Elder Law Louisiana

Estate Planning Trends

Over the last couple of decades, there has been a shift in the areas that consumers address when they engage an estate planning attorney to get and keep their estate legal program in order.

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While these are just trends - they don't apply to every family and every set of circumstances. For example, many families don't have a federal estate tax concern, but they also don't ever want or intend to qualify for Long Term Care Medicaid. Some estate planning issues are evergreen, they will be addressed regardless of the political landscape: issues like providing for minor children, providing for disable children, and providing for adults who cannot handle a lump sum inheritance the right way.

But the following are general shifts we see:

(1) Estate tax planning vs. Medicaid Eligibility planning. Few families these days need to worry about the federal estate tax. The average middle class family these days does worry about losing their home and life savings if they get sick and need long term care.

(2) The ILIT vs. the IIOT. Gone are the days where parents created an irrevocable life insurance trust in an attempt to use life insurance proceeds to pay estate tax. Here are the days where people transfer assets to a particular type of trust that enables them to retain elements of control but not lose the assets if they get sick.

(3) The $15,000 gift tax annual exclusion. Used to be, everyone and their brother would make gifts annually of $15,000 in an attempt to reduce the assets ultimately subject to the federal estate tax. Now, those gifts are useless, particularly if they are being made with some future Medicaid eligibility goal in mind.

(4) Avoid Lumping Assets in Surviving Spouse's Estate vs. The Double Step Up. Now, we want the assets of the first spouse to die to be "lumped" into the suriviving spouse's estate, for estate tax purposes. Assets in the estate of the surviving spouse get a step-up in capital gains tax when the surviving spouse dies. This "lumping" used to be a "no-no" because it cause the surviving spouse's estate to exceed the $600,000 estate tax exemption (which is now $11.4 million).

(5) Providing for a Child Predeceasing vs. Providing for a Child Divorcing. Many people now express a very clear desire that they do not want their ex-daughter-in-law, or their ex-son-in-law, ever controlling a penny of their money.

(6) Old School Will vs. New School Trust. Lawyers were taught in law school that wills and probate are the way to go. Plus, guiding a family through the intricacies and obstacles of the court-supervised probate (we call it "Succession" in Louisiana) can be easy and highly profitable work. Now, with so much information on the internet, consumers have now wised up to the concept that an estate can be set up to eliminate the court and attorney involvement of probate.

(7) Old School Probate vs. New School Trust Administration. Old School - your assets are frozen when you die, and your survivors hire lawyers to sort through the legal maze. New School - name a trusted family member as the Successor Trustee (or Co-Trustees) of your funded trust, and keep 100% of your estate in the family.

(8) Custom Will or Trust Provisions vs. Custom Beneficiary Designations. Now, many people have the majority of their financial wealth in their Individual Retirement Account (IRA). Your will or trust has nothing to do with directing where your retirement assets go when you die. With unique family circumstances, many families overlook the need to have their estate lawyers customize not only their traditional wills and trusts, but also their beneficiary designations on retirement accounts, annuities, and life insurance.

(9) Traditional vs. Blended Family. With people living longer and getting married more, the blended family estate plan can get tricky. Protections need to be in place both for the surviving spouse AND the children or heirs of the first spouse to die.

BONUS: For estate planning professionals only: Old School - the QTIP election. New School - the Portability election. This has to do with proper estate tax reporting within nine months after the first spouse dies, EVEN IF the first spouse to die's estate does not exceed the applicable estate tax exemption amount.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

If You Have an Undivided Interest in Family Property, Watch This Regarding Your Future Louisiana Long Term Care Medicaid Eligibility

Some people mistakenly believe that an applicant for Louisiana Long Term Care Medicaid does not own property that belonged to their parents when the parents' Successions have not been completed.

Here's an example: Grandparents owned a piece of real estate. Grandparents died many years ago leaving two children, a son and a daughter. Either the grandparents' Wills, or intestate law (you pick) leaves the property to the two children, equally. The grandparents' successions were never completed leaving title to the property in grandparents' names.

