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Free Webinar – Why NOT To Name Kids As IRA Beneficiaries

by with No Comment Asset ProtectionLegal Technical

The US Supreme Court in Clark v. Rameker (June, 2014) solidified that children or other “non-spouse” individuals should not be named the beneficiary of an IRA, if asset protection is a goal.  The court, in a 9-0 decision, declared that an inherited IRA is not a “retirement account” and allowed the bankruptcy trustee to invade an IRA inherited by the debtor (child), to pay her creditors.  The decision set the new precedent that inherited IRAs are not protected from the creditors and predators of its owners. Click here for a decision tree on naming your IRA beneficiary options and the asset protection impact.

Bigstock-Elementary-School-Kids-Group-I-50081939The Supreme Court decision left intact the ability to name a spouse as beneficiary, since a spouse has the right to create a new IRA or combine the IRA of the deceased spouse with his or her existing IRA. While this method may appear to protect a spouse’s inherited IRA, it is not a viable approach when an individual dies without a spouse, or if the surviving spouse is in need of long-term care.  There is however, a foolproof way to protect IRAs after death, regardless of circumstance. Name a trust as beneficiary!

Most legal and financial professionals will grimace at the idea of a trust being named beneficiary of an IRA.  They believe that doing so makes the entire IRA taxable at death or will result in the loss of the “stretch” and force it to be paid out within five years.  This is true only if the trust named beneficiary is not a “qualified” pass thru beneficiary, but if it is, it enjoys all the benefits the trust beneficiaries would receive as direct beneficiaries.

For a trust to be a “qualified” pass thru beneficiary of an IRA it must meet four criteria:

1) it must be valid under state law;

2) it must have identifiable “human” beneficiaries;

3) it must be irrevocable after death; and

4) a copy of the plan document must be provided to the plan administrator.

While there are some complexities in complying with these rules, once understood and properly applied, naming a trust as the beneficiary is the only way to ensure asset protection of inherited IRAs in the post Clark v. Rameker world. When properly drafted, a Revocable Living Trust, an Irrevocable Pure Grantor Trust (iPug™), a grantor trust or non-grantor trust can be utilized. The drafter of the trust must distinguish the “inside” designation strategy from the “outside” designation strategy. That is, how to structure the beneficiary designation on the IRA beneficiary designation form and integrate it with the beneficiaries designated in the Trust to accomplish a myriad of scenarios for the surviving spouse (or other beneficiaries) that do not have to be decided until after the death of the IRA owner.

Click here to download a copy of the LWP IRA Beneficiary Designations Decision Tree.  And to learn more about Clark v. Rameker join our FREE webinar THIS Wednesday, December 17th at 7:00 ET.  Register now.  It's 100% free!  We'll see you then.

Dave Zumpano

 

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When It Comes To Medicaid, What Is The Break-even Point

by with No Comment Legal TechnicalMedicaid

The break-even point is the point at which it doesn’t matter whether the individual applies for Medicaid or continues to private pay.  Either way, the individual is going to pay the same amount. 

Bigstock-Marketing-background--Break-E-69885466Let’s say that the minimum months to qualify is 20 months.  The break-even point is 40 months.  (60 minus 20).  If at any time the individual goes into the nursing home and applies for Medicaid prior to 40 months, you will “flip the switch” and apply for Medicaid.  The penalty period is 20 months, so the individual private will have to private pay for those 20 months.  If that was done in month 10, then the individual will pay the penalty until the 30th month from the date of the funding of the iPug.  (10 months plus 20 months penalty = 30 months from funding).  The individual will begin to receive Medicaid benefits the 31st month.  The individual does not have to wait until month 60 from the date of the funding to get their benefits in that scenario.

If the individual applies for Medicaid on the break-even point – month 40, they will still have a 20 month penalty, which will push them to 60 months from the funding date.  If they don’t apply for Medicaid in month 40, then the individual would have to private pay for those 20 months until month 60.  After which time, the individual will apply for Medicaid and Medicaid won’t see the transfer 61 months earlier.  Either way it costs the same; it doesn’t matter whether you apply for Medicaid or not.  (That said, know your local rules too – in Texas for example, there is a slight benefit for being on Medicaid and in the penalty period, so I would probably go ahead and apply at the break-even point for Texas residence).

