Elder Law Louisiana

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

Medicaid 2018 Asset and Income Limits (with Analysis)

Every year the State of Louisiana's Department of Health adjusts certain Louisiana Long Term Care Medicaid asset and income limitations for Long Term Care applicants and recipients. The following is a summary of the changes made for 2018.

The Long Term Care Resource Limit for Single Individuals ($2,000)  and Married Couples ($3,000) has not changed.

The Spousal Resource Standard has increased from the 2017 amount of $120,900, to the 2018 new limit of $123,600. What this means is that if one spouse is in a nursing home (the "institutionalized spouse") and one spouse still lives in the community (the "community spouse"), the the community spouse can retain up to $123,600 of Countable Resources. The rationale is that the spouse who is not in the nursing home needs assets to live off of.

Note that the Louisiana Home Equity Limit has increased from $560,000 in 2017, to $572,000 for 2018. Most people realize that the home is not a countable resource - it is an exempt asset. But what some don't realize is that when a Medicaid recipient dies, the State of Louisiana has Estate Recovery Rights which allows the State of Louisiana to force the sale of the home to reimburse Medicaid for what Medicaid spent on the deceased Medicaid recipient's care.

However, if the home, at the time of Medicaid application, is worth more than $572,000, then the applicant will not qualify for Medicaid due to Louisiana's Home Equity Limit of $572,000. 

Regarding monthly income, the new Spouse's Maintenance Needs is $3,090 of monthly income. Generally, the Community Spouse will be permitted to keep the first $3,090 of the couple's monthly income. Exceptions to this rule apply, however, so work with the right estate planning attorney to protect as much of your assets and income as possible.

Finally, the Average Monthly Cost for Private Patients of Nursing Facility Services remains at $4,000, as it has since November 1, 2007. This means that if you make an uncompensated transfer within five years prior to applying for Medicaid, you will be assessed a penalty period of the value of the transfer divided by $4,000. The fact that the actual cost of nursing home care increases each year makes it very difficult to transfer assets prior to a nursing home stay to protect assets. This $4,000 number really should be increased since the lower the number - the longer the penalty period.

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

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

A Last Will and Testament Ain't Asset Protection

Was working with a Louisiana couple that came in to discuss getting their estate legal affairs in order. While different people have different priorities when it comes to estate planning (taxes, nursing home expenses, probate, blended families, children who spend, disabled children, in-laws you don't like, protect grandchildren, who will be in charge, health care decisions, to name a few), this couple perceived their biggest threat the potential to lose their savings and home to nursing home expenses. One of the spouses had an illness that didn't pose an immediate threat to independent living, but there is certainly the likelihood down the road that long term care will be needed.

One of the spouses, who was not real educated, mentioned on one or more occasions something like, "While I kinda heard that when it comes to estate planning, all you need is a Will." 

I get that in coffee shops and in barber shops people give advice to their friends and colleagues. But when it comes to the intricacies and varied issues involved these days, one-size-fits-all advice just doesn't work.

Obviously, if you write a Last Will and Testament, you are going to leave all of your assets in your name. If you have assets in your name and you go into a nursing home, you must spend your assets first before Medicaid pays for the care. They let you keep your home but Medicaid will have Estate Recovery rights so that when you die, your home must be sold to reimburse Medicaid for what they spent on your care - after you spent all of your own money.

Because there is uncertainty in life, I don't know how this family's story will end. They've worked hard to accumulate what they have. It sounds like their children and grandchildren could really benefit from an inheritance. But only time will tell what will happen in the future.

Paul Rabalais
Estate Planning Attorney
paul@RabalaisEstatePlanning.com
Phone: 866-491-3884

Louisiana Man Protects House Proceeds FOR Grandchildren and FROM Nursing Home Costs

Hoping you can benefit from my vlog by hearing stories about what others have done and then realizing you can do the same to protect what you have for yourself and your loved ones.

I'm working with a gentleman who just sold his house and will likely be renting for the rest of his life. He's handicapped and he has no family nearby that can help take care of him - he's convinced that if his condition worsens one day in the future, he'll need to reside in a nursing home.

He has three grandchildren that he adores. He wants to make sure that his money stays protected for his grandchildren to benefit from one day. When I inquired whether he was concerned about losing the money to the nursing home, he said that was his #1 concern.

So we are in the process of setting up a trust for him - a very particular kind of trust - so that if he does go to the nursing home, that his money is protected. Note that the typical "avoid probate revocable living trust" does NOT protect the money from nursing home expenses.

I told him he was being smart by planning ahead. Because of some of our federal and state regulations, it's paramount that you take advantage of legal strategies well before you get sick.

For more updates, Subscribe to the youtube channel of Rabalais Estate Planning, LLC. Also, you'll be doing me a big favor if you share this info with your contacts and friends.

Paul Rabalais
866-491-3884
www.RabalaisEstatePlanning.com
Offices all over south Louisiana

Louisiana Usufruct and Long Term Care (Nursing Home) Medicaid

We get lots of questions about whether people who own the Louisiana usufruct can qualify for Louisiana Long Term Care Medicaid benefits.

