Medicaid Asset Protection Trusts

Introduction – The Emerging Field of Elder Law

As an estate planning and elder law attorney, one of my goals is to educate folks on how to get the benefits they are entitled to without wiping out all of their assets. According to the U.S. Department of Health and Human Services, someone who is 65 years old today has nearly a 70% chance of needing long-term care. In Oklahoma last year, the average cost of a semi-private room in a nursing home exceeded $53,000.

Given the above figures, even those with significant means could struggle to pay for a nursing home. Enter Medicaid. Medicaid is a government program designed to help with the costs of long-term care. This is a great tool to have in one’s toolbox. But there is a caveat: Medicaid has strict asset requirements. Although exceptions exist, married couples can generally keep only about half of their money. The situation is even more dire for single individuals, who are limited to $2,000. Fortunately, there is a way to protect assets and at the same time qualify for these vital benefits. It’s called a Medicaid Asset Protection Trust.

What is a Medicaid Asset Protection Trust?

A Medicaid Asset Protection Trust (MAPT) is a special type of irrevocable trust. Unlike a revocable living trust, the grantor cannot terminate or cancel a MAPT. For this reason, some people shy away from it. Nevertheless, a MAPT is more flexible than it might first appear. That’s because the grantor controls the trustee designation. In short, the grantor can appoint a trustee of their choosing, and can change that trustee at any time. What’s more, while the principal of the MAPT is unavailable to the grantor, the grantor and the grantor’s spouse can receive all of the income generated by the MAPT. For example, let’s say the MAPT owns a portfolio of stocks and bonds valued at $200,000. The grantor is prohibited from cashing out the investments, yet can be paid all of the dividends and interest on them.

Conclusion – Advance Estate Planning is Best

A MAPT is a great way to ensure one can pass down an inheritance to family and loved ones regardless of whether they require long-term care during their lifetimes. The catch is that to be fully effective, a MAPT must be in place for at least 5 years before the grantor applies for Medicaid. This makes advance planning imperative. Consequently, I encourage anyone who is concerned about dealing with the costs of long-term care to contact an estate planning and elder law attorney today.

Estate Planning: What Makes Me Different?

Doesn’t Every Attorney Do Estate Planning?

Let’s face it: many attorneys do estate planning. At least they claim to. Coupled with the emergence of companies like LegalZoom, there’s no shortage of options for the consumer. However, estate planning is much more than pieces of paper.

Promote Your Values and Increase Family Harmony

At the end of the day, I think we all want to be remembered. I certainly do. How can estate planning help with this?

When done right, estate planning enables clients to promote their personal values. Be it the importance of hard work, entrepreneurship and investment or charitable giving, we can specifically tailor your estate plan to carry on your values long after you are gone. Importantly, your estate plan can encourage your loved ones to do the same.

Estate planning can also increase family harmony. Normally, we think of estates causing discord in families. While this unfortunately happens, it does not always have to be the case. The key is to leave no stone unturned.

Good Estate Planning Requires a Process and System

I work my hardest to provide every client with individualized representation. I do not believe in one-size-fits-all estate plans. I know that all of my clients are human beings. I know that each of my clients has their own unique goals, wishes and fears. However, good estate planning requires a process and a system. What’s mine?

  • I am a member of the WealthCounsel and ElderCounsel, which are nationwide organizations dedicated to excellence in the fields of estate planning and elder law;
  • Comprehensive information gathering;
  • Robust drafting software for top-of-the-line documents;
  • Instructions regarding trust funding; and
  • A closing “Legacy Interview”, in which the client puts the estate plan into their own words

Your Life. Your Legacy. My Passion.

Your Life. Your Legacy. My Passion. Yes, it is a slogan. But I take it to heart. I try to live out my motto every single day. For me, the greatest joy is seeing the sense of relief and peace of mind my clients have in knowing that their family will be taken care of and their legacy will be protected.

Medicaid: Protect Your House

Introduction – Protecting Your Home From Medicaid

Previously, we discussed what Medicaid covers and the financial eligibility requirements. Today, I want to get a bit more specific. In particular, I am going to discuss the largest asset most people own: their home. Depending upon the circumstances, the primary residence can present significant problems as it relates to Medicaid. Fortunately, however, there are planning techniques available to address these issues.

The Home Is Exempt From Medicaid…At Least Initially

Under the Oklahoma Medicaid rules, an applicant’s primary residence up to $572,000 is exempt. This means that so long as a Medicaid applicant’s home is valued at less than that amount, it will not be counted when determining the applicant’s eligibility for long-term care benefits. Consequently, the home is not initially a concern for most people who need Medicaid.

