Can You Protect Your Home If You Need Medicaid?

Anyone who owns a home, whether a magnificent mansion or a modest ranch, worries about the possibility of losing the home because of long-term care. How can they keep the home for their spouse or even for their family, if they need to apply to Medicaid for long-term nursing care costs?

The problem, reports The Mercury in a recent article “Protecting your house and Medicaid” is that people often come up with strategies on their own. And these strategies usually don’t work.

The first thought of someone who is confronted with the need to qualify for Medicaid is to immediately transfer ownership of the family home to another person. The idea is to take the home out of their countable assets. But unless the person who receives the house is an adult child, that transfer only leads to problems.

Medicaid’s basic premise is that if you can afford to pay for your own care, you should. Transfer of a home, let’s say one with a value of $400,000, means that a $400,000 gift has been given to someone. When you apply for Medicaid, there is a five-year lookback period. Any assets given away or transferred in that five-year period is considered to be an asset that was under your control. Medicaid will not pay for your care in that case.

There are some exceptions to the gifting rules, but this is not something to be navigated without the help of an experienced elder law estate planning attorney. Here are the exceptions:

Assets for your spouse. It’s understood that your spouse needs a place to live, and a transfer of the home to your spouse does not result in penalties under Medicaid rules. This usually means transfer from title as joint tenants with rights of survivorship or tenants by the entireties to the healthier wife or husband. It is also understood that a transfer to your spouse at home is not a disqualifying transfer. This is a common practice and part of Medicaid planning.

A disabled child. A parent may transfer a house to their disabled child on the theory that it is needed for self-support. It is not necessary for a child to lose a home, because a parent will be on Medicaid. This is a common mistake, and completely avoidable. Talk with an elder law attorney to learn more.

If a child is a caretaker. Sometimes an adult child moves into the parents’ home to care for the ailing parents. When a child moves in with the parents for a period of at least two years to care for them so they could stay at home and avoid going to a nursing home, or if the child has lived with their parents for longer than that and they need this care at home, then under federal law the home can be transferred to the child without penalty and the parent can go to a nursing home and receive care under Medicaid. Not knowing about this rule may sometimes lead the parents to transfer a house to someone else, and that is another very common mistake that causes adult children to be left without a home.

For a person who is single or a widow or widower who will never move home after moving into a Medicaid certified nursing home, the house may be sold, and planning can be done with the proceeds of the sale. Paying bills to maintain a vacant home for no reason and having the government take the home as a creditor through the estate recovery program does not make sense. Laws also vary significantly by state. An elder lawyer estate planning attorney can help navigate this complex and often overwhelming process.

Reference: The Mercury (July 31, 2019) “Protecting your house and Medicaid”

Elder Law Estate Planning for the Future

Seniors who are parents of adult children can make their children’s lives easier by making the effort to button-down major goals in elder law estate planning, advises Times Herald-Record in the article “Three ways for seniors to make things easier for their kids.” Those tasks are: 1) planning for disability; 2) protecting assets from long-term care or nursing home costs, and 3) minimizing costs and stress in passing assets to the next generation.

Here’s what you need to do, and how to do it.

Disability Planning

Disability planning includes signing advance directives. These are legal documents that are created while you still have all of your mental faculties. Naming people who will make decisions on your behalf if, and when, you become incapacitated gives those you love the ability to take care of you without having to apply for guardianship, conservatorship, or other legal proceedings. There are many names for these advance directives, which include financial powers of attorney, health care powers, health care proxies, and living wills.

Your agent named in the financial power of attorney will make all and any legal and financial decisions on your behalf. In addition, if you use a power of attorney that is specifically drafted for long term care and benefits planning, the agent will have unlimited gifting powers that may save about half of a single person’s assets from the cost of nursing home care.

The agent named in the health care directive can make medical decisions, and you can also have language that advises your agent about how you want your body to be taken care of in the event you are incapacitated. If you want to list these separately, you can also use a health care proxy to name the person who can make medical decisions, and use a living will, to convey your wishes for end-of-life care, including resuscitation and artificial feeding.

When advance directives are in place, you spare your family the need to have a judge appoint a legal guardian to manage your affairs. That saves time, money and keeps the judiciary out of your life. Your children can act on your behalf when they need to, during what will already be a very difficult time.