Grandparents' daughter is now requiring nursing home care and is applying for Louisiana Long Term Care Medicaid. As part of the application process, it is discovered that Grandparents' daughter is entitled to inherit one-half of the property. Medicaid rejects the daughter's Medicaid application based on the Medicaid Manual's Estate definition, which provides:

"Count the applicant/enrollee's share of an undivided estate as a resource the first day of the month following receipt. Receipt is deemed to be the day of death in the case of a direct descendant or when there is an uncontested will designating the individual as beneficiary."

Medicaid correctly assets that even though the Successions had not been started or completed, one-half of the property is a countable resource, pushing daughter's countable resources far in excess of the $2,000 statutory limit. The Medicaid application is denied. If the daughter is going to stay in the nursing home, somebody will need to pay the nursing home the applicable $6-7,000 monthly amount.

Because receipt of the property is deemed the date of death, it behooves families to, pro-actively and promptly complete the Successions of their ascendants, so that planning can be done in advance of a nursing home stay in order to protect family property.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Is Estate Planning Mainly For the Rich?

Is estate planning only for the rich? Do middle class folks really need to engage in estate protection or estate planning?

While there are dozens of reasons people engage in estate planning with estate planning lawyers, this post addresses who REALLY benefits the most from engaging the services of the right estate planning attorney. Let's look at three aspects of estate planning - taxes, probate, and long term care expenses - and see who gets whacked the most from failing to plan.

Let's say Rich and his wife have accumulated $8 million. They never engage in any estate planning because they are too busy sailing on their boat and travelling in the Caribbean. But as they age, they get sick and they spend a staggering $1 million on long term care expenses. Then, they die, and between all the probates in the various states (they own real estate in multiple states), their estate incur a total of $400,000 in probate cost. Still, their two children divide the remaining $6.6 million - each child walks away with $3.2 million - not too shabby.

Now, let's say Middle Class Max worked his tail off to pay off his $350,000 home and accumulated $700,000 in savings. They also neglect estate planning. Later in life, Max has a stroke, and Max's wife has dementia. They too spend $1,000,000 in long term care expenses. They spend their life savings of $700,000, and Medicaid pays the remaining $300,000. They are not forced to sell their home during their lifetime, but Medicaid pursues reimbursement of $300,000 from the estates through Medicaid's Estate Recovery Program. During the probates, the house is sold for $350,000, Medicaid is paid $300,000, and funeral and probate expenses wipe out the remaining $50,000. Middle Class Max's two children are left with zippo, $0, not a thing.

So you tell me, which family would have benefited more from engaging in estate planning the right way? Rich's family or Middle Class Max's family?

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

When an IRA Owner Should Take More Than Their Required Minimum Distributions In Order To Save Income Tax and Avoid Nursing Home Spend-Down

In this post we discuss the topic of whether IRA owners should take more than their Required Minimum Distributions (RMDs) in order to have the family pay less overall income and capital gains tax, and to protect accounts from nursing home costs.

My best guess is that more than 90% of IRA owners elect to take only their Required Minimum Distributions from their Traditional IRA. It seems that the only people who take more than the RMD are those who need the money to spend it.

What many don't realize is that the net amount to family is often not as much as it could be when IRA owners take only their RMDs. The rational goes something like this: When an IRA owner takes RMDs only, it is likely there will be a taxable IRA that will be left to beneficiaries. The beneficiaries must pay income tax on distributions they get from their Inherited IRA - sure, they can postpone distributions but they will still pay income tax on these postponed distributions.

However, an IRA owner whose taxable distributions exceed the RMDs, so much so that the entire IRA is depleted, will be able to invest these after tax proceeds in such a manner that the appreciation on those after-tax investments will never be taxed, due to the step-up in basis rule.

The kicker comes when an IRA owner wants to protect their IRA from nursing home expenses. When they take only the RMDs, it will create a situation that when they enter a nursing home, they will still own an IRA and will be forced to take distrubtions, pay income tax, and spend the after-tax proceeds on their nursing home care until they have less than $2,000, leaving virtually nothing for their heirs or designated beneficiaries.

However, the IRA owner who took larger IRA distributions, paid taxes, and put after-tax proceeds in a Medicaid qualifying Grantor Trust will protect those assets from future nursing home expenses, and will maximize what goes to the beneficiaries income tax free and capital gains tax free.

