This book, like everything I’ve ever accomplished to date, is the result of team effort, support and the positive attitudes of those that are near and dear to my heart. I extend the deepest gratitude to the following:
My children, Katie, Nikki and Jessie whom, never fail to make me proud on their travels through life and constant efforts to believe and achieve.Louise Hise and her children Gary, Jim, Steve, Linda and Ginny; An Irish Catholic family that taught me the value of appreciating that inner circle of family and the importance of support, understanding and making time to be there.
My fiancé Ginny: Without her support, backing, understanding and positive encouragement, I’d have never made the time to complete this goal.To the lawyers, their firms and professional guidance upon which I relied to provide a basic framework to inspire you the reader, an understanding of the importance to plan for the untimely arrival of the unforeseen and predictabilities.
To the government agencies and U.S. Organizations that allowed me to use their research to inspire look-forward actions needed to care for our loved ones and subsequent heirs.To you, the reader, who has faced the realities that life so often, ends before we are ready. ASSET PROTECTION AND ESTATE PLANNING FOR ALL AGES™. Copyright © February 2006 by Ronald E. Hudkins. All rights reserved. For information or address go to http://www.AdultWishFoundations.com
ASSET PROTECTION AND ESTATE PLANNING FOR ALL AGES™ Revision one. Copyright © August 2006 by Ronald E. Hudkins. All rights reserved. For information or address go to http://www.AdultWishFoundations.com
Chapter OneEstate Planning Overview
a. Getting Your Affairs in Order b. Why Planning Should Start Early
1. Life Estate
2. Protecting Assets from Medicaid
3. The Mortgage
4. Protecting Assets from the State
5. Basis of Eligibility
6. Scope of Services
7. Dying in Intestate
8. The Realities of Probate
9. Last Will and Testament
a. Changing a Will
b. Adding a No Contest Clause c. Protecting a Will’s Integrity d. Do You Really Need a Will?
10. Durable Power of Attorney
11. Living Will
a. How Soon Do You Need One? b. How Do You Make One?
12. Health Care Proxy
13. Trusts
a. Revocable Trust
b. Irrevocable Trust
14. Living Trusts
a. Rules and Trustees
b. Offshore Trusts
c. Legality of Offshore Trusts
15. Financial Rules for Long-Term Care
16. Financial Protection for Spouse
17. Estate Taxes
18. Protecting Your Spouse
19. Protecting Your Furred Friend
20. Roth IRA’s
21. Insurance Options
22. Considering Life Insurance
a. Term
b. Whole Life
23. Gender Issues Meet Social Security
24. Second Marriages and Estate Planning
25. Disinherit or Oversight Considerations in Planning
26. Planning for Intangibles
27. Capacity Challenges
28. Undue Influence Considerations
29. Conclusion
Finding an Estate Planning Attorney
1. Understanding the Legal Practice Areas
2. Checking Credentials and Community Standing
3. Selection Considerations
4. Questions to Ask an Estate Lawyer
5. Financial Consideration
6. Hiring the Attorney
7. Developing a Relationship
8. Preparing for the First Meeting
9. Required Documentation and Information
Community Based Services for Long-Term Care
1. Adult Day Care
2. Telephone Reassurance
3. Senior Centers Overview
4. Transportation Overview
5. Home Health Care
6. Homemaker/Health Aide Overview
7. Hospice Overview
8. Home Repair and Modifications
9. In Law Apartments
10. Housing for the Aging and Disabled
11. Board and Care Homes
12. Assisted Living
13. Nursing Homes
14. Nursing Home Inspection Checklist
Evaluating Health Information on the Internet
1. Determining Who Runs the Website
2. Purpose of the Web pages
3. Understanding Sources of Information
4. Checking Website Documentation
5. Reviewing Data and Credentials
6. How Current is Information
7. Site Links
8. Visitor Information Collections
9. Visitor Interactions
10.Accuracy of Information in E-mails
11.Accuracy of Information in Chat Rooms
Buying Prescription Medications on the Internet
1. Doctor Consultations
2. Websites that Protect You
3. Know Your Source of Medications
4. How Online Sales Work
5. Protecting Your Privacy
6. Consumer Safety Alert
7. Frequently Asked Questions
Choosing a Doctor If Yours Retires or Dies
1. What Should You Look For in Medical Care
2. What Type of Doctor is Best
3. Managed Care and Doctor Choices
4. Finding a New Doctor
5. Making An Informed Choice
6. Questions to Consider
7. First Appointment Initiatives
8. Sources for Additional Help