Protect Assets

Goal number two is protecting assets from the cost of long-term care. Losing the family home and retirement savings to unexpected nursing costs is devasting and could be minimized or avoided with the right planning. The first and best option is to purchase long-term care insurance. If you don’t have or can’t obtain a policy, the next best is the Medicaid Asset Protection Trust (MAPT) that can be used to protect assets in the trust from nursing home costs, after the assets have been in the trust for five years.

Have a Trust

The third thing that will make your adult children’s lives easier, is to have a trust that dictates where you want your assets to go after you die. A trust lets you leave assets to the family as you want, with the least amount of court costs, legal fees, taxes and family battles over inheritances. It also allows for the estate to be settled quicker, which will in turn also be easier for your children. Work with an experienced estate planning attorney to have a trust created.

Think of estate planning as part of your legacy of taking care of your family, ensuring that your hard-earned assets are passed to the next generation. You can’t avoid your own death or that of your spouse, but you can prepare so those you love are helped by thoughtful and proper planning.

Reference: Times Herald-Record (July 13, 2019) “Three ways for seniors to make things easier for their kids”

Advance Planning Key for Alzheimer’s Patients

A retired physician and his wife have allowed a local television station to report their family’s journey with Alzheimer’s over the course of the last four years. The series continues with WCCO CBS Minnesota’s article “All Lined Up Before You Need It’: Alzheimer’s Association Shares Steps for Estate Planning,” with four steps to take if you notice that a family member is having memory lapses or trouble with simple tasks.

The Quinn family—Dr. Paul Quinn and his wife Peg—had some tough conversations years ago. This was a period when Paul’s memory was better, and when he was able to be completely honest with his wife about his wishes and what the couple would need to do moving forward.

Peg Quinn said that getting everything lined up long before it’s needed is very important.

If there’s any sign of cognitive decline, there are legal and financial steps that must be pursued. Start with addressing the family budget and projected medical costs for long term care. If possible, gather all family members together for a planning session.

If they live in different parts of the state, or of the country, ask the family members to travel for a weekend family meeting. This is the kind of planning that is better when everyone is physically present.

Start by naming a power of attorney. It needs to be someone who is aware of the situation and will be able to make decisions on behalf of the diagnosed individual. An estate planning attorney can assist in making this decision.

Next, establish an advance health care directive with a focus on medical decisions. This may be the toughest part since it is impossible to know how long someone will live with Alzheimer’s, or what kind of lifestyle that person would be living. According to the Alzheimer’s Association, the average patient lives between four to eight years while suffering from Alzheimer’s. The cost of care can add up fast—as much as $5,000 to $7,000 a month in some cases.

That’s why the next step—selecting an elder law estate planning attorney is so important. Planning for long-term care, qualifying for Medicaid and other benefits, is a complex challenge.

Dr. Quinn expressed his wishes to stay in his home as long as possible. The familiarity of their home makes life much easier for both of them, so they agreed early on to have in-home care if it’s ever needed.

An estate planning attorney can help the family by drafting any necessary estate planning documents and creating a plan as early as possible. A trust must be created and executed before the person is legally incompetent. The same goes for a power of attorney and any health care power of attorney documents. Medicaid planning should be done as soon as possible since there is a five-year look-back period concerning transferring any assets.

Whether you or a family member just got a diagnosis or already in the throes of Alzheimer’s, consult an estate planning attorney to review any documents or arrangements to ensure that your affairs are in order and that you are prepared for the future.

Reference: WCCO CBS Minnesota (July 23, 2019) “’All Lined Up Before You Need It’ : Alzheimer’s Association Shares Steps for Estate Planning”

How Much Money Do I Need to Put into a Special Needs Trust for my Child?

One of the toughest things about planning for a child with special needs is trying to calculate the amount of money it’s going to take to provide both while the parents are alive and after the parents pass away.

Kiplinger’s recent article asks “How Much Should Go into Your Special Needs Trust?” The article explains that it’s not uncommon for folks to have done some estate planning but not necessarily special needs estate planning, even if it’s something they need for their loved ones. More importantly, they haven’t thought about how much money they should earmark to fund that trust someday or any other plan to provide for their family member and which assets would be the best to use.