Now, if the individual becomes ill in month 45 and goes to the nursing home and applies for Medicaid, then applying for Medicaid still triggers the 20 month penalty.  This will push the Medicaid eligibility out past the 60 months to month 65 (45 months from funding plus 20 months of penalty).  This is beyond the initial 60 months from funding, so you don’t want to apply for Medicaid after the break-even point.  If the individual makes it past the break-even point before they need a nursing home, they will private pay the nursing home cost until month 60.  After month 60 passes, the individual can apply for Medicaid and answer “no” to the question of have you given any money away in the last 60 months and avoid the 20 month penalty.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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How To Calculate The Minimum Months To Qualify & Assets At Risk To Break Even

by with No Comment Estate Planning Drafting SoftwareLegal Technical

What do they really mean? 

If you're an Lawyers With Purpose member, you know the minimum months to qualify is a term we use in to determine how many months that it will take to get a client’s excess assets down to zero by gifting money and paying for nursing home costs.  It is then used to calculate the breakeven point (60 – minimum months to qualify = breakeven point).

Bigstock-colorful-numbers-background---44896171Before a client can be eligible for Medicaid, their excess assets much be zero.  We know that we want to protect as much money as possible and that to do that we have to give the excess assets away (we have already performed our spend down analysis at this point).  If the penalty divisor for the state is $5000 / month, then we know that if we give away $5,000, then we must pay for one month of nursing home cost.  At the point, we have already done the analysis to figure out the monthly deficit – that is, how much money will the client have to pay from their resources after their current living expenses, allowable Medicaid exemptions, and nursing home costs are taken into account.  Let’s say that is $10,000.  So we know that if we give away $5,000, we pay for one month of nursing home cost.  If we have to pay for one month of nursing home cost we have to pay $10,000.  If our excess assets equals $100,000, then to get through month one, we give $5,000 away, we pay $10,000, and that reduces our excess assets by $15,000 and leaves excess assets at $85,000.  The next month, we do it again.  We give away $5,000, we incur one month of penalty, and we pay $10,000 to the nursing home.  That leaves us with $70,000 in countable assets.  The next month we do it again.  We give away $5000, we pay $10,000 to the nursing home, and our countable assets drop to $55,000.  (Longtime members may remember this as the “MPS Dance.”)  This continues until our countable assets drop to zero, then we add up how many times we had to do the dance, and that becomes our minimum months to qualify.  A short cut is to take the total excess assets and divide by the amount needed each month, in this case $15,000.  In our example, that will give us 6.67 months.  In other words, we have to give away $15,000 for 6.67 times in order to get the excess assets down to zero. 

This number is then used to calculate the amount of money we can protect – the penalty divisor times the minimum months to qualify.  Here that would be $5000 x 6.67, which would equal $33,350.  Because we give away $33,350, we know we will have to private pay for 6.67 months (the penalty).  That money is protected because it will not need to be spent on the nursing home.  Then we calculate the amount of money that is at risk until breakeven – that is, if the client or spouse goes into a nursing home prior to the breakeven point, then this is the amount that they will have to pay before Medicaid will begin to pay for their care.  We know that we have to pay for 6.67 months of nursing home care in this scenario, so we multiply the cost of the care each month, $10,000, by the number of months we will need to pay for the care, 6.67, which gives us the total cost that is at risk to having to pay the nursing home as $66,700.  So, worst case, they will have to pay that $66,700 to the nursing home in order to protect the $33,350.  Not great numbers in this particular scenario, but it is still better that spending it all down and applying to Medicaid.

Announcing NEW Pricing, Services, & Membership Changes—Effective Monday, October 27th

At LWP we are committed to innovation and continuous improvement. In an effort to augment our services and the value of our membership levels, LWP is excited to announce changes to our membership levels. All membership offerings were specifically designed to serve solo, small and medium sized firms based on their customized needs. Changes are applicable to all NEW memberships beginning Monday October 27th. 

