Elder Law Louisiana

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.

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.

The Right Kind of Louisiana Trust Protects Estate From Nursing Home Costs

Been working with a Louisiana couple who's main concern was losing assets to nursing home expenses in the future. They had a revocable living trust set up years ago by a non-lawyer group. They were hoping that their existing trust would protect those assets from their future nursing home expenses.

Several of their family members had lost everything due to extended nursing home stays. This couple owned a home, rental property, as well as stock and mutual funds.

We quickly realized that their revocable living trust gave them no protection from nursing home costs in the future. So, part of their new estate legal program for these Louisiana residents includes establishing the right kind of trust that allows them to remain in control of their estate, yet have it structured in a way that their two biggest threats to estate depletion (nursing home costs and probate) are no longer a concern.

If you'd like to start a conversation about how you can protect your home and life savings from government interference, give our office a call from anywhere at 866-491-3884

Updated Long Term Care Medicaid Numbers For 2017

About this time every year, Medicaid updates certain charts of Medicaid rules. Income and asset limits are often adjusted for inflation. The following are recent changes to the Louisiana Long Term Care Medicaid regulations. Note that exceptions exist to many of these rules and we are providing this information to be general in nature.

  1. Spouse's Resource Standard. When only one spouse enters a nursing home, the spouse who stays outside of the nursing home (often called "Community Spouse" because they are still residing in the community) can retain a certain amount of Countable Resources. For 2016, the Spouse's Resource Standard was $119,220. For Admission Dates from 1/1/17 to 12/31/17, the Spouse's Resource Standard will be $120,990. Example: Grandpa enters the nursing home 2/1/17, while Grandma stays at home. Their combined bank accounts total $350,000, andthey have no other assets besides a home and a vehicle. They will be required to be private pay in the nursing home and spend their $350,000 on Grandpa's care until these funds are spent down and they have less than $120,990 remaining. Then, Grandpa can apply for, and presumably qualify for, Louisiana Long Term Care Medicaid.
  2. Spousal Maintenance Needs. This figure increased from $2,980.50 in 2016 to $3,022.50 for 2017. Example: Let's say, in the above example, Grandpa and Grandma spend down all of their bank accounts below the Spouse's Resource Standard. But Grandpa and Grandma each have $1,800 of monthly income from pension benefits and social security ($3,600 total). The Spousal Maintenance Needs provision allows Grandma, in the above example because she is a Community Spouse and needs some income to live off of, can keep the first $3,022.50 of income that they have. The reminder of their income will be assigned to the nursing home, and Medicaid will pay for the balance of Grandpa's nursing home care.
  3. Home Equity Limit. Perhaps you've heard that your home is "exempt" for Medicaid purposes. A deeper dive while enable you to realize that while the home is not a Countable Resource in determining your Medicaid eligibility, your home that is in your estate when you die is subject to Medicaid Estate Recovery regulations which require Medicaid to force the sale of your home after you die to reimburse Medicaid for what they spent on your nursing home care. But if you own a home that is valued at more than $560,000 in 2017, note that the Home Equity Limit for 2017 is $560,000 (up from $552,000 in 2016.

What does all of this mean? It means that you need to plan ahead to protect the value of your home and your life savings from losing it all to a nursing home stay.  Click the button below if you would like to watch my 23-minute video which teaches Louisiana residents how to protect their home and life savings from nursing home costs.

What Are Options That People Consider When Attempting To Protect Their Estate From Nursing Home Poverty?

I've talked to many Louisiana families about things that they had done in an effort to protect their money from all being sucked up by the nursing home costs which can exceed $100,000 annually. Lots of mistakes being made here by people who don't truly understand the intricacies of the Louisiana Long Term Care Medicaid law and regulations. While you won't get all the answers in this post, you'll learn what some of the common mistakes are. So...here are options that just don't work.

Do Nothing

Probably the worst thing that you can do if you want to protect your estate from being eaten up to nursing home costs is to ignore the problem.

Example. Nelda had her home worth $150,000 (no mortgage). She also owned accounts totaling $450,000 in value. Nelda procrastinated taking action to protect her estate from skilled care cost. A stroke caused Nelda to have to reside in a nursing facility. Nelda was forced to spend all of her $450,000 (until there was less than $2,000 remaining) before qualifying for Medicaid. When Nelda died, Medicaid pursued its Estate Recovery rights, forcing Nelda’s home to be paid to reimburse Medicaid for what it had spent on her nursing home care.

