About 68% of families own some type of pet. Whether it is a fish, cat, or dog, the United States families spends about $69.4 billion on their pets each year! Unfortunately, most of these same families do not plan for their pets if they become incapacitated or pass away.  There are a few steps to make sure that your pet will be taken care of when you can’t do it.
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1.     Pet Alert for Wallet – A pet alert card should be placed in your wallet to notify emergency personnel that you have a pet at home in case you are in an accident and become incapacitated.  The pet alert card should state your pet’s name, what type of animal they are, what your address is, who they may contact to take care of your pet, special instructions, and name and contact number for your veterinarian.
 
2.     Pet Profile – A pet profile is a document that you can keep in your home that any person, including emergency personnel, would be able to find in order to take care of your pet.  This is a longer document than the pet alert and it contains specific information about your pet.  Each pet should have its own pet profile document.  The document should include the following information:
a.     Pet’s name, sex, if they are sprayed or neutered, type of distinguishing marks, license number, microchip
b.     Person to notify in case of emergency, name, address, phone, list back up individuals
c.      Veterinarian’s name, address, phone number
d.     Can your pet be transported easy, if not what will help transport the pet, is there a pet carrier, where is it located, where are the leases, muzzle, harness
e.      Information about what your pet’s likes and dislikes, type of food your pet eats, where are the pet’s toys, supplies, food, treats, any other special instruction
f.      What medication is your pet taking, what dose does your pet need, who supplied the medication and how to get refills, is your pet vaccination up to date
g.     Does your pet have daytime routines or night time routines, does your pet get along with other animals, children, elderly people; is your pet aggressive or have bad habits
h.     Information on pet insurance
i.       Information concerning a Power of Attorney, Will, or Trust that dictates what happens when you pass away
j.      Any other information that will assist in taking care of your pets
 
3.     Pet Insurance – Pet insurance has become a big business and just like human health insurance there are many types of plans to choose from, here are a few.  Whole pet with wellness may include expenses like: exams, lab test, x-rays, prescriptions, surgeries, hospitalization, chronic conditions, hereditary conditions, wellness, etc.  Major Medical may include expenses like: exams, lab test, x-rays, prescriptions, surgeries, hospitalization, chronic conditions, and hereditary conditions.  Pet Wellness may include expenses like:  wellness exams & test, flea/heartworm prevention and vaccinations.  Each insurance company might call it by a different name.

After you determine what expenses you would like covered you must decide what type of reimbursement you would like either percentage of an invoice or a benefit schedule.  A percentage of invoice is based on the treatment cost and you will get back a percentage of what you paid the vet.  Benefit schedule is capped at a set amount for each condition and it does not matter what the total cost is you will still only receive the capped amount.

Whatever type of insurance you decide to purchase make sure you know what is covered and not covered.  When choosing a company make sure the company has a record of being dependable and get quotes.
After you get the coverage make sure you keep a copy with your pet records, pet profile, estate planning documents, and a copy with your vet.
 
4.     Pet Guardian – A pet guardian may be a friend, company, or the humane society that will take care of your pet on a temporary or permanent basis when you are not able too.  If it is a company or humane society they will have you complete documents allowing themselves to make all the decision about your pet health, maintenance, and care.  In additional, they will require you to either reimburse them after the fact, make a down payment, or have you leave them funds after you pass away.  It is very important to investigate these places completely to make sure they live up to the standards of what you want for your pet’s care.
 
5.     Pet Power of Attorney – A pet power of attorney can be part of your Financial Power of Attorney but many times this is a separate document just for your pet.  The document should state who is going to be the caregiver of your pet when you can’t.  A backup caregiver (or more) should be listed in case your primary caregiver can’t or won’t take care of your pet.  This document should allow the caregiver to make all medical decision for your pet including treating disease, illness, or injuries.  It should state what type of last wishes you have for your pet.  How the cost of treatment and last wishes will be paid for by you or your estate.  The document should state whether you will allow the caregiver to rehouse your pet and any other authority your agent will need to take care of your pet.  Many times specific agencies will have documents for you to sign or you can contact your attorney to include language in your Financial Power of Attorney (which you should already have).  A Financial Power of Attorney is only good while you are living, after you pass away you need to make additional provision for your pet.
 
6.     Include Pet in Wills – You may include instruction in your Last Will and Testament for a caregiver (and backup caregiver) and provide funds for a caregiver to take care of your pet.  If you do not provide any instructions, then whoever you name as a residuary beneficiary will be the person who gets your pet. Residuary beneficiary is the person(s) that will receive the remainder of your assets after your specific bequests.  The problem with leaving instructions in your Will is that your Will must go through probate court first.  Probate court can be costly, time consuming, it becomes public record, and very stressful, even for your pet.  A Will does not allow for disbursement over the life time of your pet.  Money is given in one lump sum.  Unfortunately, there are some people who will take the lump sum and leave your pet at the shelter or worse have your euthanized.
 
