What is the purpose of estate planning?

When someone passes away, that individual’s property must somehow pass to another individual.  Estate planning serves as a method of putting your affairs in order, with the goal of maximizing the benefits your assets provide you during your life, as well as maximizing the benefits your assets provide your intended beneficiaries (normally close family members) upon your death.  A proper estate plan also involves strategies to minimize potential estate taxes and estate administration costs as well as to coordinate what would happen with your home, investments, business, life insurance, employee benefits, and other property in the event of disability or death.  Additionally, a thorough estate plan should also include directions to carry out your wishes regarding health care matters so that if you are ever unable to communicate the directions yourself, someone you know and trust and have appointed will be able to make those decisions for you.


Does everyone need a last will and testament?

Yes.  Some people think that a will is unnecessary because state statutes and laws provide a default method of dividing and distributing a decedent’s assets upon death.  .  If you die without a last will and testament, state law will determine who receives your assets and even who will serve as guardian of your minor children (if applicable).  Oftentimes, the state’s intestacy laws will result in the wrong individuals inheriting your assets upon your passing.  You should decide how your assets are distributed upon your death, not the state legislature.

Others think they do not need a last will and testament because all of their accounts are payable on death or beneficiary designated.  In actuality, all these designations do is potentially post pone estate administration.  With most jointly owned or beneficiary designated assets, when one/the primary owner dies, full ownership transfers to the remaining owner/designated beneficiary.  However, if the new owner dies without adding a new owner or designating a beneficiary, the asset must be probated upon the new owner’s death.  Additionally, even if your accounts are payable on death or beneficiary designated, if the designated individual predeceases you or you die simultaneously, or you open a new account and forget to name the account correctly, then the account designations fail.  Finally, be aware of some of the other problems that may develop if you add joint owners to your financial accounts: 1) loss of absolute control; 2) loss of the asset to a creditor of the joint owner; 3) potential gift/income tax problems; 4) disinheritance of other family members not named on the account (because a last will and testament does not control most jointly owned assets).

Still, others think that since they do not have significant assets in their estates, they do not need a last will and testament.  Even if you do not believe you need a last will and testament, it is better to execute one to ensure that your assets are divided and distributed in accord with your wishes regardless of the situation upon your passing.


How does a last will and testament estate plan function in practice?

As long as you remain in good health, you are the person who owns and controls your property.  However, when you become incapacitated (unable to make decisions for yourself), the individuals named under your financial and health care powers of attorney must step in to make decisions for you.  You may choose whether your power of attorney(s) become effective immediately, even while you are able to handle your own affairs, or whether they become effective only upon incapacity.  Regardless, title to property stays in your name during your lifetime under a last will and testament-based estate plan. The individuals you name in your financial and health care powers of attorney (a/k/a/ attorney-in-fact) simply have the power to handle property titled in your name as your designated agent.


When should I review my existing last will and testament?

You may change your last will and testament as often as you desire.  If a change is relatively minor, you may only need to execute a simple amendment (known as a codicil) to your last will and testament.  However, if the changes you desire are more drastic, you may need to execute an entirely new last will and testament (being sure the new document revokes all prior last will and testaments executed).

In addition to modifications you desire, you should also review your last will and testament whenever any of the following events occur (to name a few):

  • Marital status changes;
  • A child is born;
  • You move to another state;
  • The value or character of your assets changes significantly;
  • Your intended beneficiaries change or one dies;
  • An individual you appointed to serve as personal representative, guardian or trustee changes or dies;
  • Laws involving federal and state estate tax deductions change; and/or
  • It has been five years since you last reviewed your last will and testament.


Why would I want a revocable living trust if I already have a last will and testament?

Contrary to what you may have heard, a last will and testament may not be the best plan for you and your family.  First and foremost, a last will and testament does not avoid probate, so there will generally be at least a 120 day period during which your assets are essentially frozen and unavailable (subject to certain limited exceptions) to your intended beneficiaries.  Additionally, there will be court costs attributable to any estate administration, with the possibility of additional fees for Register of Deeds, Department of Motor Vehicle and attorney services (if needed).

Furthermore, since a last will and testament does not become effective until after your passing, it provides no protection if you become physically or mentally incapacitated and you failed to appoint someone to handle your financial affairs through a valid legal document.  Even if you execute a valid financial power of attorney, financial institutions may still question the authority of your appointed agent (“attorney-in-fact”) and be reluctant to honor your agent’s requests.  However, a properly funded revocable living trust actually owns your property, making it easier for your trustee to conduct your affairs without question and/or intervention from financial institutions holding trust assets.  Without such planning, a court may easily take control of your assets before you die, which is becoming an even greater concern to the fast-growing elderly population and their families.

Fortunately, a simple and proven alternative to a last will and testament is a revocable living trust.  A revocable living trust can help you appoint someone to handle your assets during your incapacity, avoid probate, reduce estate taxes, or set up long-term property management.