If you have been considering joining the Lawyers with Purpose community, please contact mhall@lawyerswithpurpose.com to schedule a 15 minute demo to see the upcoming pricing, services, & membership structures! 

Existing LWP member? Great NEWS, you’re grandfathered in! 

Dave Zumpano,

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

The VA Benefits Software

by with One Comment Estate Planning Drafting SoftwareLegal MarketingVA

Our VA software is very unique.  With Victoria L. Collier, the number one V. A. expert in the country, helping develop and create the software. 

 

Many people don't know the eligibility standards around VA benefits.  They know that there is a certain amount of assets and income, but you don't know the amount of assets you can have.  In many cases, you can have assets in the hundreds of thousands of dollars and still be eligible.  We have the software that uses the VA's own formulas in making these determinations.

In addition, our software is very unique in that you could enter client information and it will generate the necessary documents for the application.  We have a complete application process that is tracked through a client management system which gives you reporting, so you're very familiar with where each case stands and what step of the process it's in, the forms that have been completed, which ones are done by clients, which ones are done by the office, and the software will generates those forms. 

Very unique and different, unparalleled in the industry.  Very user friendly for any law practice that's experienced, or doing veteran benefits for the first time, they can confidently ensure that their paraprofessionals are able to handle a large majority of this work.  And they can keep tabs on it with the reporting to be confident that they're not missing any major deadlines.

It’s great technology to help any practitioner be confident that they're not missing anything!

If your interested in learning more about the LWP-CCS drafting software, join us in Phoenix October 20-22nd at our Asset Protection, Medicaid and VA Practice With Purpose program.  Click here to register today!  Existing members who would like to participate can contact Angela at acrowther@lawyerswithpurpose.com

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

 

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Defensive Use Of Powers Of Attorney

by with No Comment Asset ProtectionLegal TechnicalSNT

The General Durable Power of Attorney (“GDPOA”) has often been described as the most effective burglary tool since the crowbar.  The defensive use of the elder principal’s GDPOA can minimize the potential for Elder Financial Abuse.  Proper counseling of an elder by the estate planning attorney, and customized drafting of the GDPOA to address the elder’s specific worries about the powers granted to the agent, can help minimize the potential for EFA. 

Bigstock-Power-Of-Attorney-30978749Of particular concern to many elders is the abuse of gifting authority under the GDPOA, or other granted powers that could defeat her estate plan if used improperly by an unscrupulous agent.  Other problematic powers that are routinely granted under many boilerplate GDPOAs include the authority to make tax-motivated transfers, to exercise disclaimers or powers of appointment, to sell assets subject to a specific bequest in the elder’s Will, to change beneficiary designations for the elder’s non-probate assets (for example, life insurance, retirement plans, accounts with transfer-on-death or pay-on-death designations), to create joint interests with the right of survivorship, and to create, amend, revoke, or terminate an inter vivos trust that would avoid the probate process. 

The law in many states requires a person to opt-in to each and every power granted under a GDPOA, especially the powers noted above.  Although the expense of customized drafting, explanations of opt-in powers and review of worst case scenarios for the illicit use of granted powers can be significant, these approaches can provide enhanced protection against EFA for the elder and the intended beneficiaries of her estate plan.

Additional protection against EFA can be afforded by setting forth in the GDPOA specific duties of the agent (signed and acknowledged by the agent), including the duties of loyalty, good faith, and due care; a duty to keep the principal’s property separate from that of the agent; the duty to denote clearly any of the principal’s property titled in the name of the agent in that capacity; and the duty to keep a contemporaneous record of each transaction undertaken by the agent on behalf of the elder, a running account of all receipts and disbursements as agent, and a full annual (or more frequent) accounting to the principal, her conservator, if any, other persons designated in the GDPOA to receive this information, and to the elder’s executor or other personal representative within 90 days of her death.