Special needs estate planning involves creating a special needs trust (SNT) that allows a person with a disability to continue to receive certain public benefits. Typically, ownership of assets more than $2,000 would make the individual ineligible for certain public benefits. Assets held in a special needs trust don’t count toward this amount.

A child with special needs can generate multiple expenses. The precise amount will be based on the needs and lifestyle of the family and the child’s capabilities. Public program benefits can in many cases offset many of the above-mentioned costs. However, these benefits likely will not cover the entire cost of care.

When the parents die, the budget needed to care for the child often must be increased because the things the parents did must be monetized. For instance, the parents likely managed and coordinated the child’s care holistically. After they pass, a care manager may need to be compensated to do the same thing. There are also legal and trust administration expenses to think about.

An SNT usually isn’t funded until the parents’ death. At that time, the trust would need to file a tax return each year and pay taxes on any income made by the trust assets.

It is vital to conduct a complete analysis of the future costs to provide for a child with special needs so that parents can start saving and making adjustments in their planning. If this is something you are concerned about, speak with an elder law or estate planning attorney about creating a special needs trust.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

What Do I Need to Know About Special Needs Trusts?

One of the hardest issues in planning for a child with special needs is trying to calculate how much money it’s going to cost to provide for the child, both while the parents are alive, and after the parents die. A recent Kiplinger’s article asks “How Much Should Go into Your Special Needs Trust?” As the article explains, a special needs trust, when properly established and managed, lets someone with a disability continue getting certain public benefits.

Even if the child isn’t getting benefits, families may still want the money protected from the child’s financial choices or those who may try to take advantage of them. A trustee can help manage the assets and make distributions to the child with special needs to supplement their lifestyle beyond what public program benefits provide.

A child with special needs can have some expenses that are not usually encountered when raising a typically developing child, and the amount will depend on the needs and lifestyle of the family and the child’s capabilities. One of the biggest unknowns is the cost of housing. If the plan is for the child to live in a private group home-type situation, there are options. Some involve the purchase of a condo in a building with services for those with special needs. Many families also add into the budget eating out once a week, computers and phones and other items. In determining how much to fund a special needs trust, parents must remember that, after their death, the child’s budget must increase to monetize for things the parents did for the child, such as care coordination and advocacy.

As mentioned earlier in the article, special needs individuals may qualify for public benefits that can offset some of the basic costs for a child with special needs. For example, the child may be eligible for Supplemental Security Income (SSI), as well as a Section 8 housing voucher and SNAP food assistance. When the parents retire, SSI is typically replaced with Social Security Disability Insurance (SSDI), which is one-half the parent’s payment. When the parent dies, this payment becomes three-quarters of that amount. At that time, Adult Family/Foster Care may be an option to anticipate. Parents should also consider the possibility that the child may also be working and bringing in additional income (minus whatever benefits may be offset by this income).

It is vital to do a complete analysis of the future costs to provide for a child with special needs, so parents can start saving and making adjustments in their planning right away. The laws on this planning vary from state to state, so be sure to contact an experienced elder law attorney.

Reference: Kiplinger (June 10, 2019) “How Much Should Go into Your Special Needs Trust?”

What to Tell the Elder Law Attorney

If you went to a doctor’s office and did not tell the doctor what your symptoms were, it would be hard to get a good diagnosis and treatment. The same goes for a visit to the elder law estate planning attorney. Without all the necessary facts, advises the Times Herald-Record in the article “What you need to tell the elder law estate planning attorney,” the estate plan may not be very effective. It may need to be revised or created all over again, the inheritance may be given to people other than those you intended, and there could be family conflicts.

Understanding the intersection of elder law and estate planning can help you know and understand what your attorney will need to find out from you. Elder law is all about planning for disability and incapacity. This includes identifying the people who would make decisions for you if you become incapacitated as well as protecting your hard-earned assets from the cost of nursing home care. Estate planning is focused on transferring assets to the desired people, the way you want, when you want, with minimal court costs, taxes, or unnecessary legal fees and avoiding disputes over an inheritance.

Here are some of the things you should be ready to discuss with your attorney to create the most effective plan:

Family dynamics. If you have a child you haven’t seen in years, you need to discuss the child. They may have a legal claim to your estate, and that must be planned for. Perhaps you want to include the child in the estate, perhaps you don’t. If you disinherit a child in a will and you die without a plan, that child becomes a necessary party to probate proceedings and has the right to contest your will.