What is a revocable living trust?

A revocable living trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary.  You can be the trustee of your own revocable living trust, keeping full control over all property held in trust.  A revocable living trust is simply a legal document you execute while you are alive that contains your instructions for how you want the trust assets spent during your lifetime and also upon your passing (rather than one that is created at your death under the terms of your will). Different kinds of revocable living trusts can help you appoint someone to handle your assets during your incapacity, avoid probate, reduce estate taxes, or set up long-term property management.

Doesn’t a trust in a last will and testament accomplish the same thing?

Not quite.  It is possible for a last will and testament to contain wording that creates a testamentary trust to save estate taxes, care for minors, etc.  However, because it is part of your last will and testament, this trust does not go into effect until after you die and your last will and testament is probated.  Therefore, it does not avoid probate and provides no protection at incapacity.

Will I lose control of my assets if I establish a revocable living trust?

No, you do not automatically lose control of your assets upon establishing a revocable living trust.  You may serve as trustee of your revocable living trust during your lifetime, as long as you are mentally competent, and thereby retain control over all of your assets.  As trustee, you are in control of all assets held in the name of your revocable living trust and you may engage in any transaction (just as when you held your assets in your name personally).  Additionally, there are no changes to your income tax filings either; you simply continue to file taxes as you have individually (or martially) in years past.  It is only upon your incapacity or death that a named successor trustee (who you have previously appointed within your trust document) shall take over and manage the trust’s financial affairs in accordance with the terms of the trust document (which you previously created).  Finally, upon your passing, your trust becomes irrevocable so that no one may change your testamentary wishes.  However, for married couples, the surviving spouse still has absolute control over his or her share of assets after the first spouse’s passing; the trust only becomes irrevocable as to the deceased spouse’s share of the assets.


Why do I have to worry about incapacity if I show no signs of diminished mental acuity?

In the future, if you are unable to conduct your business and financial affairs, and you have not executed any legal documents and developed valid arrangements for such a possibility, only a court appointee can handle your affairs for you, even if you have a last will and testament in place (remember, a last will and testament is only effective upon your passing, not during life).  Once the court is involved, it usually remains involved until you recover or die.  As such, the court (not your family or trusted confidants) controls how your assets are used to care for you and makes such decisions in a time consuming manner that is also a public record.

At the very least, you should execute a durable power of attorney for financial affairs and appoint an individual you trust to handle your financial affairs when/if you are unable to do so.  Even with this document in place, however, oftentimes financial institutions will hesitate to acknowledge the validity of such a document.  However, executing a durable power of attorney in addition to a revocable living trust can be very effective for proactive incapacity planning.  As mentioned previously, a properly funded revocable living trust actually owns your property, making it easier for your trustee to conduct your affairs without question and/or intervention from financial institutions holding trust assets.


What happens to me and my trust assets if I become incapacitated?

If you become incapacitated, the “successor trustee” you named in your revocable trust document handles your financial affairs for as long as needed, paying bills and making distributions according to the terms of your revocable living trust (which you created and normally require for your assets to be spent on you and for your benefit during your lifetime).  If you recover, you may become trustee again and your named “successor trustee” will step back down until needed again.  Ultimately, when you pass away, your successor trustee will pay all your debts and last expenses and distribute any remaining assets in accord with the terms of your revocable living trust.


What is the federal estate tax?

The federal estate tax is potentially assessed against a decedent’s transfer of assets at the decedent’s death.  The federal estate tax is different from, and in addition to, estate administration (probate) expenses (which can be avoided with a revocable living trust) and final income taxes (on income the decedent receives in the year of the decedent’s death).  All of a decedent’s assets (e.g. cash, stock, real estate, insurance, trust assets, annuities, etc.) are valued based on the fair market value on the decedent’s death and the total value of all the assets is termed the “gross estate” of the decedent.  The “taxable estate” of a decedent is the value of the decedent’s gross estate, potentially less certain deductions (e.g. estate administration expenses, debts of decedent, property passing to surviving spouses, etc.) and reductions in value (in limited cases).  If the resultant taxable estate exceeds the statutorily set exemption from the federal estate tax amount, the applicable federal estate tax will be assessed against the decedent’s estate.  Additionally, if a federal estate tax is assessed, it is generally due and payable within nine months of the decedent’s death and must be payable in cash, which is often difficult for taxable estates to accomplish without liquidating assets.


Can a revocable living trust reduce estate taxes?

A simple probate-avoidance revocable living trust has no effect on estate taxes.  More complicated revocable living trusts, however, may greatly reduce the federal estate tax assessment for individuals who own a lot of valuable assets.  An example of a tax-saving revocable living trust designed primarily for married couples with children is one which leaves familial property to the surviving spouse in trust for the lifetime of the surviving spouse, and then to the children upon the surviving spouse’s death.  Such a trust can save hundreds of thousands of dollars in estate taxes, money that may instead be passed on to intended beneficiaries.

