Estate Planning: Why It Is for Everyone

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Welcome back to Ask Dr. Mia podcast, Conversations on Aging Well. And today I have special guest and friend, Jeff Bloomfield, who is an accomplished and dedicated lawyer focusing on tax and estate planning. In my work with families dealing with dementia and other age-related conditions, estate planning and. All the legal questions that oftentimes surround someone who may have diminishing mental capacities is a common area of questions. So I thought I wanted to bring Jeff on to have a conversation on the podcast. So Jeff actually holds an estate planning certificate and an LLM in tax from Georgetown University Law Center. And he also taught as an adjunct professor at the Elon Law Wills Clinic, where he trained law students on drafting estate planning documents for North Carolina probate process. So depending on where you're listening to this podcast, laws are highly state specific. So today, we're going to be specifically focusing on the North Carolina process. But hopefully, there will be things to consider. regardless of where you are. So welcome to the podcast, Jeff. Yeah, thanks for having me, Mia. Thank you. So let's jump right in. First of all, Jeff, can you kind of help us define some terminology? There's a lot of terms that I think gets used interchangeably, but they're definitely mean different things. So what is estate planning versus power of attorney versus guardianship, living will? It seems like nobody really knows exactly what those are and when they're needed. And when do you need a lawyer versus not? Yeah, that's a great question. So a lot of those documents you just mentioned, like the power of attorney, are usually part of an estate plan. And an estate plan is kind of putting together all-encompassing documents. So that can be a will, a trust, your durable power of attorney, or some people know this as a financial power of attorney, and then all of your healthcare documents. So healthcare power of attorney, living will or advanced directives, and also some HIPAA authorizations as well. So that kind of will kind of make up an estate plan. And then how you kind of tweak those really depends on your specific situation. Gotcha. And I know I commonly tell people the difference between a healthcare power of attorney and a durable power of attorney or a financial power of attorney, where as a physician, I can document and help fill out someone's healthcare power of attorney and that document by itself does not necessarily need a lawyer, but it has to be, can still be of legal consequence. But the durable power of attorney is something that really deals with people's assets and that's something where I do oftentimes recommend for people to see a lawyer and thank you for explaining about estate planning how it's an all-encompassing process depending on what the person needs. So how is a trust different from say someone taking over as the durable power of attorney? Yeah, so a lot of times what people are most familiar with is a revocable living trust. And that is something you set up during your lifetime and you can fund it with certain assets, but you can also take assets out and put them back in and you can change it however you want while you're alive. And then once you pass away, the trust is going to decide how are these assets going to be directed to my heirs? Are they gonna stay in trust or are they just gonna kind of everything's gonna go to my chosen people and that's it? Or is this something that's gonna continue on maybe to protect someone with special needs? Or if there's a spouse, right? So you mentioned dementia, a lot of times you don't wanna leave everything to a spouse with dementia. So the trust can continue to add additional protections. And then. a truss different from a will then? So a will is kind of handles a lot of the same stuff, but a will kind of ends, it's gonna end no matter what once you pass away and your estate's administered. And a will is gonna force you into the court system. All right, so with a trust, you can avoid a lot of the court system. And so that is a big plus to the trust because you don't, sometimes you think you have a really simple estate, but things can get... more complicated, you know, if you have someone with dementia or you have kind of circumstances that you didn't foresee, maybe you have a kid that has special needs or a grand kid that has special needs and is now inheriting. And that inheritance can really mess up government benefits. And so with a trust, it kind of keeps everything kind of nice and clean. It keeps it out of the court system. It's a lot less friction. Right. So I always tell my clients when they're kind of asking the big difference about that is like, well, when you pass away, the cost to administer a will is usually about five to 6% of your estate. The cost to administer a trust is usually comes out around like 1.2% is how it is right now. So there are significant savings that can happen there for your heirs and then also significant protections. So beyond just, you know, making sure you avoid probate. Yeah, what is probate and what are some of these protections mean from the court? Oh, absolutely. So probate is when you pass away, just because you have a will, doesn't mean who you've named in your will automatically gets everything. You have to submit that will to the court and the court has to approve the will. They have to approve your selection as an executor. And then the court monitors the whole process and they monitor all of the accountings, they monitor all of their filings and everything else that kind of goes into probate. They might... you know, kind of look at stuff you're going to have to like give bank accounts and all kinds of other records you might not want as a public record. And so that's what happens with a will. And the purpose of a trust is it keeps everything kind of out of that system. Right. So you're not having to get approval from the court to do, you know, what you said you wanted to do, right? So you said, you know, I want my grandkids to get everything. You don't