SO HOW DO I AVOID PROBATE?
It is really quite simple: You die “broke”!
Not meaning to sound crass, flippant or stupid, the only way to avoid having a need for a probate action is to have no assets, debts or claims to deal with. By now you already know that the word “broke” has more than one meaning don’t you?
So you have worked hard all your life and have accumulated a nice nest egg. In fact you may even have some money or property left over to give away to family, friends or charity. To die broke does not necessarily mean you are living in a box under the bridge. It just means that upon your death ALL of your financial affairs have been dealt with in a way that leaves you “broke” at the moment of your death.
OK, HOW DO I BECOME “BROKE”?
You do this by (1) ‘Divesting’ [giving away for no or low market value], (2) by designating a beneficiary to your property, or (3) “selling” everything [converting the nature of your property] you have before you die.
By seeing a lawyer who specializes in this area, such as we do at SCHMIDT & SCHMIDT, SC., you can have a plan drawn up that will deal with Divestments [giving property away], selling/spending and other Beneficiary Designations [deciding who will get certain property upon your death] in a way that allows you to keep possession of your home, bank and brokerage accounts, retirement plans as well as insurance and annuity plans.
WARNING: Some of these plans do have significant impact on your estate, especially if you are ever in need of using the services of a nursing home. Even if you do not want to go to a nursing home, your health situation may require the use of one. If you plan wrong the vast majority of your estate will be used to pay for a nursing home.
See Medical Assistance Planning.
MEDICAL ASSISTANCE PLANNING FOR LONG-TERM CARE
Not all of us will be so lucky to never need the use of a nursing home. Some of us may need these services for a few weeks; others a few years. A "nursing home" in this section is not an Assisted Living Center or a Community Based Residential Facility. It is a facility with skilled nursing care.
It is this skilled nursing care that is so very expensive. A month in a nursing home here in central Wisconsin can cost upwards toward $7,000 per month! A year of such care can cost over $80,000 for one person. For the average Wisconsinite such spending will consume all that the patient has saved. Further, what if there is still a surviving spouse healthy and well living at home? Living in sheer poverty should not be the end result of such families.
Please keep in mind that financial impoverishment is not necessary. With the assistance of the attorneys at Schmidt & Schmidt SC, going broke does not have to happen to you, your parents, or other loved ones.
Many of our clients are children with elderly parents. We will work with the whole family in researching, developing and implementing various estate planning and medical assistance planning programs to help those who are likely to need the services of a nursing home.
Medical assistance planning is not illegal. It is as legal and necessary as income tax planning. The tools used in medical assistance planning are (1) Spending and Conversion of assets and (2) Divestment and other Gift Planning.
Some key components of medical assistance planning:
Several asset types are not counted as "assets" for medical assistance. These are assets you can keep and need not be sold or given away to qualify for Medical Assistance. These include the home, some cash savings ($2,000 single & up to $93,000 married), automobile, prepaid funeral & burial, minute life insurance, personal property and an automobile. Many of these assets are limited in quantity.
However, a 'medical assistance' lien will be placed on your home if you are single or your spouse needs the services of a nursing home too.
Look back period for property given away for no less than fair market value is 36 months or 60 months if you have transferred property to any type of trust.
When you give away property you create a period of ineligibility for Medical Assistance. This period of ineligibility (months) is the quotient of the value of the gift over the Average Cost on a Month in Nursing Home (recalculated yearly State of Wisconsin). Example: Month of nursing home ($5,100) over value of gift ($25,000) or 25,000/5,100 = 4.9 months of ineligibility.
Ineligibility starts with the month of the gift and fractions of a whole month are eliminated. Thus, in the example above, the gift giver will not be able to receive long-term care through Medical Assistance for four months.
The Long-Term Care component of Medical Assistance is changing and Congress is reviewing many aspects of the program for budget purposes. This will make planning ever more necessary.
MEDICAL ASSISTANCE PLANNING - FAQ
– or Can the Nursing Home Take My House?
NOTE OF WARNING:
In early February 2006 Congress made [eliminated] major changes to the “Divestment Planning” tools that have been used by attorneys and financial advisors for many years. [Deficit Reduction Act of 2005.]
As of this writing “Divestment” – the giving away of assets for less than fair market value – is no longer considered a viable tool for planning. We strongly recommend that if your assets are below $250,000.00, primarily consisting of your home, do NOT give any of your assets away to any one without first talking to an attorney about the many negative outcomes that will befall you.
Please see either Peter or Andrew at SCHMIDT & SCHMIDT, S.C. to discuss your pre-nursing home planning needs AS SOON AS POSSIBLE.
Most people who visit this page are the children of those likely to go into a nursing home in the near future. Dealing with our parents is at times more challenging than dealing with raising our children.
We love our parents and they love us. But the stresses of making these decisions are so often seen as the last resort, the final step, or the first nail of the coffin. Emotions run high. So high that no one wants to talk about, the nursing home, financial assistance, medical assistance, Medicaid, assisted living options, COP programs, property divestment, burial instructions, funeral trusts or any other elderly related subject.