In addition to creating a tax-saving revocable living trust that takes advantage of individual and spousal estate tax exemptions, other ways to reduce or eliminate federal estate taxes include removing assets from your estate before you die (via gifting) and buying life insurance to pay remaining federal estate taxes.


Can I avoid the federal estate tax by giving away all my assets before I die?

No.  If you give away more than the statutorily set annual gift tax exclusion amount  to any one person or non-charitable institution, a federal gift tax will be assessed against you which is assessed at the same rate as the federal estate tax.  However, by making gifts of less than the statutorily set annual gift tax exclusion amount, you may enjoy substantial federal estate tax savings (depending upon your potential taxable estate upon your death).  Additionally, you can oftentimes give an unlimited amount of property to your spouse.  Furthermore, any assets given to a tax-exempt charity or money spent directly on another individual’s medical bills or school tuition is generally exempt from the federal gift tax as well.


How does a revocable living trust-based estate plan work in practice?

A revocable living trust is a decision-making entity through the initial and successor trustees; therefore, the trust must actually own the property before the trustee can make any decisions regarding it.  The trustee of a revocable living trust may not make any decisions regarding property it does not own.  The process of transferring ownership of your property to the revocable living trust is called “funding,” which consists of sending instructions to financial institutions that the property is now to be held as “John Doe, Trustee of the John Doe Revocable Living Trust, dated Month Day, Year,” instead of “John Doe” personally.  A revocable living trust is funded with real estate by preparing and recording new deeds.  Other property may be placed in a revocable living trust by preparing new assignments of title or by filling out new form documents.
Ideally, a revocable living trust is fully funded during the trustmaker’s life, so that only an insignificant combination of residual assets are left to “pour-over” into the trust by the pour-over will at death (e.g. automobile).  Based upon a combination of economics, expertise and practicality, the client, attorney and legal staff will decide together on a case-by-case basis who will handle the funding of a revocable living trust.  Once a revocable living trust is properly funded with the trustmaker’s assets, the initial trustee gains title to the assets and is able to make decisions regarding them moving forward.


Will you consult and collaborate with my other trusted professional advisors?

Four Pillars Law Firm will gladly consult and collaborate with any of your trusted professional advisors, including, but not limited to, certified public accountants, insurance professionals, financial planners and other attorneys.  Designing your estate plan is truly a team effort among experts chosen directly by you or chosen for you with your approval.  As professionals, we collaborate and apply our individual disciplines and skills to design a plan that we would suggest to you for approval.  Always remember, we are here for guidance; however, you are always the final decision maker.


What is an estate administration and what assets are involved?

An estate administration (a/k/a/ probate) is a proceeding that involves presenting the estate assets (all assets which did not transfer to a surviving beneficiary via operation of law, e.g. payable on death accounts, right of survivorship accounts, and beneficiary designated accounts) of a decedent before the clerk of court.  It is a method by which the rights of all interested parties (e.g. the intended beneficiaries named in the decedent’s last will and testament, potential creditors of the decedent, and any blood relatives not named in the decedent’s last will and testament who believe they were inappropriately omitted) are determined relative to the decedent’s estate.  When the proceeding is finalized, title to assets of the decedent is passed to those entitled to the assets.

Although every estate administration is unique, most involve the following steps:

  • Filing of a petition with the clerk of court;
  • Notice to beneficiaries under the decedent’s last will and testament or to the decedent’s statutory heirs (if no last will and testament existed);
  • Petition to appoint a personal representative;
  • Inventory and appraisal of estate assets by the personal representative;
  • Payment of estate debt to rightful creditors (including a sale of estate assets, if the estate is not sufficiently liquid to pay all rightful claims of creditors);
  • Payment of estate taxes (if applicable); and
  • Final distribution of assets to beneficiaries/heirs.


Why would I, or my family, want to avoid an estate administration (probate)?

It can be expensive.  At the minimum, the Clerk of Court charges $61.00 to open an estate administration file and $0.40 per $100.00 of the gross assets of the estate (with a minimum charge of $15.00 and maximum charge of $6,000.00 for the gross estate assets).  Depending on various circumstances, other court fees could apply.  Additionally, there may be Register of Deeds fees (if deeds need to be recorded to evidence a change of real estate ownership) and Department of Motor Vehicles fees (if change of motor vehicle ownership needs to be evidenced with an updated title).  Finally, there may be an additional cost of hiring an attorney if you need assistance in handling the estate administration.

It takes time.  At a bare minimum (with the simplest of estates), an estate administration takes 120 days; however, estate administrations generally take 9 months to 2 years.  During part of this time, assets are usually frozen and nothing may be sold or distributed to your intended beneficiaries without court and/or personal representative approval.  If your family needs money with which to live, they must request a living allowance which may even be denied.

It is a public proceeding.  As such, an “interested party” may see what assets you owned and which creditors you owed money to prior to death.  Furthermore, if any of your intended beneficiaries, or omitted heirs for that matter, who are disgruntled may contest your last will and testament which can further delay the administration and cause unneeded family strife in public.