But Medicaid Won’t Let You Have Your Cake And Eat It Too

While the primary residence is exempt for purposes of the initial Medicaid application, a couple different things can happen once the individual is a nursing or assisted living facility. First, the home may lose its exemption. The Oklahoma Medicaid rules provide that the primary residence loses its exemption (and becomes a countable resource) if the individual receiving long-term care cannot return home after a period of 12 months. What happens then? Either the home must be sold and the proceeds spent down or the Oklahoma Health Care Authority places a lien on the property.

How To Protect The Family Home From Medicaid

For many families, the home is worth so much more than its market price. The memories, the history, even the struggle…these are all things that cause a home to have sentimental value. The last thing a family dealing with Alzheimer’s disease or another incapacitating illness needs is to lose their home. What can you do?

The best course of action is to plan in advance. Irrevocable trusts are one option. These are special types of trusts designed to shield the home from the expenses of long-term care. Another possibility is special insurance products that pay a portion of the daily cost of a nursing or assisted living facility.

But what if you do not plan in advance? The techniques mentioned above are either unavailable or have limited effectiveness. In such situations, the use of life estates, annuities and promissory notes or family transfers might be prudent.

Conclusion – Talk To An Elder Law Attorney About Medicaid

By now, you hopefully know that the Medicaid rules are very complex. If you or a loved one are faced with the prospect of needing Medicaid to pay for long-term care, you should consult with an elder law attorney. Elder law attorneys specialize in issues affecting older adults, like Medicaid. While it may seem that nothing can be done and your family is going to lose everything, this does not always have to be the case.

Estate Planning: 3 Things Newlyweds Should Know

Introduction – Estate Planning for Newlyweds

Are you a newlywed? If so, estate planning is probably the last thing on your mind. For starters, nobody wants to think about their spouse passing away. What’s more, weddings cost a lot of money. By some estimates, 74% percent of couples go into debt to pay for their wedding (source: https://studentloanhero.com/featured/wedding-costs-survey-couples-take-debt-married/). At the same time, however, getting married raises significant estate planning issues. Here are three things all newlyweds should know:

Your Spouse Might Not Get Everything if You Pass Away

Did you know that under Oklahoma law the surviving spouse does not automatically get the entire estate? That’s right, the surviving could be just one of many beneficiaries. This is because of something called the laws of intestate succession. These laws apply in the absence of a written estate plan. In some instances, your spouse’s parents or brothers and sisters could end up with as much as half of the estate. Therefore, at minimum, all married couples should at least have a last will and testament.

Health Care Decisions Matter, Too

Whenever we think of estate planning, the first thing that comes to mind is distribution of assets following death. Although vital, this is not the only thing to consider in estate planning. Equally important is planning for incapacity and health care decisions. Some people may remember the tragic case of Terri Schiavo. She was a young Florida woman who had a stroke. She then fell into a persistent vegetative state. Her husband told doctors Terri’s wish was to be taken off life support. Terri’s parents claimed she wanted to be kept alive as long as possible. Unfortunately, nothing was in writing. Consequently, the parties battled in litigation for years. The moral of the story is to set forth one’s wishes ahead of time. Newlyweds should be sure to execute durable powers of attorney and Advance Directives for Health Care.

Estate Planning is a Lifelong Process

I always tell clients that estate planning is not a one-time event. Rather, it is a lifelong process. Your will or trust needs to be reviewed and updated when major changes in your life occur — be it the birth of a another child, a career change or the purchase of a new home (see also, “Two Indicators Your Estate Plan Needs Updated”). Nevertheless, developing a relationship with an estate planner early on and laying the proper foundations makes it much easier to implement the necessary changes later.

Conclusion – Estate Planning Benefits Newlyweds

Marriage is a major life milestone and an extremely exciting time. By preparing your estate plan, you can rest easy and enjoy life with your new partner knowing that your future is secure and your family will be taken care of. To help with the decision, I am offering a 20% discount on all of my estate planning services to newlyweds* through Labor Day 2018. Act now before it’s too late!

*Defined for purposes of this offer as married for one year or less

Probate: 3 Things You May Not Know

Introduction

Whenever you lose a loved one, probate is the last thing that comes to mind. Unfortunately, for many families, it becomes part of the grieving process. Having an idea of what to expect can make it easier on everyone. Here are three things you may not know about probate.

Wills Do Not Avoid Probate

We have all seen the movies: a person passes away, and then the family gathers at the attorney’s office for a reading of the will. If all goes well, the estate is divided according to the deceased’s wishes. In reality, things are not so simple. You can think of a will as instructions to the probate court on how to distribute the property of the deceased. However, it is up to the probate court to determine whether a will is valid and how to enforce it. Therefore, even if the deceased left a will, probate is still necessary.

