How to plan for long-term care costs

A new legal issue in estate planning is how to handle digital assets during one’s lifetime, and how to pass on these digital assets to future generations.  Digital assets can include a variety of things, but in this article, we will focus on cryptocurrency. Cryptocurrency can most easily be defined as a virtual currency that uses a heightened security technology called blockchain. Due to their intangibility, cryptocurrencies are stored and traded electronically. We are seeing more clients and estates with investments in cryptocurrency, such as Bitcoin. As a reference for readers who are new to cryptocurrency, one Bitcoin was valued at less than one cent in 2010, and as of the writing of this article, one Bitcoin is valued at $104,620.10. Additionally, the full market cap of all available bitcoin is a staggering $2.06 trillion. The rise in the value of cryptocurrency and a newfound public investing interest presents new legal challenges when crafting the best estate plan for each client. One of the most important goals in estate planning is making it as easy as possible for your loved ones to access and administer your estate. If a client currently holds or has plans to invest in cryptocurrency, it is crucial to obtain information on any cryptocurrency held by the individual and to include language or proper directions in the estate planning documents that permit fiduciaries to access, retain, and manage the cryptocurrency without limitations or liability. It is important to provide these powers to the fiduciaries in an estate or trust, because even if the decedent provides the fiduciary with their cryptocurrency passcode during their lifetime, the fiduciary’s use of the passcode after death — without the proper permissions in the decedent’s estate planning documents and related laws — could cause the fiduciary to violate federal or state privacy laws, terms of service agreements, or computer fraud and data protection laws. For individuals with Trusts that plan on or are currently holding cryptocurrency as an investment, your Trust document should give authority to the Trustee to handle the cryptocurrency, even if the owner is the Trustee. Many trusts or wills created more than five years ago might not include the necessary language to properly and legally manage cryptocurrency. At a minimum, a cryptocurrency investor who wants to establish a trust holding cryptocurrency should release a trustee from any duty to diversify and provide the trustee with the necessary indemnification. However, as noted earlier, is important to ensure that doing so does not violate any applicable laws or terms of service agreements. It may be that a specific gift of the cryptocurrency is contained within the Will itself, or a Memorandum is prepared to sit alongside the Will, detailing instructions on how to access the funds or the private key itself. It is generally not recommended that an individual share his or her passcode with others for security reasons, but once a passcode is lost, it can be virtually impossible to recover. Leaving cryptocurrency to your loved ones after your death and avoiding probate requires more planning than traditional assets. For example, Coinbase, a popular cryptocurrency wallet, does not support naming a beneficiary for individual accounts and they require estate planning documents or proper probate court documents to transfer a Coinbase account. With proper estate planning, you can simplify the process for your beneficiaries and ensure that they inherit your cryptocurrency while avoiding unnecessary delay or expense. Wesley W. Harris is an associate attorney at Farrar & Williams, PLLC, a law firm limiting its practice to trusts, estate planning, and elder law, located at 1720 Higdon Ferry Road, Suite 202, Hot Springs, Arkansas, and can be contacted at 501-525-4401 or by email at wesley@ farrarwilliams.com. The firm’s website is farrarwilliams.com.

Did you know that nursing home care in Arkansas can be nearly 70% more expensive than assisted living facilities? This staggering statistic underscores the importance of planning for long-term care — not just for yourself, but for your loved ones, as well. As you look ahead to 2025, here’s a New Year’s resolution worth adding to your list: Take time to explore your options and make a plan for long-term care. It’s not exactly a topic people enjoy thinking about, let alone discussing. In fact, the discomfort around aging is one of the biggest reasons many people delay or avoid proper estate and long-term care planning. If this sounds familiar, don’t feel guilty — you’re not alone. Long-term care insurance is often the best way to prepare for the future. This type of insurance can help you avoid the high costs of nursing home care by covering expenses for in-home care or assisted living. Despite its advantages, most people don’t purchase long-term care insurance, leaving them with limited and often less desirable options when the need for care arises. Here’s the reality: without long-term care insurance, your options for covering nursing home costs are limited to two primary paths: 1. Private Pay: You can pay out of pocket if you have sufficient assets. However, with nursing home costs averaging between $7,000 and $10,000 per month, this method quickly becomes unsustainable for most families. 2. Long-Term Care Medicaid: This government program can help cover nursing home costs, but it comes with strict income and asset requirements. The eligibility rules can vary depending on whether you’re single or married, adding another layer of complexity to the process. Unfortunately, without long-term care insurance, Medicaid is often the only viable option. However, it’s important to note that Medicaid typically does not cover in-home care, which means nursing home care may become unavoidable for those relying solely on this program.  Over the years, our firm has helped hundreds of individuals and families navigate the challenging process of obtaining long-term care Medicaid eligibility. Our expertise ensures that you don’t have to face these hurdles alone. Now is the time to take control of your future. Planning ahead for longterm care not only protects your assets but also provides peace of mind for you and your loved ones. Don’t wait until it’s too late — start the conversation today.