The GDPOA should also address self-dealing and conflicts of interest that inure to the benefit of the agent, including any specific examples the elder wishes to identify (for example, investments in the agent’s personal business or improvements to the agent’s residence or other properties).  The GDPOA should also outline whether and how the agent is to be compensated for services while acting as agent (for example, hourly at a specified rate, or a fee based on the value of the assets under management).  Fairly compensating an agent can encourage him to be more honest, attentive and diligent in the exercise of his duties, and help forestall EFA.

If you are interested in learning more about what it means to be a Lawyer With Purpose.  Come join us in Phoenix for 2.5 days of technical legal information at the 2014 Asset Protection, Medicaid & VA Practice With Purpose Program October 20-22nd.  Click the link to register today!

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.

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What’s A TAP™ Trust?

by with No Comment Asset ProtectionEstate Planning Drafting SoftwareLegal Technical

Many people wonder what a TAP™  trust is.  To start, a TAP™  trust is a “Tax All Purpose Trust.”  The name reflects the usability and functionality of trusts that were traditionally much more restrictive. 

Most people are familiar with an ILIT, an Irrevocable Life Insurance Trust.  This trust is traditionally created to hold life insurance policies to ensure it’s proceeds at death, are not included in the estate of the grantor for estate tax purposes.  The ILIT can be either a grantor or non‑grantor trust.  Essentially, a grantor trust is one in which the IRS deems the grantor to be the owner for income tax purposes.  This ensures that all income generated by the grantor trust is taxed to the grantor directly; on his or her tax return, and not taxed to the trust (whose top tax rate occurs at about $11,000 versus the top tax rate for individuals which is more than $450,000.  In a separate regard, transfers to ILIT’s or other grantor trusts are a completed gift for gift tax purposes and excluded from the estate of the grantor in determining the grantor’s estate tax at death.

Bigstock-Close-up-on-old-book-on-colorf-52414138The Tax All Purpose trust is similar to the ILIT but much more expansive.  Traditionally ILITs held only insurance policies.  The TAP™  trust can hold insurance policies, real estate, stocks, bonds, and even business interests.  In fact, it can own any asset you own, even your IRA, (but not until after your death).  A TAP™  trust, like a traditional ILIT, can be set up as a grantor, or non-grantor trust.  As a non-grantor trust, it will be taxed as a separate taxpayer, and all the income is taxed directly to the trust at trust income tax rates.  As a grantor trust, all income is taxed on the personal income tax return of the grantor, at the individual tax rates. The flexibility of the TAP™  provides convenience for clients because a single trust can hold many various assets rather than having a single trust for each type of asset.  Similarly, a TAP™ trust can also act as a standalone IRA trust, if designed.  While other trusts accomplish this with more flexibility, if a client had a TAP™ trust for other purposes, he or she could also use it to accomplish your IRA planning goals. 

Another opportunity use for TAP™ trusts is to make annual gifts to one (or several) people to reduce the taxable estate of the grantor.  In some circumstances clients elect separate TAP™ trusts for each grandchild.  The intent is to make annual gifts in the amount of the exclusion (currently $14,000.00) to each grandchild and appoint each grandchild the trustee of their separate trust.  The TAP™  is used as a mechanism to identify how each beneficiary utilizes and manages the assets to allow the grantor become more confident of the beneficiaries ability to manage it more responsibly.  Ultimately, the client can use the TAP™  trust to identify whether additional annual contributions should be made for the individual and whether they should be the beneficiary of all his assets after death.

In today’s world of expanded estate tax limits ($5,340,000 – 2014), a TAP™  trust is a catchall trust to address the need of clients who want to give completed gifts to third parties without necessarily having them be controlled by the beneficiary, but allows for it if desired.  The primary purpose of a TAP™ trust is to ensure all gifts made to the trust will be excluded from the grantor’s taxable estate.  In the absence of being concerned with estate tax, an irrevocable pure grantor trust (IPug™) should be used.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Integrating Easy

by with No Comment Legal TechnicalMedicaidSystems & ProcessesVA

Tiffany Brown, Vice President of DocuBank, again join the Lawyers With Purpose blog as a guest and shares her perspective of how the administrative part of running a practice can be daunting. 

