Avoidable True Stories
Why A Durable Power Of Attorney Is Important
Recently we had a husband and wife who live in Broward County call our office. They own a condo. The wife is in a persistent vegetated state and will be for some time. There is no durable power of attorney. The Husband wants to sell the condo. He has been advised by a title company that he will need her signature or authorization by court order after opening a guardianship.
Under these circumstances, there are no other options other than opening a court-supervised guardianship. The guardianship process requires court approval for the sale and a yearly accounting of all the ward’s assets. So when the condo is sold, the wife's 1/2 of the proceeds, plus ALL of her other assets, will be held in a restricted account that is held under court supervision for the rest of her life.
The above scenario could have been easily avoided with a durable power of attorney. Be sure to complete your estate plan in order to avoid these types of situations for yourself and your family because these processes can drain your family emotionally and financially.
The Elephant In The Room - Will & Estate Planning
Most people don’t like to talk about or even think about their mortality. If you have children and you don’t have a will or a trust you are leaving them with a heavy burden to carry.
Anne Heche, the actress who recently died after a car accident, is a good example case of why a person may want to consider creating a will sooner rather than later. Heche was divorced with two children from different relationships when she passed away. Her eldest son is 20 years old, but her younger son is still a minor.
Although they are assumed to be her sole heirs, only her oldest son is of age to administer her estate. He has filed a petition for a guardian ad litem to be put in place to protect his younger brother’s interests. The guardian ad litem may be a financial burden to Heche’s estate, and the costs of securing this professional will potentially reduce the assets available to her sons.
Even though her eldest son is dealing with his mother’s estate, this is undoubtedly very difficult for a person to go through at such a young age. Heche’s eldest son likely will not be able to do this all on his own and will need the services of a probate attorney — likely further increasing the costs of administering her estate and depleting how much is left for her children.
This process requires further professional involvement and fees that her estate must pay. In addition, it is possible that the father of her youngest son may seek to intervene in the estate’s administration to ensure he is treated fairly. Litigation costs could rack up quickly if there is any disagreement related to this.
Preparing a will and other estate planning documents can make legal proceedings significantly less complex and expensive and keep your situation as private as possible. It can also make it easier for your loved ones to know exactly what you want to happen to your assets and possessions.
If I Don’t Have a Will, Who Gets My Stuff?
Many people do not realize that if you pass away without a will, your local state laws on intestacy will determine who qualifies as your heir and inherits your property.
For example, in many states, if a person passes away unmarried but with children, the children will inherit everything. But what if the person had a long-term partner or was engaged to be married? They may have wanted their significant other to inherit some of their assets, but a “default” state law may lead to a different result.
Or, what if you have no living children, siblings, parents, or spouse? Your property may go to the government instead of friends, grandchildren, nieces, or nephews.
Having a will prevents these scenarios from happening.
The Importance of Choosing a Guardian for Your Children
Another benefit parents should consider is their ability to choose a guardian for their children in advance.
This matters, for example, when the other parent is not living or cannot be located. If a person does not set forth their wishes ahead of time, multiple parties may step up after a person’s death and argue over who should care for any minor children.
A court may be tasked with making this decision, and it may not be what you would have wanted. This can be expensive, traumatic for all involved, and a long process. Courts will generally try to appoint the individual a person has selected if your wishes are in a will or other planning document.
The Bottom Line:
The bottom line is that having estate planning documents in place makes your wishes more likely to be honored and less likely that a court will decide what happens. This is also true where you may be incapacitated and unable to voice your wishes. While Anne Heche’s situation is not unusual, it is avoidable.
Will a Medicaid Trust allow me to qualify for Medicaid?
Medicaid imposes strict rules on how much money and assets an applicant can have. To qualify for Medicaid, you must fall under the asset limit, which is $2,000 in most states.
Even with greater than $2,000 in assets, however, you may be able to get on Medicaid by establishing a Medicaid Asset Protection Trust (MAPT). When you put your assets in a MAPT, Medicaid in certain states will not count the money in the trust toward its resource limit.
After you create a Medicaid Asset Protection Trust, you no longer own the assets within it, allowing you to qualify for Medicaid following the five-year lookback period. Note: you qualify for Medicaid 5 years AFTER you create the trust and fund it.
People who are currently healthy but plan to go on Medicaid in the future might choose to use this Medicaid planning strategy. This is not a tool for those that need Medicaid right away.
Once you make the trust, you cannot change your mind and take those assets back. Your trust must be irrevocable for you to qualify for Medicaid because it means that you no longer own or control these assets.
Many other types of revocable trusts are ineffective in preparing for Medicaid.
Some of the benefits of a MAPT are:
They preserve generational wealth, safeguarding assets for family members.
After you pass away, the state cannot take your assets from your beneficiaries to reimburse them for your long-term care, as MAPTs avoid probate.
Since nursing home fees can be exorbitant, MAPTs can save your family money, as they let you qualify for Medicaid once the lookback period has ended.
The drawbacks of MAPTs include the following:
Once you establish a MAPT, you forfeit the control and use of your assets. If you need money, you will not be able to draw from the trust.
The fees associated with preparing a MAPT can be costly, ranging from $5,000 to $12,000. However, you save potentially thousands of dollars in medical costs so in many circumstances it is quite beneficial.
If you plan early enough, you can protect most if not all of your assets and still qualify for Medicaid benefits.