Q: My brother-in-law told me that his assets are safe from any Medicaid claims that he might encounter in the future for nursing home care because he has a Revocable Trust. I also have a Revocable Trust, but I didn’t think it protected my assets from Medicaid claims. Who is correct?
A: You are. A Revocable Trust does NOT protect your assets from a Medicaid recovery claim against you. A Revocable Trust allows the creator/grantor (you) to make any changes to the Trust at any point in their lifetime, as long as they are competent. Because you have so much control over a Revocable Trust and are the beneficiary of the trust during your lifetime, Medicaid law allows for a claim to be made against assets held in a Revocable Trust just as they could make a claim over assets owned in your individual name. If you or your brother-in-law are concerned about protecting your property and/or other assets from future Medicaid claims related to nursing home or hospital expenses, you need to visit with an estate planning attorney well versed in elder law matters.
Generally speaking, if you want to protect certain assets from creditor claims, including Medicaid, your assets must be owned by an IRREVOCABLE Trust, which CANNOT be controlled by you in any way. There are Irrevocable Trusts designed specifically for individuals who are concerned about protecting family assets, such as farm and ranch property that has been in the family for generations, and minimizing the risk of losing those assets to pay for long-term nursing home care. Be aware that this type of planning typically involves making a gift and triggering the 5-year look-back for Medicaid eligibility, so time is of the essence. Postponing planning until it appears that long-term nursing home care is inevitable can significantly decrease your ability to protect many of your assets. However, if you are currently in such a situation where you are facing immediate nursing home admission, don’t despair, there may be other options available to you.
If you have questions, it is critically important that you seek out an attorney who understands the Medicaid system as it relates to elder care matters in your State. If you have questions about any estate planning or Medicaid planning matter in Kansas, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. 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, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
Q: My mother is a relatively healthy 80 year old. A neighbor suggest that we transfer her home to me and have her retain a life estate interest, so she could avoid losing out on benefits from Medicaid, should she need nursing home care in the next few years. I am an only child and my father passed away years ago. What do you think about this idea?
A: If the life estate deed is recorded at least five years before your mother requires a full-time nursing home care, this transfer should not bar her from Medicaid qualification. The rules on Medicaid qualifications for this type of situation are complicated to say the least. However, an overly simplified answer would be that her life estate interest will not be counted as a resource for KanCare (Medicaid program in Kansas) qualification purposes.
Maintaining your mother’s home while she is in the nursing facility could potentially strain your finances. If she uses a life estate deed, there are other issues you both should consider, including:
1. Sale. If you plan to sell your mother’s home while she is alive, be aware that selling the house will require your and your mother’s consent. Your mother’s life estate interest has a value and such interest likely will then disqualify her from receiving KanCare benefits for a period of time, during which she will have to private pay for her nursing home care.
2. Gifting and Capital Gains Tax. Remember, that even though you don’t have a tangible asset yet due to your Mom’s life estate interest, you have still been gifted the residuary value of the home. Property that is gifted during your mother’s lifetime does not get a step-up in basis at her death, meaning you will likely have to pay capital gains tax on the property if you sell it. The tax you will owe after the sale could be substantial and will depend on factors such as what your mother paid for the property when she purchased it and what you sell the home for. Additionally, this will result in a penalty if your mother goes into a nursing facility and needs to become Medicaid eligible within 5 years of making the gift.
3. Death of Residuary Owner. What happens if your mother gifts you her home, maintains her life estate and then you die before she does? The property would then go to your estate, which may not be what your mother would want.
Instead of deeding the house to you and having your mother retain a life estate interest, your mother may want to consider creating an irrevocable trust and deeding the house to the trust. This gives you a lot more flexibility. The trustee could sell the house and the sale proceeds would not disqualify your mother from KanCare benefits. If the house is not sold, then when your mother passes away, the trust could be set up in such a way that you would receive a “stepped-up basis”, resulting in no capital gains taxes if and when you sold the house.