have to run that by the court system. It just, the trustee is just empowered to do it and make it happen. And so there's a lot less friction there. Um, and then for as far as protections, like we mentioned before, if you have a will and you say you have a special needs, let's just say for instance, you have a special needs grandchild and your will gives everything to your grandchildren and you didn't know, you know, you didn't really plan that have a special needs grandchild. You didn't, it wasn't in the cards. Like when you made the will. Well. that special needs grandchild is gonna get their inheritance no matter what. And that chunk of cash can have significant impacts on, um, on any kind of benefits they're set up to get. With the trust, you can kind of build in those protections in advance. So maybe you don't have a special needs grandchild right now, but in the future, you know, you end up with one. Well, you could build in protections in your trust right now that if that scenario ever comes to play out. You're protected and you don't have to pay everything out to that grandchild and mess up those benefits. You can pay them into a trust for the grandchild to kind of hold them as like what they call, we call it like a third party supplemental needs trust. Interesting. Yeah, that gets complicated really quick. My mind is already spinning. And I think when you when you're talking about government benefits, I think in my mind, I start thinking about Medicaid, especially because it is the insurance for the poor. And oftentimes, it will cover people with disability not being able to work. Is that what you mean in terms of? Yeah. yes, that is the big one, is Medicaid. Absolutely. so what are some common issues that you see as relates to Medicaid and I know Medicaid pays for a lot of long-term care services in our country along also with children who need ongoing special needs even as they become adults and other specific situations? Yeah, so a lot of what I do around Medicaid is kind of protective planning, advanced planning. So it's kind of recognizing I might need Medicaid in the future and I don't want to have like all of my assets go to funding my care. Like I wanna leave my kids something. So what you can do is you can set up trust that protect those assets while you're alive and then kind of when you're in long-term care. So the government is not gonna come back and take those assets because when you're on Medicaid, the big issue is, it's a thing called, I don't know if you've heard of this, it's called the clawback. And so Medicaid will claw back anything they've paid for your care out of your estate. And so this hits a lot of families really hard because they're not prepared for it, right? And you might have a family farm, you might have a house that's been in the family forever. And now mom or dad has been on Medicaid and long-term care, and there's been no planning done to kind of protect that, that property. And all of a sudden this property that's been in the family for a couple, a generation or two is, is yanked away in the clawback to pay for mom and dad's care after they've passed away. And so there is a lot of planning that can be done to protect those kinds of assets in advance. I see. So potentially someone could put their home that they live in or what other assets that's been in their family into a trust and separate out that asset from the rest of their assets in terms of the one thing that I oftentimes talk about is to spend down to become eligible for Medicaid especially for people who are Medicare eligible. There's a lot of misconceptions about what Medicare will and will not pay for. In fact, Medicare really doesn't pay for much of long-term care services at all. So a lot of my patients end up having to spend down on how much their assets are until they're poor enough to qualify for Medicaid. But the clawback is something that I did not learn about until recently. Yeah, yeah, so the spend and the spend down kind of works in conjunction like with that kind of trust planning, because you do need to spend it down. But what that does with the trust does is it gets a lot of stuff out of your estate. So it gets those assets out of your name and into the name of a trust. And so you can you can protect them that way. And then you're not you're not running into the situation years down the line where you're going to have those assets clawed back. Like once they've been into the trust, you've got a window, you've got to go five years. So a lot of times the people that do this planning, like in their mid sixties to late sixties are a great time to kind of do that planning, but you have to have an honest conversation. Like, are you going to need this kind of care? Right? Because I have a lot of times I have people come to me and they're in their eighties and they're like, I need to do this. Like, this is going to happen to me. And it's too late, right? Cause you're not going to make it. You're not going to make it the five years. You have a five year window. And if you don't make it that five year window, um, it's just not going to happen. And so I've got to kind of have a hard conversation and say, you know, we, you've waited too long to kind of do this type of planning and like, we could do it, but it's not going to help you because the likelihood that you're going to need that care before five years is very, very high. I see. And I think when you mean the five-year window, you mean that Medicaid will look back the previous five years into whether or not that trust was, say, set up five years before you started applying for Medicaid. And if someone, you know, in their 80s, statistically, they may not live until their 90s. Mm-hmm. they're in their 80s and say they need long-term care services starting at 85 when they started planning for this at 80, then that falls within the five-year window that you were talking about. Is that right? Okay. And what are some other common issues that you see in your practice with families and clients regarding estate planning? You know, things that maybe a lot of people don't know about and are surprised to find out. Yeah, I