Buying Contact Lenses On the Internet, Phone or by Mail
1. Purchase considerations
2. Valid Prescription Data
3. Legal troubles
4. Skipping Regular Check-ups
5. Problems Avoided with check-ups
6. Your actions when problems arise with contact lenses
7. Reporting problems with contact lenses1
Exercise: Getting Fit for Life
1. Why exercise
2. Four types of exercise
3. Who should exercise
4. Safety tips
5. How to find out more
Frequently Asked Questions
1. Health Care 2. Estate Planning
Appendix Two
Information Resources
1. U.S. Government Sites
2. Organizations
3. Associations
4. Commissions
5. Hotlines
6. Information Centers
7. Services
8. Publications
9. Insurers
10.Bureaus
11.Leagues
12.Links
13.Networks
14.Scouts
Estate Documentation Overview
1. Personal Records
2. Financial Records
3. Estate Planning Checklist
Ben has been married for 50 years. He always managed the family’s money. But since his stroke Ben can’t talk or walk. Shirley, his wife feels overwhelmed. Of course, she’s worried about Ben’s health. But, on top of that, she has no idea what bills should be paid or when they are due.
Eighty-year-old Louise lives alone. One night she fell in the kitchen and broke her hip. She spent one week in the hospital and two months in an assisted living facility. Even though her son lives across the country, he was able to pay her bills and handle her Medicare questions right away. That’s because several years ago, Louise and her son talked about what to do in case of a medical emergency.
Plan for the future.No one ever plans to be sick or disabled. Yet it is just the kind of planning that can make all the difference in an emergency. Long before she fell, Louise had put all her important papers in one place and told her son where to find them. She gave him the name of her lawyer as well as a list of people he could contact at her bank, doctor’s office, investment firm and insurance company. She made sure he had copies of her Medicare and other health insurance cards. She added her son’s name to her checking account, allowing him to write checks on her account. Finally, Louise made sure Medicare and her doctor had written permission to talk to her son about her health or any insurance claims.
On the other hand, because Ben always took care of financial matters, he never talked about the details with Shirley. No one but Ben knew that his life insurance policy was in a box in the closet or that the car title and deed to the house were filed in his desk drawer. Ben never expected his wife would have to take over. His lack of planning has made a tough situation even tougher for Shirley.
I truly hope some unforeseen event does not fall upon you or your loved ones any time soon but, especially prior to you getting your estate plans in proper order.Estate Planning Starts Early
Young people just starting out in life may think that estate planning is not a high priority. However, according to a leading expert in the field, it’s never too early to consider how vital this step is to prudent financial planning.
When just starting out, perhaps there are more worries about the immediate needs, Eventually, goals blossom into actually preparing for the future and a comfortable living standard. The idea of immortality is more the thought than any possibility of death. With the longer life spans enjoyed in these modern days, there just may be some benign measure of reality there. However, writing a will is not just a concern for seniors, the young and everyone in between; it is a legal matter, which must be an important part of financial planning.
The state probate process is one solid reason to complete a will. In rough terms, as much as 6% of an individual’s total (gross) assets (or more) go to probate fees and associated costs.
The last thing someone would want to do is lose control of their assets to the court system. Unfortunately, putting off what you know needs to be done now – planning and implementing an estate plan – could result in just that.
Asset distribution laws vary from state-to-state, but generally a married person’s possessions go first to the spouse and children, should there be any.If you are single, then most often your possessions would be passed to your parents, if they are still alive. Should your parents be deceased, then the order of succession is usually to the siblings (brothers, sisters), then to other living family (relatives) and finally, to the state. The state is highly capable of absorbing and liquidating assets.