Be aware, that this type of trust is very complicated and not something that should be attempted on your own or without expert guidance. Please see an experienced long-term care estate planning attorney to determine the best course of action for your mother’s unique situation.
For more information on Real Estate and Medicaid planning, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
Acting as Trustee of a Trust can be challenging, and you should understand the responsibilities and duties involved if you are to serve in such a position. Although you may have initially been willing to assume this role, there may come a time when you know you want to resign as Trustee. Perhaps the administration of the Trust is taking more time and energy than you have available, or perhaps your health has deteriorated to the point where you no longer can properly carry out your duties; you don’t need to have a specific reason to resign. However, if you do need to resign as Trustee of a Trust there are a series of steps that should be followed to ensure that you are released, as much as possible, from any further liability.
A Trustee resignation should occur pursuant to the terms of the Trust. As long as you are Trustee, you are a fiduciary of the Trust with a duty of loyalty and a duty of care to the Trust and to the beneficiaries. Therefore, you must resign properly in order to ensure that you are not held responsible for problems that may occur due to your resignation or after your resignation. Even if the terms of the Trust seem clear and easy, you should consult with an attorney to ensure you are in compliance with the Trust and the law.
To resign as Trustee, the following steps generally must occur:
1. Check the original Trust document to see if there is a successor Trustee named. If there is no successor Trustee listed, a new Trustee will have to be appointed. The Trust may allow you to appoint a successor Trustee, but a thorough examination of the Trust will be required to determine this. If one or more of the original Grantors are still living and capable, they can name a successor trustee, if the Trust is a Revocable Trust. If the Grantor is unable to appoint a new Trustee, the current beneficiaries may be able to appoint a new Trustee. As a last resort, the Court always has the ability to appoint a successor Trustee. Whether these options are available to you depends largely on the terms of the Trust and the type of Trust.
If you’re age 65 or older, issues like retirement and long-term care planning are probably more frequent topics of your conversation. Even if you’re not in this population group, chances are you know and care for someone who is. Research from the U. S. Department of Health and Human Services suggests that if you are age 65 or older, you’re most likely going to need long-term care at some point in your life. Unless you are sufficiently wealthy or exceptionally poor, it would seem wise to do some advanced planning to cope with the increasing health care costs that will accompany long-term care stays.
Options you may want to investigate include, but are not limited to:
1. Long-term Care Insurance. The older you are and the longer you wait to obtain insurance, the more expensive it will become. Costs for long-term care insurance (LTCI) tend to be expensive and premiums will most likely rise over your lifetime. With average premiums running at $2,700 a year (per industry research firm, LifePlans), seniors may find LTCI too cost prohibitive to be a realistic option. Additionally, your age or current health condition may disqualify you from obtaining this type of insurance.
2. Life Insurance. Some insurance companies offer life insurance with long-term care riders. With this type of policy, your beneficiaries may still receive a death benefit even if you use long-term care rider benefits. With traditional LTCI, there is no death benefit paid to your beneficiaries after your death.
3. Family Members. Your immediate or extended family members may be able and willing to care for you or pay for your health care costs. With annual semi-private nursing home room costs running on average at $90,000 annually, according to a 2019 Genworth study, few families can afford to cover these costs for a year, let alone for multiple years.
4. Medicare. Kansas Medicare program (KanCare) does NOT cover long-term care expenses for patients requiring full nursing home care, except for very limited circumstances.
Congratulations on your child’s high school graduation! Your graduate deserves acknowledgement for their hard work and the achievements they earned, but let’s not overlook the tremendous role that you, as a loved one, played in their success. Without your support and guidance, they most likely would not have reached this educational milestone.
You’ve shared your wisdom and advice, helped them plan their future course. Now it’s time for your child to embark upon their next journey in life: work or continued education. Before you turn your new “adult” out into the world, there is one last thing you should help them complete when they turn 18: estate planning. While you may not think 18 year olds need estate planning, there are three basic documents which every young adult needs:
1. Durable General Power of Attorney
The first necessary component of a young adult’s plan is a durable general power of attorney. Through a durable general power of attorney, your teen designates someone to make business and financial decisions. The durable general power of attorney can be set up as either “springing” or “non-springing”. A “springing” durable general power of attorney becomes effective only if your child becomes incapacitated; at that time it “springs” into action. Should your child be involved in an accident or suffer an illness and be unable to pay their rent or other bills, their appointed agent could make those payments and communicate with financial institutions and school officials until such time as he or she recovers.