While I understand that people don't want to pay tax until the positively, absolutely have to, perhaps some thought should go into whether an IRA should take only the RMDs that are required, or whether they should take out more than the RMDs, and invest the after-tax proceeds in a manner that is both protected from nursing home spend-down, and income or capital gains tax at death.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

What Does "Asset Protection" REALLY Mean?

In this post we dig a little deeper about who wants to protect their assets and their estate from losing their estate to (1) nursing home expenses; (2) a lawsuit; and (3) government intervention.

People often call our office or request to discuss with me how they can "protect their assets." But different people, in different circumstances, have different ideas regarding what they want to protect their estates FROM.

One group of people asks me about how to protect their estate from long term care expenses. Perhaps they are 65 or older, and they have seen family members and friends be forced to deplete their estate, and even lose their home, sue to the costs they must pay to reside in a nursing home.

When we engage in a conversation about Long Term Care Medicaid eligibility, we have to take an in depth look at an individual's, or couple's, assets, monthly income, health, age, and the different rules that apply. Often we make some determination regarding what assets should remain in the individual or couple's name, and what assets, perhaps, should be transferred to some form of a trust. Not that the traditional "avoid probate" revocable living trust does NOT provide much in the way of protection from nursing home expenses. Also note that this form of "asset protection" is most effective when transacted at least five years before entering a nursing home.

The second theme of asset protection involves protecting assets you own in the event you get successfully sued. Sometimes people contact us and they are a nervous wreck because "something happened," (maybe the threat of a lawsuit, maybe an automobile accident where you were determined at fault, maybe someone injured on real estate you own, or maybe you have a serious illness and you are worried about the millions of dollars of potential health care expenses).

Two common obstacles I've seen to this kind of asset protection are: (1) People do not want to give up the control over what they own; or (2) people don't engage in this kind of asset protection until it is too late - whereby action could be later undone due to the rules on fraudulent conveyances and the intent to defraud creditors.

The third category of asset protection requests comes from those who, in general, want to protect their estate from "the government." When I ask follow-up questions and dig deeper, they often want to protect their estate from the various forms of taxation, and they want to keep their estate out of probate (the court system).

The solutions for these three categories of asset protection vary based on the appropriate set of laws, rules, and regulations that apply to your situation, and the solutions vary based on your particular financial and estate situation.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Which revocable or irrevocable trusts allow you protection from the dreaded nursing home expenses?

"Do revocable or irrevocable trusts help qualify for Long Term Care Medicaid?"

That is the question we often get from clients and prospective clients who are concerned that they will lose their savings and home if they wind up in a nursing home facility.

There are many different kinds of trusts, but often people tend to break them down into two types: revocable and irrevocable.

Regarding revocable trusts, the Louisiana Medicaid Eligibility Manual could not be much clearer, "The entire corpus of a revocable trust is counted as an available resource to the individual."

Revocable trusts have never been used to protect assets from nursing home expenses. Revocable trusts are, however, used extensively for Succession / Probate avoidance purposes. And quite frankly, when the revocable living trust works like it should, it's a wonderful thing for the survivors of the person who set up the trust. When the person who set up the trust (Settlor) dies, the Successor Trustee (often a family member) can immediately disburse assets to the trust beneficiaries (often the children) without any of the attorney and court involvement, expense, and delay associated with a court-supervised probate process.

Regarding irrevocable trusts, it is important to note that not every irrevocable trust offers nursing home protection and Medicaid eligibility. An important provision in the Louisiana Medicaid Eligibility Manual provides, in pertinent part, that, "The portion of the corpus that could be paid to or for the benefit of the individual is treated as a resource available to the individual..."

There are several other factors that affect Medicaid eligibility when someone has established an irrevocable trust, but clearly of the trustee can pay corpus to or for the individual seeking Medicaid eligibility, then the trust assets will need to be spent prior to eligibility.

Some parents, in order to protect assets, establish an irrevocable trust and provide in the trust instrument that a trustee may make distributions to or for the children of the Settlor of the trust.

