When it comes time to review or update your estate planning papers like wills and trusts, you need to make sure that you and your lawyer look at what can be done now to protect and preserve your assets from long term care costs that might or might not emerge.
This area of law and planning is often referred to as elder law. It is essentially lifetime planning designed to make it so you "qualify" for government benefits later, if needed.
A recent statistic reveals that 70 percent of the U.S. residents in long-term facilities are on Medicaid (welfare). There are many things that can be done, but each and every case is unique. It is necessary to act early because there is a five-year look-back period where gifts can create a period of ineligibility.
In all cases, however, where we think it might be an issue, we will advise that there be specifically enumerated powers in the general Durable Power of Attorney that authorizes the agent to do Medicaid (elder law) planning.
We usually direct the agent must act with a lawyer and that any distribution from the principal (you) to other people be consistent with your estate plan. We explore the economic feasibility of insurance (long term care or paid up long term care with death benefit rider if policy not used for care while living).
For those who wish to make sure their kids will get something, if they own their house free of debt and they are willing to forego doing a reverse mortgage on the house, then we can guarantee the house will go to the kids so long as you do not need Medicaid within five years.
This planning involves deeding the "future interest" in the house to the kids or to a trust for the benefit of the kids, and retaining a "life estate." You will retain absolute and unequivocal ownership while you are alive.
On your passing, the life interest evaporates and the state is not able to recover anything from your house. The reason is that your life interest vanishes upon your passing and there is nothing for the state to recover.
It is very important planning, if you wish to make sure your family inherits anything. A little bit of planning can do so much to neutralize many threats, and it can make a BIG DIFFERENCE. It could mean the difference between leaving your children or something, or nothing at all.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. www.mwinnesq.com