Probate is a Public Process

Unlike the reading of a will in the movies, where only the family is present, probate is a highly public process. First, everyone with an interest in the estate must be notified of the proceedings. What’s more, the Personal Representative of the estate must publish a series of notices in the local newspaper. Lastly, in the digital age, Oklahoma’s court records are available online. All of this means that the details of a deceased person’s estate, from how much money they had to who inherits, are readily accessible to the general public.

It Is Expensive and Time-Consuming

Probate is expensive and time-consuming. Depending on the size and complexity of the estate, you can expect to pay anywhere from $3,000.00 to $10,000.00. Regarding the timeline, even utilizing certain summary procedures for small estates under Oklahoma law, it is virtually impossible to complete the process in less than 2 months. More typically, it takes 6-7 months. Consequently, there is a substantial delay in the heirs receiving their inheritances.

Bottom Line: Avoid Probate

As you can see, probate is less than desirable. Thus, it is best to avoid. How, you may ask? The answer is a revocable living trust. Click on this link to learn more: http://www.tylerrbarrettlaw.com/2017/12/living-trusts-the-gift-that-keeps-giving. Or speak with an Oklahoma estate planning attorney.

Medicaid 101: Financial Eligibility

Introduction – Medicaid Financial Eligibility

In my last post, I discussed the basics of Medicaid (click here). To recap, Medicaid is a joint effort between the states and federal government. It pays the medical expenses of qualified individuals. I am an estate planning and elder law attorney. My law firm helps clients plan for long-term care in nursing homes. The Medicaid long-term care program has strict financial requirements. What are these requirements, and are there any exceptions? That’s the subject of today’s post.

Medicaid Asset Limits

In order to qualify for Medicaid, individuals must have less than $2,000.00 in countable assets. What is a countable asset? Generally, Medicaid considers all of the property a person owns. This means everything from real estate to stocks and bonds to life insurance. However, there are several exceptions. The following are some of the exemptions when determining the applicant’s eligibility:

  • Primary residence (up to $572,000.00)
  • One vehicle (of any value)
  • Life insurance with no cash value
  • Burial plots and irrevocable burial policies

The above list is not exhaustive. Whether an asset is exempt can turn on several factors. Thus, it is important to consult with a qualified elder law attorney about your particular situation.

Medicaid Income Limits

In addition to assets, the Oklahoma Health Care Authority (which administers Medicaid) looks at the applicant’s income. Oklahoma is an income cap state, meaning there is an upper limit on how much income you can have. This figure changes based on the cost of living. For 2018, the Oklahoma income cap is $2,250 per month. Nevertheless, a person may be able to keep more of their income by establishing a Medicaid Income Pension Trust. I will cover Medicaid Income Pension Trusts in an upcoming post.

Conclusion – Find the Right Elder Law Attorney

As we have seen, Medicaid is a complicated program. And qualifying for benefits is not easy, as a person must have minimal assets and income. Unfortunately, the price of nursing homes continues to rise. Too often, this leaves folks feeling like they are between a rock and a hard place: either divest all of their assets or potentially go without critical care. Luckily, elder law attorneys like myself have several strategies to preserve assets in the face of long-term care. My next series of posts will provide an overview of those strategies. Until then, visit the Oklahoma Health Care Authority’s website for more information on our state’s Medicaid program: http://www.okhca.org/

Medicaid 101: Coverage & Eligibility

Introduction to Medicaid

While many people have heard of Medicaid, few truly understand it. Beginning today, this blog will feature a comprehensive, multi-part series on the program. Part one is an overview of coverage and eligibility.

What is Medicaid?

Medicaid is a joint effort between the states and federal government. It pays health care costs for qualified individuals. The program covers a broad range of health services. For our purposes, however, we will focus on long-term care in a nursing facility. At minimum, federal law requires the nursing facility benefit to cover the following:

  • Nursing and related services
  • Specialized rehabilitative services
  • Medically-related social services
  • Pharmaceutical services
  • Dietary services individualized to the needs of each resident
  • Professionally directed program of activities to meet the interests and needs for well being of each resident
  • Emergency dental services
  • Room and bed maintenance services
  • Routine personal hygiene items and services (source: Medicaid.gov).

Who is Eligible for Medicaid?

First, the applicant must be over the age of 65 or disabled and in need of long-term care. Next, the individual must meet certain financial requirements. Medicaid considers both the income and assets of a person. States have flexibility to craft their own unique, specific limits. Generally, in Oklahoma, one cannot have assets over $2,000.00 or income exceeding $2,250.00 per month. As we will see in the coming weeks, there are important exceptions and caveats to these figures.

Conclusion

The Medicaid rules and regulations are highly complex. In addition, they differ from state-to-state. What’s more, mistakes in dealing with assets and income can render a person ineligible for care. At best, that’s inconvenient. At worst, it’s life-threatening. Therefore, when a family member or loved one is faced with entering a nursing facility, you should consult a qualified elder law attorney in your area. Next week, we will delve into greater detail regarding the financial requirements. Until then, happy Memorial Day weekend!

