The Coronavirus pandemic has forced families to think about topics they might generally avoid; serious illness and death. Because the virus doesn’t always present symptoms in the early stages, those who are struck with a severe form often do not have time to prepare their business and legal affairs before requiring medical intervention. What can you do now to ensure that your legal and financial matters are in order? Below are some recommendations on what you or your loved one can do to keep your home and business running smoothly in case you are hospitalized or otherwise unable to act on your own:
1. Review your Health Care Power of Attorney (HCPOA). This document allows someone to make your health care decisions in the event you are unable to. You may name one or more individuals whom you trust to act as your agent(s). We recommend that you name at least one alternate agent, should your first agent be unable or unavailable to make decisions on your behalf. If you become mentally competent and able to communicate with your doctor, the authority of your HCPOA agent ceases.
2. Review your General Durable Power of Attorney (GDPOA). This document is often referred to as a business or financial power of attorney. Your agent can pay your bills, file your taxes, and conduct your ordinary business affairs. Similar to the HCPOA, you may name one or more individuals whom you trust to act as your agent(s). Again, we recommend that you name at least one alternate agent, should your first agent be unable or unavailable to make decisions on your behalf.
You’ve just come from taking your elderly mother to her doctor and learned that she needs to be admitted to a long-term care facility. Your mother isn’t a wealthy woman and you have no idea how she is going to pay for long-term care. This would be a good time to consult an elder law attorney and here’s why:
A good elder law attorney can help you devise a plan to pay for your mother’s long-term care, make suggestions on ways your mother can preserve some of her assets and which assets need to be liquidated, sold, etc. If your elder law attorney determines that your mother will immediately qualify for Medicaid benefits, she will need to provide the following information as part of the Medicaid application process:
1. Non-Financial Documents
a. Identification – picture ID (driver’s license, state ID)
b. Social Security card(s)
c. Birth verification (birth certificate, baptismal certificate or school record with date of birth)
d. Marriage license or death certificate/divorce decree of spouse
e. Health Insurance Identification Card (for all insurance coverage including Medicare, Medicare Supplemental, etc.)
f. Military discharge records including original Form DD-214
g. Names, addresses, phone numbers of all children
h. Listing of assets sold or given away in the last 5 years
2. Legal Documents
a. Most recent Health Care Power of Attorney, Living Will, General Durable Power of Attorney, Will
b. Trust documents
c. Business entity/partnership agreements
d. Resident admission agreement (if in assisted living or nursing home)
Rumors, gossip and hearsay are your worst enemy when it comes to long-term care planning. Many people delay planning because they hear one thing or another from a family member or friend, but they never take the time to investigate whether the information is accurate or if it even applies to their own situation. Before you assume you won’t qualify for Medicaid benefits for nursing home care, or wouldn’t benefit from long-term care planning, do yourself a favor and visit an experienced elder law attorney to get the FACTS. In the meantime, here are a few common long-term care misunderstandings held by many clients:
1. To qualify for Medicaid benefits, I must get rid of all my assets. False. In Kansas, although you’re not allowed more than $2,000 in “countable assets” to receive Medicaid, not all of your assets are counted toward computing your eligibility. For example, in Kansas, your house is an exempt asset so long as your spouse resides there or there is a chance that you will return home. Other exemptions include assets that can’t be converted to cash, burial plots, business or income-producing property, household furnishings, personal property, pre-paid funeral plans and a vehicle. Further, if you are married, your spouse (a/k/a well-spouse or non-applicant) may keep a portion of your countable assets as his/her “community spouse resource allowance”. However, something everyone should keep in mind, is that many of the aforementioned assets lose their exempt status after death.
Dementia is a frightening diagnosis for any family.
The life expectancy for an individual with dementia can vary greatly depending on the exact diagnosis but patients routinely live more than five, eight or even 12 years after they first begin to require full-time care. These numbers vary depending on the individual and advancing treatments but they give you a better idea of what you might expect should you or a family member receive a dementia diagnosis.
Even with the best of intentions to receive care at home, very few family members are equipped to provide the health and safety needs of a patient with advanced dementia. As a result, most dementia patients end up needing full-time nursing home care. Will you be financially able to pay for that care?
In Kansas, the average annual cost for around-the-clock care in a nursing home, with a semi-private room, is a little over $65,000, according to a 2019 Genworth report. This means that an individual needing eight years of full-time nursing home care would pay more than $520,000 over that time period. For many families, this equates to most or all the wealth they have accumulated over their lifetime.
Medicare does NOT pay for long-term care in a nursing home. It will cover some expenses related to temporary admissions, but not long-term care. Medicaid is the State agency that provides payment for long-term care but only individuals who have less than $2,000 in countable resources are eligible. The application process for Medicaid can be confusing and time consuming. That process is even further complicated if you feel you have been unfairly denied Medicaid assistance (a common event, even for clearly qualified applicants).
Have you ever experienced the frustration of forgetting a password or login information for one of your online accounts? The process to regain access to your account can be maddening. Now, think about what your loved one might experience if they need to gain access to your accounts after your death. Would they know where to begin? Have you provided a trusted friend or family member with a list of your digital accounts and passwords, or at the very least, provided them with the location of where that information is stored?
