of rollover can only occur once per year, so if you rolled over a distribution within the previous 365 days, you cannot do it again.

For questions and answers about the RMD waiver, click here and here. To learn more, contact Amy Stratton or Kristen Prull Moonan.

Seniors Affected by the Coronavirus Pandemic Have More Time to Apply for Medicare or Change Plans

The closure of Social Security offices has caused problems and worries for recently unemployed seniors who need to apply for Medicare after losing their employer coverage. In response, the federal government has announced that seniors affected by the crisis have additional time to enroll in Medicare or change plans.

With millions of people out of work and losing their employer health insurance due to the coronavirus pandemic, the need for Medicare coverage is critical. While it is possible for some seniors to apply for Medicare online, others need to provide more information, including individuals who did not sign up for Medicare Part B initially because they had health insurance through an employer. Seniors who are applying for Medicare Part B after losing their job need to provide proof of their employer policy along with their Medicare application to ensure they aren’t subject to substantial penalties. With Social Security offices closed, Medicare applicants may have difficulty figuring out how to submit the necessary information or getting answers to their questions about their application.

The Centers for Medicare and Medicaid Services (CMS) has announced changes to Medicare enrollment periods to help seniors affected by the coronavirus pandemic. Those who missed their opportunity to enroll in Medicare will have additional time to apply. CMS is providing “equitable relief” to seniors who:

  • were in their Initial Enrollment Period (IEP), General Enrollment Period (GEP), or Special Enrollment Period (SEP) between March 17, 2020, and June 17, 2020; and
  • did not submit an enrollment request to the Social Security Administration (SSA).

Seniors have until June 17, 2020, to submit an application. Applications can be submitted via fax to 1-833-914-2016 or mailed to the local SSA field office. Although SSA offices are closed for in-person service, offices are still processing applications received by mail. For the SSA’s Social Security Office Locator, go here: https://secure.ssa.gov/ICON/main.jsp.

For questions and answers on how to submit a Medicare application and what information is needed, click here.

In addition, CMS has announced an SEP for people to make changes to their Medicare Advantage and prescription drug plans if they missed the open enrollment period or a special enrollment period due to the coronavirus pandemic. The SEP is available until July 13, 2020.

For more information from CMS, click here.  Or, to learn more, contact Amy Stratton or Kristen Prull Moonan.

States May Not Terminate Medicaid Benefits During the Coronavirus Pandemic

Access to affordable medical care is especially important during a global health crisis. You should be aware that federal law prevents states that have accepted increased Medicaid funding from terminating Medicaid benefits while the coronavirus health emergency continues.

The Secretary of Health and Human Services has declared a nationwide public health emergency for COVID-19. In light of the public health emergency, the Families First Coronavirus Response Act provides that if you were enrolled in Medicaid as of March 18, 2020, the state (provided it accepted expanded Medicaid funds during the crisis) cannot terminate your benefits even if there is a change in your circumstances that would normally cause your benefits to be stopped. The law states that your Medicaid coverage must continue through the end of the month in which the Secretary declares that the public emergency has ended. The only exceptions to this non-termination rule are if you choose to terminate your benefits yourself or you move to another state.

States that already terminated a Medicaid recipient’s benefits should be contacting recipients and encouraging them to reenroll. If the state determined that you were “presumptively eligible” for benefits before March 18, 2020, this rule does not apply to you, and the state may terminate your benefits if it eventually concludes you are not eligible for benefits. However, if you have coverage because you are appealing a decision of ineligibility that was made before March 18, 2020, the state cannot terminate your benefits during the health emergency.

For an FAQ about the Medicaid requirements under the law, click here. To learn more, contact Amy Stratton or Kristen Prull Moonan.

What to Do and Not Do with Your Estate Planning Documents

Creating and executing estate planning documents is just the first step. Once you have completed the documents, you need to know what to do with them.

All estate plans should include, at minimum, two important planning instruments: a durable power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf. Once you have all these essential estate planning documents, you need to make sure they are stored properly and get to the right people.

Store the Documents Properly
Your estate planning documents should be stored in a safe, secure location that is accessible to your personal representative (also called an executor), the person you appoint to handle your estate’s affairs after your passing. Some law firms will store your original signed documents for you. If you want to keep them at home, you should use a water- and fire-proof safe or filing cabinet. Many people use a safe deposit box in a bank, but these can be hard for your representative to access. Often the documents giving your personal representative the right to access the safe deposit box are themselves in the box. If you do use a safe deposit box, you may want to have a joint owner on the account.