Here's my words of warning regarding Medicaid eligibility. Seek out good legal help in your area. Medicaid is a combined state and federal program, so you must work with someone who is well-versed in your state's eligibility provisions. Don't try this at home on your own. Get it right the first time.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Dave Ramsey Says OK to Give Assets Away to Avoid Tax, But Not to Protect From Nursing Home

When seniors are either uninsurable for long term care insurance, or they make a conscious decision to avoid purchasing long term care insurance, they have a decision to make regarding potential future nursing home expenses.

And America disagrees with Dave Ramsey regarding his stance on paying for nursing home costs.

First of all, I like Dave Ramsey and his message regarding getting and staying out of debt. I also like his message about living within your means and saving for a rainy day. His message is contrary to the commercial messages people see and hear daily encouraging people to borrow and spend.

Dave Ramsey despises the estate tax. I'm sure Dave encourages all taxpayers to take advantage of tax laws like the mortgage interest deduction, the business expense deduction, and the charitable deduction to keep as much of their money in their pocket and send as little to the government for redistribution. Regarding the estate tax, I'm sure Ramsey would encourage people who are subject to the estate tax to give away as much as they can to avoid the 40% tax, and keep the family wealth "in the family."

But when it comes to nursing homes, Dave's advice is different. He suggests that you never take a penny out of your name, or re-title an account or an asset. He says if you have money you should spend it all on your care. Don't dare engage in any activity, even though it is permissible, to protect your estate from long term care costs, he says.

Here's an example. Let's say Couple A and Couple B live in the same street and all four individuals are 72 years old. Each couple has $460,000 in life savings, and each couple has a home worth $160,000. Annual nursing home costs in their state are $80,000 per person per year.

Couple A listens to Dave Ramsey and they keep everything in their name. Five years later, at age 77, both husband and wife enter a nursing home. They must spend their $460,000 in life savings on their care down to less than $3,000 - it takes them three years to do this because they are spending $160,000 per year. They then qualify for Medicaid. They live one more year in the nursing and they both pass away after residing in the nursing home for four years. After the die, Medicaid pursues its Estate Recovery rights, forces the sale of the home to reimburse Medicaid for the $160,000 of expenses it incurred. The family gets ZERO.

Couple B ignores Dave's advice and takes estate planning action to protect their savings and home. Five years later, at 77, Couple B enters the nursing home and qualifies for Medicaid. Four years later, just like Couple A, Couple B passes away. The children of Couple B now share the $640,000 of assets that Couple B had worked for, paid taxes on, and saved.

Dave Ramsey implies that what Couple B did was fraud. But it's fraud when, for example, you remove all of your assets from your name one month or one year before applying for Medicaid and you lie about it. But the government says it is permissible to engage in Medicaid planning, so long as you engage in it at least five years before applying for Medicaid.

I find it odd that Dave Ramsey would encourage people to take advantage of all tax deductions available to keep assets in the family while still taking advantage of the services the government has to offer, but don't dare move a penny of your assets in order to protect it from privately paying for nursing home costs - particularly when the government says it is ok to do so, as long as you follow their rules.

Again, I like Dave Ramsey's message on being debt-free and avoiding debt, but America does not think it is fair when those who carelessly spend everything get a 100% free ride for their long term care costs, while those who scrimp and save and accumulate a few hundred thousand dollars must get wiped out if they must reside in a nursing home.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Medicaid Income Rules When You Have a Community Spouse and an Institutionalized Spouse

Any way you look at it, long term care services are expensive. And when you have a married couple with one spouse residing in the nursing home while the other spouse is healthy enough to reside in their residence, it gets tough because on top of the several thousand dollar nursing home bill, the couple is also spending thousands monthly to maintain the residence. In these circumstances, couples spend hundreds of thousands of dollars over several years.

Many couples, particularly those who do not plan ahead, are forced to consume their assets (also called "Countable Resources"). This post is not about spending or protecting the assets, but this post is about how the monthly income of the couple gets handled.

Here's an example. Let's say that each spouse is receiving $2,000 of monthly income (social security and pensions are common forms of monthly income, but there are others).

Louisiana Long Term Care Medicaid rules provide that ownership of income is determined without regard to community property laws. For Medicaid purposes, a spouse has full ownership of income paid in his name.