By no means is it being said that various wills are the answer to a complete estate plan. A will alone, specifically will not control who gets ‘joint property’ (such as a home you and a spouse purchased together), or possibly, bank and brokerage accounts and 401(k)s or IRAs
(Individual Retirement Accounts) for which you have designated a beneficiary.Simply put a last will and testament is the main piece of a basic estate plan that does not require a substantial amount of legal fees for its creation.
Putting together a well-thought-out plan that provides for you during incapacity as well as after your death is essential,” Hudkins said. “Talk to an estate planning attorney about other legal documents such as a Medical Power of Attorney (proxy) for Health Care, a Living Will (Health Care Declaration), and a Durable Power of Attorney for Financial Affairs.
You are never too young to need a will. If you end up in a hospital in a coma, you need someone in a position to make personal, medical and financial decisions for you. Should you have an untimely death, the key to planning ahead is to have a written plan so your wishes will be carried out exactly as you so designate. Without a written plan, there is probate, family feuds, extended agonies and other unpleasant possibilities.
Congratulations! You have taken a very important step in the right direction. After reading this book, you will have a much better idea on how to customize your individual estate needs by understanding your legal initiatives, alternatives and obligations that secure the future of your heirs.
The Life Estate
The life estate is something every first year law student learns about when they study the arcane and often bizarre history of property law that harkens back to the days of English knights, lords and serfs, and the transfer of property through the ceremonial throwing of dirt clods with oaths of duty to accompany. The life estate is about as old as they come as instruments of wealth transfer go and students love it, because it is relatively easy to understand. Apart from what students love and what is easy to remember, however, the life estate still has practical value today in your estate planning and assets management schemes.
The basic idea of the life estate is that a person can be left a piece of property for life, and upon their passing, the property in question can go to whoever is designated to receive that property afterward. The individual or group who receives the property after the life-tenant passes is called the remainderman or remaindermen, which is useful only in that it helps
one to remember that the person who remains gets the property. If, for example, one wants to leave a family estate that has been with the family for many generations to their spouse and then have it immediately pass on to their children or another relative who will maintain the estate for the generation to come, then a life estate might be the perfect vehicle to do so. Another example is the same family estate, left to a surviving spouse until the surviving spouse either dies or remarries. Again, the aim is to ensure that the estate stays in family, a contingency which is threatened by the remarriage because that creates a new marital jointtenancy, absent any other provision. Often the life-estate was used to keep assets, like the family home, headed down a single line of familial ownership.
However, the life estate has other uses, for example, it can leave an asset to be owned by one person until the death of third person. If an older relative has become incapacitated, such that it is difficult for them to make decisions for themselves, then the asset can be left in the care of another for the incapacitated person’s lifetime. An example might be, that Blackacre (the fictitious name for a piece of property used in law schools everywhere) is left in the care of cousin Tilly, until great aunt Nelly’s death. Thus, Tilly is allowed to make Nelly comfortable at Blackacre (the family home) until Nelly passes on. In this instance, Nelly’s life is what is called, the measuring life of the life estate, and Tilly’s ownership ends when Nelly is gone.
On the whole, the life estate may be falling out of use for a number of reasons and being replaced by the much more fluid instrument of the trust. But, the life estate still captures, from time to time, our instincts regarding how property is to pass from one generation to another and that is why it is still relevant even for an estate planner who uses it very rarely. It helps us to ask and to get the answer to very difficult questions, which is part of the act of estate planning. Both the client and the attorney must face tough questions, and the life estate (even if it is sometimes regarded as a legal relic of the past) tells us how people used to answer questions of intra-generational wealth transfer and why. We may use different instruments to bring about our legal ends (or we may not), but even if we do, the life-estate still has relevance in helping us think about the questions that underlie the choices to be made in estate planning.
Protecting Assets from MedicaidHaving its origins in 1965, Medicaid is a Federal program that offers health care coverage for select low-income families. Title XIX of the Social Security Act is a Federal/State sponsored program that is designed to pay medical costs for certain designated families who happen to have low incomes/resources with which to pay for it themselves. So who is eligible for Medicaid? Eligibility includes people who are aged, blind, or disabled, along with certain people in families with dependent children. Although a Federal program, Medicaid is run by the states, which means that each state determines who is eligible and the range of health services offered.