Finally, your family and intended beneficiaries have no control over the process.  The process itself, as a court proceeding before the clerk of court, will determine how long it will take, how much it will cost and what information is made public.


What is asset protection?

Asset protection is a proactive method designed to protect a client’s assets from potential creditors.  It is a form of risk management planning that involves a legal and ethical review of a client’s financial assets, after which there is normally a restructuring of those assets to take advantage of various techniques and legal exemptions that seek to place those assets beyond the reach of potential creditors.  In addition to insulating assets from potential creditors, asset protection planning can allow you to negotiate a favorable settlement with creditors from a position of strength.


What is the Veteran’s Improved Pension “Aid & Attendance” benefit?

“Aid & Attendance” is a commonly used term for a seldom publicized veterans’ disability pension income.  The rationale behind using the term “Aid & Attendance” to refer to a veteran’s pension benefit is because many veterans (or their single surviving spouses) may become eligible if they have a regular need for the aid and attendance of a caregiver or if they are housebound. Evidence of this need for care must be certified by Veterans Affairs as a “rating.”  With a rating, certain veterans (or their surviving spouses) can now qualify for an Improved Pension.  Generally, the Improved Pension benefit has only been publicized to low income veteran households without a rating, but that benefit awards a lesser dollar amount.  The purpose of this benefit is to provide supplemental income to disabled or older veterans who have a low income.  The Improved Pension benefit is for war veterans (or their surviving spouses) who have disabilities that are not connected to their active-duty service.  If the veteran’s income exceeds the Pension amount, then there is no award.  However, income can be adjusted for unreimbursed medical expenses, and this allows veterans with household incomes larger than the Pension amount to qualify for a monthly benefit.  There is also an asset test to qualify for Pension.

In addition to the foregoing factors, to receive Improved Pension, a veteran must have served on active duty, at least 90 days, during a period of war. There must be an honorable discharge. Single surviving spouses of such veterans are also eligible. If younger than 65 years of age, the veteran must be totally disabled. If age 65 and older, there is no requirement for disability. Additionally, there is no disability requirement for a single surviving spouse.


Who qualifies for the Veteran’s Improved Pension “Aid & Attendance” benefit?

Veterans (or their surviving spouses) in this category often have income above the maximum Improved Pension rate and they may also have significant savings or investments.  Typically, this category of application requires a potential recipient to be paying for ongoing and expensive long term care or other medical costs.  For veteran households receiving expensive long term care services and whose incomes exceed maximum Improved Pension rates, a rating (of “Aid & Attendance” or “Housebound”) is almost always necessary in order to receive a benefit.

A rating for “Aid & Attendance” or “Housebound” is determined by a representative after reviewing medical reports and findings by private physicians or from hospital facilities.  More specifically, the following criteria are used to determine the need for aid and attendance:

  • Inability of claimant to dress or undress himself (herself), or to keep himself (herself) ordinarily clean and presentable;
  • Frequent need of adjustment of any special prosthetic or orthopedic appliances which by reason of the particular disability cannot be done without aid (this will not include the adjustment of appliances which normal persons would be unable to adjust without aid, such as supports, belts, lacing at the back, etc.);
  • Inability of claimant to feed himself (herself) through loss of coordination of upper extremities or through extreme weakness;
  • Inability to attend to the wants of nature; or
  • Incapacity (physical or mental) which requires care or assistance on a regular basis to protect the claimant from hazards or dangers incident to his or her daily environment.

Most importantly to note, not all of the above mentioned disabling conditions are required to exist before a favorable rating may be made. The personal functions which the veteran is unable to perform are considered in connection with his or her condition as a whole.  It is only necessary that the evidence establish that the veteran is so helpless as to need “regular” (scheduled and ongoing) aid and attendance from another individual (not that there be a 24-hour need).

In most cases, without a rating, there is no available benefit. However, with a special rating, there is a special provision for calculating the Improved Pension income which allows household income to be reduced by 12 months worth of future, recurring, unreimbursed medical expenses.  These allowable, annualized medical expenses are such things as insurance premiums, the cost of at-home care, the cost of paying any person to provide care, the cost of adult day care, the cost of assisted living and the cost of a skilled nursing home facility.  This special provision can allow veteran households earning more than the annual maximum allowable pension rate to qualify for Pension.

There is also an asset test to qualify for the Improved Pension “Aid & Attendance” benefit.  Any asset or investment that could be easily converted into income may disqualify an applicant.  An asset ceiling of $80,000 is often publicized as being the upper limit; however, this ceiling has more to do with Veterans Affairs internal filing requirements and is not an actual test.  In reality, there is no dollar amount for the test and any level of assets may block an award of the benefit.  The asset test ultimately becomes a subjective decision made by the representative processing the application.