Health issues. If you don’t have long-term care insurance, you need five years to protect assets in a Medicaid Asset Protection Trust (MAPT). Therefore, now may be the time to start a plan. If you have a child who is disabled and receives government benefits, you can leave them money in a Special Needs Trust (SNT).

Assets listing. Full disclosure of all your assets, income, how assets are titled, who the beneficiaries are on your IRAs, 401(k)s and life insurance policies, are all the kinds of information needed to create a comprehensive estate plan. Keeping secrets during this process could lead to a wide variety of problems for your family. Your entire estate could be consumed by taxes or by the cost of nursing home care.

There’s no doubt these are extremely serious topics to broach. You or your spouse may experience some strong emotions while discussing them with your attorney. However, creating a proper estate plan, preparing for incapacity and loved ones with special challenges will provide you with peace of mind that will make it worth it.

One last point: an estate plan is like your home, requiring maintenance and updates. Once it is done, make a note in your schedule to review it every time there is a major life event or on a consistent timely basis, such as every three or four years. Laws change and lives change. Your estate plan may also need to change.

Reference: Times Herald-Record (May 25, 2019) “What you need to tell the elder law estate planning attorney”

Power of Attorney: Why You’re Never Too Young

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making, when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are three basic power of attorney documents: financial, limited, and health care.

You’re never too young or too old to have a power of attorney. If you don’t, a conservator must be appointed in a court proceeding, and they will make decisions for you. If the conservator who is appointed does not know you or your family, they may make decisions that you would not have wanted. Anyone over the age of 18 should have a power of attorney.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue a conservatorship and will not have the ability to make decisions on your behalf until that’s in place.

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a power of attorney, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the power of attorney documents you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

Surviving Spouse Needs An Estate Plan

When one spouse dies after meticulously titling assets to pass through joint tenancy to the surviving spouse, estate planning attorneys flinch. There are occasions when everything works smoothly, but they are the exception. As this article from the Santa Cruz Sentinel warns “After husband’s death, wife needs to create revocable trust.” Actually, she needs more than a revocable trust: she needs an estate plan.

Most of the assets in the plan created by her husband, in this case, did pass to the wife outside of probate. However, there are a number of details that remain. She needs to obtain date-of-death values for any non-IRA securities the couple owned, and she should also have their home’s value determined, so that a new cost basis for the house will be established. She also needs an appointment with an estate planning attorney to create a will and an estate plan.

If the surviving spouse dies without a will, her children will inherit the estate in equal shares by intestate succession. However, if any of her children pass before she does, the estate could be distributed to her grandchildren. If they are of legal age, there is no control over how the assets will be managed.  Making matters worse, if a child or grandchild is disabled and receiving government benefits, an inheritance could make them ineligible for Social Security and Medicaid benefits, unless the inheritance is held within a Special Needs Trust.

Another reason for an estate plan: a will details exactly how assets are distributed, from the set of pearls that great aunt Sarah has kept in the family for decades to the family home. A durable power of attorney is also part of an estate plan, which lets a named family member or trusted friend make financial decisions on your behalf, if you become incapacitated. An estate plan also includes an advance health care directive, so a loved one can make medical decisions on your behalf if you are not able.

These are the basics of an estate plan. They protect loved ones from having to go to court to obtain the power to make decisions on your behalf, as well as protect your family from outsiders making claims on your estate.

A revocable trust is one way to avoid probate. An estate planning attorney will be able to evaluate your own unique situation and determine what the best type of trust would be for your situation, or if you even need a trust.

You may be thinking of putting your home, most families’ biggest asset, into joint tenancy with your children. What if one or more of your children have a divorce, lawsuit or bankruptcy? This will jeopardize your control of your home. A revocable trust will allow your assets to remain in your control.

The last piece in this estate is the IRA. If you are the surviving spouse, you’ll want to roll over your spouse’s IRA into your own. Make sure to update the beneficiary designation. If you neglect this step and the IRA pays into your estate when you pass, then the IRA has to be cashed in within five years of your death. Your children will lose the opportunity to stretch IRA distributions over their lifetimes.

An estate planning attorney can help guide you through this entire process, working through all the details. If your goal is to avoid probate, they can make that happen, while protecting you and your loved ones at the same time.