In determining how much of the income the couple can keep. Medicaid rules provide that the income of the community spouse is never to be considered in determining eligibility for an institutionalized spouse. Keep in mind that the spouse residing in the nursing home institution is called the "institutionalized spouse," while the spouse still living in the community is called the "community spouse." The community spouse always gets to keep all of the community spouse's income.

In order to determine the institutionalized spouse's patient liability, we must start with that spouse's gross monthly income ($2,000 in our example) and subtract their personal needs allowance ($38). Then, we subtract the Community Spouse's Maintenance Needs Allowance.

The Community Spouse's Maintenance Needs Allowance is calculated by subtracting the community spouse's income ($2,000) from the Community Spouse's Maintenance Needs Standard ($3,160.50 for the first half of 2019 - it gets adjusted twice each year). Thus the Community Spouse's Maintenance Needs Allowance totals $1,160.50.

So, $2,000 minus $38 minus $1,160.50 equals $801.50. This is the institutionalized spouse's patient liability. The concept here is that the community spouse always gets to keep all of the community spouse's income. But if the community spouse's income is less than the applicable Maintenance Needs Standard, then the community spouse gets to keep enough of the institutionalized spouse's income to get the community spouse up to a total of monthly income that equals the Maintenance Needs Standard.

Keep in mind here that these are Louisiana rules and your state's rules may differ. Also note that this calculation is not made, nor is it relevant, if the patient is denied Medicaid due to too many countable resources or for some other disqualifying reason.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Designating Your Spouse versus a Trust for your Spouse as Beneficiary of your IRA

A common estate planning principle communicated by spouses who have children from prior marriages and relationships is, “If I predecease my spouse, I want my assets to be available for my surviving spouse’s needs, but when my surviving spouse dies, I want my assets to revert back to MY children.”

This can get complicated when the estate consists of Traditional IRAs, as many estates do. Let’s take the example of a Husband and Wife who each have two children. When H dies, his IRA is worth $1,000,000. In the year after Husband dies, Wife is 80 years old.  

When it comes to income tax planning and IRAs, most recommend to keep the IRA balance as large as possible, allowing an IRA owner to earn investment income on deferred income taxes. 

In this post we will discuss two strategies: (1) Naming the surviving spouse as the designated beneficiary of Husband’s IRA; and (2) Naming a trust (for the benefit of the spouse) as the beneficiary of Husband’s IRA. 

When a surviving spouse is the designated beneficiary of an IRA, the surviving spouse’s ability to roll over inherited benefits to her own IRA gives her a powerful tax-deferring option, not available to any other IRA beneficiaries. If the surviving spouse holds the IRA as an owner, her Required Minimum Distributions (RMDs) are determined using the Uniform Lifetime Table under which her Applicable Distribution Period (ADP) is the joint life expectancy of the surviving spouse and a hypothetical 10-years-younger beneficiary. If she withdraws only the RMDs under the Uniform Lifetime Table, the IRA is guaranteed to outlive the surviving spouse. And it’s likely that the IRA will be worth more in the surviving spouse’s late 80’s than it was when she inherited it at age 80. 

Let’s look at some numbers. Since Wife can use the Uniform Lifetime Table, her first required distribution the year after Husband dies (assuming a $1,000,000 IRA value) is $53,500 (5.35% of the IRA value). The next year her RMD is 5.59%. And the next year, 5.85%. If the investment performance of the IRA exceeds these distribution percentages, and she only takes the RMDs, the IRA will grow.  

The downside, however, is that since Wife is treated as the owner of the IRA, Wife can name whoever she wants as the beneficiary of beneficiaries of her IRA. She could exclude Husband’s children by naming Wife’s children, or perhaps even Wife’s new spouse that she married after Husband died! 

So instead of naming Wife as the designated beneficiary of Husband’s IRA, Husband considers naming a trust for Wife as beneficiary. The trust instrument might provide that RMDs go to Wife for her lifetime, but when Wife subsequently dies, trust assets revert back to Husband’s children. But since a trust was named as the beneficiary of Husband’s IRA, even if the trust qualifies as a “see-through” trust, RMDs after Husband dies will be based on the single life expectancy of the surviving spouse (Wife) which results in substantially less income tax deferral than would be available if the surviving spouse were named as the outright beneficiary and rolled over the benefits into her own IRA. 

