As an Elder Law attorney, one of the main questions I get is “how do I save my assets”? What is implicit in this question is the fact that your assets are at risk as you age. To understand how to save your assets, it is first important to know the risks you face. We’re going to talk about the main one: Long Term Care.
The numbers go like this, 70% of individuals over the age of 65 will need some type of long-term care in the future. Bearing in mind, that some people pass away before needing long-term care, that number is a pretty conservative estimate. A 70 plus percentage chance of needing long-term care means that paying for the cost of care should be paramount in your planning for the future.
Without a proper plan, you may have to pay the cost of care out of pocket. Considering that the average cost of care can range from $5,000 to $10,000 per month, it won’t take long until you end up liquidating all of your assets and hand everything over to the long-term care facility.
How do you prevent this from happening? One option is to get Medicaid to cover the cost of care. Medicaid is a program that you pay into your whole life. Every time you earn a paycheck, a little bit gets taken out for Medicaid. So, you may as well utilize it. The problem most people have is figuring out how to qualify for Medicaid AND preserve your assets. That’s where an experienced Elder Law attorney can help.
Whether it’s through a spend down, trust work, deed work, or a combination of the three, there’s a lot of options out there to get qualified for Medicaid, save your assets, and have the cost of care covered. If you have questions about preserving your assets and paying for long-term care, give the experienced Elder Law attorneys at McIntyre Elder Law a call at (704) 259-7040.
First, what is the doctrine of Necessaries? This doctrine
in North Carolina means that one spouse may be held responsible for the other
spouse’s medical bills. These medical bills can include hospital bills, doctor’s
bills and yes, nursing home care bills.
Why does the fact that a surviving spouse may be
responsible for the other spouse’s medical bills matter? Well, the obvious
answer is that the surviving spouse would have to pay those bills… But… If the
surviving spouse failed to pay those bills then those bills could attach to the
surviving spouse’s estate when the surviving spouse passes away.
For example: If the surviving spouse passes away and
they owned a home, maybe other real estate, perhaps some monies and/or
investments that they wish to pass to their children and grandchildren, then the
debts of the spouse that predeceased the surviving spouse could then be
attached to those assets as they pass through the probate estate or estate administration
of the 2nd (surviving) spouse.
The surviving spouse, no doubt, may feel an extreme sense of
confidence that they have no debt and that they will not be burdened by the
spouse who passed first. In the example above, let’s posit that the first
spouse needed extensive nursing home care. The state may even send a lien
notice after that spouse passes away that (for the purposes of this example) $126,000
is owed to the State of North Carolina, Department of Health and Human Services
(DHHS). The surviving spouse may even ignore this notice, not realizing that
this amount will attach to his/her estate when they eventually pass away and
risk sacrificing assets that would otherwise pass to the next generation lien
Are there ways to save the assets of the surviving spouse
from these liens of the deceased spouse? Yes. There are multiple ways to
prepare the assets of the surviving spouse to not only protect the home, other
real estate, money and investments but to also keep the surviving spouse in
control of those assets for the remainder of their lives.
Deed planning with deeds like life estate and ladybird deeds
can keep one in control of their properties for the rest of their lives and
protect them from a recovery under the Doctrine of Necessaries or because of a
personal lien they may have at their death. Trusts can also help protect assets
and pass them lien free to loved ones.
As elder law attorneys, we frequently get questions regarding a variety of financial products available to seniors. One such product we are asked about on almost a daily basis is the reverse mortgage. With 70% of individuals over the age of 65 going into long-term care at some point in their lives, it becomes a primary concern for seniors to determine how they will pay for their cost of care—especially when you consider the astronomical costs associated with long-term care (from $5,000 to $10,000 per month). One of the ways available to attempt to pay for long-term care is using a reverse mortgage. But, is this the best option?
Let’s start by defining it. A reverse mortgage is a loan whereby you transfer the equity in your home into monthly payments. This results in a reduction of some or all of your equity and an increase in your monthly income based on the agreed payment schedule. Based on the definition, you may already start seeing how this arrangement can be risky.
First of all, you will lose the equity in your home. This means that your main asset—the one you have worked tirelessly for yours to pay for—will once again be encumbered by a loan. This also means that if you want to pass your home along to your children, they may be receiving a burden rather than an asset.
