Common Estate Planning Mistakes

This article from the Wall Street Journal Blog is excellent.

We all know that having an estate plan is good for our finances and for our heirs. But many of us fail to put a plan in place—for fear of facing our own mortality, among other reasons. And those who do have a plan often make mistakes that can lead to familial and financial problems down the road. The Experts, a group of finance professionals and academics, weigh in on what they see as the biggest mistakes people make with estate planning.

Read the rest by clicking here…

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What’s the Difference Between Estate Planning and Drafting a Will?

What’s the Difference Between Estate Planning and Drafting a Will? Many people think that an estate plan is a Will and vice versa. But nothing could be further from the truth. Drafting a Will is an important piece of estate planning, but is only one piece, and in my opinion not the most important part of estate planning.

Drafting a Will only tells people, after you’re gone, who gets what, when, how, and how much. A Will also names the person you want in charge – the executor. A Will alone requires probate to move your assets to those people you’ve picked to get them.

A comprehensive, complete estate plan includes coaching and documents for protecting you, your family, and your assets during your lifetime! A great plan avoids probate, fees, and costs later.

Some of the other documents in a comprehensive estate plan are:

• A Durable Power of Attorney. This tells the world who you want and allow to manage your finances, legal matters, and personal affairs if you can’t or don’t want to.
• A Healthcare Power of Attorney. This very important document tells healthcare professionals such as doctors and nurses who you want to make your healthcare decisions if you can’t. Without it, the decisions are left up to the doctors.
• A HIPAA Waiver (Protected Healthcare Information Release). This allows the doctors, nurses, and other healthcare professionals to share information with the people you’ve named. These people have no decision-making authority.
• A Living Will or Right to Die with Dignity Document. Detail your wishes for life support and under what conditions life support will be used. It works hand-in-hand with your Healthcare Power of Attorney.
• Revocable Living Trust. In certain cases you’ll want a trust as a part of your plan. A trust allows you more flexibility and privacy than a Will alone. You also get a Will as part of this plan. But the Will with a trust is a safety net. When you have a trust, you’ll also get some supporting documents.
• Memorandum of Gifting. Whether you have a Will or Trust, the “memorandum of gifting” allows you to “override” the Will or Trust. In this memo, you can leave gifts of “tangible personal property” to people without the need to rewrite your will or trust to do so. This doesn’t include cash, stocks, bonds, or other securities.
• A Deed or Deeds. Protect your house and real estate from probate and possibly the ravaging cost of long-term care. With the proper planning now, you won’t have to worry about losing your house later.

All these documents work together to create a comprehensive estate plan. A comprehensive estate plan protects you, your family, and your money during your lifetime and beyond. It lets you enjoy the peace of mind you deserve and lessens burdens on loved ones during difficult times.

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Qualifying for Medicaid Without Losing Everything You Have

Qualifying for Medicaid without losing everything you have is possible.

How do you qualify for Medicaid without losing everything you have in the process?

Hi, I’m Gary DeWitt the founder of DeWitt law.

I have good news and bad news. You usually can’t protect everything you have, but you can protect what you have.

Qualifying for Medicaid – What Makes it Work?

Qualifying for Medicaid requires one of two things to make it all work.

First, the person needing long term care must be mentally competent and able to sign the forms and move money around.

Or, Second, the spouse or family must have a durable power of attorney with sufficient power and language to let them sign the forms and move money around. If you don’t have a power of attorney or haven’t had it reviewed for Medicaid purposes, I highly recommend getting it done before you need to apply for long term care.

Brief History of Medicaid

Medicaid was created in 1965 to assist low-income people get long term care.

Medicaid provides health coverage to millions of Americans, including eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities. Medicaid is administered by states, according to federal requirements. The program is funded jointly by states and the federal government.

Income and Assets Overview

Qualifying for Medicaid has income and asset limits.

For Medicaid purposes, you have 2 kinds of assets.  First you have countable assets.  These are assets Medicaid is going to count against you. You also have non-countable assets which I’ll talk about.

First, everybody is allowed to have a home under Medicaid law. The equity in that house can be up to $603,000.00 in 2021. Thanks to some changes that happened in August of 2021, this equity can be preserved for the family in Arkansas.

Let me clarify. Everybody is allowed to have a home and all adjoining real estate if it’s worth less that $603,000.00. And adjoining means across the road too. But it doesn’t mean that you can have property in another state or another area of the state. That would count.

Second, a couple is allowed to keep up to $130,380.00 of cash on hand. I’ll come back to this in a minute. It’s not quite that simple.

The individual needing care can make up to $2,382.00 per month of gross income. The person that stays at home is allowed unlimited income.

The individual needing care can have $2,000.00 in their name.

An unmarried individual can have a home too. But they can only have $2,000.00 in their name.