3 Keys to a Successful Probate

Introduction

You have just lost a loved one, and now comes the dreaded words: you need to go to probate. Sure, dealing with a court is never fun. However, there are things you can do to make the process easier on your family. Here are three keys for a successful probate.

Hire the Right Probate Lawyer

Some people will tell you that you do not need a lawyer for probate. True, the rules allow parties to represent themselves in all cases – including probate. But is that smart? Oklahoma probate law is highly complex and technical. Any mistakes in following the procedures can lead to months of delays or, worse yet, subject the personal representative to legal liability. So, what should you look for in a lawyer? My recommendation is to find someone who specializes in estate planning and probate. Further, good organizational skills are a must since probate has a lot of moving parts.

Communicate Early and Often

The last thing you want is dissension among the family. In my experience, the number one cause of disputes in probate is lack of communication. The personal representative might be doing everything by the book. Nevertheless, if he or she keeps other heirs in the dark, suspicions tend to grow. For that reason, I always advise clients to go beyond the basic notice requirements and be fully transparent about all aspects of the probate, from the assets of the decedent to creditor claims and administrative expenses.

Follow Court Orders

Throughout a probate, the court will issue various orders. It is vital that the personal representative follow them. It may not seem like a big deal as long as you are “doing the right thing”. Unfortunately, title examiners, banks, real estate agents and others working with an estate do not always see it that way. These parties want to know that the personal representative is operating within the law and has full legal authority to perform the action in question. If you are unsure about the particulars of an order from the probate court, ask your lawyer.

Conclusion

Probate takes time, but it does not have to cause misery. By hiring the right probate lawyer, communicating well and complying with court orders, you can ensure a successful process.

Updating a Living Trust

Introduction

As I’ve said many times before, estate planning is an ongoing process. This is particularly true of living trusts. In order to achieve your goals, it is vital that you update your trust over time. When should you update your trust, and how? That is the subject of today’s post.

When to Update a Living Trust

There are three instances when you should consider updating a living trust. The first is a change in personal circumstances. By that, I mean things like the birth of a new child or grandchild or getting married. Such events could alter your desired beneficiaries and the shares they receive or who you want to manage your affairs (for instance, newlyweds will likely want to make their spouse the health care decision maker). Secondly, similar to a change in personal circumstances, any significant changes in your finances could warrant amending your trust. Finally, the passage of new laws might make parts of your trust obsolete. A good example is the recently-enacted Tax Cuts and Jobs Act, which doubled the federal estate tax exemption amount and overhauled the business taxation structure.

How to Update a Living Trust

I cannot stress this enough: do NOT update a living trust on your own. Your attempts to do so may be legally invalid or, worse yet, cause severe unintended consequences. The best thing to do is contact the attorney who originally drafted your trust. He or she is likely to be most knowledgeable about its terms and provisions. However, if your attorney is retired, no longer in practice or has moved to a different city, then you can reach out to a new attorney. Personally, I offer free estate planning reviews to prospective clients.

Conclusion

The hard part is getting a living trust in place initially and funding it. Once the trust is created, updating it throughout the years is fairly easy, provided that you know when and how to do so.

3 Non-Tax Reasons for Estate Planning

Introduction – Non-Tax Reasons for Estate Planning

The Tax Cuts and Jobs Act doubled the federal estate tax exemption to over $22 million for married couples. Some are now asking: “What’s the point of estate planning?” Minimizing estate taxes should be a goal for high net worth clients. Yet, it’s not the only reason to plan. In fact, estate planning is more important now than ever. Here are three reasons why:

Taking Advantage of New Business Provisions

The Tax Cuts and Jobs Act significantly altered business taxation. First, the legislation lowered the corporate tax rate to 21%. Second, it created new, favorable treatment for pass-through entities. This includes partnerships and S corporations. Given these provisions, business owners should reevaluate how their companies are structured. Changes could result in a lower tax bill.

Preparing for the Possibility of Incapacity

Medical experts predict that the incidence of Alzheimer’s and dementia will triple by 2050. Thus, it makes sense to prepare. Durable powers of attorney, Advance Directives for Health Care (also known as a living will) and trusts allow loved ones to make decisions for you in the event of incapacity.

Protecting Beneficiaries

Estate planning is about your legacy. You have worked hard for your money. Nevertheless, in the absence of proper planning, your beneficiaries’ inheritances can be lost to creditors, divorcing spouses or even the government. Fortunately, trusts can protect that money by controlling the timing and manner of distributions.

Conclusion

Don’t let the increased federal estate tax exemption give you a false sense of security. Estate is still something everybody should do. By planning properly, you can minimize income taxes, plan for incapacity and preserve your legacy for generations to come.

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