Second, the payments are limited to the equity you have in the home. Thus, if you still owe a substantial amount or your home is not worth much money, you’re depleting the equity for a very small pay out.
Third, it won’t pay for your entire cost of care. Unless you have a home worth millions of dollars, a reverse mortgage will likely not pay enough money to cover the entire cost of your long-term care. Equity in the home tends to pale in comparison to the costs of a facility over the span of a few years. Therefore, you may be risking your home to cover only a fraction of your costs.
Fourth and finally, there are better options. Planning early on can allow you to utilize long-term care insurance in a tactical way to cover your cost of care. But, even if you do not qualify for long-term care insurance, you may still have the option of having Medicaid or VA Benefits pay out for you. These are viable options that will help you cover future costs while also preserving your assets.
At McIntyre Elder Law, we take an asset preservation approach. This means that we create a strategic plan for you whereby we seek to help you cover your cost of long-term care and keep what you own so that you can pass your legacy to your loved ones. You do not have to give, sell, or otherwise liquidate your assets to ensure your future. Whether it is planning for Medicaid, VA Pension Benefits or planning with long-term care insurance, we can find the plan that fits your needs, goals, and financial situation. Call us today (704) 259-7040.
I’m Greg McIntyre and this is the elder law report. Today I want to talk about long-term care crisis planning.
What is long-term care crisis planning?
Let me give you an example.
If a loved one, such as a spouse or parent needs assisted living or nursing home care, let’s say they are headed to care, or are already in care and lots of money is being spent down, assets are unprotected, then what do you do?
Can you activate a veteran’s benefit or Medicaid benefit to help pay? And the answer is, Yes.
That’s what it is. It’s a situation where someone needs care and we’re trying to figure out how to protect their assets. These assets could be retirement assets or your home. We’re also trying to figure out how to pay for the care.
Misconceptions versus Reality
What can you do?
A Common Misconception
You Cannot Protect Assets.
This is totally untrue.
In most cases, most assets can be protected. We can protect close to one hundred percent of the assets if we are given the chance to do so.
Many people think they must spend all their money on care and lose their home before they can get help. This is not true. My job is to see which assets we can save and what benefits we can access to pay for care. There is rarely a situation where we cannot save the assets, and we try and save as close to one hundred percent of the assets as possible.
Just don’t listen to street lawyers, the word on the street, because it’s usually wrong.
Patient Monthly Liability (PML)
What this means is, a person’s income needs to be paid to an assisted living or nursing home facility because Medicaid will only pay for the portion the income doesn’t pay for. This can be quite a shock to people.
The Community Spouse
This is a program for the (healthy) spouse, where they may be able to keep a portion of their spouse’ income so they can keep paying the house payments and living expenses.
Assets versus Income
This can help if you are confused about what constitutes an asset versus an income.
Assets are everything you have already made, the money you have already accumulated. Such as, your house, car, bank account, retirement account, 401k, IRA, stocks, bonds, annuities.
Income is your job income, social security income, pension income, things you cannot liquidate, money you get once a month.
That differentiates assets versus income.
What do you need to do when you come and see us?
What do you need to do to put in an application?
Our goal is to come up with a plan to protect your hard-earned money and property. We also want to help you pick a benefit to access if you don’t have long-term care insurance.
When you come and see us, bring your financial documents. It helps us to have that information so we can better help you when we present your application to Medicaid. We want to show Medicaid what we have presented to them works under their rules.
So, plan ahead, this is so important.
To get way ahead of the crowd, get your foundational documents in order, General Durable Power of Attorney, Healthcare Power of Attorney, Living Will, Will.
If you have questions about long-term care crisis planning, foundational planning, pre-planning, or long-term care insurance, call our office at 704-259-7040 or visit mcelderlaw.com and sign up for our e-newsletter.
I have spoken at length about how pre-taxed funds can complicate an estate plan. While having a fund that you can grow with pre-taxed money can increase the rate of the fund’s growth, it can be a bit of a double-edged sword.
The thing with pre-taxed money (like traditional IRAs) is that if you want to use that money, you have to pay the tax on it first. You can’t roll those funds over to cover the cost of living, nor can you pull the money out to pay for big expenses without also paying tax. Thus, that money is essentially locked up.