If you are like me, you will be spending a lot of time with family and friends this holiday season. I often encourage clients to use this family time as an opportunity to discuss their estate plan and as a way to instill values in their children or grandchildren. I was recently reminded of this by Warren Buffett’s most recent shareholder letter, where his one suggestion to all parents, whether they are of modest or staggering wealth, was when your children are mature, have them read your will before you sign it. While it might not sound like the merriest conversation to have around the dinner table, it can often help avoid surprises and even increase family harmony. Families that speak freely about these matters might avoid surprises and can oftentimes make better plans involving choice of Executor or Trustee, succession plans for a family business, and long-term care decisions. If you have never considered an estate plan, this might be a good time to seek your family’s opinion. As Warren Buffett continued in his letter, be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death. You don’t want your children asking “Why?” in respect to testamentary decisions when you are no longer able to respond. The conversation might be less about what the family thinks of your current estate plan and more about what the family’s role is in the event of your incapacity or death. It is important to let the person you have named as your agent under a Power of Attorney, Executor or Trustee know that they have been named, in order that they understand their responsibilities. It might even be a good idea to introduce your Executor or Trustee to your estate planning attorney. These conversations can also encourage your children to consider their own estate plan, including naming a guardian for their minor children through their Last Will and Testament, or setting up a family trust.  How each family handles these delicate conversations depends on personalities and preferences of the family. Perhaps this conversation should be held through a series of talks instead of one large one. It might be best to talk only to the child(ren) you have named as Executor or Trustee, or even to talk separately to each child to hear their opinions and fears.

Many of my senior clients report to me that they are having conflicts with their daughter-in-law or son-in-law. While none of us like to discuss tensions in our families, the fact still remains that in many families, you may not have a close relationship with the spouse of your adult child. Indeed, sometimes these relationships are quite unpleasant and even hostile. Many seniors wish to take steps to ensure that any inheritance received by their adult child does not ultimately pass to the inlaw with which the senior has a bad relationship. Rather, many seniors would rather that their child’s inheritance, instead, ultimately pass to their grandchildren (either in the event that the adult child should predecease, or alternatively in the event the adult child receives the inheritance). If you wish to prevent your daughter-in-law or your son-in-law from receiving a part of your estate, how do you do this? First, you need to be clear in your estate planning documents that if your adult child should predecease you, their share passes to your grandchildren. Further, you can also include a direction that the adult child’s inheritance continues in a trust that ultimately reverts to the grandchildren and not to the in-law. This can give your adult child generous access to his or her inheritance but eliminate the rights of the in-law of whom you are not fond.  Eliminating the possible inheritance rights of your son-in-law or daughter-inlaw is not difficult to implement as part of your overall estate plan. It can be a good solution for the many seniors who just cannot abide the thought that an inlaw, who has a bad relationship with the senior, might receive a large portion of the seniors’ estate.

Did you recently retire or move to Arkansas from another state? If so, you might want to read this article. The legal complications of moving from state to state are not as complicated as they were in past years. But you still want to be “street smart” about the tax and legal issues that can differ from one state to another. For example, if you sold your home in another state recently, you probably do not owe any capital gains tax on the sale, but you usually do need to file a final state income tax return for that state. The good news is that you will probably not owe any tax on the sale if your profit was less than $500,000 (this exemption may vary from state to state, but the federal exemption for a married couple is $500,000 in profit on sale of the principal residence) What about your will, trust and power of attorney? Are these documents legal in Arkansas? As a general rule, the answer is yes. A legal document properly executed in another state is legal in Arkansas. But then the legal system always has exceptions to consider. Do you have children that you are not naming your will? Arkansas has a law, known as the “pretermitted heir law” that requires your will to at least mention the child, even if you do not wish to give that child anything under your will. Likewise, if you have a deceased child leaving children, you need to mention those grandchildren’s names in your will. Failure to mention the child or grandchild can result in that person you wished to disinherit instead of receiving a large portion of your estate despite the terms of your will to the contrary. What about Arkansas estate tax? Fortunately, Arkansas has eliminated its state estate tax, so that is not a problem. The federal estate tax still applies to estates in excess of $13.61 million and there are even larger estate tax exemptions for married couples. Do you still own real estate in another state? For example, many families own vacation condominiums in Florida or Colorado. If so, you will want to plan for that to avoid “ancillary probate,” which is a probate court proceeding in another state. This can be an expensive and time-consuming legal problem for your surviving spouse or children. In summary, if you have moved to Arkansas from another state, the laws are usually not significantly different from state to state.  But you still may want to double-check your will or trust to avoid any legal problems that may be unique to your family situation.

