Don’t Transfer Ownership of Your House to Your Kids Before You Read This

With the cost of long-term care (LTC) skyrocketing, you may be concerned about your (or your elderly parents’) ability to pay for lengthy stays in assisted living and/or a nursing home. Such care can be massively expensive, with the potential to overwhelm even the well-off.

Because neither traditional health insurance nor Medicare will pay for LTC, some people are looking to Medicaid to help cover this cost. To become eligible for Medicaid, however, you must first exhaust nearly every penny of your savings.

Given this, you may have heard that if you transfer your house to your adult children, you can avoid selling the home if you need to qualify for Medicaid. You may think transferring ownership of the house will help your eligibility for benefits and that this strategy is easier and less expensive than handling your home (and other assets) through estate planning.

However, transferring your home to the kids is a big mistake on several levels.

It can not only delay—or even disqualify—your Medicaid eligibility, it can also lead to numerous other problems.

Medicaid Changes
In February 2006, Congress passed the Deficit Reduction Act (DRA), which included a number of provisions aimed at reducing Medicaid abuse. One of these was a five-year “look-back” period for eligibility.

This means that before you can qualify for Medicaid, your finances will be reviewed for any “uncompensated transfers” of your assets within the five years preceding your application. If such transfers are discovered, it can result in a penalty period that will delay your eligibility.

For every $6,810 worth of uncompensated transfers made within this five-year window (the current North Carolina monthly divisor), your Medicaid benefits will be withheld for one month.  But, any transfers made beyond that five-year period will not be penalized.

So, if you transfer your house to your children and then need LTC within five years, it may significantly delay your qualification for Medicaid benefits—and possibly prevent you from ever qualifying. Rather than taking such a risk, consult with us to discuss safer and more efficient options to help cover the rising cost of LTC such as long-term care insurance.

A potentially huge tax burden

Another drawback to transferring ownership of your home is the potential tax liability for your child. If you’re elderly, you’ve probably owned your house for a long time, and its value has dramatically increased, leading you to believe that by transferring your home to your child, he or she can make a windfall by selling it.   Read more if you want to know about selling the home after qualifying for Medicaid.

Unfortunately, if you do that, she or he will have to pay capital gains tax on the difference between your home’s value when you purchased it and your home’s selling price at the time it’s sold by your child. Depending on the home’s value, these taxes can be astronomical.

In contrast, by transferring your home at the time of your death, your child will receive what’s known as a “step-up in basis.” It’s one of the only benefits of death, and it allows your child to pay capital gains taxes when he or she sells your home, based only on the difference between the value of the home at the time of inheritance and its sales price, rather than paying taxes based on the home’s value at the time you bought it.

We can help you choose the most advantageous estate-planning strategy to minimize your beneficiaries’ tax liability and ensure they get the most out of their inheritance.

Debt, Divorce, Disability, and Death

There are numerous other reasons why transferring ownership of your house to your child is a bad idea. If your child has significant debts, his or her creditors can make claims against the property to recoup what they’re owed, potentially forcing your child to sell the home to pay those debts.

Divorce is another problematic issue. If your child goes through a divorce while the house is in his or her name, the home may be considered marital property. Depending on the outcome of the divorce, this may force your child to sell the home or pay his or her ex a share of its value.

The disability or death of your child can also lead to trouble. If your child becomes disabled and seeks Medicaid or other government benefits, having the home in his or her name could compromise eligibility, just like it would your own. And if your child dies before you and has ownership of the house, the property could be considered part of your child’s estate and be passed on to your child’s heirs, creating a problem for you.

No substitute for proper estate planning
Given these potential problems, transferring ownership of your home to your children as a means of “poor-man’s estate planning” is almost never a good idea. Instead, with us as your Personal Family Lawyer®, we can help you find better ways to qualify for Medicaid and other benefits to offset the hefty price tag of long-term care and also keep your family out of court and out of conflict in the event of your incapacity or when you die.

We offer an array of estate planning strategies to protect all of your assets, while also enabling you to better afford whatever long-term healthcare services you might require.

Contact us today to learn more.

Call 919-883-2800, or schedule an appointment.

They know what I want…

A recent article from Northwestern Mutual says otherwise.

An astonishing 69% of people have not planned and NEVER ASKED the people they expect to provide care for them … those family members who will provide care for loved ones don’t know what is coming!

If they do not know what you want, or that you want THEM to be a part of the decisions, things WILL NOT GO AS YOU HOPE!

Don’t keep your wishes a secret!

Have the conversation with your loved ones about how you want to be treated, and how you want to be cared for as you age.  “Hoping” is not a plan.  “Thinking” about doing something is not a plan.

Take steps today to PLAN.  What should you set up first?

Money Matters

You should have Financial Powers of Attorney planned, completed, and recorded with your county (yes, I know, recording isn’t required anymore … do it anyway).  These powers allow someone to help make decisions for you when you cannot.  For example, paying your bills, making sure your living accommodations are taken care of, and keeping current with taxes.

Does it matter?

You bet!  I had a client a couple of years ago who stopped her auto-withdrawal from the bank for her mortgage.  She suffered from dementia and didn’t trust the bank and thought they were stealing from her.

Guess what?   You probably know … her house was foreclosed on, and she died alone in a nursing home.

What about Medical decisions?

Same thing … you need a Medical Power of Attorney to be sure that someone can make medical decisions when you cannot.  For example, if you have a stroke and need care, what are your planned wishes for care?  No one will know if you can’t speak for yourself.  Proper Medical Documents allow us to help you put your thoughts into writing, so you can speak through your agent.