Contact Four Pillars Law Firm is you are dealing with assets that may disqualify you from receiving the Improved Pension “Aid & Attendance” benefit.  It is extremely important that assets which may be gifted or converted to income also meet Medicaid gifting rules in case the veteran or the surviving spouse may have to apply for Medicaid at a future date.  Four Pillars Law Firm can help diminish or eliminate Medicaid penalties associated with reallocating assets in order to become eligible for the Veteran’s Improved Pension “Aid & Attendance” benefit.


Do I need to consult with an attorney before applying for the Veteran’s Improved Pension “Aid & Attendance” benefit?

According to VA, the average processing time for a claim is 177 days — almost 6 months.  Knowing how to submit a well-documented claim could cut this processing time in half.  Additionally, the complexity associated with these high income claims warrants seeking advice from someone with expertise; otherwise the processing time from VA could be extended to 8 to 12 months or even longer.  Failing to submit documentation correctly could mean the maximum award may not be realized or the claim could be denied.

Veterans or family members should seek further advice before attempting to submit a claim that deals with income in excess of maximum allowable pension rate and involves long term care costs. Advice should also be sought for claims that involve assets that may lead to a denial of the benefits.  This Improved Pension “Aid & Attendance” type of claim for higher income households requires medical evidence for substantiating a need for aid and attendance or being housebound.  In addition, evidence is needed to prove recurring medical costs.  Furthermore, if assets may prevent receiving a successful award, legal consultation should be sought out to help with this issue.  Finally, if a fiduciary may need to be appointed, legal assistance could provide advice to reduce the time added to the claims process by this additional step.

Alternatively, the Improved Pension claim associated with low income, few assets and no ongoing, long term care costs can usually be attempted by the veteran household or a member of the family without much help.  Little additional advice is needed to submit one of these claims.  If a member of the family or a trusted friend wants to submit a claim on behalf of a veteran, there must be a proper VA power of attorney.  There is a form available online — VA 21–22a.


What is the Veteran’s Compensation benefit?

The veteran’s Compensation benefit is designed to award veterans a certain amount of monthly income to compensate for potential loss of income in the private sector due to a disability or injury or illness incurred in the service.  In order to receive Compensation, a veteran has to have evidence of a service-connected disability.  Most veterans who are receiving this benefit were awarded an amount based on a percentage of disability shortly after they left the service.  There is generally no income or asset test for most forms of Compensation, and the benefit is nontaxable.

As the Compensation application process is fairly clear and requires no additional knowledge to submit a claim, there is little further mention of Compensation benefits on this website.  As Four Pillars Law Firm does not represent applicants in the Compensation application process, the balance of this website is devoted almost exclusively to Improved Pension benefits since such benefits fit nicely with covering long term care costs.


Can I receive the Veteran’s Improved Pension “Aid & Attendance” and Compensation benefits concurrently?

Compensation and Improved Pension claims are submitted on the same form and Veterans Affairs will consider paying either benefit.  If a claimant is awarded both benefits, the claimant may only receive one of them.  Generally, for applications associated with the cost of at-home care, assisted living or skilled nursing home care, the Improved Pension benefit results in more income.


What is Elder Law?

Elder Law is a field of law that focuses its guidance and services toward enhancing the lives of individuals as they age as well as individuals with special needs.  Some of the different fields of law which Elder Law encompasses include the following:

  • Disability planning (e.g. Durable Powers of Attorney, Revocable Living Trusts, Living Wills) for financial management and health care decision-making;
  • Estate planning, including planning for the management of one’s estate during life as well as its disposition upon an individual’s passing;
  • Long term care facility options and placement;
  • Preservation/transfer of assets seeking to avoid spousal impoverishment when a spouse enters a long term care facility;
  • Medicaid eligibility;
  • Medicare benefits;
  • Supplemental and long term health insurance options; and
  • Estate administration and Revocable Living Trust administration;

Legal issues that affect the elderly are becoming more and more complex and nuanced.  Actions taken by the elderly, as well as individuals with special needs, regarding a single matter may have unintended legal consequences.  It is important for attorneys dealing with the elderly and individuals with special needs to have a broad understanding on the laws that may have an impact on any given situation.


How do I pay for a long term care facility when it charges upwards of $5,000.00 per month?

One of the things that concern people most about long term care facility care is how to pay for that care.  There are basically four ways that you can pay for the cost of a long term care facility.

  • Long-term Care Insurance:  If you have this type of coverage, it may go a long way toward paying the cost of a long term care facility.  Unfortunately, most individuals facing a long term care facility stay do not have this type of coverage.
  • Private Payment:  Most individuals resort to this form of payment at first.  Quite simply, it means paying for the cost of a long term care facility out of your own savings.  However, with long term care facility bills averaging between $4,500 and $6,000 per month in our area, few people can afford a long-term stay in a facility.
  • Medicare:  The national health insurance program primarily for people 65 years of age and older, certain younger disabled people, and people with kidney failure.  Medicare provides short-term assistance with nursing home costs, but only if you meet the strict qualification rules.
  • Medicaid:  The federal and state funded (state administered) medical benefit program that may pay for the cost of a long term care facility if certain asset and income tests are met.