mean, from kind of like your perspective of like the population that you work with is a lot of people don't realize like what you need to do to get a power of attorney in place or for like a durable power of attorney. I have people, a lot of times I have people come to me and mom or dad are in a bad situation. They're like, I need a durable power of attorney for my mom or dad. And you ask a couple of questions about mom or dad and turns out mom or dad is non-responsive. You know, and they've, they've just gone way too far and you have to kind of have that conversation, like, like a person has to be very competent to, um, make that durable power of attorney. And cause those are very, it's something very powerful that you're handing over to another person. And so they need that kind of competency to know what they're doing. So you can't just make a durable power of attorney for anyone. And then you have to have the hard conversation. Once you realize you can't make a durable power of attorney for your parents, is that what you really need is a guardianship. And the guardianship again, throws you back into the court system. Like you need to be approved for the guardianship and then you need to keep detailed records and submit those to the court every year to maintain that guardianship. Yeah, the guardianship process is one where it gets very complicated and unfortunately I've sometimes seen families kind of get into emotional turmoil over who is the guardian, which sibling wants to be the guardian versus not want to be the guardian, which oftentimes is different from the person who's actually providing the care. Mm-hmm. I can say for my colleagues as well who are seeing a lot of people with memory loss, I've oftentimes written letters saying, you know, this person may be still in a very early stage in their dementia journey and can name someone who can be their power of attorney because, you know, naming someone as your surrogate decision maker is a relatively simple decision come into estate planning or come into financial details. So that gets tricky and obviously no one plans on getting dementia and so it's something that sometimes I cannot reasonably write a letter like that because the person has already progressed to a stage of dementia where I'm not sure if they really understand what it is that they're signing legally. Yeah, so that would be a really good time to pull a lawyer in because our standard of competency differs a lot from your own standard of competency for a doctor. For us, they need to be able to tell us who their heirs are and the disposition of their estate. And I have a number of former clients with a dementia diagnosis who are very clear in the morning. Right, you meet with them in the morning and they can tell you like, these are all my kids. This is what I own. These are my bank accounts. Um, this is where I want it to go. And you meet with that same person later on in the afternoon and they are not the same person. Right. So from a legal perspective, as long as they can tell us that, like, then we can prepare those documents for them and get them in place. So it's a lot of times it's like working, you know, with the person to be like, I know you have this dementia diagnosis. That doesn't mean you can't make an estate plan, right? You just need to be able to tell me these things. And then you need to be able to tell me these things when we sign the documents. So a lot of times, you know, we can hurry up and get something in place, um, before it's too late. So just because you have a dementia diagnosis, that doesn't mean you're not competent to make an estate plan anymore. Gotcha. And is estate planning really only for people who might have a lot of assets? I'm just trying to think that, yeah, who are the people who might need an estate planning? I mean, everyone should have an estate plan. If you own any type of property, if you want to see your stuff go to a certain person, any assets, right? Because we talked before about a grandkid with special needs. A very small inheritance can really mess up those benefits. And the same with a spouse as well. You can have... You don't need that much wealth to mess up government benefits. Yeah, yeah. And I know in North Carolina, I mean, every state is different in terms of what is eligible in terms of amount of assets for Medicaid eligibility and of course Medicaid expansion kind of raises the level of where someone might be eligible. So converting a little bit away from Medicaid, how does one find a reputable lawyer besides, you know, word of mouth? Um, I mean, word of mouth is always great. Uh, I would kind of look for like how long they've been in practice. I would look for, um, you know, what kind of organizations do they belong to? Um, so there's a number of like different estate planning kind of organizations. Like there's the estate planning council that I belong to. Um, there's other places like wealth council as well. I also belong to that one as well. And it's just for like ongoing kind of training and things of that nature. But I would like encourage people to kind of look for someone who kind of focuses just in that area. Like I would not, I'd be hesitant to pick a lawyer who, you know, is willing to do your traffic ticket. He's willing to do your divorce. He's willing to do your estate plan, you know. He's willing to do, you know, the closing on your house. Like, I think that's kind of, that's kind of dangerous. We call it in the, we call that practicing door law, which is like you'll take anyone that comes to your door. And so... I would be hesitant to trust your estate plan to someone like that. I mean, I'd be hesitant, you know, you want someone who this is what they do, this is what they focus on. They are, you know, they're getting all of their continuing legal education stuff is focused on that. And so that would be my recommendation if you're just kind of like starting from like a Google search. Right, right. And I think that's the same for medicine as well. Sometimes there are people who are great at having a huge breadth of experience and expertise, but sometimes you need someone