Let’s look back at the numbers. If a trust for Wife is named as beneficiary of Husband’s IRA, the first RMD when Wife is 80 (based on the same $1,000,000 IRA) will be $98,000 (9.8% of the IRA value). At age 81, the RMD will exceed 10% of the account value. And each year, the percentage will increase. If Wife lives long enough after Husband dies, the RMDs based on the required single life expectancy table will cause most of the benefits to be distributed to Wife outright which will defeat the purpose of trying to protect those IRA assets for Husband’s children. 

So keep in mind that there are tradeoffs when it comes to naming beneficiaries of IRAs.

Who Will Pay Your Long Term Care Expenses (Part 3 of 3)?

People turning 65 have a 70% chance of needing long term care services. And 20% of people turning 65 will need long term care services for more than five years.

Basic long term care services exceed $5,000 monthly. In 20 years, this cost will double. Funds come long term care services come from three sources: (1) the government; (2) insurance companies; and (3) out of people's own pockets.

In previous posts we discussed more specifically how the government pays people's long term care expenses through Medicaid (Part 1), and we discussed how insurance companies provide funds to help people cover all or a portion of these expenses (Part 2). Here we'll address what happens when people are forced to pay for the care out of their own pocketbooks.

Here are some problems that families incur when they have to spend their own hard-earned dollars paying for long term care services.

Sometimes a family will admit a spouse or parent into a nursing home, forking out $6,000 per month, while the people in the rooms to the left and the right, and the nursing home resident across the hall, are all getting what's called "a free ride." This makes people bitter about the "system."

But let's say, rather, that a family decides to skip the nursing home route and they decide to keep husband/wife/father/mother at home. Well, 24/7 care these days cost in excess of $10,000 monthly - so the funds go even faster.

So now the family decides to save money by having the children "take turns" caring for their parent. But what often happens is only two of the four children live in the same geographic area, while two others live in town. And the primary caregiving daughter who lives locally gets made at her siblings because, while she does not mind caring for her parent, she's having to carry the heave load while other siblings don't pull their weight. All this causes family relationships to tear apart - at least that's what they tell me!

So, what should you do?

(1) Plan ahead. You'll have the most options if you start having serious discussions while you are healthy. Talk to an attorney who can help you with these and other estate planning options. Talk to your family who will play a significant role in your care.

(2) Get some help. To get the best information about your best options, you'll need help from an estate attorney who understand's your state rules regarding Medicaid eligibility, and what it takes to get there. You'll need to uncover your long term care insurance options - perhaps your attorney can guide you through this as well. And you'll need to consult with your family who will be assisting you in the future.

(3) Don't be a victim of "Paralysis By Analysis." Sometimes, when there are too many options to consider, and some of those options seem complicated, people throw up their hands and take no action, putting it off for another day, which turns into another year and then another decade.

So plan ahead. Get good information. Work with good people so you can get it right the first time, and then live your life to the fullest knowing that your long term care needs will be met according to your plan.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Who Will Pay Your Long Term Care Expenses (Part 2 of 3)?

With so many people needing long term care these days, consumers are asking lots of questions about how to protect what they own if they need expensive long term care services in the future.

In Part 1 of our three part series, we addressed when and how the government covers long term care expenses. In this Part 2, we are addressing how and when insurance companies cover long term care expenses.

In general, there are two types of long term care insurance: traditional long term care insurance, and asset based long term care insurance.

Traditional long term care insurance can be looked at similar to your automobile insurance and your homeowner's insurance. You pay for it every year, and if you never file a claim, that money is kept by the insurance company. If you own traditional long term care insurance and never need long term care services, the money you paid for the traditional long term care insurance is never recovered.

In this post, however, we'll look at an asset based insurance product that combines life insurance with long term care benefits. This policy is often funded with a single payment whereby an individual or a couple repositions what is often an existing low yield asset (like funds in a savings account) into a policy and the result is a net zero cost.

Let's take a look at an example. Let's say a healthy 59 year old couple wants to protect their assets from long term care expenses. They want to ensure that if either or both of them need long term care services in the future, that they will each have $6,000 of monthly long term care benefit, and they want that benefit to last for an unlimited period of time. They also want to make certain that if they do not need long term care services in the future, that their children (their beneficiaries) will receive a tax-free death benefit from the insurance company after they both pass away.