In today’s digital age, you must remember access information for not only social media and consumer sites, but also highly sensitive accounts with banks, investment firms, accounting and tax services, and credit card companies. By creating a digital asset plan, you can create a quick reference source of login and password information for yourself, and help your family locate and access your accounts should they need to do so after your death.
How should you create a digital plan?
1. First, create a digital inventory. Your inventory may look something like this:
• An itemized list of computing hardware, such as personal computers, external hard drives or flash drives, tablets, smartphones, digital music players, e-readers, digital cameras, and other digital devices. It is a good idea to reference the location of each item, the corresponding operational manuals, and warranty information.
• List all data that is stored electronically. Detail whether that information is stored online, in the cloud, or on a physical device. This data might include family genealogy, health records, photos, personal and business contact information, educational and military service information, etc.
• List online accounts, such as email, social media accounts, shopping accounts, photo and video sharing accounts, online storage accounts, and websites and blogs that you may manage.
• List domain names you own and expiration/renewal dates for the same.
If you grew up in rural America, it’s a pretty safe bet to say you know a farm or ranch family who experienced a bitter argument after the parents passed away while the farm/ranch assets were being divided. Perhaps you were even one of the unfortunate family members caught up in the turmoil because Mom and Dad never found time to do estate planning, or just couldn’t decide on a method to transition the farm/ranch operation to the next generation.
If you own a farm or ranch, would like to keep the operation in your family for future generations, AND desire to preserve family relationships, now is the time to form a solid succession plan. A good succession plan takes time and isn’t without emotion and compromise, but the result can provide a future for your family and ensure your operation transfers to the next generation with as few problems as possible. Succession planning is a complex matter but here is a brief synopsis of three common succession options we see:
1. Farming heir purchases farm assets from parents as they reach retirement age. The proceeds are incorporated into the parents’ estate, with the intent to share those proceeds with the children upon their death. Drawbacks to this approach may include the requirement that the farming heir have access to large amounts of money or credit to complete the purchase. (Too much debt may financially cripple the farming heir if he/she does not have adequate collateral prior to the sale.) Also, the parents’ will have capital gains tax on the proceeds from the sale. Both of these could be lessened by the parents financing the sale. Keep in mind that should one or both of the parents require multiple years of nursing home care, some or all of this income could be required for their care, leaving little to nothing for their heirs after death.
2. Farming heir purchases farm assets from estate after both parents pass. The drawbacks to this option are very similar to the first option. The farming heir must have access to large sums of money or credit and if the parents required extended nursing home care and received Medicaid, the heirs may be required to sell farm property at public auction to pay Medicaid debt. The upside here is that since the assets would have received a step-up in basis at the parents’ death, the selling heirs will not have to pay capital gains tax.
If the task of helping your parents coordinate medical services, home repairs, caregivers, and legal and financial consultants has fallen to you, below is some important information you might need.
As your parents’ physical and/or mental health declines, they may require skilled nursing home care. If this is necessary, you will need to be aware of your parents’ financial information to determine if they will have enough to pay for their care versus if you will need State assistance. Similarly, you should have a comprehensive knowledge of their medical needs and treatments to ensure adequate health services will be provided to your parents. If your parents are agreeable, begin to accumulate this information now before you are faced with an emergency nursing home admission or a death. Gathering this information while your parents are alive and able to advise you on the location of assets, names of advisers, etc. will save you countless headaches - trust us!
What’s the easiest way to gather this information? Your parents can most easily assemble the necessary documents and contact information, if they are in good health and willing. If they struggle with their health or organizational skills, they could legally appoint you to serve as an immediate Power of Attorney for their financial and health care matters, to help them with this process. These Powers of Attorney would allow you to communicate with any business or health care agent working with your parents even if your parents still have capacity. You could also make decisions on their behalf, should that become necessary. As a legally appointed Power of Attorney, you can pay their bills, sign contracts, make investments, etc… Be aware, however, with this power comes greater legal responsibility. Your decisions must be beneficial to your parents and be in keeping with their standard practices. You will be held to a higher standard by the Court if it is determined that you acted against your parents’ best interests.
So, you and your significant other want to get married? Congratulations! Because a marriage is a legally binding contract, you need to be aware of your legal rights and obligations before saying “I do”. Most couples, in addition to the actual marriage contract, will enter into multiple other contracts while planning the wedding event of their dreams. To help your wedding day and marriage run more smoothly, we’ve assembled a few ideas for you to consider:
• Get written contracts with vendors. Early in the planning process, you will likely arrange for vendors to supply your venue and reception needs. Vendors can include bridal or tuxedo stores, photographers, bakers, reception halls, musicians, caterers, florists, security, clergy, wedding coordinators, printers, travel agencies, etc. Make sure you obtain written contracts from each vendor specifically stating what they will supply for you and the price, including details of when and where everything will transpire. The written contract should be obtained at the time you make a payment. Failure to have a written contract can lead to unimaginable stress and disappointment at your wedding.