Since the first two methods are generally self-explanatory, the content of this website is mainly devoted to explaining Medicare and Medicaid coverage of long term care facility costs.


What is Medicare and what long term care facility costs does it cover?

Medicare is a federally funded and state administered health insurance program primarily designed for older individuals (i.e. those over age 65) and those individuals with special needs.  Medicare may provide some limited long-term care benefits.  Generally, if you are enrolled in the traditional Medicare plan, and you enter into and remain in a hospital for at least three days, after which time you are discharged to a long term care facility (often for rehabilitation), Medicare may pay for a while.

If you qualify, traditional Medicare may pay the full cost of the long term care facility stay for the first 20 days and may continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that’s over $100 per day.  Some Medicare supplemental insurance policies will pay the cost of that deductible; if your supplemental insurance policy does not, you must pay this daily deductible privately out of your own savings.  In order to qualify for this 100 days of coverage, however, the long term care facility resident must be receiving daily “skilled care” and generally must continue to “improve.”  In following, the most fortunate Medicare recipients may be covered for the first 100 days of long term care facility costs for each “spell of illness.”  (Note: Once a Medicare recipient receives Medicare coverage for a “spell of illness,” that recipient will not be eligible for another Medicare covered long term care facility stay until the recipient has not received a Medicare covered level of care for 60 consecutive days.)

Regardless of whether Medicare covers the full 100 days of a long term care facility stay (which it rarely does), once Medicare terminates coverage, you are back to looking at the other payment possibilities: long term care insurance, private pay or qualifying for Medicaid.


What is Medicaid and what long term care facility costs does it cover?

Medicaid is a joint federal-state program for the medical care of certain financially needy individuals.  Although established by federal law, those federal statutes provide options to all the states as to what they will pay for and who is entitled to coverage.  As a result, the laws of each state are different and the Medicaid rules have become highly complex.  However, once you have been approved for Medicaid, virtually all of your medical expenses will be covered by the program (including prescription drugs, hospital stays, long term care facility stays, etc.)

Considering many individuals cannot afford to privately pay $4,500 to $6,000 per month for the cost of a long term care facility, and those who are able to privately pay may only be able pay for a while before finding that their life savings has been depleted in a matter of months, rather than years, Medicaid is the ultimate answer for the vast majority of senior citizens who find themselves entering a long term care facility.  In fact, Medicaid has become the long-term care insurance of the middle class.  With that said, in order to become eligible for Medicaid benefits, you (and your spouse, if applicable) must pass certain qualifying tests relating to your income and assets.

The reason for Medicaid planning is simple.  First, you need to provide enough assets for the security of your loved ones, as they may have a similar crisis in the future and need long term care.  Second, as mentioned previously, the rules are extremely complicated and nuanced.  The result is that without proper planning and advice from a knowledgeable source, many people spend more than they should and their family security is jeopardized.


What assets are reviewed in determining Medicaid eligibility?

Medicaid groups an individual’s assets into one of two categories: exempt and non-exempt (or countable).  Exempt assets are those assets which Medicaid will not consider the value of in determining an individual’s eligibility for Medicaid (at least for the time being).  Non-exempt assets are countable assets and their values are considered in determining an individual’s eligibility for Medicaid.  Additionally, if an individual is married, Medicaid will consider the assets of both spouses in determining the eligibility of the spouse in the long term care facility.  However, assets of married individuals receive special treatment so the spouse who remains at home will not be unduly impoverished.

In general, the following items are the primary exempt assets:

  • Homesite (principal place of residence), up to $500,000 in equity.  (Note: The long term care facility resident may be required to evidence some “intent to return home” even if this never actually takes place);
  • Personal belongings and household goods;
  • One automobile;
  • Income-producing property, up to$6,000 in equity, which is producing at least a net 6% income;
  • Burial spaces and certain related items for the applicant and spouse;
  • Up to $1,500 designated as a burial fund for applicant and spouse (if there is no funeral contract in place);
  • Irrevocable prepaid funeral contracts; and
  • Value of life insurance if face value is $10,000 or less.  (Note: If the face value exceeds $10,000, then the cash value of the policy is countable).

All other assets are generally non-exempt and are countable.  Essentially, all money and property, as well as any item that may be assessed a value and converted into cash, are countable assets (unless it is one of the assets listed above as exempt).  A non-inclusive list of non-exempt countable assets is as follows:

  • Cash, savings and checking accounts, credit union share and draft accounts;
  • Certificates of deposit;
  • Individual Retirement Accounts (IRA), Keogh plans (401(k), 403(B));
  • Long term care facility resident accounts;
  • Prepaid funeral contracts that can be canceled;
  • Trusts (depending on the terms of the trust and whose assets were used to fund the trust);
  • Real estate (other than the residence);
  • More than one automobile;
  • Boats and recreational vehicles; and
  • Stocks, bonds and/or mutual funds.