Qualifying for Medicaid – Cash on Hand Limits

Let’s talk about the cash on hand limits. I said earlier that a couple, the spouse staying at home, can have $130,380.00 of cash or cash equivalents.  In Arkansas that includes checking, savings, retirement accounts, IRAs, 401(k), stocks, bonds, investment accounts, and more. This doesn’t mean you have to spend all your excess on nursing home care.

You can turn countable assets (cash) into non-countable assets. You can spend money to improve your home, pay down the mortgage, buy a new car, prepay a funeral, and much more. You can also turn cash on hand into an income stream. This is done with special financial planning.

The reason we talk so much about what you can spend money on and how much you can have is that Arkansas is a “half” state.

Half the Cash

That means that a couple can keep half their cash on hand up to the $130,380.00 limit.

For example, if you have $200,000 you can keep $100,000. If you have $260,760 or more, you keep $130,380.

Qualifying One Person in a Couple

Qualifying one person in a couple usually consists of coming up with a good spending plan and converting the excess cash into income for the spouse staying at home.

We arrange the accounts so the person at home name is on the accounts. We open an account for the person needing care just in their name and put $2,000 in it.

If the person needing care makes over $2,382.00 per month, then a special trust must be setup to hold the excess.  In the end, the money in that trust gets paid over to Medicaid.

Qualifying a Single Person

Qualifying a single person for Medicaid is harder than qualifying a person in a couple.

First, they can only have a total of $2,000.00 on hand. Their income is limited to $2,382.00 per month.

What to do if mom or dad has $100,000 in a retirement account?

The Penalty Period

Before I can explain how to handle this, I need to go over the penalty period.

If somebody gives away property within 5 years of applying for Medicaid, then that “gift” is penalized by the Medicaid rules. Technically the gift has to be made for the purpose of qualifying for Medicaid to be penalized.

The penalty is that the person must pay for their own care for a period of time until the penalty is used up.

So, if mom gave away $25,000 last year knowing she would need help and the “penalty” is $5,000 per month, then mom must pay for 5 months of care.

Qualifying for Medicaid by Giving Money Away

Medicaid has a penalty for giving money away.  But, what if we do it anyway, in a controlled way?

Can we give some money to the family, but pay for care during the penalty period?

I’m going to use $5,000 as the monthly penalty for easy math, but it is $5,871 per month in Arkansas.

Assume dad has $102,000 in the bank. He gets to keep $2,000 leaving $100,000.00 that must be dealt with before he can qualify.

What if he gave half to the family, and turned the other half into income payable to the nursing home?

So, $50,000 goes to the family.  This is going to result in a 10-month penalty period. That is $50,000 divided by $5,000 per month. But dad kept $50,000. However, that’s more than the $2,000 he is allowed. So, we take dad’s money and turn it into a stream of income paid to the nursing home for 10 months at $5,000 per month.

It’s not nearly as simple as that because income and other things must be factored into the calculations. I highly recommend seeking professional legal help that knows how to do the calculations.

Qualifying a Couple for Medicaid

Qualifying for Medicaid for a couple is about the same as qualifying an individual.

The only real difference is the couple can have $3,000 of cash.

Qualifying for Medicaid starts now!

You need to get comprehensive, complete durable powers of attorney done so that your family doesn’t have to worry about it later. You see, if you need long term care and can’t make decisions, you can’t sign a power of attorney and its too late to protect what you have.

You need to meet with an experienced estate planning and elder law attorney that knows what can be done now to get as many assets protected as possible from the ravaging costs of long-term care. They will guide you in what can be done to protect your assets.

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FAQ: Why does it cost so much?

The process is relatively easy and inexpensive when you consider the end cost emotionally and financially of not doing it.

Breaking this down by a minimum every 5 year review, you are looking at $1.21 per day. That is less than the cost of a cup of cruddy convenience store coffee.

Really, less than a cup of cruddy convenience store coffee every day.

You are getting a well thorough, custom, individualized plan you can trust. Not a “box” plan from the office supply store or online.

There is something to the saying “you get what you pay for.” Lisa did an online will but did not get part of it notarized. This could have caused a big problem later if it was not caught during other work being done. The overall cost would have been much greater than having a custom plan done.

Asset transfers will add to the base price. Any Supplemental Needs Trusts will add to the price.

If the attorney has to go to your location, then travel time at the hourly rate will typically be added.

Finally, don’t expect bargain prices if you just need a single document. An attorney, like a CPA or doctor’s office, has an overhead to open the file, make notes, do the work, and close the file.

