Medicaid Trust

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

Rules on an Irrevocable Trust and Nursing Home Medicaid

This post describes the regulations that exist regarding when assets in a trust are considered resources of someone who is applying for Long Term Care Medicaid.

Many Seniors are concerned about the cost of long term care, especially if it is necessary that they spend months or years in a skilled nursing facility.

Some Seniors explore getting assets out of their name timely to make themselves eligible for Medicaid. These same Seniors, however, are uncomfortable putting assets in their children's names for fear of losing control of the assets, and for fear of giving their children unwanted tax consequences.

Some people explore putting assets in trust for purposes of gaining future Long Term Care Medicaid eligibility. The Louisiana Long Term Care Medicaid Eligibility Manual (the "Manual") has specific rules regarding whether trust assets are considered a resource of the Medicaid applicant, rendering them ineligible for Medicaid benefits.

Regarding when the Medicaid applicant is a trustee of a trust, the Manual provides:

"Count the trust as a resource, regardless of whose funds were
originally deposited into the trust, if the applicant/enrollee:
 is the trustee, and
 has the legal right to:
- revoke the trust, and
- use the money for his own benefit."

Regarding when the Medicaid applicant is a Settlor of a trust, the Manual provides:

"Count the trust as a resource if the applicant/enrollee is the settlor
(created the trust) and:
 has the right to revoke it, and
 can use the funds for his own benefit"

Regarding when assets are not considered a resource and penalty periods apply to the transfer of the assets to a trust, the Manual provides:

Consider penalties under the transfer of resource policy (refer to
I-1670 Transfer of Resources For Less Than Fair Market Value) if
the applicant/enrollee:
 created the trust,
 does not have the right to revoke it, and
 cannot use the principal for his own benefit.

The traditional "avoid probate" revocable living trust clearly is a resource for a Medicaid applicant. Many people, however, create other trusts, and transfer assets to those trusts, which can enable a Senior to avoid the risks inherent in transferring assets during into children's names, while starting the five year penalty period and protecting assets from the nursing home spend down.

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

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

4 Estate Planning Tips For 2018

2018 brings some changes to the estate planning horizon. The following are four tips that you can take advantage of to protect your estate in 2018.

(1) Taxes. With the new law changes, there will be less emphasis on gift and estate tax avoidance, and more emphasis on capital gains tax and income tax avoidance. Smart married planners will ensure that their estate gets the valuable "double step-up in basis" (doesn't happen automatically), while other smart planners will arrange their affairs so that they and their heirs and beneficiaries minimize the income tax burden of a transfer of retirement accounts and other valuable assets.

(2) You're Living Longer. Because you are living longer, you need to protect your estate if you get sick for a prolonged period, or, if your mind becomes demented. Arranging all of your assets so that your trusted loved ones have access when you can't, and, for some, protecting your estate from nursing home poverty, is critical. To protect your estate from when you are sick, you must take action while you are well.

(3) Simplify Your Estate Settlement. Many Louisiana families want to arrange their estate so that judicially-supervised court proceeding (some call it "Probate;" other Louisianians call it "Succession"). Whether it's utilizing a revocable living trust or other probate avoidance strategies, act in 2018 to make estate settlement simple. In addition, have conversations with participants in your estate settlement - before your estate settlement. This can go a long way toward having an amicable estate settlement.

(4) Get Started. Procrastination is a big obstacle to estate planning. Put it on your "To Do" list, and then get started so you can check it off your "To Do" list. You'll feel great knowing you have all your legal affairs in order for yourself and your family.

Happy New Year! Make 2018 your best ever.

Paul Rabalais
www.RabalaisEstatePlanning.com
Law Office locations: All over south Louisiana
Toll-free 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.

Difference Between Revocable and Irrevocable Trust

People often ask me to explain the difference between a revocable and an irrevocable trust. That's a tough one because there are so many kinds of trusts and even irrevocable trusts can, within the terms of the trust, allow certain things to be revoked or amended. But here's my answer.

Most people who consider forming a trust like the concept of a "revocable" trust. The word "revocable" implies that you can amend, undo, change, alter, or revoke the trust. When someone hears that a trust is "irrevocable," they often get concerned because that implies that things are rigid, fixed, inflexible, and control is lost.

