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A will is a written instrument containing directions for how the property of the person making the will (the ìtestatorî) shall be distributed upon his or her death. The will may specify the sources from which taxes, expenses, claims and other charges against the estate are to be paid, and it may also be used to take advantage of estate tax deductions and exclusions. Sometimes the will contains instructions for the guardianship of the testatorís minor children, if there is no surviving parent.
A will can be used to place funds in trust for the benefit of minors or anyone else the testator might consider unable to handle property. Such a ìtestamentaryî trust can provide for childrenís education, or may simply hold the property until a minor becomes an adult. Conditions for a testamentary trust are at the discretion of the person making the will.
The will is usually executed in accordance with the laws of the state where the testator resides. These laws usually require that the will be signed by the testator and at least two witnesses who have no interest in the property passing under it. A signed instrument purporting to be someoneís will is not officially recognized until the court having jurisdiction over the instrument declares it to be valid after examining it and the circumstances surrounding its execution. The process by which a court determines whether a will is valid is known as probate.
The person or institution named in the will to take charge of the estate is called a personal representative or executor. The functions of an executor include gathering all the decedentís property, following the instructions of the will, paying taxes, paying claims against the estate and administration expenses, paying bequests under the will, safeguarding the interests of the beneficiaries, and closing the estate. Trusts established by the will are managed by a trustee, which may be either an individual or a bank.
If a person dies intestate (without a will), state law determines how the property is to be divided among the family. The probate court appoints an executor, and in most intestate cases the estate is distributed to the heirs immediately. Minor heirs receive their share upon reaching age 18. The state will also resolve any outstanding guardianship questions. If there are no living relatives, all of the assets will be turned over to the state.
If you die without a will, everything that you own in your name alone will be divided among your spouse, children, or other relatives according to state law. The court will appoint a personal representative to collect and distribute your assets. The personal representative and the attorney for the personal representative are entitled to be paid based on the total value of all propertyóbefore deducting mortgages or other liabilitiesóin your probate estate.
Most Americans die without having wills, but the consequences of dying intestate vary greatly with individual circumstances. Generally, the need for a will grows as oneís assets and family ties increase. Wills are especially important for parents with children who are minors, because parents can name a guardian in a will and make arrangements for financial support of children even past the age of 18. Texas law also provides for a separate ìDeclaration of Appointment of Guardian for Minor Childî in which parents can designate their wishes, in the event of death, for the care of their children.
Couples also have each other to think about. If one spouse dies without a will, state law might force the other to split the assets of the estate with the children, leaving the surviving spouse without enough support. Stepchildren, ex-spouses still living, non-custodial children, and a myriad of other possibilities can add further complications.
A single person with few assets probably doesnít need a will. If such an individual does care about who would get something (such as a car), one option is to change the title or deed to make the item joint property with right of survivorship to a co-owner. Financial accounts can also be jointly held, with or without right of survivorship, and can pass directly to anyone you name. The disadvantage of co-ownership is that it can be difficult to remove the co-ownerís name later if circumstances change; usually, the co-ownerís interest in the property lasts for life.
There are several categories of wills:
Any of these kinds of wills can be valid if done properly. If preparing a will without the assistance of an attorney, it is important to study the state probate statutes to find out precisely what the law requires for a will to be considered acceptable in court.
A trust is a means by which a person (often called the ìgrantor,î ìsettlor,î or ìtrustorî) can dedicate a portion of his or her assets to a specified purpose and transfer all decisionmaking power over those assets to a manager or ìtrustee.î The trustee has legal ownership of the transferred property (the ìcorpusî or ìprincipalî of the trust), subject to the conditions of the trust specified by the grantor.
Trusts can be living (established during the grantorís lifetime) or testamentary (established in a will). A living trust can be revocable (subject to termination or modification at any time by the grantor for any reason) or irrevocable. If irrevocable, the grantor can never end the trust, modify its terms, or withdraw assets. An irrevocable trust is an independent entity under the law.