The people who protect their estate from nursing home costs typically are those who are proactively seek out the right information, at the right time, and work with the right people, and get it right the first time. Others risk losing everything they own.

Give It Away

Some people choose to give their assets away so that the assets will not be in their name when they get sick and apply for Medicaid.

People generally utilize one of two different gifting strategies when they attempt to help their financial situation by giving their assets away:

1.      Give $14,000 Away. Gift and estate tax laws provide that you can donate $14,000 to as many people as you want to without gift and estate tax consequences. Many people mistakenly interpret this as an income tax rule. Many mistakenly believe that either the donor or the recipient must pay income tax on gifts that exceed $14,000. Example: Dad gives Daughter $114,000. No one owes any income tax, but since the gift exceeded $14,000 (by $100,000) Dad has used up $100,000 of his $5.450,000 estate tax exemption. No one owes tax, but when Dad dies, he can “only” leave $5,350,000 free of the 40% estate tax. The problem, however, with making $14,000 annual gifts, from a Medicaid Planning standpoint, is that assets are not protected until five years after they are given away. So, giving it away in $14,000 increments does little good.

2.      Give Everything Away. Some people think that they will beat the government by putting all of their assets in their kids’ names. But his could be really dumb move for tax purposes. Example: Mom and Dad own a home that they bought 35 years ago for $30,000. Today, the home is worth $240,000. If Mom and Dad donate the home to the kids during Mom and Dad’s lifetime, then the kids will get Mom and Dad’s $30,000 “carry-over” capital gains tax basis. When the kids later sell the home, there could be an extra $60,000 or so of capital gains tax due. Plus, when Mom and Dad donate their home to their kids, Mom and Dad will lose their property tax homestead exemption. In addition, many parents that I talk to don’t like to give up the control over their assets that they give up when they put everything in their children’s names. Serious problems could result if the children die, go bankrupt, have IRS issues, get divorced, have spouses with bad spending habits, or if they can’t pay their debts. Don’t turn over everything you own to your kids.

Rely on Medicare To Pay Nursing Home Costs

While Medicare will pay for some of the nursing home costs for the first 100 days of rehabilitation if you had a prior hospital stay of at least three days, you must pay 100% of the remaining costs of the skilled nursing facility (unless you qualify for Medicaid).

Have a Last Will and Testament and Power of Attorney

If you think that somehow your last will and testament will help you avoid losing your home and life savings to nursing home poverty, then think again. A last will and testament (“Last Will”) names your executor who will administer the court proceeding when you die, and your Last Will tells a judge who to make sure remaining assets get disbursed to at the end of the court proceeding (“Probate”). But a Last Will does nothing to protect your estate from long term care costs.

Example. Mom had a Last Will prepared naming her daughter, Sue, as the executor. In her Last Will, Mom left her estate to her two children, Sue and Richard. Mom felt like she did all she needed to do to “protect her estate for her children.” Eight years after writing her Will, Mom went into a nursing home. Mom was forced to spend her entire life savings on her nursing home care. When Mom died, Sue, as the executor of Mom’s probate, was forced to sell Mom’s home on behalf of the estate and give all of the proceeds of the sale to Medicaid – leaving the children with nothing.

A common Last Will technique can get you in bigger trouble. Many married couples write Last Wills. Often, the Wills are structured so that the first spouse to die leaves all of his or her assets to the surviving spouse. Then, because all of the assets were lumped into the surviving spouse’s estate, the surviving spouse must deplete the entire family estate before getting any help from Medicaid. So, the “I Love You” Will leaving everything to your spouse can be a disaster.

Put Your Money In a Safe Deposit Box – Or In A Hole You Dig In The Back Yard

One of the questions on a Medicaid application asks where you have a safe deposit box and what is in the box. Documents of Proof that Medicaid says it may need from you includes, “A list of what is inside any safe-deposit box.  This must be a written statement by a bank employee or a sworn statement from someone who looked inside.”

Failing to disclose the necessary information on a Medicaid application is Medicaid Fraud. It’s easier to plan ahead, get the right information to enable you to protect your estate, and then take that action.