The typical "avoid probate" trust is a revocable trust. There is no requirement that the typical "avoid probate" trust be irrevocable. Your home and other assets must simply be titled in the name of your trust when you die.

Other trusts that people establish, however, are irrevocable because the trust must be irrevocable to get the benefits that the person setting up the trust is attempting to get. For example, people with large estates will often transfer a portion of their estate each year to an irrevocable trust for the benefit of their future heirs. To exclude the assets from the taxable estate, the trust must be irrevocable. Assets that you own in your revocable trust will be included in your estate for federal estate tax purposes - but this typically applies to the wealthy.

For the middle class, many people transfer assets to an irrevocable trust to remove them from their name for nursing home purposes and to achieve Long Term Care Medicaid eligibility. Assets in your revocable trust, while avoiding probate, are Countable Resources and must be spent on your care if you enter a nursing home facility.

To make matters just a little more complicated, most people who form a revocable living trust provide, in their trust instrument, that their revocable trust becomes irrevocable upon their death. People do not want other third parties to be able to change the terms of their trust after they die.

So, whether you have a revocable trust or an irrevocable trust depends on your circumstances and what you are trying to accomplish. 

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.

How To Transfer Assets To A Trust

Was working with a gentleman from Metairie, Louisiana. He was getting to a point in his life when he wanted to get all of his estate legal affairs in order.

He was interested in arranging an estate legal program so that his home and investments would be protected from the nursing home spend-down, and he wanted to make things easy when he passed on by enabling his children and grandchildren to avoid probate.

One of the questions he asked was, "Mr. Rabalais, how do you transfer a home, an investment account, and life insurance policies to a trust?"

I said, "Well, each asset is different." I told him that we would prepare all of the necessary paperwork to transfer his piece of real estate to his trust, and that once he signed the paperwork, we would record the transfer in the real estate records of the parish.

I then told him that once his trust is signed, he can go to his brokerage firm and request that his account title be transferred from "Joe Smith," to "Joe Smith as Trustee of the Joe Smith Trust."
He said that seemed simple enough.

He also currently owns two life insurance policies that have cash value. He did not want to be required to surrender the life insurance policies when he enters a nursing home. He correctly heard that if he went into a nursing home, he would be forced to surrender his life insurance polices and spend that cash value, rendering his life insurance policies worthless and without a death benefit.

I told him that once his trust is signed, he can contact his agent and request that ownership of the policies be transferred from his name to his trust. Easy enough.

Different classes of assets get transferred to trusts in different ways. But it's easier than most people think!

Paul Rabalais

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.

Lafayette,Louisiana Family Benefits From Dad's Estate and Medicaid Planning

I've been working with a Lafayette area family lately. Dad has his home, his life savings, and a couple of other pieces of property, and he wants to make sure his kids get it when he dies. His biggest threats to his children, as he sees it, are:

  1. Losing the assets due to a long-term care nursing home stay;
  2. Taxes; and
  3. Probate

A large part of his life savings is tucked away in his Individual Retirement Account (IRA). He also has investments held in an account that is not an IRA, and he has some money in bank accounts.

He realized that his IRA is threatened. He knows that any distributions from the IRA during his lifetime or after he dies will be subject to income tax to the recipient of the distribution. He was questioning whether taking required minimum distributions each year was the smartest way to handle his IRA. Here's what he said:

"If I just keep taking my required distributions, then I will pay tax on those distributions and the remainder of my IRA will continue to grow tax-deferred. All of the future growth will be ordinary income to whoever receives a distribution and those distributions in the future could be taxes at a rate as high as 40%, particularly if they go to my kids. Plus, if I go to a nursing home, I will be forced to take large distributions, pay the income tax, and then spend the remaining amounts on my nursing home expenses."

Then he asked:

"Wouldn't it be better if I took larger distributions that the required distributions, pay the tax, and then place the after-tax proceeds in a special trust account where it will be protected from my future nursing home expenses? Oh, and since the trust is a Grantor Trust, any future appreciation of my investments after I take it out of the IRA will passtax-free to my kids due to the step-up in basis that they will enjoy when they sell the assets after my death?"