Reference: Santa Cruz Sentinel (March 24, 2019) “After husband’s death, wife needs to create revocable trust”

Medicaid Planning and Estate Planning Documents

The conversation that you have with an estate planning attorney, when you are in your thirties with a new house, young children, and many years ahead of you is different than the one you’ll have when you are much older, maybe just before you retire. The estate planning attorney will know that you are about to enter a time in your life, when the legal documents you prepare are more likely to be used, says the article “Learn about legal documents and Medicaid” from the Houston Chronicle. Many conversations with clients include a conversation about Medicaid planning and estate planning documents.

It should be noted that everyone needs an estate plan at any time of life, so they may state their wishes for how assets are distributed and name a person who will speak in their behalf, in the event of incapacity because of an illness or injury.

An estate plan also includes a power of attorney, so someone you chose can serve as your agent to transact business and handle your financial matters if you are incapacitated. There should also be a declaration of conservator, in the event of later incapacity and a HIPAA medical authorization document. In some instances, a designation of remains is prepared in order to name an individual who will be the appointed agent to care for the body at the time of death.

However, there’s another reason why you’ll need to meet with an attorney at this time. As we get older, the need to address long term care becomes more important. Making the right decisions now, could have a big impact on the quality of your retirement and your later in life medical care. It is important to have a conversation about Medicaid planning before it is too late to plan.

If you have not updated your will or your powers of attorney, specifically a durable power of attorney for property, it would be wise to do so now. You will need a document to clearly authorize your agent to deal with assets. Any documents that are out of date, or in which named agents have predeceased you, won’t be effective, leading to problems for you and your heirs.

The document may also need to include a broad gifting power for your named agent, so assets can be transferred out of the estate. If this detail is overlooked, the agent may not be able to protect your assets.

This is the time when you may want to take steps to protect your children upon your death or upon the death of the second parent. If your goal is to eliminate assets to be eligible for Medicaid coverage, this planning needs to be done well in advance. In numerous states, there are state administered programs that pursue recovery of assets when a person has received Medicaid benefits. In California this program is called Medi-cal.

Your attorney will be able to work with you and your family to address your specific situation. It may be that your estate plan will include trusts, or that certain assets need to be retitled. Meet with an estate planning attorney who is familiar with your state’s laws and make sure to ask about Medicaid planning. And don’t procrastinate.

Reference: The Houston Chronicle (April 19, 2019) “Learn about legal documents and Medicaid”

What Are the Six Most Frequent Estate Planning Mistakes?

It is a grim topic, but it is an important one. Without a legal will in place, your loved ones may spend years stuck in court proceedings and spend a lot in legal fees to settle your estate. The San Diego Tribune writes in its recent article, 6 estate-planning mistakes to avoid, that without a plan, everything is more stressful and expensive. Let’s look at the top six estate planning mistakes that people need to avoid:

No Plan. Regardless of your age or financial status, it’s critical to have a basic estate plan. This includes crafting powers of attorney for both healthcare and finances and a will.

No Discussion. Once you create your plan, tell your family. Those you’ve named to take care of you, need to know what you’ve decided and where to find your plan.

Focusing Only on Taxes. Estate planning can be much more than just about tax avoidance. There are many other reasons to create an estate plan that have nothing to do with taxes, like charitable giving, special needs planning for a family member, succession planning in the event of incapacity and planning for children of a prior marriage, to name just a few.

Leaving Assets Directly to Children. If you leave assets directly to your children or grandchildren under age 18, it can cause unintended custodian or guardianship issues. Minors can’t own legal property, so a guardian will be appointed by the court to manage the property for them, until they reach age 18. If you don’t name a guardian, the court will appoint one for you and that person may have very different ideas about how the account should be managed and invested.

Making Mistakes with Ownership and Property Titles. With many blended families, you may want to preserve assets from an inheritance as your own separate property or from a prior marriage for your children. There are many tax consequences and control issues in blended families about which you may not be aware.

Messing Up Your Trust. Many people don’t properly fund or update their trusts. An unfunded trust doesn’t do anyone any good. Assets that aren’t titled in the name of the trust don’t avoid probate.

Finally, be sure to review your estate plan regularly, as your circumstances change.

Reference: San Diego Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”