So I'm sharing information today with you from the Louisiana Medicaid Eligibility Manual regarding usufruct and Medicaid.

When someone who owns a usufruct is in a nursing home and attempting to qualify for Medicaid, the first thing you want to determine is whether their usufruct is over a consumable or a nonconsumable. 

If the person owns a usufruct of a consumable, such as money, certificates of deposit, promissory notes, bank accounts, etc., then the entire amount of the asset's value is a Countable Resource. So, if Dad died leaving Mom the usufruct of a bank account that had $200,000 in it when Dad died, then the entire amount is considered a resource of Mom. Some people mistakenly believe that since there are naked owners (typically, the children), that Mom does not have to consume these assets in the nursing home.

If the usufructuary owns the usufruct of a nonconsumable item, such as land, houses, shares of stock, etc., then the value of the usufructuary's usufruct must be determined by a Medicaid table that factors in the usufructuary's age. So, for example, if Dad died and left Mom the usufruct of a piece of land worth $100,000, and Mom is 80 at the time of her Medicaid application, then the table indicates that Mom's usufruct is worth 43.659% of the asset. So, by Mom owning the usufruct of a piece of land worth $100,000, she has a Countable Resource valued at $43,659. This is a problem for Mom. Perhaps she will need to sell her usufruct for this amount and then consume all of that money before successfully qualifying for Medicaid.

The problem here is that there is little that can be done at the last minute to solve this problem. But there's lots that can be done if you act early (ideally, at least five years before entering the nursing home. 

Find this helpful, go LIke our law firm's facebook page at Rabalais Estate Planning, LLC, and discover lots more.

Seven Common Uses For Trusts

People often mistakenly believe that trusts are for rich people. But you're about to find out that the trusts are used these days by all classes of people, and in some scenarios, trusts can benefit the middle class more than they can benefit the wealthy.

The following are seven common reasons people in Louisiana use trusts:

(1) Avoid Probate. Probably the most common reason nationwide why people use trusts. When you die with assets in your name, whether you have a last will or not, your assets are frozen. Your executor and your heirs will hire attorneys who will guide the family through the government-supervised probate (also called "Succession") process. Most people believe that this proceeding is too burdensome, costly, time-consuming, and just an overall pain in the behind. In some cases, it tears families apart. You can establish your revocable living trust and name trustees and beneficiaries of your trust, re-title assets into your trust while you are alive, so that when you die, your trustee disburses your trust assets to your beneficiaries, all outside of the government and legal system interference.

(2)  Avoid Nursing Home Poverty. The biggest threat to many people's life savings these days is not taxes or probate, but long term care expenses. With people living longer, if you own assets and need long term skilled care, you will be forced to pay for all of your own care out of your own savings until you have less than $2,000 remaining. If you work with the right people and set things up the right way, at the right time, and you get it right the first time, then you can protect your home and life savings from a forced spend-down in the event you need long term care in the future.

(3) Protect Irresponsible Heirs. Many people we work with want to leave an inheritance to their children or grandchildren, but they fear or they know that leaving a lump sum to certain individuals will enable them to squander the inheritance and spend it on the wrong things. You can establish a trust so that when you die, the inheritance for the financially immature heir can be doled out to him or her over time, or perhaps provide for a monthly stipend, or provide that someone else would have the discretion to determine when the heir is financially responsible enough to handle an inheritance. 

(4) Blended Family Situation. The biggest worry about blended families and estate planning is that when the first spouse dies, the worry is that all of the assets will go the surviving spouse. And then when the surviving spouse dies, all assets will go to the surviving spouse's children. The children of the first spouse to die won't get a penny. If you are a spouse in a blended family situation, you can establish a trust so that when you die, your assets are available for your spouse, but when your surviving spouse later dies, remaining trust assets go back to your children. This helps blended families protect assets for the right people.

(5)  Special Needs Trust. If you leave assets outright to someone who is getting government benefits, then the inheritance you leave them may get them kicked off of their benefits. By leaving the inheritance to what is commonly referred to as a "Special Needs Trust," you can arrange things in a way so that your heir continues to receive the valuable benefits, but also benefits from the inheritance that you left them the right way in a trust.

(6) Minors. Don't ever leave anything outright to a minor. When you leave life insurance or part of an estate to a minor, then that inheritance, while the child is a minor, must be directly supervised by a judge, and a judge must approve every expenditure of the inheritance on behalf of the minor, and then when the child turns 18, the remainder of the inheritance gets dumped in the child's lap. You can set up a trust so that you name a trusted friend or relative, or perhaps a company, to be the "Trustee" of a trust for the benefit of your minor child or grandchild. This will further make sure that what you leave to the minor is used for the right reasons outside of government interference, and is doled out the right way as the minor gradually turns into an adult.

(7) Avoid Taxes. Some people set up trusts to avoid taxes. The wealthy often establish trusts to move money from their "taxable estate" to an arrangement whereby assets are "out of the estate." It is important to note, however, that this estate tax affects only a small number of families. When an individual dies with an estate of less than $5.5 million, the estate is not required to file a federal estate tax return. Married couples can double the amount they can protect.