What I am getting at is, an estate heavily invested in pre-taxed accounts tends to not be very flexible for planning purposes. And you want flexibility. After all, 70% of individuals over the age of 65 will need some type of long-term care. If most of your money is locked up, how will you manage to protect your assets and pay for long-term care?
A great option for folks with pre-taxed accounts is an asset based long-term care insurance policy. As I’ve mentioned in other articles, long-term care insurance is a great tool to cover the cost of future care (not only long-term care but chronic care as well). Not only does it cover the cost of long-term care, it also provides you with flexibility in your future plans, all the while costing less in a year than two-weeks at a long-term care facility.
So, what’s an asset based long-term care policy? This type of policy allows for you to directly pay your long-term care insurance premiums out of your tax qualified account. This is a great option because it allows you to roll that money over without taking an immediate tax hit. Thus, the amount withdrawn from the pre-taxed account is not taxed when used to pay the long-term care premiums. Furthermore, what you pay toward long-term care insurance may be tax deductible depending on your overall medical expenses for the year.
Long-term care insurance is not only a great option to ensure that your cost of care is covered at a reasonable and affordable rate, it’s also a great estate planning tool to lend you flexibility and optimize your tax liability each year. If you have questions regarding long-term care insurance or an Estate Planning or Elder Law matter, let the experienced attorney at McIntyre Elder Law help you. Call (704) 259-7040 for a consultation today.
As an Elder Law attorney, I meet with people all the time. I want them to get more than they expect from their visit. There are ways to accomplish this.
If you are about to see an estate planning or elder law attorney, what steps should you take?
One, if you have any estate planning documents already, bring them with you.
When a client brings in estate planning documentation, I can look through it just to verify everything is written correctly and make sure they do what they are written to do and comply with statute. This way, there is no guess work.
If, for example, I’m reviewing a power of attorney, I can get a copy of it for my records and make sure it is recorded at the register of deeds. This is important.
If reviewing a Will, I’m looking to make sure it still complies with your wishes, as the Will may have been written ten or twenty years before. I also want to make sure it complies with North Carolina law, as this changes from time to time.
Two, it’s great if you can fill out the client information sheets before you turn up at the office. At my office, we email the information sheets to you and ask that you send it back through email. This automatically goes straight into our digital client information system. The information you provide can help me understand how best to deal with your situation. I then have time to do any research to further help your cause.
Now, some people can be hesitant to give my office information about their finances, and I understand that. They want to know, why are you asking me about my retirement? Why are you asking me about my assets? But as an elder law attorney, and especially as an estate planning attorney, I really need to know what’s going on financially to be able to help. This is about planning your estate, and without the financial information, it would be very difficult to do that successfully.
For instance, a plan will be very different for someone who has several million dollars, plus long-term care insurance, versus someone with several hundred thousand dollars and no long-term care insurance. Each estate plan is tailored to the individual.
Three, research. When potential clients sign up for consultations, they get access to our e-newsletter and receive emails ahead of the consultation. This can help them to do some research of their own, which is a good thing. I love to meet with clients who already have a good idea what they want. It allows us to cover more ground in a shorter space of time. This makes everything more efficient.
Finally, go into a consultation with an open mind. This is important because you may think you need one thing, for instance, a Trust, and I mention this all the time, but I talk more people out of Trusts than into Trusts. Now don’t get me wrong, there are some great Trusts, but most people who think they need a Trust, want it for probate of Wills, or they perceive tax issues that may not be a reality for them at that moment. So, it’s good to have an open mind because I may have a more efficient solution for you.
These are some of my tips for getting the most out of your visit to an attorney. For more information, visit mcelderlaw.com and sign up for our e-newsletter. If you have any questions, please give me a call, Greg McIntyre at 704-259-7040.
If you wanted to cross a bridge and someone told you that the bridge had a 70% chance of collapsing, would you cross it? No. You are a reasonable person and you would create an alternative plan to reach your destination. Unfortunately, you face the same odds for a similarly catastrophic event and most have not prepared for it.