People with disabilities or handicaps face many obstacles in life, including costly heath care and limited ability to earn money. Parents with disabled children must carefully consider their estate plan to make sure the long-term needs of a disabled child are provided for. This type of planning is often referred to as “special needs” planning. The goals of special needs planning are different from conventional estate planning. Many children with disabilities benefit from government benefit programs such as SSI and Medicaid. These government programs require the disabled person to have limited income and assets in order to be eligible. While living, the parents can assist with the needs of their disabled children without a loss of benefits. However, at the death of the parent or parents, specialized planning is required to make sure the disabled child does not lose their benefits based on an inheritance. In order to preserve the government benefits that are so desperately needed for a person with long-term disabilities, the parent can structure the inheritance in the form of a Trust, known as a “Special Needs Trust” or SNT.  A SNT provides for the disabled child’s needs over and above what is provided by the government benefit programs. There are limits on what the funds from a SNT can be used for; however, they can provide for the disabled child’s long-term benefit and allow the health costs to be paid by the government programs in place. The SNT also names a Trustee and Guardian for the disabled child so that the proper persons are in place to look after the well-being of the disabled child. An SNT can revert back to other family members at the death of the disabled child. In addition to planning for the inheritance of a disabled child, there are other legal issues a parent must consider once the “child” has attained adulthood. If the child has mental deficiencies then the parents may need to file to become the legal Guardian of the child at age 18. In order to learn more about the benefits of structuring your estate to protect the needs of your family, please consult with an experienced estate planning attorney. The peace of mind that comes from a well-thought-out estate plan is worth its weight in gold!

Probate is a court-supervised proceeding where a person’s Last Will and Testament is enforced and administered at the time of death. Since it is a court-supervised process, it can be quite expensive (up to 6% of the estate value) and time-consuming (minimum of six months in Arkansas). Based on these issues, most seniors attempt to avoid having their estate pass through probate. Estate planning often focuses on probate avoidance. This article will focus on some probate avoidance strategies that should be avoided or at least carefully considered. Before addressing strategies to avoid probate that are undesirable, I would like to provide a brief explanation on the best probate avoidance planning, which is the use of a Revocable Living Trust. Trusts are the most popular estate planning document primarily because they avoid probate while at the same time thoroughly addressing all issues that can come up in administering an estate at death. A Trust is simply an agreement that not only controls your assets while you are alive (with you serving as your own Trustee and remaining in full control), but also controls the disposition of your assets at death (much like your Will would). Based on the perceived high cost of setting up a Trust, many people attempt to avoid probate by other means, most commonly through joint accounts, payable on death (POD) accounts, and transfer on death (TOD) accounts. Joint accounts are when a child or other beneficiary is named as a joint owner. POD accounts designate a beneficiary(s) at death and are available for most bank accounts. TOD accounts (much like POD accounts) are allowed for most investment accounts. The problem with these planning strategies is that they do not plan for the “what if’s” in life, such as the prior death of a named beneficiary or a beneficiary who has financial or personal problems. They also do not require the payment of your final expenses such as funeral expenses. POD and TOD accounts simply distribute the funds outright to the named beneficiary with no other contingency plans. Joint accounts create an additional risk in that the named joint account owner is an owner of your account, thereby subjecting the assets in said account to their creditor and marital claims. This author strongly discourages the use of joint accounts. If your family needs access to your funds in the event of your incapacity, your estate plan will have a Power of Attorney to allow such access for your benefit. For this reason, there is no need to have a joint account owner (other than your spouse) with a proper estate plan.  In my experience, these “shortcut” strategies often have poor results and end up costing more in legal fees to clean up. Further, based on unattended consequences as a result from such strategies, your family may end up in conflict with one another over what your true intentions were. If you or a loved are interested in avoiding probate, I encourage you to discuss the pros and cons of the various strategies with an estate planning attorney.

