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Getting your affairs in order and other tidbits

Powers of Attorney (financial delegation of authority to be used while you are alive) are often more important than a Will. Always name an alternate agent on your Will, Health Care Proxy and Power of Attorney. Some brokerage firms require their own Power of Attorney, for example Merrill Lynch and Fidelity. Revocable Trusts don’t protect assets if nursing home placement occurs. Irrevocable Trusts might, but they are more complicated, expensive, and subject to Medicaid (aka Masshealth) scrutiny years down the road when seeking eligibility.

The way to protect your assets from nursing home costs is to a) die b) transfer assets c) guarantee your kids will care for you or d) enter into a caregiver agreement with your children and pay him/her regularly pursuant to that Agreement e) buy long term care insurance. I often view LTC insurance as inheritance insurance. The spouse or kids’ “future inheritance” isn’t consumed by long term care costs if you have that product.

$15,000 allowable gifts under IRS and federal inheritance laws have absolutely nothing to do with Medicaid transfer rules. Just because the IRS allows it doesn’t mean Medicaid does. Moreover, these IRS gift allowances to minimize inheritance taxes are only relevant if you are over the federal taxable threshold which is now over $11,000,000.

How many of you readers does that apply to? Forget about the $15,000 figure and focus on transferring big money if you want to protect from long term care costs. If you intend to deed your house to your kids to avoid probate and try to protect it from nursing home costs, always retain a life estate. Don’t transfer to more than 3 children. Too many people on one deed. Too many cooks in the kitchen. I had one client who wanted to put 8 kids on a deed!

If you do transfer to the kids make sure they have their own legal papers in order since they are now “partners” with you. Prenuptial agreements are not recognized by Medicaid. If one spouse is rich and other is poor and in a nursing home, the rich spouse’s assets must be used for care. Medicaid asset protection and eligibility rules are different for community services, rest homes, Assisted living facilities and nursing homes. It is a whacky hodgepodge. Medicaid rarely pays for assisted living facilities.

If you have a disabled child, establish a Trust for him or her. Formal, written, Caregiver Agreements between an elder and his/her children are becoming more common now that Medicaid gifting prohibitions (the 5-year look back) make it so hard for elders to protect their savings for their kids. A veteran can’t bank on going to Holyoke Soldier’s home. Many veterans or veteran’s family prefer there because it is only 8% of the cost of a private nursing home.

Do your family (and your life partner if you are not married) a favor and get your estate plan in order. Accept the fact that we are all going to die or become disabled, yet we don’t know when. You may have heard about the bicyclist who was hit by a car and died near Childs Park. Tragic. Unexpected bad things do happen. I am an avid cyclist myself. My affairs are in order as a healthy 63-year-old guy.

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