7.     Pet Trust - A pet trust is legal in all 50 states but each state might have specific laws regarding trust like how much money you can leave to a trust.  A trust is a legal document that will allow you to name a person or corporation as the trustee (manager) of the trust’s assets.  You will nominate a caretaker or new owner of the trust.  Always pick backup trustees and caretakers.  You will state what the trustee is allowed to reimburse the caretaker for the pet’s expenses.  You must leave some type of assets that can be sold or financial assets to pay for your pet’s care.  You must determine how much to leave to the trust so that your pet’s needs are adequately cared for.  In the document you will explain the type of care you want for your pet during its lifetime and what will happen after the pet passes away.  Also, you will identify what you would like done medically for the pet in case the pet needs major medical attention or needs to be put to sleep.  If there is any assets left after your pet passes away you will want to name a beneficiary for those assets.
 
8.     Pet Cremation and Sanctuary – After your pet passes away you will want to make arrangements for your pet’s body.  Some people allow the veterinarian to make the arrangements and other’s want to make all of the arrangements by themselves.   Just like humans, you can have funeral and memorial services, caskets, urns, lots, cremations, flowers, dinners and have your pet’s body placed in a sanctuary which is the same thing as a cemetery for pets.  Lots of choose for pet owners to make and many companies lets you make and prepay for these services ahead of time.  In addition, some companies will create memorials that include a copy of your pet’s paws on jewelry or molds, jewelry to contain ashes, picture frames, memorial rocks, etc.
 
Your pet is a significant member of your family and it is important that you make arrangements for your pet when you can’t make decisions anymore.  It is imperative that you have a say in your pet’s care, this can be done by powers of attorney, wills, trust, and guardianships.  If you don’t make arrangements ahead of time then your pet could be caught up in the legal system and your wishes will never be known.  The last thing you want is your pet to be scared and not taken care of or worse yet end up in a shelter or be euthanized.  Remember and take care of your pet, they love you and are part of your family!

A “life estate” is when a person(s) owns property during their lifetime. They are called “life tenants”. The life tenant has the right to use the property, live in the property, control the property, and receive any rent from the property until they pass away.  The life tenant is responsible for the taxes, insurance, and maintenance of the property during their lifetime.

After the life tenant passes away the property is transferred to the beneficiaries which are called “remaindermen”.  The transfer is made without having the property go through probate court. 

During the lifetime of the life tenant, the life tenant can’t mortgage the property without the remaindermen agreeing to the mortgage.  Most banks will require the remaindermen to sign all mortgage documents.

Also, the life tenant is not allowed to sell the property without the remaindermen agreeing to the sale.  If all of the life tenants and remaindermen agree to sell the property, the remaindermen would receive a portion money from the sale.  Please note the amount that the life tenant will receive from the sale has difference values depending on why they are selling the property.  If the life tenant is concerned about Title 19 (Medicaid for the Nursing Home), the Medicaid life tenant table requires the life tenant to take a greater value then the IRS requires on the IRS’s life tenant table. It is very important to determine how to split of the proceeds from the sale of the property because it will affect all parties differently, under the Medicaid and the IRS tables.

Life estate may be a valuable tool in both estate planning and Medicaid planning.  For estate planning the property will avoid probate and will avoid capital gains if it is transferred at the life tenant’s death and not sold during their life time.  For taxes purposes, the remaindermen will take the property at the value of property at the date of death of the life tenant.  The remaindermen will not take it at the value the life tenant purchased the property and will receive the step-up in basis.  This means the remaindermen will not pay capital gains taxes on the property when they become owners.   However, the basis of the property at the time they became owners and the value of the property when they sell it could cause them to pay capital gains or receive a loss.

For Medicaid purposes, a life estate may protect up to 100% of the value of the property from a Medicaid lien or spend down. If the life tenant gifted the property away before August 1, 2014 and the life tenant did not apply for Medicaid for 5 years from the date of transfer, it would be 100% protected from a Medicaid lien or a spenddown.   The 5-years is known as the 5 year look back period where if you gifted away any assets for less than fair market value it is considered a divestment and you may not qualify for Medicaid. If you created a life estate after August 1, 2014 and made it pass the same 5-years look-back without applying for Medicaid then a portion of the value of your property would be protect.  Medicaid may still put a lien on the property for a portion of the value that the life tenant is entitled too.  The amount is based off of Medicaid table, which calculates the lien based on the life tenant’s age and the value of the property.

There are always problems with everything in life and that is true with life estates.  I already mentioned that a life tenant can’t sell the property or take out a mortgage on the property without permission of the remaindermen.  Some additional problems are related to the remaindermen’s interest.  Because the remaindermen have an interest in the property, if the remaindermen go through a divorce, personal injury, court case, or bankruptcy a lien could be placed on the property.  The creditor will not be allowed to force a sale of the property because the life tenant still has a right to use the property until they pass away.  Also, that means the creditor can’t not enforce the lien until the life tenant passes away.