Some people mistakenly believe that if they “put their child’s name on their bank account,” then the bank account somehow is no longer a Countable Resource for Medicaid eligibility purposes. Wrong.

Gretna, Louisiana Estate Planning Audience Worried About Losing Assets To Nursing Home Expenses

Gave an estate planning presentation to a great group of folks in Gretna today. When each of the individuals walked in, I asked them what they were hoping to learn during the presentation. The responses were all very similar, although each response was based on a particular background or family experience. Some of the responses were as follows:

  • Husband has dementia. One woman stated that her husband has dementia and she was worried that she would have to put him in the nursing home in the future, which would cause them to lose their life savings, and ultimately, lose their home. She said most of their net worth was in their home and she was hoping to be able to leave the home to their children.
  • Couple Wants to Avoid Leaving It to the Government. Another Gretna couple said our information is exactly what they were looking for. They have worked hard and had saved. They want to see their hard-earned estate go to their children instead of to the government or the nursing home. They said that one of their two children was an attorney - I told them that I would not hold that against them. :)
  • Couple owns rental real estate. One couple owns several doubles in Jefferson Parish. The husband, in his late 60's, had seen other family members deplete their estate due to nursing home costs. They were concerned about protecting their property and their savings for their one child. We discussed the capital gains tax problems associated with donating the properties to their son right now.
  • Husband Died Two Years Ago. One woman in attendance lost her husband two years ago and had not started on his Succession. She is getting to a point where she can't manage the home and is considering selling it and moving into something smaller. There are family issues that may make completing the probate difficult, if not impossible. Perhaps we can help her.
  • Future Executor Worried. One gentleman said he was named as the executor of his elderly parent's Will, but prior to attending my presentation, thought he would be able to go to the bank and brokerage firm after his parent dies with the Will and get immediate access to funds for immediate distribution to his many siblings. Now he is a little worried because the sibling relationships are less than rosey, and he anticipates many problems when his parent dies and he tries to fulfill his duties as executor.

All in all, it was a great crowd in Gretna today. All were worried about the various potential interferences that could mess up their trying to leave their estate to their children. I look forward to the opportunity to work with many of these folks and help them establish a Louisiana estate planning program out of our Metairie office so that they can pursue their senior years without worry that there will be difficult estate issues when they die.

If you live in Louisiana, and would like to discuss how an estate legal program might help your family protect 100% of your estate, give us a call at 866-491-3884, and let's set up a time to chat about how easy it is to get your estate legal affairs in order.

 

Shreveport Couple Wants Estate Plan To Protect Home and Husband's Separate Property From Probate AND Nursing Home Costs

I started working yesterday with a married couple from Shreveport last week. They stated that their main estate planning concerns were:

  1. They wanted to avoid the surviving spouse and their children to avoid probate when they die. They had been involved in a difficult probate in the past;
  2. They wanted to make sure that property that had been in the husband's family would remain in their family for their children and grandchildren; and
  3. They wanted to stay in complete control of their "money" but they wanted to make sure that their home and the husband's family property was protected from nursing home costs.

They talked at length about how two of their four children spend a significant amount of their time on the husband's family property - hunting on part of it, fishing on part of it, and enjoying the outdoors. The other two children did not use the property much but those two children would enjoy getting their share of the mineral rights from the property after both the husband and wife pass away.

They also talked about how one of their daughters was very organized, and responsible, and had really good business sense. The couple decided that this daughter would be the one designated as the Successor Trustee to handle transfers of assets equally to the four children after husband and wife die.

So, the end result is that we are establishing to trusts for their family. the first trust is arranged to protect the value of their home and the husband's separate property from any possible future nursing home costs. The husband asked, and I assured him, that his family property would retain its separate property status in the trust. Assets in this trust will avoid probate when they die. We also set up a second trust to hold their investments. The couple will remain in complete control of these accounts while they are alive and spend the funds as they wish. These accounts will never be frozen when they die because they are trust accounts. When one spouse dies, the surviving spouse will stay in control. After both spouses die, their daughter (the Successor Trustee) will have instant access to divide these accounts equally among the children, outside of probate.

If you live in Louisiana and would like to have an estate legal program in place to protect yourself and your family from nursing home costs and probate, click here to watch a 23 minute video where I explain - precisely - in layman's terms - what you need to do to protect your family.