It is a common misconception that Medicaid is a program that is designed to cover all poor persons. Medicaid DOES NOT offer paid medical assistance to every single poor person. Those eligible to receive medical assistance must be a part of one of the groups designated in the following list:
Medicaid - BASIS OF ELIGIBILITY:Unfortunately, many nursing home residents end up exhausting their assets on long-term care. But it doesn't have to be that way. The best time to plan for the possibility of nursing home care is when you're still healthy. By doing so, you may be able to pay for your long-term care and protect assets for your loved ones.
Medicaid is a joint federal-state program that provides medical assistance to various low-income individuals, including those who are aged (i.e., 65 or older), disabled, or blind. It is the single largest payer of nursing home bills in America and is the last resort for people who have no other way to finance their long-term care. Although Medicaid eligibility rules vary from state to state, federal minimum standards and guidelines must be observed. In addition to you meeting your state's medical and functional criteria for nursing home care, your assets and monthly income must each fall below certain levels if you are to qualify for Medicaid. However, several assets (which may include your family home) and a certain amount of income may be exempt or not counted.
To determine whether you qualify for Medicaid, your state may count only the income and assets that are legally available to you for paying bills. Medicaid planning helps you devise ways of making your assets and income inaccessible. Over the years, attorneys have developed several strategies to rearrange finances and legally shelter assets from the state. These strategies--and the Medicaid rules themselves--can be complicated, so you should consult an experienced elder law attorney if you wish to take steps to protect your assets from the state.
Countable assets are those that are not exempt by state law or otherwise made inaccessible to the state for Medicaid purposes. The total value of your countable assets (together with your countable income) will determine your eligibility for Medicaid. Under federal guidelines, each state compiles a list of exempt assets. Usually, this list includes such items as the family home (regardless of value), prepaid burial plots and contracts, one automobile, and term life insurance.
There are special rules for counting assets and allocating the assets between the spouses. When you or your spouse first enter a medical institution, nursing home, or request a community waiver program, the county/tribal human or social services department will, if requested, conduct an assessment of your total combined assets. The amount of your total combined assets at the first time of institutionalization determines the amount of assets you may keep.
If you have assets of $100,000 or less, you can keep $50,000 for the community spouse and $2,000 for the institutionalized spouse. If your assets are over $100,000 you should contact your local county/tribal social or human services department for help in determining the amount of assets you can keep. The community spouse share can be higher than the standard if a court or administrative hearing officer orders a higher amount.
Once the couple’s assets are at or below their asset limit, they have one year in which to assure the institutionalized spouse has no more than $2,000 worth of assets in his/her name. During this time period, the institutionalized spouse usually transfers all but $2,000 of his/her assets to the community spouse.
Examples of countable assets may include, but are not limited to: · Cash.
· Checking Accounts. · Savings Accounts. · Certificates of Deposit. · Life Insurance Policies.
· Your home (as long as the community spouse or other dependent relatives live there).
· One vehicle.
· Burial assets (including insurance, trust funds, and plots).
· Household furnishings.
· Clothing and other personal items.
“Excess" assets (assets which are above the asset limit) can be reduced to allowable limits if they are used to pay for nursing home or home care costs, or for other things such as home repairs or improvements, vehicle repair or replacement, clothing, or other household expenses. If excess assets are not reduced the institutionalized spouse cannot become eligible for Medicaid.
There are special rules for counting income and the amount of income that can be transferred from one spouse to another. Only the institutionalized person’s income is counted in determining eligibility. The community spouse cannot be required to pay for the institutionalized spouse’s care except when there is a court order to do so.
Through Medicaid planning, you can rearrange your finances so that countable assets are exchanged for exempt assets or otherwise made inaccessible to the state. For example, instead of spending your savings solely on nursing home bills, you can pay off the mortgage on your family home, make home improvements and repairs, pay off your debts, purchase a car for your healthy spouse, and prepay burial expenses. There are many other ways to shelter countable assets. Consult an experienced attorney for more information.