Another problem arises when the life tenant is in the nursing home and on Medicaid.  If the life tenant is single then their assets are at $2,000.00.  They probably do not have any money to pay the taxes, insurance, and the maintenance on the property.  That means the remaindermen will need to pay those costs until the life tenant passes away.  Do the remaindermen have the money to do that?  Also, things like snowplowing and other yard work need to be taken care of.  The remaindermen might not live in the area or have money to hire someone to do that. Other bills that need to be taken care of like water, electricity, and heat. It is never a good idea to leave a property vacant for any period of time.  If the property is rented, the income from the rent must be given to the life tenant which could affect their Medicaid benefits.  If the parties agree to sell the property while the life tenant is still alive, then the life tenant will need to receive some of the proceeds which could affect their Medicaid benefits.  The sale during the life of the life tenant will also cause tax implications and the step-up value will be lost.
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Life estate may be a very valuable tool in estate planning and Medicaid, but it may also cause problems if it is not done right.  There are three very complex laws to consider: tax laws, Medicaid laws, and estate planning laws.  It is always best to speak with a lawyer and an account who knows the laws before you create a life estate.

By taking the time and effort necessary to plan your estate, you will be able to:

1. Provide for your immediate family
   Couples want to provide enough money for the surviving spouse. If you have minor children,  under 18, you will want to assure their education and upbringing. If you and your spouse pass away you need a will nominating guardians for your children. Otherwise, a court will decide without your input where your kids will live and who will make important decisions about their money, education, and way of life.  You should elect when they receive money taking into consideration their personal needs, lifestyle (sports, music, disabilities), and all future needs (college).
2. Get your property and assets to beneficiaries quickly
   Options include insurance paid directly to beneficiaries, joint tenancy, and living trusts, as well as using simplified or expedited probate and taking advantage of laws that provide partial payments to beneficiaries while a will is in probate. Also, see the blog entitled "Easy Steps to Have Your Financial Assets Avoid Probate".
3. Plan for incapacity
   During estate planning, you can also plan for possible mental or physical incapacity. Living wills and durable health-care powers of attorney enable you to decide in advance about life support and pick someone to make decisions for you about medical treatment.  Also, you will need a Durable Power of Attorney for Finance and Real Estate. These are documents that anyone over 18 years old needs. Remember a Will does nothing for you while you are alive.
4. Minimize expenses
   Good estate planning can keep the cost of transferring property to beneficiaries as low as possible, leaving more money for your beneficiaries.  Some expenses that can be avoided are taxes, lawyer fees, court cost, appraisal fees, newspaper fees, and accountant fees.
5. Choose personal representatives/trustees for your estate
   Choosing competent personal representatives/trustees and giving them the necessary authority will save money, reduce the burden on your survivors, and simplify administration of your estate. Remember this is the person who is going to "clean up" your estate.  They are going to be under stress from family, beneficiaries, companies, and the court process.  You will want someone who is good at understanding financial decisions under pressure.
6. Ease the strain on your family
   You can take a burden from your grieving spouse and beneficiaries by planning your funeral arrangements when planning your estate. Or you may want to simply limit the expense of your burial or designate its place. Ask us about funeral trust which are insurance products that are Medicaid protected, if done right.
7. Help a favorite cause
   Your estate plan can help support religious, educational, and other charitable causes, either during your lifetime or upon your death, and at the same time take advantage of tax laws designed to encourage private philanthropy.  This may be done by trust or by direct beneficiary designations.
8. Reduce taxes on your estate
   Every dollar your estate has to pay in estate or inheritance taxes is a dollar that your beneficiaries won't get. A good estate plan can give the maximum allowed by law to your beneficiaries and the minimum to the government.  In Wisconsin we do not have inheritance tax.  The estate tax is $5,490,000 (2017), and $5,600,000 (2018).
9. Provide for people who need help and guidance
   Do you have an elderly parent or disabled child, or a grandchild whose education you want to assure? You could establish a special trust fund for family members who need support that you won't be there to provide.  By creating trust for these individuals, you will avoid the beneficiary from losing their government benefits and you are able to control the assets after you pass away.
10. Make sure your business continues smoothly
    If you have a small business, you can provide for an orderly succession and continuation of its affairs by spelling out what will happen to your interest in the business.  Also, if you become incapacitated during your life, you can plan for someone else to control the business.
    
11. Remember to make arrangement for your pet​​  
    If you are single, make sure you arrange for someone to take care of your pets after you pass away.  You should always talk with them before you nominate them as beneficiary of a pet.  That person might need extra money or space to properly take care of the pets or they might be allergic. 
    
    

​Remember when planning your estate  you should have on your team qualified tax accountants, financial advisors, and attorneys.