Medicaid Planning Baton Rouge

How Traditional, Simple Louisiana Estate Planning Can Wipe Out The Savings

This is my attempt to educate a few Louisiana folks on the front end about estate planning so they don't get bit on the back end.

Traditional estate just doesn't always work like it used to. It's typical and traditional for married couples, at some point, to go see a lawyer about getting a Will done. Then, the attorney prepares a Will that, typically, either leaves OWNERSHIP or USUFRUCT to the surviving spouse. In fact, most couples don't know what they did - they just know they wrote a Will.

Well, one of the biggest drains of an estate while you are alive can be long term care expenses. I hope that this enables you to realize that how you arrange your estate planning legal documentation can have a profound impact on what you leave your family and what you leave what some people call the Evil Empire of the State of Louisiana.

Let's take an example. Let's say that Dad died. Dad had saved over the years enough to accumulate some CDs. His CDs, when he died, totaled $500,000 in value. And let's say Dad's traditional Will either left Mom ownership or usufruct of the $500,000.

Now that Dad died, Mom cannot live alone. She needs around the clock care. So Mom goes into the nursing home. The children think that the $500,000 is PROTECTED, because Dad left it to the kids but left Mom only the usufruct. But of course they are all quickly informed that Mom must spend the entire $500,000 on her nursing home care before Mom would qualify for Louisiana Long Term Care Medicaid. 

Of course this is when Mom and all the kids say, "Well we did not know!" Or they say, "Nobody told us....". Or they say, ""This doesn't seem fair when 3 out of 4 people in the nursing home are on Medicaid..." Or, "Surely there is something we can do at the last minute here..." Or, "Can't we just hide the money in a hole in the back yard?" Or, "Daddy just wanted to take care of Momma..."

Here's the key: Plan for these situations in advance. What Dad and Mom are getting legal affairs in order, it makes perfect sense to have an intelligent discussion about how they should leave things to each other and the family in a way that the family does not lose it to long term care expenses, taxes, or other government intrusions.

Hopefully this little piece of education can help some unknowing families get ahead of the game and protect what they've worked for. In the past, only the wealthy could afford to pay lawyers and other professionals to get the best estate protection advice. Now, with the advent of youtube and other free social media networks, anyone who wants to education themselves can find out just about anything on the internet and then seek out the right help to protect themselves and their family.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com

Gentleman Shocked to Learn That With a Pre-Nup, His Assets Weren't Protected If Wife Went to Nursing Home

I was talking to a gentleman yesterday. He was a little concerned about the possibility of losing his assets to his nursing home expenses in the future. He had recently married (for the second time). Since he and his new wife each had children from their prior marriage, and they wanted to keep their estates separate, the signed a pre-nup (also known as a Marriage Contract or a Separate Property Agreement).

He felt that he and his wife's estates were in order because of their Marriage Contract. He told me, "If my wife happens to go to a nursing home in the future, I have everything protected because of my pre-nup."

Well, no so fast. What most people who remarry later in life after losing a spouse think is that if they have a pre-nup and all of the assets are kept separate - no community property, then the assets of the spouse who does not go into the nursing home are protected. But people who think that are dead wrong - no pun intended.

The Louisiana Long Term Care Medicaid Manual provides that the assets of the spouse who stays at home (even if they are separate property of the spouse who stays at home) must be used to satisfy the needs of the spouse who is in the nursing home.

So, if you are in a second (or third) marriage, and you are confident you will never enter a nursing home - and thus, never lose your life savings, know that you could still lose everything you've worked for if your spouse needs long term care. There is a legal strategy available to you to protect your (and your spouse's) assets from nursing home poverty, but you must take advantage of the legal strategy at least five years before either spouse needs long term care.

In Some Rare Circumstances, Last Minute Medicaid Planning Is An Option

I was working with a family today. Dad was in the nursing home getting rehabilitation. Elderly Mom was still living at home, and she is too fragile to be able to take care of Dad if he comes home after rehab. Mom and Son said Dad weighed about 230 pounds, and Dad would need someone around the clock to care for him. Dad is likely to live in the nursing home until he dies.

Mom was disappointed because she expressed how hard Dad had worked over the years to save some assets to pass along to their children. They owned a paid-for home, and they had another roughly $230,000 of life savings. We discussed how, normally, people in a nursing home have to spend all of their savings until they have less than $2,000 remaining. She also told me that the nursing home in Lake Charles, Louisiana, would cost her husband $5,400 monthly. She could foresee their life savings that they had spent seven decades saving - wasting away.