A grantor may change the terms of a testamentary trust before death, assuming that the grantor has not become incapacitated and unable to make such decisions. In any case, testamentary trusts require that the will creating them be probated. These trusts might also be accountable and have to report to the court.
The trust assets are managed for the benefit of one or more beneficiaries. The grantor can also be trustee and beneficiary, but usually if the grantor is the trustee, there must be other beneficiaries. In some states, the trust can remain empty (unfunded) for quite a while after its creation. In states such as Texas, however, some nominal funding (e.g., $100 in a bank account) is required.
The Miller Trust was established in 1993 as a way to help medically needy individuals qualify for Medicaid nursing home assistance. Before the Miller Trust was established, thousands of individuals were denied Medicaid nursing home benefits because their monthly income was only slightly higher than the maximum eligibility amount (currently $1,452 per month). This left them without the care they needed, and without the resources to pay privately for nursing home care, which can range in cost from $1,800 to $3,000 per month.
To be eligible for Medicaid to pay for the cost of care in a nursing facility, an individual must:
In Texas, this means that the person must have no more than $1,452 in income each month and no more than $2,000 in resources. In many cases, however, persons need a nursing facility, but exceed the income threshold. To alleviate some of the hardship of this situation, the state created a new kind of entity called a Miller Trust to keep a potential recipientís income from exceeding the $1,452 limit. (Resources are not affected by a Miller Trust and can still be a basis for Medicaid ineligibility.)
The average cost to establish a Miller Trust in Texas is currently $850 to $1,500. Once the trust is established, all of the individualís retirement and social security checks must be deposited into the trust. The individual is then viewed by the state as having zero income. (In some cases, only a portion of the individualís monthly income may have to be placed in the trust to qualify for Nursing Home Medicaid.)
Trust deposits need only to be made for one month. At the end of this month, the individual should qualify for Nursing Home Medicaid and the application for Medicaid should be submitted. After Medicaid approval, three checks will be drafted out of the trust each month. The first will be a check for $30 which goes to the individual to pay for personal expenses incurred while in the nursing facility. The second check can be written for any medical or dental expenses not covered by Medicaid. The third check goes for the cost of care the individual receives in the nursing home. In effect, this is the remainder of the money left in the trust each month.
If the individual for whom the Miller Trust has been established is married and the individualís spouse still resides in the community, the third check will first go toward the spouseís Monthly Income Standard protected under the Spousal Impoverishment Law. This monthly income standard is currently $1,919 per month. After this final check is drafted out of the account, all other funds go toward the cost of the nursing home care.
The Miller Trust also applies when seeking Nursing Facility Waiver Services. The Nursing Facility Waiver provides home and community based services to individuals who require care. This program is offered through the Texas Department of Human Services and has been designed to be a cost-effective alternative to institutional care.
A Miller Trust is considered
irrevocable unless the individual for whom the trust is
established recovers to the extent that nursing home care is no
longer needed.
References
Eisenberg, Howard B. 1991. "Durable Power of Attorney v. Living Will: Counseling Older Clients," Illinois Bar Journal, vol. 79.
Rudy, Sharon R. 1996. "Substituted Decision-Making For the Elderly: Living Wills, POAs, and Other Options, Illinois Bar Journal, vol. 84.
Stewart, C. Jean, Kathy L. Seidel, and Elizabeth J. Bedient. 1991. "Disability Planning: Powers of Attorney; Living Wills; Right to Refuse Medical Treatment; Medical Directives and Other Alternatives," American Law Institute-American Bar Association Course of Study (597 ALI-ABA 445): Basic Estate and Gift Taxation and Planning (February 13).
Teitler, Michael F. 1986. "Contingency Planning for Incapacity: Powers of Attorney, Revocable Trusts, Health Care Decisions and Living Wills, Committees and Conservators, and `Informal Arrangements,' " Practicing Law Institute, Estate Planning and Administration, Order No. D4-5186.
University of Texas Medical Branch. Undated. Internet http://www.utmb.edu/aging/
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