If you are over the age of 65, you have a 70% chance of needing some sort of long-term care—whether it’s in home, assisted living, or skilled nursing level care. If you do end up needing long-term care (LTC), which you likely will, you’ll need to figure out how you’re going to pay for it. You may receive Medicare and a Medicare supplement but that will not cover the cost of LTC. Medicare will only cover up to 80 days of care but only if you are improving. If your progress hits a plateau, you will need to find an alternative means of paying.
LTC can be extremely expensive. Depending on the level of care, you can expect to pay anywhere from $5,000 to $10,000 a month or more. Most do not have the cash on hand to pay out that kind of money for the long-term. If you do end up paying out of pocket, you will likely need to liquidate your assets (home, care, retirement accounts, and investments) to cover the bill. Paying out of pocket, for most, means that they will not be leaving anything for their loved ones when they die. Everything they own goes to cover the cost of care.
Luckily, there are alternatives out there. Medicaid is one alternative which I have written about at length in other articles. Medicaid may be a viable and beneficial option for you. Check out my other articles to learn more.
Another alternative is long-term care insurance. LTC insurance is much like life insurance, car insurance, or any other type of insurance in that you pay monthly premiums, and, upon the occurrence of a triggering event, the policy pays out. For car insurance, the triggering even is a wreck. For life insurance, its death of the insured. For LTC insurance, it’s the need for long-term care.
LTC insurance premiums do present a monthly obligation. They can cost anywhere between $1700 to $2300 per year. However, that amount pales in comparison to the cost of LTC out of pocket. With LTC insurance, you will pay, in a year, less than half of what you’d pay in a month without the policy.
Another benefit is the variety of policies available. This allows you to pick the plan that will ensure a return on your investment. For example, some LTC insurance policies have a chronic care rider. This means that the policy will pay out if you have the need for care beyond what Medicare will pay for but not to the level where you need assisted living or nursing home care. Thus, even if you are a part of the lucky minority who never needs LTC, LTC insurance can still benefit you.
If you have questions about long-term care insurance or your estate plan, the attorneys at McIntyre Elder Law are ready to help. Contact us at 704-259-7040.
I asked my staff what I should talk about today and one of them said, people have to know how important estate planning is…
I see people every day who didn’t plan ahead, and it can make life very hard for them, so I wanted to go over a few points to show why you should engage in estate planning.
Whether the time is right to start estate planning or not, you should stop what you’re doing and think about if you’ve properly planned to protect your hard-earned money, property and your family.
So why is estate planning important?
First, Protect Your Home.
I love my home, I’m working to pay for design changes and upgrades, and it’s going to take me thirty years to pay off my mortgage. My home is important to me. I invest a lot of time, money and energy into my home and for a lot of Americans, it is the biggest asset they have.
You want to protect that asset, right?
Here is why you should put in place your estate plan to protect your home.
· It will help you stay in control of your home for the rest of your life.
· It will help protect your home if the state tries to take it to pay for a health care situation.
· Your home can be part of the legacy you pass on to your children.
It can be simple to protect your home. A Ladybird Deed is one way.
Second, Protect Your Family.
I love my wife and my kids. If a situation occurs where a catastrophic health care situation happens and I need long term care, I would want long term care insurance in place. By having this insurance, all my assets do not have to be spent down and used to pay for that health care. I don’t want my wife and kids to live in poverty, so I need to put an estate plan in place. That’s very important to me.
A person who has long term care insurance is protecting everything they have worked for, including their home. Even if you do have long term care insurance in place, you still want to set up your other foundational documents.
· General Durable Power of Attorney
You should have a document that allows your spouse to act as you financially, as long as you trust them.
· General Healthcare Power of Attorney
· Living Will
These documents allow someone you trust to act as you if something happens to you and you’re unable to act for yourself.
It is simple to put these documents in place.
Third, Protect Your Finances.
A great way to protect your finances is through Trusts.
Let’s say you have a large amount of money, but you don’t want it all going to a grandchild in one lump sum when they reach eighteen. We use Trusts to protect that money for you and your grandchild by assigning a Trustee. This could be one of your children, someone you trust. That money could help them through college, or a trade school. Then, after they matured a little, maybe at twenty-five, the Trust could distribute a larger portion of the funds to them over time, say ten percent a year, so they don’t get it all in one go.
Fourth, Flexibility with Benefits.