• You will need a marriage license. Contact the Clerk of the District Court at your county courthouse to fill out the required paperwork at least a week prior to your wedding date to ensure all the proper documents are completed in time for your ceremony. In Kansas, once you make an application for the marriage license, there is a 3-day waiting period before you can pick up the actual license required for your marriage ceremony. You also will need to provide identification and pay a fee. After the ceremony, both spouses, the officiant and two witnesses must sign the marriage certificate. Either you or your officiant must record the signed marriage certificate with the state to make the marriage legally official. If you plan to change your name, you should inquire about this procedure at this time.
Q: My husband and I are in reasonably good health and although we are in our 60s, we have had conversations about the day when we may need to move to a nursing home facility. How can we preserve most of our assets for our children?
A: There are several things you can do before one or both of you need nursing home care. Before we begin, make a comprehensive list of all your assets, including their current value, the name of the company and/or adviser, location of the asset, legal description of any real estate, minerals, wind or water rights, how ownership is titled, and current beneficiary information. This list should include any assets that are non-income producing such as inherited mineral interests, business interests, insurance policies, etc. You will need to share this information with an experienced long-term care planning attorney for their recommendations.
Below is a list of options you may want to consider:
1. Meet with your long-term care planning attorney and accountant to discuss if your financial situation will allow you to begin transferring assets to your children now, either in part or in whole. Ideally, you would transfer as many assets to your children as possible at least five years before your admission to a full time nursing facility, as you will be penalized for any gifting done in the five years preceding an admission, which increases your overall out-of-pocket expense. Be aware that just because you gifted assets to your children with the expectation that they help with any financial problems you may encounter in your later years, they are under no legal obligation to comply. Gifting can be done to your children outright or in a trust. A trust is more costly, but gifting outright to your children means your newly-gifted assets are subject to your children’s possible divorce settlement, lawsuit or bankruptcy.
2. Continue to age at home and attempt to avoid nursing home care altogether. If you have not already developed a healthy routine of diet and exercise, begin immediately. Consult with your physician to see what suggestions they have to improve your odds of remaining independent at home.
3. When you need assistance, move in with one of your children. This may not be a popular option for either you or your child, but if you wish to preserve as many assets as possible from nursing home expenses, this strategy can be an answer. You may need to provide some fair compensation to your care-giving child, as they are taking on the additional responsibility of caring for you and will incur additional expenses and loss of personal freedom as a result. Consult with your long-term care planning attorney to structure compensation to the care-giving child so that it won’t be considered a gift and factored against you when computing your nursing home costs if that becomes necessary at a later date.
4. Depending on your age and your ability to pay, you may be able to purchase long-term care insurance. Long-term care insurance is expensive and may not pay the full amount of your nursing home care, but it can cover a large portion of the expense. Be sure to thoroughly research the insurance agent and company before purchasing any policy. Additionally, be sure to inquire about the policy’s inflation protection and waiting period you must incur prior to payment being issued to the nursing home. We advise getting 2-3 quotes for long-term care insurance to avoid an inferior product.
5. If you have a disabled child, you may want to consider making donations to fund a special needs trust on their behalf. These donations are not considered a gift when the nursing home calculates your expected expense. Donations to a special needs trust are irrevocable and cannot be used for the benefit of anyone other than the disabled individual for whom the trust was established until such time as the disabled individual is deceased.
If you and your family have questions about long-term care planning and asset protection, please contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, 1031 Exchanges, and related matters.
You may have heard of a Special Needs Trust, but do you fully understand what it is or how it can be beneficial? Over the years, we’ve had the privilege of working with multiple families of special needs individuals to establish this type of trust. Let’s cover a few of the most common questions we are asked:
1. What is a Special Needs Trust? A Special Needs Trust is a legal tool established specifically to benefit someone with physical and/or mental disabilities. These trusts are used to provide financial support for the individual with the disability.
2. What are the benefits of a Special Needs Trust? By using a Special Needs Trust for a disabled individual, a family member or friend can establish a fund that will be used to provide comfort care items to a disabled person, without jeopardizing that individual’s eligibility for government assistance. Without a Special Needs Trust, substantial financial gifts made to a disabled person, even those provided for in a trust established for their benefit, could disqualify them from receiving government benefits for which they would otherwise be eligible.
3. Can the beneficiary (the disabled individual) access the funds in the Special Needs Trust? No, a Trustee is appointed when the trust is established who is solely responsible for buying services and products for the individual, like vacations, home furniture and supplies, medical and dental expenses, educational expenses, vehicles, personal care attendants, etc. If the disabled individual were to have direct access to the funds in the Special Needs Trust, he/she could be disqualified from government benefits.
4. Who can set up a Special Needs Trust? Anyone may establish a “third party” Special Needs Trust for the benefit of a physically and/or mentally disabled person. You need not be a relative of the individual. A “first party” Special Needs Trust or a “payback trust” is established by a disabled individual or a conservator on their behalf and holds assets that belong to the disabled person, who must have special needs and be
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