While the Medicaid rules themselves are complicated and tricky, it is generally safe to say that a single individual should qualify for Medicaid as long as the individual has only exempt assets plus a small amount of cash and/or money in the bank (up to $2,000).


Will I lose my home?

As mentioned previously, the homestead is an exempt asset and hence its value is not taken into consideration when determining Medicaid eligibility.  However, upon a Medicaid recipient’s passing, the State will try to recover the value of Medicaid payments made for long term care facility residents from their estates.  The process of recovering these amounts paid by Medicaid to a long term care facility on behalf of the recipient is called “Estate Recovery.”

Estate Recovery is the process by which the State attempts to recover the benefits paid during the life of the Medicaid recipient from the recipient’s probate estate.  Generally, the probate estate consists of assets that the deceased Medicaid recipient owned solely in his or her name without beneficiary designation(s).  Some believe the federal law permits the states to go even further and recover from non-probate assets, including assets owned jointly or payable to a beneficiary.  The asset most frequently seized in the Estate Recovery process is the homestead of the Medicaid recipient.  A long term care facility resident may own a home and receive Medicaid benefits without having to sell the home.  However, upon passing, if the home is part of the probate estate, the State may seek to force a sale of the home in order to reimburse the State for the Medicaid payments that were made during the Medicaid recipient’s life.

With that said, there are currently ways to protect the homestead from Estate Recovery with proper planning; however, you will need assistance from someone knowledgeable about these rules.


I heard the Deficit Reduction Act (DRA) Medicaid laws passed by Congress in 2006 made it impossible to protect assets from Medicaid?

This is a common misunderstanding.  The rules are certainly different, but it just means that we have to make some adjustments in the Medicaid asset protection strategies we employ.  Some strategies that were useful in the past may no longer be effective.  On the other hand, new rules mean new opportunities and new strategies to employ.


If my loved one is on Medicaid, won’t my loved one receive substandard care?

The quality of care is more a function of the specific long term care facility, rather than the pay status of your loved one.  The truth of the matter is that a majority of long term care patients are already on Medicaid.  There are some ‘high class’ facilities that cater specifically to those for whom cost is not a consideration; however, most facilities will generally have a mixture of Medicaid and private pay patients.  Generally, the actual caregivers of the facility have no idea, nor do they care, which is which.  Besides, every facility must abide by both state and Federal standards of care because it is against the law to provide substandard care.  Ultimately, regardless of whether the patient is private pay or on Medicaid, the more involved the family, the better the care of the patient.


Is long term care planning in conjunction with asset protection planning strategies legal?

Absolutely, such planning strategies are legal, as long as they are done appropriately.  Four Pillars Law Firm implements asset protection strategies in accordance with the Federal and state Medicaid eligibility rules, exactly as they are written.  We use the rules to our advantage when employing asset protection strategies and are forthcoming with any such strategies when making an application for Medicaid.  Again, we use the rules to our advantage; we do not try to get around or evade them.


Who ultimately gets the protected assets?

The assets can be transferred to any individual(s) the Medicaid applicant desires, although the spouse and children or other family members are usually the ones chosen. However, from Medicaid’s point of view, it does not matter who receives the assets.


How long does it take to become eligible for Medicaid?

The answer to that question depends entirely on the particular situation, including such variables as income, expenses, value of assets, etc.  However, we will identify the best strategy to get your loved one financially qualified as quickly as possible, while protecting as much of your loved one’s assets as possible.


I thought Medicaid required individuals in a long term care facility to ‘spend down’ all their money on the cost of care prior to qualifying for Medicaid benefits?

If you go to the Department of Social Services and make an application for Medicaid benefits on behalf of a loved one in a long term care facility, most often that is what the caseworker would tell you and like for you to believe.  Although you may not have more than $2,000.00 in your bank account (along with some other exempt assets mentioned in other parts of this website) in order to qualify for Medicaid, the rules do not necessarily require that you spend your money on anything specific, including cost of care.  Four Pillars Law Firm can assist you and your loved one in becoming eligible for Medicaid as soon as possible while still protecting at least half, if not more, of your loved one’s assets (depending upon the assets involved and whether there is still a spouse at home in the community, amongst other factors).


I thought it was against the rules to give away your money in order to become eligible for Medicaid?

Not necessarily.  It is a violation of Medicaid rules to dispose of (e.g. give away) assets, for whatever reason, and then not disclose that fact at the time of your Medicaid application.  However, there are some Medicaid asset protection strategies and techniques (some of which involve “gifting”) designed to maximize the portion of a Medicaid applicant’s assets that can be protected.  In utilizing such strategies, as long as such transfers of assets are disclosed at the time of the Medicaid application, then there is full disclosure which is what is required during Medicaid applications.