At Schmidt & Schmidt S.C., we have first hand knowledge of nearly every aspect of helping you and your parents make decisions.
STORY: Several years ago Andrew was sitting at the dining room table with his in-laws and his wife’s siblings. During a discussion on end of life planning, one of the siblings asked, “So Dad, where is your will kept?”
You would have though she had asked Dad to jump over the moon! He would not tell nor would he reveal who drafted it. “Some things are just to be kept private,” he argued. “You’ll find out when I die!” Since then no one has asked a single related question.
This response is so very wrong! Yet it is uttered in about half of the families we assist. If your parents are asking you to take care of them at the end of their lives, when they can no longer take care of themselves or upon their death, their financial and legal affairs would be a lighter burden upon you knowing ahead of times where, what and how critical information is kept.
With a month in a skilled nursing facility costing about $5,500 per month or $66,000.00 per year, few Wisconsinites have the cash or asset resources to pay this kind of monthly expense. If your parents have a home, a couple of cars, life insurance, some CDs, annuities, a vacation cabin, and an IRA you will face the obligation of selling ALL of them to pay for skilled nursing care.
We invite you to speak with one of our attorneys. SCHMIDT & SCHIMDT, SC, will create a Medical Assistance Plan that is age, marriage and income appropriate taking into account the huge number of variables each family has. Below are answers to questions:
WHAT IS MEDICAL ASSISTANCE PLANNING?
Medical Assistance [MA] covers a wide range of medical services for the income eligible. These medical services are provided by MA-certified providers and facilities. MA long-term care assistance pays for the skilled nursing home care of a MA patient. But to have MA pay for the nursing home the MA patient must have no “assets”. If a person has assets these assets must be spent down or divested before a person can become eligible for MA nursing home care.
This is typically why most elderly seek out an attorney to assist them in qualifying for MA. In order to qualify for MA a person has to have no “assets” or be “broke”. But what “broke” means to MA is not what it means to the average person.
At SCHMIDT & SCHMIDT, SC, MA planning involves a detailed review of a client’s assets and income. These are then weighted against the requirements of MA. A Medical Assistance Plan is created for the client. With proper planning and prompt implementation of this plan a person can save thousands to tens of thousands of dollars.
HOW DO I TO BECOME ELIGIBLE FOR MEDICAL ASSISTANCE?
To be financially eligible for Long-Term Care Assistance a client will need to show they have few assets and little income available to pay for a nursing home.
“Asset Eligibility” means:
Basic Asst Limit:
$2,000 in cash.
No other assets other than exempt assets.
Exempt Assets:
Primary residence,
Vehicle of less than $4,500 value,
Personal possessions of less than $4,500,
Wedding & engagement rings,
Term life insurance,
Burial funds (depending on program $1,500 on up),
Tools of trade.
At SCHMIDT & SCHMIDT, SC, these eligibility rules are matched up against a variety of very effective tools that can allow you to retain possession of many of your assets. The degree of retention depends on many factors. The best is early planning.
WILL THE NURSING HOME TAKE MY HOUSE?
No. The nursing home does not take your home. But if you use MA Long-Term Care Assistance, a lien (like a mortgage) will be placed on you home to reimburse the state for the money it spent on your care. After your death this lien will have to be paid. This means the house will then have to be sold to pay this bill.
A Last Testament and Will cannot stop a lien from being placed against your house. A Durable Power of Attorney will not stop a lien. Nor will a revocable trust stop a lien. There is little one can do as they are moving in to a nursing home to prevent a lien from being placed on the house.
Advanced planning is VERY CRITICAL. Do not hesitate. We have seen tears, heard some bad words and have felt powerless when family members ask us what they can do to prevent the “nursing home from taking the house” after mom or dad have been admitted.
At SCHMIDT & SCHMIDT, SC, we know what you can do to keep your home in your family. With all of the variables present in each family a quality Medical Assistance Plan will be presented to you for your consideration.
WILL MY SPOUSE HAVE TO GO “BROKE” TOO?
The answers presented above focus on a single or un-married individual. When one of a married couple needs MA Long-Term Care then a new set of rules are applied to the scenario. The person going into a nursing home is called an “Institutionalized Spouse” and the other person is called the “Community Spouse”. The institutionalized spouse generally follows the guidelines set above. Meaning he/she will have to be “broke.”
The Community spouse does not have to be broke or “impoverished”. But on the other hand the community spouse cannot be a millionaire in his or her own name. Typically the Community Spouse can retain the marital residence, a significant amount of cash assets, his/her IRAs, and sufficient assets to ensure a nice monthly income.
Your Medical Assistance Plan created at SCHMIDT & SCHMIDT, SC., will clearly address the needs of a married couple with an eye towards keeping as many of the family assets in the family.
CAN MY CHILDREN PARTIPATE?
With your written permission we would be very glad to discuss, inform and/or educate your children on what you are planning to do.
It is foolish to exclude your children or your caregivers from this process. To do so could mean thousands of dollars not given to your family, a great deal of anguish over missed opportunities.
Please contact us to set up an appointment with you or you and your family.