A “non-springing” durable general power of attorney is effective as soon as it is signed. This document might be necessary if you have a child going to school in another country or far out of state. That child is not unable to handle their own matters, but, nonetheless, might need you to assist with some of their affairs for them while they are so far away from home.
2. Health Care Power of Attorney
A Health Care Power of Attorney is the second document recommended for all young adults. This document allows the young adult to name a person (a/k/a agent) to make medical decisions for them if they are unable to make such decisions themselves. The agent will work with doctors and other health care providers to provide the young adult with the care that they would want. Once the patient regains their capacity, the young adult can simply go back to making their own healthcare decisions. Many young adults move away from home to work or attend school where they no longer have a relationship with local physicians. By having a health care power of attorney in place when an emergency arises, the young
In an age where estate planning is considered a low priority item by some, and an extravagance by others, are there any circumstances that necessitate immediate estate planning? In our experience, if you answer “NO” to one or more of the following statements about your life circumstances, we strongly suggest that you consider doing some estate planning:
1. I have executed a Healthcare Power of Attorney to appoint an agent of my choice to make medical decisions for me in the event that I am unable to make such decisions for myself. My agent has agreed to serve on my behalf in this capacity and either has a copy of the legal document I have signed or knows where to obtain one.
2. I have executed a General Durable Power of Attorney to appoint an agent of my choice to handle my financial affairs for me in the event that I am unable to. My agent has agreed to serve on my behalf in this capacity and either has a copy of the legal document I have signed or knows where to obtain a copy.
3. I have appointed someone in my Last Will and Testament to care for my minor children if I am unable to. They have agreed to serve in this capacity and know where to obtain a copy of the legal document in the event of my death.
4. I have created a secure way for trusted individuals to access and manage my digital assets, records and profiles and ensured that such individuals are aware of this and know where to look for this information.
If your answer was “NO” to any of the above statements, then you risk not being able to choose who you would want to take care of you or your children in the event of your incapacity or death. Instead, the Court would have this responsibility. This means that in addition to being a costlier proceeding, you would also have no say over how your medical or financial decisions would be made. Would you approve of your house being sold, being placed in a nursing home facility (not of your choosing), or your financial investments being liquidated by someone you didn’t choose? If any of these situations make you the least bit uncomfortable, you should consult an experienced estate planning attorney today.
For more information on estate planning, 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, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.
If you or a family member have faced a recent health scare, such as the kind presented by the Coronavirus, it’s likely that you’ve been told to update your Last Will and Testament. You may have had a new Will prepared or had your previous Will updated with a Codicil. While preparing a Will generally is a move in the right direction when it comes to estate planning, it may not be the “best” option for you individually.
A Will is one of the most basic levels of estate planning that you can do in order to direct how and to whom your assets will be distributed upon your death. People often misunderstand the estate process and assume that their assets will automatically pass to the beneficiaries found in their Will after their death. What they don’t realize, is that assets that pass by way of a Last Will and Testament must first go through the probate process before any distributions can legally take place.
To clear up some of that confusion, here are some answers to common misconceptions surrounding the probate process:
1. If you have a Will, your family will not have to go through a probate. Not true! In fact, if you do Will-based planning, you are planning for a probate. This means your estate will go through a court process and be open to public examination before your beneficiaries will receive their inheritance. Your named Executor under the Will cannot even act on behalf of your estate until the court has granted them approval to do so.
2. Probate is a simple and speedy process. This is rarely true. On average, it takes up to 16 months to settle an estate. That’s a significant wait time for beneficiaries to receive the assets you intended them to have. Additionally, you will need legal assistance if you are required to open a probate in an estate due to the complexity of the process. Professional help from a good probate attorney will be your best insurance for preventing unnecessary expenses and delays during the probate process.