His analyses appears to make a lot of sense. Most people are encouraged to keep every penny that they can inside their IRA. I'm not saying that's wrong every time, but as long as the investments grow inside the IRA, then a big chunk of each distribution will go the IRS. If the IRA goes ahead and takes distributions faster than required, and pays the tax on those distributions, then future appreciation would escape taxation due to the step-up in basis. Plus, if the IRA owner takes distributions and places those funds into the right kind of trust, then there is the added benefit of being protected from future nursing home costs.

Anyone who has an IRA and is concerned about future taxes and about losing the IRA to nursing home expenses, should have a conversation with an estate planning attorney who understands not only the estate tax, but the income tax and capital gains tax consequences of taking minimum distributions versus taking distributions larger than the minimum required amount.

Give us a call at 866-491-3884 to start a conversation about how to protect your IRA from the government. Don't wait another day. Every day that you wait could be costing you and your family!!!

Seven New Louisiana Estate Matters That Walked Into Rabalais Estate Planning During The Last Two Days

I have been fortunate to have seven different families, from Metairie, Baton Rouge, Shreveport, Gonzales, and Zachary. ask me to help them with various estate matters over the last two days. Each family has a different situation and a different concern, so I thought I'd give you a general overview of their problems and how we are solving them so that if you have a similar problem you will know that you are not alone and there is someone that can help who has helped others in similar situations.

Here are the seven different situations that families have retained me in the last two days to help them:

  1. Mom's Investment Account Frozen. A gentleman came and met with me two days ago. His mother had passed away and, as a result, her investment account was frozen. Mom and the son had the same investment advisor. The investment advisor suggested that the son come see me so that we could complete the probate (also known in Louisiana as "Succession") to obtain the necessary court orders which will allow the family to have access to Mom's currently frozen investment account.
  2. Want To Protect Each Other and Teenage Child. A couple came in that had been referred by another financial advisor. The couple had a teenage child and wanted to make sure that their "legal affairs were in order" because they had done no estate legal planning in the past. We will be setting up an estate legal program for this couple to make legal matters easy or nonexistent when one spouse dies, and then making sure that guardians and trustees are named for their minor child should something happen to the parents before the child is an adult.
  3. Couple With No Children. Working with a couple that has been married for decades with no children. They have some pets that are important to them. We will be setting up an estate legal program so that when one of them dies, matters will be under the continued control of the surviving spouse, and that after they both pass away, funds will be set aside for the care of their pets, with the remainder of their estate being divided among four charitable causes that they care deeply about. Nice and fun couple - organized too!
  4. Blended Family. Working with a couple each of whom was in their second marriage. They each had one child. The children lived geographically far apart and had not spent much time together. The couple wanted to make sure that protections were in place for each other so that when one dies, there is no interruption from the children, and then when both spouses die, things are in place for the two children to inherit outside of probate and other court legal proceedings being necessary. Another really nice couple.
  5. Protect Mom's Money From Nursing Homes. Working with a family where Mom is currently residing in an assisted living facility. The family realized that all assisted living facilities in Louisiana are private-pay, but they are worried that if Mom's conditions worsens, Mom will have to move to a skilled nursing facility and be forced to spend $6,000 monthly or more on her care.  We are setting up a legal plan for the family so that Mom's money will be protected if she has to reside in a nursing home in the future. Plus, probate will be avoided when Mom dies.
  6. Execute Will. I wrote a Will for a woman many years ago. She passed away recently. I met with the family and they retained us to execute Mom's Will and complete Mom's Succession so that the home and Mom's CDs, and the vehicle, could be transferred 100% into Dad's name. We are also updating all of Dad's estate planning legal documents because he wanted to change how things would be disbursed upon his death.
  7. Plan For Two Children. Now working with a gentleman who contact me after "watching some of my videos and reading some of my blog posts online." He has a rather large estate, much of it in real estate, and he wants to make sure that it goes to his two children the right way and he wants it to be easy for his two children to inherit the property. We also had some discussions about capital gains tax and estate tax to make sure that his children would avoid as much tax as possible as this property gets transitioned to the next generation.

While many people think that estate planning is the same for everyone, you can see from reading these seven examples that every family and every individual has a unique situation that requires unique solutions. If you have an estate that you want to protect for your family, feel free to give my office a call at 866-491-3884 to start a conversation about the easiest ways to protect what you have for your loved ones.

Paul Rabalais