Spread the Word
It is critical that you tell your personal representative where the documents are located so that he or she can easily access them when needed. If the documents are locked away, your representative needs to know the combination or where the key is located.

You should also talk to other people who might be affected –such as your agent under a power of attorney or a health care proxy–about what you want if you are unable to communicate your wishes yourself. Doing this ahead of time will help them execute your wishes when the time comes. You may want to give family members copies of your documents. If an original document is lost, the court may accept a copy in some circumstances.

Avoid Confusion
Make sure you destroy any old estate planning documents that are no longer valid. Old documents can cause confusion among family members and could lead to litigation.

In addition, do not write on your current documents. If you want to make a change, contact your attorney to formally change the document. Handwritten additions are usually not valid and could raise questions about the document. To learn more, contact Amy Stratton or Kristen Prull Moonan.

Three Changes You May Want to Make to Your Estate Plan Now Due to the Pandemic

You may need to reevaluate some elements of your estate plan in light of the coronavirus pandemic. There are unique aspects of this crisis that your current estate planning documents may not be suited to handle.

The language in some estate planning documents that is fine under normal conditions may cause additional problems for you and your loved ones if you fall ill during the pandemic. Look over the following documents to see if they may need updating in order to fulfill your wishes:

  • Living will. A living will is a document that you can use to give instructions regarding treatment if you become terminally ill or are in a persistent vegetative state and unable to communicate your instructions. The living will states under what conditions life-sustaining treatment should be terminated. Many living wills contain a prohibition on intubation, which can be used to prolong life, even in a vegetative state. However, in the case of Covid-19, intubation and placement on a ventilator can actually save a patient’s life (although many patients who are intubated still die). If your living will contains a blanket prohibition on intubation, you may want to rethink that.
  • Durable Power of Attorney. A power of attorney (POA) allows you to appoint an agent to act in your place with regard to financial matters. A POA can be either current or springing. A current POA takes effect immediately, usually with the understanding that it will not be used until and unless you become incapacitated. A “springing” POA only takes affect when you become incapacitated. The problem is that springing powers of attorney create a hurdle for the agent to get over to use the document. When presented with a springing power of attorney, a financial institution will require proof that the incapacity has occurred, often in the form of a letter from a doctor. In the current chaotic environment of the coronavirus pandemic, getting a letter from a doctor will be difficult, if not impossible. Requiring your agent under a power of attorney to seek out a doctor to get a certification of incapacity will only add to their tasks and delay their ability to act on your behalf.  Consider changing the POA so that it can take effect immediately if needed.
  • Health Care Proxy. A health care proxy allows you to appoint someone else to act as your agent for medical decisions. It will ensure that your medical treatment instructions are carried out. Without a health care proxy, your doctor may be required to provide you with medical treatment that you would have refused if you were able to do so. Usually, the person who is appointed to act as your agent would confer with the doctors in person. That will likely be impossible during the coronavirus pandemic because family members often are not allowed in the hospital with sick patients. You need to make sure your health care proxy contains a provision that expressly authorizes electronic communication with your agent.

Consult with your attorney to make sure these documents and your other estate planning documents express your wishes during this time.  To learn more, contact Amy Stratton or Kristen Prull Moonan.

How Your Stimulus Check Affects Medicaid Eligibility

The coronavirus relief bill includes a direct payment to most Americans, but this has Medicaid recipients wondering how the payment will affect them. Because the payment is not income, it should not count against a Medicaid recipient’s eligibility.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a one-time direct payment of $1,200 to individuals earning less than $75,000 per year ($150,000 for couples who file jointly), including Social Security beneficiaries. Individuals earning up to $99,000 ($198,000 for joint filers) will receive smaller stimulus checks. Payments are based on either 2018 or 2019 tax returns.

The basic Medicaid rule for nursing home residents is that they must pay all of their income, minus certain deductions, to the nursing home. If the stimulus payment were considered income, it would likely have to go straight to the nursing home. Since in most states Medicaid recipients cannot have more than $2,000 in assets, there was also concern that the stimulus payments could put many recipients over the asset limit.

In a blog post, the commissioner of the Social Security Administration (SSA) has clarified that the SSA will not consider stimulus payments as income for Supplemental Security Insurance (SSI) recipients, and the payments will be excluded from resources for 12 months. Because state Medicaid programs cannot impose eligibility requirements that are stricter than SSI requirements, the payments should not affect Medicaid eligibility.

To learn more, contact Amy Stratton or Kristen Prull Moonan.