At 59 years old (the numbers get progressively worse the older you are when you do this), they decide to reposition $114,400 with the insurance company. When either of them need long term care and cannot perform two of the six activities of daily living, the insurance company will reimburse them for $6,000 of monthly cost. However, if they never trigger the long term care benefit, the insurance company will pay their children $150,000 after both spouses pass away.

People who tend to own long term care insurance like the peace of mind they get from knowing that coverage is in place. Insureds also like the fact that if they need long term care services, they can receive those services in their home or in the facility of their choosing - they will not be bound to a Medicaid facility under Medicaid conditions. Many believe that it makes smart financial sense to own long term care insurance - particularly if they can reposition non-performing cash and know that they (or their heirs) will receive a significant return either in the form of long term care benefits or a death benefit.

People who choose not to own long term care insurance often do so because they are choosing to either rely on Medicaid or self-fund those expenses. They may something like, "Well, Momma never needed long term care. Me and my sibling took turns taking care of her and she went down fast. If Momma would have had long term care insurance, she would not have used it. So, I'm not gonna get long term care insurance."

The key here is to plan ahead. Get educated and informed. Make good informed decisions while you are relatively young and healthy. Waiting too long or waiting until the last minute significantly limits your options.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Estate Planning Issues That Arise When a Couple Gets Married Later in Life Bringing Children and Assets into the Marriage

It's common these days for two people to get married later in life after getting either divorced, or outliving their first spouse. It's also common for those spouses who get married later in life to have adult children, and they also often bring significant assets into the marriage. This post addresses some of the estate legal issues that are involved when spouses get married later in life.

When no advance legal planning is addressed prior to the marriage, problems often arise after the death of one of the spouses. It's common for there to be confusion regarding who owns the marital assets. Do they belong to the husband? Do they belong to the wife? Which assets are community property? Is there any community or separate debt? Are there any reimbursement issues? These problems get compounded when the people having the discussioin/argument are the surviving spouse and the children of the first spouse to die.

Basic Louisiana community property law dictates that anything acquired during the marriage through the effort or skill of either spouse is community property. Some spouses mistakenly believe that if these "earnings" remain in the name of the spouse who earned them, then those assets would remain the separate property of that spouse.

Basic Louisiana community property law also dictates that the natural and civil fruits of the separate property of a spouse are community property. Again, many spouses mistakenly preseum that if a spouse has "separate" investments, then the interest and dividends that those "separate" investments produce must be separate property - not so.

Some spouses, particularly those with income producing assets, will sign a declaration reserving the fruits of their separate property as separate property. But this cannot be done without their spouse knowing about it. A copy of the declaration must be provided to the other spouse, and the declaration must be filed in the appropriate public real estate records.

Many couples who get married later in life, each of whom has children of their own, and each of whom have significant assets they want to "protect," sign a matrimonial agreement, also known as a "pre-nup," "marriage contract," or "separate property agreement." Couples who do this typically attempt the modify the default community property rules that exist in Louisiana when a matrimonial agreement is not in place.

Many matrimonial agreements provide that each spouse will have their own separate assets and debts, and there will be no community property. This can make it easier to determine "who owns what" when one spouse dies. When done right, there are no community property issues, community debt issues, reimbursement issues, or other claims that the estate of the first spouse to die might have against the surviving spouse. These agreements are typically signed by both spouse prior to the marriage, and they must be recorded in the appropriate public real estate records.

And then the next issue that must be addressed after the above is addressed is: How to leave our respective estates to each other and our children or other heirs - the will and trust discussion.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Protect IRA From Nursing Home: Medicaid Planning

Often, when an individual enters a nursing home, a determination is made regarding whether they will be a private pay patient or a Medicaid recipient while in the nursing home. One part of the Medicaid application process revolves around the Medicaid applicants assets.

An individual often owns exempt assets and countable resources. Common exempt assets include a home and one vehicle. Countable resources include most other assets, including bank accounts, stocks and bonds, non-home real estate, and LLC interests.

The question often comes up as to whether an Individual Retirement Account (IRA) is a countable resource.

