These are the three things that I’m most frequently asked when giving educational talks and things of that nature.
1. If I Don’t Have Any Debt, Do I Still Have Something To Worry About?
Does not having a lot of debt protect against things like the Medicaid spenddown, paying large amounts of money for long-term care, or liens?
I had somebody recently who asked this question. She and her husband were shrewd and had little or no debt.
They lived right. They had a bunch of rental houses that were in their name. They paid everything cash out-of-pocket and didn’t have any mortgages.
What did they have to worry about?
My question to her was simply, if you or your husband have a long-term care event, and it costs you $75 to $100,000 per year to pay for that care indefinitely, is that going to put a dent in your finances?
Are the rental houses still going to be okay? Is the bank account still going to be okay? Are the monies that you have in savings going to be okay?
The answer is no.
It doesn’t matter how much money you have. At that rate of a spenddown, you’re not going to be okay.
It’s going to be very hard for you to maintain your lifestyle and your savings if you’re spending down money at that rate.
What should you do to get some protection? Well, just from my experience and knowledge of elder law, my initial recommendation is that you need to separate that liability with the rental houses and the personal income.
That way, if you get sued above and beyond by a renter, it wouldn’t come back against your personal assets, whether the insurance covered it or not.
You need to separate your business liability, which should be your rentals. That might involve setting up an LLC and putting all the rental houses in that LLC.
Then controlling that LLC. Putting all those assets in one box and separating it so that they couldn’t attack your house, your car, your savings for retirement, and things of that nature.
You’re totally exposed there if you haven’t made that protection. You could do similar work with trusts, Either one would work very well in this instance. I’d feel more comfortable with an LLC if I had a lot of rentals to deal with and manage.
If you really wanted to get complicated with it and increase your protection, we’d put each one of those rentals in its own box or LLC and encase that in a larger box, which would be an LLC that joined and owned all those sub LLCs.
Now you’re really talking about things that involve a lot of legal work but are really top tier liability protection strategies. It’s putting degrees of separation between your personal assets and your business assets, which you’ve developed and bought to provide income for you through retirement.
Obviously it would be up to the senior on how many boxes or layers of protection they wanted to add there. But you could see how that could go on for quite a while and be very exhaustive to another plaintiff’s attorney or some individual who’s trying to get at their personal nest egg and assets.
It would be very hard for them to do. So layers of protection. That’s how you stay warm in the winter. Wear layers, right? Same thing with legal planning in that situation.
Also, you might want to look into doing some deed planning on your homestead, so we add a protective deed there, like a Lady Bird deed. And maybe look at how many cash assets you have that are personal to you and whether a trust, Medicaid Asset Protection trust, or other type of instrument might be best for you, to make sure that we protect what you have.
Are you or your husband veterans? Did you serve one day during war time?
You may easily qualify for Veteran’s Aid and Attendance benefits, which could add up to $2,500 to $2,750 per month to your income. That could help out a lot if you had some type of long-term care situation.
Do you have your foundations in place? Do you have your general durable power of attorney, healthcare power of attorney, living will, and will?
Is there anything to talk about there? It was great that you were shrewd with your money, but have you been shrewd and prudent with your legal planning and protective legal planning strategies?
That’s where I come in. That’s where an elder law and estate planning attorney comes in.
Yes, you still have things to be concerned about.
In fact, I think you probably have more to be concerned about than the normal or average person, because you have more to lose.
2. What If My Attorney-In-Fact Predeceases Me?
What if my daughter or husband predeceases me? Talking about a situation where there’s an executor or power of attorney.
I look at it like a ball game.
If the first attorney-in-fact you appointed fouls out, you need to have somebody coming off the bench to take that person’s place. If that next person fouls out, is unable or unwilling to serve, then you need to have another person coming in off the bench to take that second person’s place.
In my opinion, you should go two to three people deep for subs. You have to have a deep bench, so that document grows with you and lasts throughout your entire life.
Just in case, heaven forbid, your husband or wife passed away and was unable to serve as your attorney-in-fact, for your business or personal affairs or healthcare decisions, you automatically have that trusted son or daughter coming in to handle those affairs for you.
You don’t need to have that document redone or have any new legal work done if that husband or wife, that first person that you had in there, passes away. The document should be written as such.
Should my wife be unwilling or unable to serve – and name your wife – then I nominate or designate my daughter – her name – to serve as my lawful attorney-in-fact in her stead.
We could add other people in there, so that we have people to take the primary attorney-in-fact’s place.
That’s my answer to that question. And it’s important to have that, if it’s available.
3. I Already Have A Will
This one may be the most common thing I hear. It’s not so much a question as a statement or belief.
They already had their wills done, so they think they’re protected.
Having your will in place is great. But I know that there’s a 7 out of 10 chance that everybody over 65 right now is going to need some type of long-term care throughout their life – whether it be in-home, assisted living, or nursing home care – based on our healthcare technology and the age of people right now in the population.
That’s just the facts according to a 2005 US Department of Health and Human Services report.
So if you have a will, that is great. I’d love to take a look at that will and make sure it’s up to snuff. I do that all the time, just to check those documents out.
But if we’re passing your home, for instance, through your will, then we open it up to a probate estate down at the courthouse. You have to go down to the courthouse. You have to pay to open the estate. You have to publish it in the paper, most times.
Then wait 90 days. That’s not for people to throw money into your estate, so you have more there. But for people to attach liens, like Medicaid liens or liens for healthcare costs the last year of your life.
If, heaven forbid, you had a car wreck and the insurance didn’t cover the whole amount, that lien could attach.
Any lien, any debt that has been unpaid, comes in on the estate. Your property could be sold to pay for that lien. We see it happen all the time.
So I’m glad you have a will, but to me, the will is just the safety net. It’s there to catch whatever we don’t directly make transferable upon death assets, which travel outside of the probate estate directly to your beneficiary.
The financial industry is way ahead on this. If you have a life insurance policy and you place a beneficiary on there, who gets the money?
You’ve named a beneficiary, and it’s going to pass directly to the person that you named by check. No liens attach. That’s how we want to pass your real estate as well, your house that you worked for 30 or 40 years of your life.
Three Things You Need To Know
Just to recap the top three questions:
– Not having debt is not a protection against the Medicaid or large monetary spend down.
It’s smart that you don’t have debt. But it’s not protection.
– List multiple attorney-in-facts, so that if one is unwilling or unable to serve, you have someone to come in and take their place. We handle executors the same way.
– That’s great that you have a will. But that’s probably the worst place that we can pass property. We want to try to prevent that if possible and protect that property.
These are all things we talk about when I meet with a person who is interested in doing some protective planning and seeing what options are out there.
Call me if you have any questions:
Elder Law Attorney
McIntyre Elder Law
123 W. Marion Street, Shelby