DocuBank logo with tagWhenever you find something that builds value AND is simple to set up, it’s a win-win.

Thanks to some clever programming on the part of Lawyers with Purpose, getting started with DocuBank is one such winning proposition.

The DocuBank service is a value-added benefit for both your clients and your firm but it’s also one other very important thing – easy.

The DocuBank enrollment form is built right into the Lawyers with Purpose software so that your clients simply sign the form during the signing meeting and your staff  then sends it along with the documents to establish their membership.  Any information not supplied by the software can always be added by the client at a later date.

Getting started with DocuBank is easy.  We have been working with attorneys for more than two decades to establish and comprehensive turnkey process.  Having the software integration as part of the DocuBank and Lawyers with Purpose partnership means that the DocuBank solution is even easier for you to implement. 

The discounted rates available to you through Lawyers with Purpose mean that adding DocuBank memberships to the service you provide for your clients is also affordable.  Click here to find out more about DocuBank.

Click here to find out more about how DocuBank can be a great value-added tool for your firm and your clients.

Tiffany Brown, Vice President, DocuBank

 Roslyn Drotar – Coaching, Consulting & Implementation, Lawyers With Purpose

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Have You Gotten That 2AM Call Yet?

by with No Comment Estate Planning Drafting SoftwareLegal Technical

Lawyers With Purpose welcomes Guest Blogger, Tiffany Brown, Vice President of DocuBank.  We frequently get asked on our CCI calls, or at our LWP events about the value of DocuBank.  

Tiffany offers her insight, starting with one simple question:

DocuBank logo with tagHave you gotten that 2AM call yet?  The one where a client's family is looking for the healthcare power of attorney or living will, while their loved one sits in an ER or ICU?

If you have, then you are probably already using DocuBank.  We offer protection for your firm and your clients to ensure that that 2am emergency is covered.  The DocuBank Emergency card offers 24/7/365 access to the documents your clients need during a medical emergency.   

The DocuBank service has been protecting clients since 1993 and during the past two decades we’ve evolved to include an online SAFE that clients can use to access all of their estate planning documents.  SAFE allows clients to upload and share all the personal documents they would like convenient online access to.  The ability to create limited access sub accounts for family and friends, and appoint a Digital Executor to inherit the account upon verified proof of death makes SAFE a great tool for families to share and exchange vital information with you and each other.

Any of the thousands of attorneys who use DocuBank  will tell you that they enjoy the peace of mind that DocuBank brings their clients.  And those attorneys who have received one of those 2 am wake-up calls before using DocuBank will tell you that the peace of mind DocuBank provides for their firm is well worth the price for the service. 

But DocuBank offers more than just powerful client protection. 

We also offer creative tools to help you strengthen client retention, create referrals with friends and family and reach out for referrals in your area. 

  • Email referrals to family and friends when clients enroll;
  • Hospital Outreach packet for area doctors;
  • Fax to Physician Program gives clients’ doctors the information they need to access these documents for your client;
  • Branding of your firm on each card
  • Branding of your firm on the client DocuBank landing page
  • Portal on your website that takes them directly to your branded page
  • Tangible addition to your maintenance plan
  • And much More…

We are happy to provide special discounts and benefits through our partnership with Lawyers with Purpose.  Please click here to find out more about how DocuBank can be a great value-added tool for your firm and your clients.

Tiffany Brown, Vice President, DocuBank

If you're at the Practice With Purpose program, or Members Tri Annual Retreat with Lawyers With Purpose in Chicago this week, stop by the DocuBank booth and say hello to Mike Wall!  He's there and can answer all your questions.

Roslyn Drotar, Coaching, Consulting & Implementation – Lawyers With Purpose

 

 

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Making Medicaid Qualification Easy – A Quick 10 Minute Demonstration

by with No Comment Asset ProtectionEstate Planning Drafting SoftwareLegal TechnicalMedicaidSystems & Processes

With the proliferation of those online will factories, some believe traditional estate planning is dead.  But that is not the experience of Lawyers With Purpose members.  With nursing home costs rising more and more out of reach of most people, clients are looking for ways to protect what they have scraped and saved and worked so hard to build. 