The Louisiana Medicaid Eligibility Manual provides, in pertinent part, "Count funds in an IRA as a countable resource."

When people pre-plan for a future Long Term Care Medicaid eligibility, they often transfer title to their assets to either other individuals or to certain types of trusts. While it is fairly simple to transfer title of real estate, investment accounts, and most other assets, it is not possible to transfer ownership of an IRA to others or to a trust.

Some people consider taking a large distribution from their IRA, paying the taxes, and then protecting the after tax proceeds, but this often requires the IRA owner to pay a huge income tax bill and most people don't want to do that  - I don't blame them.

We often tell people that while you are fortunate to have an IRA, you are kind of "stuck" with it for nursing home purposes.

But know that strategies exist to protect the funds in your traditional or Roth IRA, but most of those strategies require that you plan years in advance of entering a nursing home - so it's critical that you get armed with the possibilities and take sufficient action to protect those funds.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 329-2450

Arranging a Louisiana Estate for Asset Protection and Easy Inheritance

This post describes how Irrevocable Grantor Trusts are used to protect assets while parents are alive, and then to provide for an easy transition or inheritance to the children or other heirs.

As folks age, they often worry that they will run out of money before they die due to their longevity and all of the threats that seniors face these days.

Many seniors create trusts to help protect what they've worked for. They often keep some assets in their name, and they transfer other assets to a trust that they create.
 
Because their assets are titled in the right kind of trust, with the right kind of asset protection provisions, they are less likely to lose these assets from some kind of life-changing event.

These asset trusts are often irrevocable, but sometimes certain aspects of the trust are amendable. These trusts typically allow for trust assets to be sold and re-invested. These trusts usually have some provision for distributions of principal. Many of these trusts and estates are arranged so that probate is avoided at the death of the Settlors/Grantors/Trustors.

Check with the right estate planning attorney in your jurisdiction to make sure you establish an estate planning legal program that is right for you and your family. Don't try to do this yourself. Too much is at stake.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 329-2450

Protecting the Home Property When You Enter a Nursing Home

When someone enters a nursing home, it is likely that they own both exempt assets and countable resources. The countable resources must be consumed down to a certain limit ($2,000 for a single person) prior to Louisiana Long Term Care Medicaid eligibility. Exempt assets are not counted for purposes of initial Medicaid eligibility. The home is an exempt asset. So, it's important to understand the Medicaid definition of the home, under what circumstances you can transfer the home out of your name, and whether Medicaid will have Estate Recovery rights when you die.

In general, the home is described as property in which someone has an ownership interest and that serves as his or her principal
place of residence. Home property includes: the house or lot which is the usual residence, all contiguous property, and any other buildings on the home property. Property is contiguous to the residence if it is touching the residential property (even corner to corner) and is not separated by property owned by others. Property separated by a public right of way, such as a road, is considered contiguous.

If a person, in 2018, has more than $572,000 of equity in their home, then the excess in not exempt. If they own a home out of state, then, generally, it is not exempt. And if you list your home for sale, then it is no longer an exempt asset.

In certain circumstances, one can transfer their home to another person prior to applying for Medicaid, without incurring penalties. This is important because if you take the home out of your estate, then Medicaid will not have estate recovery rights when you die. 

You can transfer your home to a child who is blind or permanently and totally disabled as defined by SSI at the time of the transfer. You can also transfer your home to a child, without penalty, if the child is age 21 or over, is not blind or permanently and totally disabled, was residing in the home for at least two years
immediately before the date the individual became institutionalized, and provided care to the individual allowing the individual to reside at home, rather than in an institution.

A note exists to the above exception that provides:
The exception must be documented by written statement
from physician indicating his/her knowledge that during the
preceding two years, the individual’s child was present in the
home as the primary care giver and if not for the care
provided by the child the individual would have required care in an institution (nursing home).

Finally, if the home is in your name when you die, it will be part of your Louisiana Succession and thus, subject to Louisiana Estate Recovery rights. People often thing the home is "home-free" because it is an exempt asset. However, after a Medicaid recipient dies, if the home is in the recipient's Louisiana Succession, then Medicaid can seek reimbursement from the Succession, forcing the Succession to sell the home to pay the Succession debt.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 329-2450