There is much confusion about the relationship between wills, probate, and estate taxes. This article will attempt to explain these subjects.  First, I will address the confusing topic of wills and probate. If you die leaving a last will and testament, and you own property that is just in your name (i.e. property not in joint ownership with someone else or set up in a beneficiary designated account), your will must go through probate. There is a common misconception that a will avoids probate. This is incorrect; a will must go through the probate process. The probate court, which is a division of the circuit court, determines a will’s validity and oversees the administration of the will. So to summarize, if your estate plan consists only of a will, then your estate will go into probate. But what about the family who holds everything in joint ownership (either with spouses or children)? In that case, the will does not operate to transfer the assets, since the joint ownership controls (so the estate is not required to go through probate). However, joint ownership is often a poor planning choice as the joint owner’s creditors and/or spouse could attach to your assets. Finally, just what is probate and why does it have such a bad name? Probate is the process of a will being filed at the courthouse, and an executor being appointed by the probate court. It is in essence a court-supervised administration of your estate. This procedure involves lawyers, courts, fees (probate fees can be up to 6% of your estate value in Arkansas), and delays (minimum time for probate in Arkansas is six months). These are the primary reasons probate is so unpopular with the public. The process is also a public record so a nosy neighbor can check on your affairs! What is the best solution to avoid probate? A living trust avoids probate; with none of the disadvantages of joint ownership (joint ownership assets with your children can be subject to their IRS liens, lawsuits or divorce claims). Living trusts have become increasingly popular as the costs to establish a trust are quite reasonable, especially when you factor in the savings you get from avoiding probate. At our firm, a typical living trust estate plan costs approximately $1,950 (for a single person), whereas a basic will plan costs approximately $600. So even though the trust costs more on the front end, your family saves a lot of time and money by avoiding probate. Next, there is confusion between “probate” and “estate taxes.” These are completely separate problems. Probate is a court-supervised proceeding to transfer assets owned by a deceased person at death. Estate taxes are federal and state taxes levied on the total assets in a person’s estate (whether in a trust or a joint account or otherwise). In other words, a family can be faced with probate and no estate taxes, or estate taxes and no probate. The goal of a good estate plan is to avoid both probate and estate taxes. Many people think you only need a trust if you have an estate tax problem, but as this article shows, probate is involved even when estate taxes are not. What is the best solution to avoid estate taxes? First, only families with assets in excess of $13.61 million (as of 2024) are subject to federal and state estate taxes. Secondly, if your family has a larger estate, and you are married, proper use of “A-B Trusts” can double your exemptions to $27.22 million, since both spouses have an exemption. In summary, many people assume that since they have a will, they will avoid probate. This is a common misconception. The goal of a good estate plan is to avoid both probate and also state and federal estate taxes.

Did you make any New Year’s resolutions for 2024? Maybe you planned to eat healthier, spend more time with family, or learn a new skill. Now that half the year has passed, it is a good time to evaluate where you stand with those resolutions and maybe resolve to follow through with them. Eighty percent of New Year’s resolutions fail by February! Procrastination is often listed as the number one estate planning mistake that most Americans make. It is human nature for us to not want to think about death or disability. However, there can be some major risks or unintended consequences when you procrastinate. First, what if you die unexpectedly? In the event you die without an estate plan, your family will be put in the difficult position of trying to dispose of your assets without any specific guidelines from you. They might have to go through the probate process, which can be costly and time consuming. It could also mean unintended inheritance rights or increased estate taxes. If you do not have an estate plan and die intestate, the state of Arkansas has intestate succession laws that govern who will receive your estate upon your death. A second risk of procrastination is that of disability. If you become disabled and do not have at the least, a durable power of attorney, your family may be faced with the need to establish a court supervised guardian. A durable power of attorney will permit your spouse, or your children, to have the authority to act on your behalf in the event of your disability. A third risk of delay is that of the possibility that a terminally ill person will be faced with the difficult task of implementing an estate plan in the last weeks of their life. When estate planning is postponed until a person is terminally ill, several major problems can arise. First, there is the basic problem of a terminally ill person having to deal with the paperwork. Secondly, an estate plan prepared when a person is near death is subject to attack by reason of questions of possible incapacity (either from illness or medication). Finally, many terminally ill persons simply do not have the stamina to go through the decision-making process that is involved in estate planning. A final consideration in a comprehensive estate plan is preplanning one’s funeral so as to avoid the difficulty of your family being required to make funeral decisions within hours of your death. Many people go into detail about the type of funeral services they wish to have, the pallbearers, the cost, etc. You are encouraged to contact your funeral director to preplan your funeral.  In summary, for the benefit of both your own peace of mind and that of your loved ones, you should not postpone the preparation of your estate plan. Otherwise, you run the risk of creating additional stress and expense for your family, and possibly even yourself. Do not make the number one estate planning mistake in 2024!