Along with qualifying you for Medicaid benefits, Medicaid planning seeks to accomplish the following goals:· Sheltering your countable assets
· Preserving assets for your loved ones
· Providing for your healthy spouse (if you're married)
·
Individuals who meet the requirements for the Aid to Families with Dependent Children (AFDC) program
· Children under age 6 whose family income is at or below 133 percent of the Federal poverty level
· Pregnant women whose family income is below 133 percent of the FPL
· Supplemental Security Income (SSI) recipients in most States
· Recipients of adoption or foster care assistance
· Special protected groups (typically individuals who lose their cash assistance due to earnings from work or from increased Social Security benefits, but who may keep Medicaid for a period of time)
· All children born after September 30, 1983 under age 19, in families with incomes at or below the FPL
· Inpatient hospital services
· Outpatient hospital services
· Prenatal care
· Vaccines for children
· Physician services
· Nursing facility services for persons aged 21 or older · Family planning services and supplies
· Rural health clinic services
· Home health care for persons eligible for skilled-nursing service · Laboratory and x-ray services
· Pediatric and family nurse practitioner services
· Nurse-midwife services
· Early and periodic screening, diagnostic, and treatment services for children under age 21
Using annuities to protect assets has become very popular. Two recent books on the subject, The Medicaid Planning Handbook by Alexander A. Bove, Jr. and Avoiding the Medicaid Trap by Armond Buddish, specifically discuss the use of annuities to avoid Medicaid seizure.
Generally, if your assets exceed the Medicaid test limits, you may still be eligible for Medicaid by converting the assets to an immediate annuity income stream. Using an income annuity in this manner may be beneficial in the right situation if structured properly.
Keep in mind that states' rules for Medicaid differ greatly and it is important to learn as much as possible about your own state's requirements. The annuity income stream must begin prior to applying for Medicaid. Under the Kennedy Kassebaum and OBRA '93 Acts, an annuity must have life expectancy payout rates that are in accord with the latest social security mortality tables (HCFA Tables). Many insurance companies' payout rates are not in compliance. You should contact an agent with experience in this field.
Using a straight life annuity with no refund or no period certain guarantee will cause the income stream to stop on the death of the annuitant. Additionally, under the Estate Recovery rules passed by OBRA 93, any income that continues to heirs after the Medicaid recipient's death may be subject to recovery by the state.
You must be careful that the combined monthly income from the annuity together with your other social security and pension payments stays under the allowable federal limits. Otherwise, the purchase of too large an annuity income stream could inadvertently take you even slightly over the limit and completely disqualify you from Medicaid.
For example: Say you want to reside in a nursing home that costs $4,500 per month. In order to pass Medicaid qualification tests, you use a significant portion of your assets to purchase an immediate fixed annuity that pays $800 per month for life. Your only other income, from Social Security and pension plans, is $525, making your combined monthly income total $1,325. Be careful that this total remains below the federal guidelines. If the federal limit were $1,315, then you would be $10 over the limit and be ineligible for Medicaid coverage. Better to purchase LESS annuity income to stay well below the threshold than more income.
Like many other people, you may be thinking about giving your home away now that you are older. There may be several reasons why you might consider doing this:
· You want to avoid probate,· You want someone else to take responsibility for the upkeep of the property,
· You want to help a family member,
· You fear you can no longer live alone and want someone to stay in the home with you, or
· You worry that you may have to enter a nursing home someday.
You should never sign away your home ownership without first getting advice from an attorney. There are many risks in transferring home to another. You should talk to an attorney who is certified for or knowledgeable in elder law or estate planning.
What happens if you transfer your home? You will lose control over the use of your home and property. You will have no say in whether the property is sold, mortgaged, taken by creditors or used for a purpose that you don’t like. You will lose the right to live in the home or somewhere on the property. You will lose the right to rent the property or otherwise use or occupy the property.
You may create problems with creditors. You may get in trouble if you have creditors that have a lien on the property or if you file bankruptcy. If you transfer a home or other property, and, as a result, a bank or other creditor is unable to collect a debt, the transfer can be canceled. In some circumstances, such a transfer is considered fraud.
You may lose your Property Tax relief. If you are over age 65 or disabled, you may have the right to some relief in paying property tax under state law. If you add another person’s name as co-owner of the property, that person’s income will be counted along with yours. The increase in income may cause you to lose your eligibility for tax