The unique challenges of planning for later in a person’s life depends on the family structure. For instance, in families in which the parents are on their second marriages, who have two or more sets of children from previous marriages, there will be unique challenges to interacting and dividing assets when the time comes.
When it comes to Medicaid, the law primarily looks at the married couple as an economic unity. This includes what each owns separately and jointly. Therefore, different couples will have different considerations. For example, New York law allows a spouse who becomes ill, and needs Medicaid to transfer all of his assets to the healthy spouse, referred to as the Community Spouse, so he may qualify. But in the case of a second marriage, you may not be able to do so because estate plans may have been established or structured to provide for each family’s separate inheritance. Transferring to the well spouse may cut off the inheritance of the applicant’s children. A solution is to prepare separate asset protection trusts so that if either or both spouses need Medicaid, not only is their trust corpus protected but their dispositional intent as well, which is governed by the trusts’ terms. This is but one example in which later-in-life planning is influenced by the unique structure of the family.
Assuming you have resolved the issue above, there is also the potential that parents or individuals may simply not want to give up control. Parents and individuals place value on having access to their funds and not having to rely on anyone else. They may not like the idea that someone else has official control of their resources. For instance, people often transfer their home into a trust as part of an end-of-life financial and Medicaid plan. In establishing a Medicaid asset protection trust, you must appoint a trustee to oversee it. The trustee may not be either spouse. It may be a family member or trusted friend or commercial trustee, who will then officially be “in charge” of the assets governed by the terms of the trust. That is a form of giving up control. Even if, for our purposes, the assets in trust remain under the parents’ control for the rest of their lives, as in the case of a revocable trust, they may feel as though they are giving up control simply by placing it into the trust.
So not only is family structure determinative in establishing an estate plan, but control is also a major factor considered by both adult children and elderly parents as they navigate the best route to complete later-in-life planning.
When Do People Come To You To Begin Planning For Their Parents’ Future Needs? What Sort Of Questions Or Concerns Do They Have?
Children are not always the impetus behind planning for their parents’ future needs. Nevertheless, no matter how they find their way to my office, I find that when clients first come in, which is usually but not always in their post retirement years, they often want to do something called “asset protection.” They want to protect their homes and other major assets from the cost of long term care as they age. However, they usually do not know what goes into the process.
Clients will often ask why they must put additional protections in place if they already have a will. One of the biggest misconceptions about estate planning is that a will can take care of all your estate planning needs. It cannot. For instance, simply having a will does not necessarily determine how your assets will be inherited. Secondly, it is not a vehicle that protects your assets during life since it becomes effective upon your passing. As elder law attorneys, we explain this to our clients.
We then conduct a comprehensive estate review to determine what assets the couple or the individual have. As we evaluate, we consider several things, such as
- Whether they meet Medicaid thresholds
- Which assets could be protected ahead of time
- The desired distribution of the assets upon the individual or couple’s passing
- How to avoid probate
Clients are also often surprised that the manner in which a person’s assets are titled supersedes the instructional language in a person’s will. To explain how and why this is so, I often use hypothetical examples.
Let’s say, for instance, that there is a mother of four adult children. One of the four children, Anna, lives nearby and takes care of many of the ministerial tasks that the mother needs taken care of on a day-to-day basis. As such, the mother shares all her accounts jointly with Anna, so that Anna can easily access the funds necessary to administer these tasks for her mother.
Let’s say that the mom provides in her will that everything will be distributed to all four children, and therefore she assumes when she dies, her assets will be distributed accordingly.
Unfortunately, the reality of the situation is that the assets may not be automatically divided that way, regardless of what the will says. This is because the title on the accounts, investments, and various assets determines who inherits those resources by operation of law. If there is a joint owner on those accounts, they may have a right of survivorship. So if Anna is naively a joint title holder on her mother’s accounts worth $100,000 or $200,000, she will unwittingly inherit those funds when her mother dies.
In conclusion, a will does not necessarily determine how a client’s assets will be inherited and does not protect assets from the cost of long terms care. Estate planning is a learning process undertaken by counsel and client during the consultation and continues through the execution of legal documents and perhaps beyond. These and other questions are successfully resolved for my senior clients who ask the right questions in the first place.
Are Your Clients Usually Older Adults And Retirees? Do You Usually Work With Older Parents, Adult Children, Or Both?
My clients are usually a combination of older parents and adult children. (Let’s not forget the disabled individuals, who may be of any age. They too need planning to preserve resources for their benefit, but we will leave that for another time. ) Sometimes I hear from older parents directly and they don’t want their children involved. However, I often find that older clients do want their children’s participation. Sometimes I will get calls from adult children who live out of state, who are looking for elder law and estate planning attorneys who are local to where their parents live. Usually, they will want to set up a meeting, either just with the adult children or with both the adult children and the parents, when the children will next be in town. They have often come to the realization that it’s time for their parents to start talking about planning and want to get the ball rolling.
As far as older adults, I have had clients in their 40s all the way up into their 90s. In fact, I remember one client who drove up to my office at the age of 89. He scheduled his appointment, he came in and he said, “I think it’s time for me to do some planning.”
I love this story because that client was able to put a successful asset protection plan in place, simply because he realized that it was time for him to start preparing before things were untenable. He was able to protect his home by placing it in a trust. He did a revision of his will, his powers of attorney, his healthcare proxy, and his living will. Then he said goodbye, and ten years later I hear from his son that the client fell and had to go to the hospital. This led to time in rehabilitation and a determination that the client could not return to independent living at home.
However, because he had the wherewithal at age 89 to drive over to my office, he was able to protect his home, to protect some of his investments, and to give his estate a chance to survive the extensive cost of medical care he required. He was also able to give his son the power of attorney to handle things that my client would eventually become unable to handle himself. Therefore, his son was completely empowered to take over as if dad was directing things himself. When the time came, the house was sold, and the proceeds were placed in the bank account accessible to the beneficiary, who could pay for the extras that dad would want or need. The adult child never had to access dad’s funds to pay for his care.
It should be noted that in this case, like in many cases where you do this sort of asset protection plan, a good portion (if not all) of the money transferred into trust and protected is not meant to be used by the children for their needs, although the trust may provide for distribution of corpus to beneficiaries at trustee’s discretion. Advance planning that is careful enough also puts aside a portion of the assets to grow, and those proceeds are inherited by the clients’ children or other beneficiaries upon the clients’ death.
So, in summation, although retirees most often find their way into my office to establish an estate plan, I have welcomed clients of all ages and at many different stages of life during my tenure. My advice remains the same and follows the general rule: the sooner you do planning, the better.