who has that depth. Certainly, you wouldn't want me to deliver your baby. I could probably do it in a pinch, but that is not my preferred procedure. Yeah. And I know there's also a lot of these online estate planning programs that pop up and some of them have even emailed me asking if I can feature them on the podcast. I'm a little suspicious of them and I just want to hear from you as to what have your other clients experienced in using them or what your thoughts from a lawyer perspective. Yeah. So I think you're right to be suspicious. And I don't say that in a self-serving way, because we actually, as a firm, we make more money off of these companies that screw up estate plans than we do people getting their estate plans done by us. So if everyone did it that way, as a firm, we would make more money. But that's not why I got into this. I want to see people do well. I want to see people be taken care of. And the thing that you don't get with those kind of fly by night internet will-makers is it's really just a software and they're not having the hard conversation. Like, are you going to need Medicaid in the future? Do you have, you know, do you have a child or a grandchild with special needs that, you know, you could potentially kind of wreck their benefits with your. estate plan. Those are the questions that aren't being had. And I don't think a lot of times with that kind of the click through, answer these questions, you don't get that kind of feedback and that kind of hard discussion that you get. If you're sitting down with someone that does this all the time and they should be comfortable having a hard conversation with you. you know, and asking you kind of tough questions about your situation, your health situation, your financial situation, and then someone who's going to, you know, be honest with you about it, you know, like I've had plenty of people that say, no, I'll never, I'll never need Medicaid. I'm not, you know, they kind of see that as like, um, you know, they're, they've worked hard their whole life. They're not going to ever use government benefits. And so to try and like, bring that up is a hard thing for them to reckon with. But when you sit down with an attorney that does this, You need to have those hard conversations and be like, no, I mean, just because you've worked hard your whole life. I mean, that's why you want to do this. So, so that's my concern there with those type of, you know, software programs that'll, you know, you just plug in some answers and they spit out a will for you. Yeah, yeah, I think they're attractive because they're a lot less expensive than meeting with a real lawyer and doing the estate planning process. And, and it's unfortunate that you have so many clients, you kind of had the online programs turn out poorly and not specific for their own situation and kind of creates a situation where it costs more to fix the errors than just doing them. Right, right. And I also tend to see a lot more family stripe with those type of plans because there's no one for beneficiaries to kind of turn to and kind of get an understanding of why it was done this way. So. after someone passes away and there's differences in opinions or people have questions and they say, well, why did mom give this thing to one child versus another? Yeah, that gets really tricky. That's where like call for help, call for help. Well, that's usually what happens with those type of plans is it'll start off, right? They'll try to appropriate the plan themselves as well, like after your mom or dad passes away and it just gets into too much trouble and then eventually you've got to rope a lawyer into it. Yeah, yeah. When you say probate themselves, do you mean like the family goes to the court to try to enact a will? Okay. file all the paperwork themselves and administer and collect the bank accounts and things like that. And so that's a lot of times, a disgruntled family member will be like, I don't like how it's going. And that's when lawyers get brought in. And then everything gets just a lot more expensive, where it'd be a fraction of the cost had you just gone to a lawyer, gotten the plan done. And then you've kind of got enough... Because when you pass away, the lawyer's there to help your heirs and your kids and everyone to understand the process and walk them through it. I see. I see. So yes, I think that this is the benefit of advanced planning versus reacting to a crisis at the time that it happens. Anything else that you want to share with our audience, Jeff, in terms of things that you wish everyone would just know before they come to your door? Well, I mean, you don't have to know anything. You really don't have to know anything before you come to their door. That's kind of how we work is like our first appointment is a strategy session just to kind of get to know you, you get to know us and just kind of kind of build out like what's appropriate for you and what's not appropriate. And so that is, like I don't want people thinking before you go and you talk to a lawyer, you have to do a lot of like legal research. It should just really, you want to find someone that you're comfortable with and someone who can ask you hard questions and might ask you uncomfortable questions. And I would say if you're getting asked uncomfortable questions, um, about finances, about kind of family relationships, you've probably got a pretty good attorney that you're dealing with. I see. So the avoidance of uncomfortable questions is actually a red flag. I think it would be, yeah. Okay, well, I think that's kind of the same when people come and see me for memory loss. If I tell them something uncomfortable, they probably come to the right place because nobody has told them the thing that they think has been happening for years because everyone kind of danced around the subject. Yeah, right. Well, thank you for joining us. Appreciate your time and I will link Jeff's law office, Carolina estate planning in today's show notes as well as just some general information regarding the topics that we talked about today. So thank you and see you all next time. Thank you so much.