Q: I am the sole Trustee of my own Revocable Trust. I’d like to change one of the successor Trustees that I’ve named. Can I do that?
A: Replacing a successor Trustee in your own Revocable Trust is a simple process. Many people think a Revocable Trust has the same restrictions as an Irrevocable Trust, where the Grantor can make no changes to the document once it is signed. However, a Revocable Trust allows a great amount of freedom for the Grantor to make changes as long as they are competent.
You may replace a successor Trustee at any time by asking your estate planning attorney to prepare a Trust Amendment to name the individual you prefer to act as your successor Trustee. You will be required to review the amendment with your attorney and sign it before a notary public. You should keep the amendment with your original estate planning documents in a fire-proof location. If you have additional changes that you would like to make to your trust, you may need to restate your Trust in its entirety or even revoke the original trust and form a new Revocable Trust. Your estate planning attorney can help you decide which option is best for your unique circumstances. It is important to note that when you want to make changes, you should not write on your original Trust document for any reason, as this may invalidate the entire Trust.
For more information on Trusts, 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, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.
You’ve purchased the rings. The church and reception hall have been booked. The invitations have been mailed. Now, you’re just waiting for the big day to arrive. There’s enough disappointment to go around for everyone during this pandemic, but one of the biggest frustrations has to be the postponement of a wedding. If you’re one of the unfortunate individuals whose wedding has been delayed, you probably find yourself waiting for restrictions to be lifted so you can proceed with your big event. While your plans are on hold, here are some things to consider that will get your upcoming marriage off to the right start:
If you previously contacted these individuals or institutions, you may want to advise them of the change of your wedding date. Also this is not an exhaustive list, but should give you a good place to begin your new life as a married person. For more information on estate planning matters please contact Davis & McCann, P.A., Dodge City, Kansas. We are members of WealthCounsel, a national consortium of Estate Planning Attorneys, and NAELA, the National Academy of Elder Law Attorneys. We focus on providing the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Business Formation, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions and related matters.
If there were ever a time to consider doing an estate plan, now would be that time. This pandemic has shown us how quickly our health and livelihood can change. If you are a parent of minor children, these facts probably keep you awake at night.
Preparing a Last Will and Testament and/or a Living Trust is one of the best ways you can ensure your children will be cared for in a way you would approve, should you pass away. Without a valid plan in place at your death, your State law dictates how to divide your material possessions, who will care for your minor children (in the absence of a surviving spouse), what age those children will receive access to their inheritance, and who will be responsible for selling or distributing your items of value.
Despite these risks, most young adults don’t have even a basic Will. Megan L. McCann, estate planning attorney and partner at Davis & McCann, P. A., attributes this trend to two facts: One, young adults rarely consider the possibility of death and two, many people assume they have insufficient assets to require estate planning.
If you have children, McCann says having at least a simple Will is critical, if for no other reason than to name a guardian (the person who will provide physical shelter and care for your child) and a conservator (the person who will manage the money your child may inherit) for your minor children. “In the absence of a Will where you appoint a guardian and conservator, the State will decide who should care for your children and their assets after your death,” McCann says. She continues, “Part of our responsibility as parents is to protect our children and provide a safe future for them. By naming a guardian and conservator in a Will, you can control who provides that protection and safety for your children and their assets, if you no longer can.”
It also is a good idea to name an alternate guardian and conservator under your Will in case your original choice is unable or unwilling to act. Please be advised that the conservator need not be the same person as the guardian. Try to select individuals who you think exhibit the optimal skills for the position that you are appointing them for and whom you feel would make decisions that most closely mimic your own parenting style. It is always a good idea to get the advanced consent of the prospective guardian and conservator to ensure that they are willing to assume such a large responsibility prior to naming them in your Will. Be aware you can always revise your documents in the future to change the guardian and conservator at any time.
For more information on Estate Planning, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and focus our practice on providing clients with the best legal advice on estate planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.
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