 

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Keeping your estate plan up-to-date

You need to have the Adobe Flash Player to view this content. Please click here to continue. Attorney Misty Watson of the Danna McKitrick law firm stopped by Fox 2 today to give people vital information in planning their estate in case of emergency. Many people wait until the last minute to update documents such as their will, or not at all. When updating your documents, you should consider not only the property and assets that are being distributed, but also the people involved. Carefully consider beneficiaries as well as people with whom you have entrusted other responsibilities. These responsibilities include the executor of your will, trustee of a trust, power of attorney and guardian of your children. Below are possible events and circumstances that may require changes in your will or other estate planning documents: Marriage Divorce New baby/child Family member gets a diagnosis Death of a family member or beneficiary Change of guardians Reasons to do your estate plan in 2016: Substantial savings for probate fees Control of who makes decisions on your behalf Naming guardian for children A will is the only place you can name a legal guardian Reduce future taxes Recognized charities important to you (tax benefit as well)

Click here to view original web page at fox2now.com

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What is Elder Law?

I’m often asked what elder law is.  So here is a little more information.

One of the better articles I’ve read is located here at Wikipedia.

Elder law consists of 3 major areas:

1. Medicaid and Medicaid planning issues
2. Estate planning and administration
3. Guardianships

Very related to Elder Law are Elder Rights.  These are the rights of the elderly, who are not a Constitutionally protected class.

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What is Elder Law (Video)?

What is elder law?

What is elder law? What is involved? What isn’t elder law?

In this video I’m going to tell you what elder law is and what it doesn’t cover. Elder law is a broad topic.

Hi, I’m Gary. I’m an estate planning lawyer with DeWitt Law Firm and I’ve helped 1000’s of people here in NW Arkansas avoid probate, protect assets, and pass on what they’ve worked so hard to enjoy the peace of mind they deserve.

Many people of think of elder law as strictly dealing with issues of nursing homes and Medicaid. This just isn’t true.

Elder Law Involves a Lot of Law

Elder law covers the intersection of estate planning, contract law, real estate law, Medicaid, Medicare, and a few other areas of law. It also involves protecting people in nursing homes and creating guardianships for those that haven’t planned.

Be Prepared

Perhaps more important than getting Medicaid is being prepared for long term care. This is the job of estate planning. If you end up unable to manage your own affairs, then without a plan, your family, not even your spouse, can sign for you. If your spouse needs to sell the house or move assets around, they may not be able to. But, with a plan in place that includes durable powers of attorney, healthcare powers of attorney, and medical information waivers, your family won’t end up in court. Without a plan, your family will end up in court getting permission from a Judge to make those decisions.

Going to court and getting a Judge’s permission to manage is called a “guardianship.” In Arkansas, the powers of the guardian are limited. For example, a guardian cannot sell real estate or other property without a Judge’s order.

Protect Your Home and Money

The second part of estate planning is to protect your home and as much money as possible from being used to pay for long-term care costs. This is done, in Arkansas, by using a special deed that keeps your real estate out of probate. By keeping your real estate out of probate, Medicaid can’t recover their costs from your real estate. And thanks to some changes in the law as of August 2021 in Arkansas, Medicaid can’t “reach through” this special deed to recover their costs.

The third part of estate planning is to pass what you have on to your family in the way you want. Depending on your goals you may need a Will based or a Trust based plan. This isn’t a one plan fits everybody thing.

Contract Review

Part of elder law is reviewing nursing home contracts. If you sign without reading, you don’t know what you are agreeing to. Sometimes they’ll sneak a clause in that you are responsible for the bill if the person in the nursing can’t pay or qualify for Medicaid.

Elder Law to Qualify for Medicaid

Then there is qualifying for Medicaid.

Many people have too much money to qualify for Medicaid, but not enough money to pay for long term care and their spouse to live. A lawyer can help a family reallocate their money to spend as little as possible on long term care and pass on as much as possible to the spouse and family. Don’t let a nursing home tell you that you need to pay it all to the nursing home before your loved one qualifies. By reallocating assets, your loved one can qualify much faster and your family will spend less money.

Medicaid is a “means tested” government benefit. Means tested means that your income has to be under the income limit and your assets (including real estate) have to be under the asset limits. For a couple, they can’t have more than $130,380.00 not including the house and car.

In Arkansas, as of 2021, the income of the person needing care has to be under $2,382. But, the income of the spouse at home can be unlimited.

It’s a strange thing… The assets of both are counted, but only the income of the person in long-term care is counted.

A person or couple can own one home and all adjacent land up to a value of $603,000. In some cases, this is a planning opportunity. They can also own pre-paid, non-refundable funeral plans. Another planning opportunity.

Arkansas is a “half” state when it comes to liquid assets. This means that the spouse at home can only keep half the cash, up to $130,380. So if you have $200,000 in savings, then the spouse at home can have a maximum of $100,000 to qualify.

Most nursing homes will tell you that you need to spend the money to qualify. This isn’t a complete truth. The money can be reallocated to create income for the spouse at home.

But, if your loved one had done some comprehensive estate planning earlier, then getting qualified for Medicaid would be much easier because the real estate is protected already.

Elder Law Conclusion

I hope this helped and that you learned something.

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