Can I find out from the Department of Social Services Medicaid office how to protect assets?

No; this is almost never the case.  The Department of Social Services and caseworkers who process Medicaid applications are not interested in helping you learn how to protect assets while qualifying for Medicaid.  Besides, Medicaid caseworkers are not trained, nor are they allowed, to provide financial or legal advice



Why choose the attorneys at Four Pillars Law Firm as your attorneys?

First, choose us for our experience and knowledge.  We focus our practice on four specific areas of the law: (1) estate planning & administration; (2) asset protection; (3) veterans improved pension benefits; and (4) elder law & long term care planning.  We focus our practice on these areas of the law so that we can devote our attention to these highly specialized and nuanced areas of the law so as to more fully serve you and your interests.

Second, choose us for our teamwork.  We work together to better serve you.  With two lawyers working on your behalf, you benefit from service that is twice as efficient, quick and responsive.  More importantly, we back each other up to ensure that an attorney is always available to address your legal emergencies.

Third, choose us for our commitment to communication and access. Communicating with clients is a top priority for us. In order to better serve our clients, we have integrated the use of cell phones, email and voicemail into our law practice. Additionally, we strive to provide a flexible schedule that includes evening appointments when necessary, as well as appointments at clients’ homes, hospitals and nursing facilities.  We desire for you to discover that we are a full-service, client-oriented law firm.

Fourth, choose us for our trust and integrity.  We provide our clients with an assurance of trust and integrity from our law practice family to your family.

Fifth, choose us for our compassion and temperament.  We treat every client with the utmost respect and are here to listen to and serve you and your family in your time of need.  We are compassionate, personable attorneys who are fulfilled by helping people achieve solutions to their legal issues.


What are your attorney fees rates?

Our rates vary depending on the complexity and nature of your legal issues.  During the initial consultation, we will discuss your individual concerns and goals and what you hope to achieve by meeting with us.  After learning about and gaining an understanding of your personal needs, we will formulate a plan together which addresses the goals you desire to achieve.  At this point, once we understand the scope and complexity of your situation, will we be able to discuss a fee for the work you desire us to complete.  Although there are certain exceptions, our work engagements are generally quoted on a flat-fee basis whereby half of the flat-fee is due upon hiring and engagement and the second half is due and payable upon our completion of the documents.  Our clients seem to appreciate such a fee system as they have the peace of mind of knowing exactly what the cost will be for our services.


What should I bring to the initial consultation?

Upon confirming an initial consultation appointment, we will request that you complete an initial consultation questionnaire which encompasses personal, financial and legal information regarding you and your family.  In addition to the questionnaire, we request that you bring your most recent statement(s) for any financial accounts you have as well as any existing legal documents.


May I bring my adult children or other family members to the initial consultation?

Yes, you may.  In fact, we request that all “decision-makers” in the family attend the initial consultation.  If you are married, we require both spouses to attend the initial consultation; otherwise, we require rescheduling.  We impose these conditions on initial consultations because generally our initial consultations are free under these circumstances and we want to ensure that everyone’s time is used most beneficially.  If all decision-makers do not attend the initial consultation with a completed initial consultation questionnaire, you may be charged for the consultation.


Do I really need an attorney?

Yes. The law has become so complex in the last few decades that non-lawyers expose themselves to considerable risk by proceeding forward without legal advice. Most often, if you are facing a legal issue, the other individuals involved have the benefit of legal representation (for instance, in-house attorneys for the Department of Social Services and the Department of Veterans Affairs). We provide confidence, security and protection to our clients so that you can be assured that we will zealously advocate for your best interests.


Can I rely on legal information I find on the internet?

In short, no, you may not.  You cannot safely determine the legal course of action you should take using the information you find on the internet, including this website.  All internet legal information is inherently general and therefore cannot be a substitute for a personal consultation with an attorney.  The answer to almost all legal issues depends on the facts specific to your situation.  Unless you are a lawyer, you will not know which facts are critical to determining the answers that are right for you and your situation.  With that being said, the information on this website is intended to provide general legal information; however, it is not intended to provide any legal advice to you or anyone else and does not create an attorney-client relationship between you and Four Pillars Law Firm.  If you would like information and guidance specific to your situation, please contact Four Pillars Law Firm to arrange an initial consultation.

Now that you have reviewed some additional online resources we have provided above, please contact us with your particular inquiry and see if you qualify for a free initial consultation so that we may discuss your individual concerns and develop an estate plan that meets your needs.

Additionally, please take advantage of any of the other helpful resources we offer to clients as well as visitors to our website.  We hope you find these helpful resources informative.

If you would like to learn more about the services we offer, please visit What We Do.

*Information furnished under each Free Resources webpage is designed to provide a general, educational overview regarding the subject matter covered and is not necessarily specific to your situation or state of residence.  Four Pillars Law Firm is not providing any accounting, legal or tax advice specific to your situation.

Comments are closed.