We discussed a particular legal strategy that would enable them to save Mom about $175,000 of her $230,000. The only way this strategy works is that if the bulk of the non-home assets are liquid, and there is a child or children that will cooperate with the plan. The legal strategies are very complicated, but it involves:

  1. The parents transferring their Countable Resources to other parties;
  2. The parent applies for Long-Term Medicaid - and gets denied due to the transfer of resources. Medicaid will assess a penalty period that lasts a number of months;
  3. Assets are returned to the parents to reduce the value of the original transfer, thus reducing the penalty period;
  4. Parent spends the returned funds on their care.

All of this is very complicated and there is a significant amount of documentation that is necessary. One mistake can cost the family their entire life savings and perhaps even their home.

Taking advantage of legal strategies to protect your assets from losing to the nursing home is most effective when you plan ahead - at least five years before a nursing home situation. Since no one knows if - or when - they will go into a nursing home, it's difficult to determine when you should engage in Medicaid planning. But we know that the sooner you take the right action, the better.

But if you have a relative who is in the nursing home right now, or they are within days of going into the nursing home, and they have cash assets of $120,000 or more, you may want to give us a call so that we can help you determine if there are actions you can take within the rules of the Louisiana Long Term Care Medicaid Manual to protect what you've save for yourself and your loved ones.

Four New Client Matters Yesterday - Your Concerns May Be Similar

From time to time I will provide a summary of the issues that I deal with on a certain day so that you can perhaps comment on them, or at least get a feel for what kind of issues we deal with so that you will know that perhaps you are not alone in the kinds of issues that are important to you and your family. Yesterday, I had four new client meetings. Without revealing any confidentialities, the following are four separate summaries of new client meetings that I had with new estate planning clients.

  1. Friend Needs Estate Planning Legal Work. The first discussion I had was with a friend who owns a successful business. He said he was working with some financial advisors from out of state. His goal was to set up an estate plan for he and his wife so that after they both passed away, their business and other assets would transition the right way to his kids. We discussed business ownership, estate tax, irrevocable life insurance trusts, and updating all of his estate planning legal documents which were prepared by another attorney more than 15 years ago when his kids were very young. We'll be meeting again in the coming days or weeks ahead to finalize an estate planning legal program for him.
  2. Couple Wants Each Child To Receive A Certain Piece of Property. My second meeting was with a couple who wanted to avoid probate and make matters simple for the kids. Even though the husband made most of the big financial decisions for the family, it was the wife who really wanted to have everything simple because she was worried that her husband might die first. The couple also had two pieces of real estate - their home and another piece of property. For specific reasons that they indicated, they wanted one piece to go to one child, and another piece to go to another child, and the rest of their estate to be divided equally among the two children. Assets we addressed included: avoiding probate, estate tax avoidance, avoiding capital gains tax on the sale of property, who to designate to handle matters when they die, income tax aspects of inheriting an IRA and a stock portfolio, the wife's need to rely on their CPA if the husband dies first.
  3. Surviving Spouse Wants To Simplify Complex Estate. We worked with a family that had in the past set up some complex trusts for their children and grandchildren. The surviving spouse now wanted to simplify the surviving spouse's estate, leave it to the children, and then ultimately let the children inherit it and figure out how they can provide for their children. Issues we addressed included: estate and gift tax avoidance; lifetime charitable giving; giving to charity at death; naming an executor of a Will; updating prior estate planning legal documents.
  4. Avoid Probate and Avoid Nursing Home Poverty. My final new client meeting of the day was with a couple that was very clear from the outset of the discussion. The husband had been through a nightmare probate in recent years and he was very clear that he wanted his family to avoid the two probates that they would otherwise have to go through after he and his wife died, and they did not want to lose assets due to their possible future nursing home expenses. Issues we addressed included: Medicaid Planning; IRAs and SEP-IRAs; avoiding probate; how to handle bank accounts and CDs; Irrevocable Trusts for Medicaid Planning; how to title boats and vehicles to avoid probate.

I also took a call from a potential Probate client, but I told them that I was not the attorney for them. The woman's attorney/friend referred her to me. Her mother had died but the daughter did not have a good relationship with her two step-siblings. The mother owned a home but died with a Will or with any estate planning legal documents in place. Since this was likely to be an adversarial matter between the parties that would likely last for years in the court system, and since these matters never work out well, I told them that I would respectfully decline their offer to have me represent them in the potentially hotly contested matter. I wish them well.