Bigstock-Play-button-53748670And those clients are turning to Lawyers With Purpose attorneys to help them do it.  Lawyers With Purpose can help you quickly get up to speed to effectively and competently work with your clients in the Medicaid area.  We provide our members many tools to help them do that.  One of those tools is the Medicaid Qualification Worksheet.  The Medicaid Qualification Worksheet can help you immediately determine whether or not a client is currently qualified for Medicaid if they go into a nursing home, what you might need to do to help them get qualified if they are not already, and show them that they may not have to wait five years after they do planning with you before they could qualify for the benefit. 

You will never forget the feeling you get as you watch the wave of relief that washes over the face of the first client you are able to tell that to!  Watch this video to see how the worksheet works.

If your interested in learning more about this and other ways Lawyers With Purpose can help enhanse your estate planning practice, join us at our Practice With Purpose Program in June.  If your at all interested click the link and register today!  The hotel is close to selling out and seats are filling quickly!

 

Aaron Miller, Legal/Technical Trainer – Lawyers With Purpose.

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Probate Court Remedies For Elder Financial Abuse

by with No Comment Legal TechnicalSNT

The Probate Court (or other state court with jurisdiction over alleged incapacitated adults) generally has the power to order numerous actions and remedies for elder financial abuse, each of which typically has its own procedural and evidentiary requirements.

Bigstock-Will-7981786The appointment of a limited or full conservator for the elder, with court-supervised responsibility for managing the elder’s assets, is typically ordered as a “defensive” protective measure.  During the pendency of a conservatorship proceeding, which can be a time-consuming proposition, consideration should be given to obtaining one or more of the following temporary remedies.

(1)  Temporary restraining order to prevent irreparable harm to the elder and her assets.

(2)  Preliminary injunction to preserve the elder’s assets while the conservatorship action is pending, coupled with court-ordered disbursements for the elder’s benefit during the pendency of the action.

(3)  Recordation of a lis pendens (Latin for “litigation pending”) in the deed records of any county in which the elder owns real property, putting third parties on notice of possible claims against, or title issues with respect to, the elder’s real estate assets.

Practitioners have reported a disturbing recent trend of filing “offensive” or “attack” conservatorship proceedings.  See Vivian L. Thoreen and Dana G. Fitzsimons, Jr., Elder Financial Abuse: Protecting the Aging Client from the Den of Thieves, 46th Annual Heckerling Institute on Estate Planning, Jan. 2012.  Cited examples include “[a] child, alienated from an elderly affluent parent and likely to be disinherited, seeks control of the parent’s assets to frustrate the parent’s estate plan by draining its assets.  Another example is the child, angry about being excluded from the parent’s lifetime giving, seeking to block generosity to other family members or charities, or to compel “gifts” to himself against the will of the parent.  In even more distasteful circumstances, the child may seek to restrict the parent’s lavish lifestyle or to limit expensive care so as to preserve a future inheritance.”  Id. 

Another disturbing offensive tactic that has emerged in recent years is that of “granny snatching” (i.e. removing an elder from her home state to another jurisdiction for the sole purpose of filing a guardianship or conservatorship proceeding there based on the elder’s physical presence in that jurisdiction).  This tactic has been curtailed in recent years as the vast majority of states have enacted the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (“UAGPPJA”) in some form, promulgated in 2007.  

Notably absent from the list of 38 states and the District of Columbia that have enacted, or recently introduced legislation to enact (Massachusetts, Mississippi and New York), the UAGPPJA are several southern states, including Georgia, Florida, Louisiana, North Carolina and Texas.  (The other non-adopters are California, Kansas, Michigan, New Hampshire, and Wisconsin.)

If your at all interested in learing more about Lawyers With Purpose please join us in Chicago in June!  You can contact Molly Hall at 877-299-0326 x 201 or mhall@lawyerswithpurpose.com.  Register today – seats are filling fast!

Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.