Let’s say you already have in place long term care insurance. If something occurs, such as you miss a payment, by estate planning and having in place your foundational documents, can allow a spouse or one of your children to come in and do some planning for you, if you are unable to do so yourself. They can organize your assets so that you qualify for long term care Medicaid benefits or a veteran’s benefit.
Fifth, Flexibility and Planning.
Who wants a car with no reverse?
No one wants that, and planning is no different.
You want to build flexibility with plans. A General Durable Power of Attorney provides a reverse. It allows someone you trust to come in and do what’s needed. Let’s say you have backed into a corner with benefits planning, and your wife needs to take over and protect some assets another way. As long as your spouse has been appointed to handle your finances, they could do that. That helps you and your family. This allows for a reverse in the plan if needed.
When we put together a comprehensive estate plan, we try to see every avenue, and anticipate every turn, but as much as I think about those things, I’m not a fortune teller, which is why we need to plan.
We want to provide flexibility in the planning because of the unforeseen. These are the reasons estate planning is so important.
If you have any questions please call our office, 704-259-7040, or visit our website mcelderlaw.com. Our team will be ready to help you. I’m Greg McIntyre of McIntyre Elder Law and I’m here to protect your assets and legacy.
Considering that 70% of individuals over the age of 65 will need some type of long-term care in the future, it is important to plan for how you might pay for your care. The simplest way is to pay out of pocket. However, with long term care costs ranging anywhere from $50,000 to $100,000 per year, paying out of pocket is not an option for most—at least not long term.
Planning to Preserve
An alternative solution that will allow you to cover your cost of care is Medicaid. Long-term care Medicaid can be a life saver; but you have to meet its strict asset threshold. For example, the person who is in need of care (“the applicant”) can only have $2,000 worth of assets in their name for Medicaid Purposes (note: Medicaid does not count the applicant’s primary residence or the applicant’s vehicle). If the applicant is married, their spouse can have up to $126,400 worth of assets in the spouse’s name (minus the home and cars for the couple).
Those individuals who are over resourced (have more than the asset threshold) are put at a disadvantage. Many have more than the threshold but are by no means wealthy or able to pay out of pocket for care. Furthermore, the notion of spending all of your hard-earned assets for costly long-term care is a rather dim prospect for most. So, what are those who are over-resourced to do? Spending down the money is one option. This is a regular planning tool to preserve the value of the assets while simultaneously qualifying the individual. However, depending on the nature and amount of the assets, this may not be the best approach. For example, some individuals are so over-resourced that a spend-down includes spending some of the assets on the cost of care instead of preserving it (because it would otherwise count as an asset).
Another option is getting your assets out of your name. This is a great option if done correctly and strategically, because it can allow you to preserve all of your assets while allowing you to also receive Medicaid. You’d ideally want to gift away the amount of asset that are putting you over the threshold. (e.g. if you have $200,000 worth of assets, you’d give away $73,600 to reach the limit of $126,400). This will no doubt get you under the asset threshold. However, gifting the property—to an individual or irrevocable trust—will trigger the lookback period. The lookback period is where Medicaid looks back 3 to 5 years from the date of application (3 years for assisted living—5 years for nursing home care) to see if you gave any assets away. If the see that you have, they assume that the purpose of the gift was to artificially lower your asset level to qualify for Medicaid, which results in a penalty. The penalty is a period where—although you qualify for Medicaid—they force you to pay out of pocket for a period of time before Medicaid kicks in (currently, every $6,300 given is a month of penalty e.g. if you gave away $12,600, your penalty would be 2-months).
Getting the assets out of your name is an option for many who plan far ahead. If you do not contemplate needing care for the next 3 to 5 years, then triggering the lookback period can be a strategic move that puts you at a great advantage if you were to need care past after the lookback period has run. The issue with this strategy is that it’s a bit of a gamble. Many individuals cannot effectively guess when their health will decline. Further, many individuals wait to plan for the need for long-term care until they start to see their health decline. Thus, many don’t have the luxury of waiting for the lookback period to run.
Eliminating the Lookback Period
So, how do you manage to preserve all your assets and not suffer the effects of the lookback period? The answer is long-term care insurance (“LTC insurance”). Long-term care insurance is like health insurance that will cover the cost of your long-term care based on the policy you purchase. Like health insurance, long-term care insurance has premiums that you pay monthly. However, the price of the premiums are not cumbersome and are cheap in comparison with cost of long-term care (one month of long-term care commonly costs more than a year of LTC insurance premiums).
Many LTC insurance policies are term policies that range 3 to 5 years. This is perfect for planning purposes. Let me illustrate. Let’s say you purchase a 3-year LTC insurance policy today. You also simultaneously get your excess assets out of your name by putting it in an irrevocable trust (and triggering the lookback period). A couple days later, you suffer a stroke and immediately need to go to an assisted living facility. You can’t get Medicaid to cover the cost of care because you triggered the lookback period with the transfer to the irrevocable trust. However, you have a policy that will cover your cost of care for 3 years (the same time as the lookback period). Your LTC insurance will pay for your care for three years, thereafter you will qualify for Medicaid to cover the remainder of your costs because you’ve gotten the assets out of your name and the lookback period has run its course. We call that having your cake and eating it too.
The strategic use of an irrevocable trust and LTC insurance can allow you to preserve all of your assets and receive Medicaid down the road, while protecting you from the dreaded lookback period. If you have question about Long-term care insurance or planning for long-term care, we can help. Call McIntyre Elder Law at (704) 259-7040.
An effective estate plan will be multifunctional and flexible enough to adapt to unknown future events. A good way of creating a flexible estate plan is through the use of a trust. However, that begs the question: if I have a trust, do I still need a will? To understand the answer to this question, you must first understand how your property passes whether you use a will or a trust.
Any asset you own, whether it is real or personal property, will pass through your will, unless you have the ability to assign a beneficiary. For example, you can assign a beneficiary to a bank account, retirement account, life insurance policy etc. Whatever you do not assign a beneficiary to will pass through your last will and testament.
If your property is passing through your will, it will be subjected to the probate process. Probate is method by which the wishes of the testator/decedent (the maker of the will) are carried out any creditors of the decedent’s estate are paid, and the property is distributed to the legal heirs. This process can be lengthy, complicated, expensive, and open to creditors. A good estate plan looks to avoid probate because of the inefficiency and liability it presents.
The use of a trust is a great method to avoid probate. Any property you put into the trust will automatically pass to the beneficiary upon death. There is no lengthy process for the beneficiary to receive their inheritance. By avoiding probate, the trust also side-steps the risk of lengthy probate litigation.
Additionally, whatever you put into the trust will pass through the terms of the trust. The terms of the trust can be as creative as you want them to be. This is an effective way of creating generational wealth because it allows you to have a proverbial hand outside the grave, controlling the property for generations long in the future. Let’s say that you may leave a certain amount of money in a trust to your children. You could put terms in the trust that instructs the trustee to invest and grow that money. The terms could also instruct the trustee to only pay out for the education of the beneficiaries or their children. That way, if your goal is that future generations have the opportunity to get a quality education, a trust will help you accomplish that goal.
Trust over Will?
If you create a trust, you should plan on passing everything—that does not already have a beneficiary assign to it—through the trust. Whatever you can conveniently place into trust should be done shortly after creating the trust or obtaining the property. That way, everything of significant value passes through the terms of the trust and to the people whom you want to leave it to.
However, the trust does not eliminate the need for a will. A will serves many functions. And, in conjunction with a trust, it can serve as a back-up document to pass assets. Let’s say that you put most everything into your trust, but you left a few assets of significant value floating out there. Or maybe you acquired property after you create the trust and you forget to put it into the trust. Your last will and testament will ensure that the property still goes to who it’s supposed to go to. In fact, many individuals who have trusts also have pour-over wills. A pour-over will ensures that any property not already in the trust goes into the trust upon death. The will thereby “pours” the property over into the trust. The property will then pass through the terms of the trust as if it had been put into the trust in the first place.
A trust is a great way to pass property and avoid probate. However, just because you have a trust doesn’t mean you don’t need your will. If you have questions about trusts, will, probate, or any estate planning matters, the experienced attorneys at McIntyre Elder Law are ready to help.
This website is attorney advertising and does not establish an attorney-client relationship, which is only formed when you have signed an engagement agreement. We cannot guarantee results; past results do not guarantee future results.
McIntyre Elder Law 112 S. Tryon St. STE. 760 Charlotte, NC 28284