Don’t delay!  Life can change in an instant!

Do you drive a car?  Then, you are at risk of an accident every minute!
Do you walk around your house or apartment?  Then, you can trip and fall!

I have clients for whom both have happened, with tragic results.

Come see us!

Make the plans.  Powers of Attorney, and Wills and/or trusts.  Then, have the conversation with your family!

We can help with all your needs, including protecting your children!!

Call today!  919-883-2800

Or, schedule a session with us.

Don’t wait!

No, I’m not kidding, do not wait another minute!  Call 919-883-2800 right now.

All trusts are the same, right?

I get this question from some of my estate planning prospects … “All trusts are the same, right?

Is it true?

Nope, not even close!

What kind of estate planning does your family need?  Do you know if you really need a trust?
If you do, does your attorney understand how to make one that fits YOU?

There are many forms of trusts, and not all are created equal.  Trusts are used for many purposes and serve different functions.  They must be tailored to the unique situations that you and your family find themselves in. It is a huge benefit to work with an attorney who understands trusts.

Estate Planning Tailored to your family … Isn’t that what you’d expect?

Today, I got this request over a local listserv…

Dear List-
Would anyone be willing to share a Revocable Family Trust agreement with me?
I am drafting a trust for a husband and wife ….

I really am just hoping not to start from scratch.

Hmmm … do you really want this from your estate planning attorney?

It seems from this request that he (or she) is about to embark on building a trust for the client … but he might never have completed a trust before.  What he or she creates will be a reflection of some “model” or “go by” document that might have NOTHING to do with the reality of the client’s needs.  The attorney is certainly very skilled in his field, but apparently new to trusts.

Don’t make a mistake with your family, their future, and your money …

Be choosy … pick an attorney who will work to understand YOU and YOUR FAMILY.
Personally.  Individually.  And competently.

When you work with a Personal Family Lawyer, you get all that, and more.

Call us at 919-883-2800 to find out why we are different from most other attorneys.

Or click this link to find out more.

Do you have young children?

Then you also need to discover kids protection planning.
Don’t let poor planning cause a disaster for your kids!

Call us today!  919-883-2800

Or, schedule a phone call to discuss your needs and find out how to get a Life Pathways Planning Meeting for free (valued at $750). Click this link for more and to schedule your phone call.

Or, just book the LifePathways Planning Meeting your self right now!

Symptoms of Dementia

Symptoms of Dementia

In the past couple of emails, I noted that the dementia is progressive. That means it starts without symptoms, and then gradually the symptoms increase. Eventually, they interfere with daily life.

So, what should you look for?

Early signs of forgetfulness is often a key. This is sometimes described as forgetting why I went into a room, or where I left my keys. Of course, such things do not mean you have dementia, but they are possible symptoms. Forgetting directions to a common destination can also happen.

For others, poor decisions might be more apparent first. This can show up as a “lack of filter” in comments. I’ve heard seniors say amazing things they would never have said before the onset of dementia, and you probably have too. Another common example of poor decisions involves financial concerns. For example, a client lost multiple $100,000+ “investments” because he could no longer gauge the risk associated with the choices he was making.

Dementia in the general sense is different from the case of Alzheimer’s in the specific. Here is a list of Alzheimer’s symptoms you can read if you want more information.

What if I see a change?

People with memory loss or other possible signs of Alzheimer’s may find it hard to recognize they have a problem. Signs of dementia may be more obvious to family members or friends than it is to the person. Anyone experiencing dementia-like symptoms should see a doctor as soon as possible. If you see these kinds of changes in yourself or a loved one, don’t panic. It does not mean that dementia is starting! But, it is a good idea to check things out for yourself, and pay attention.

Keep an eye on changes, and consider planning ahead. You should look into legal documents, and be certain that IF there is a significant change in capacity, the family will be able to adapt and assist.

Help is available

If you or a loved one has been diagnosed with Alzheimer’s or a related dementia, you are not alone. The Alzheimer’s Association is the trusted resource for reliable information, education, referral and support to millions of people affected by the disease.

Call the 24/7 Helpline: 800.272.3900
Locate a chapter in your community
Use the Virtual Library

You are gaining knowledge by reading about dementia and Alzheimer’s disease, so use that knowledge to help your loved ones or yourself.

What is dementia?

According to the Alzheimer’s organization, Dementia is a general term for a decline in mental ability severe enough to interfere with daily life. Memory loss is an example. Alzheimer’s is the most common type of dementia. (see alz.org )

They go on to say, “Dementia is not a specific disease. It’s an overall term that describes a group of symptoms associated with a decline in memory or other thinking skills severe enough to reduce a person’s ability to perform everyday activities. Alzheimer’s disease accounts for 60 to 80 percent of cases. Vascular dementia, which occurs after a stroke, is the second most common dementia type. But there are many other conditions that can cause symptoms of dementia, including some that are reversible, such as thyroid problems and vitamin deficiencies.

Do you want to know more about signs of Dementia?  Download this article from Alz.org.

People with dementia may have problems with short-term memory.  This is common, and looks like trouble keeping track of a purse or wallet, paying bills,  remembering appointments or traveling.  Even just out of the neighborhood.  We often see this when a person who used to cook stops, or has trouble planning and preparing meals, or leaving food in the microwave or stove.

Most dementias are progressive and gradual, meaning that your symptoms start out slowly and over time get worse. If you or anyone you know is experiencing memory skills issues, please do not ignore them.  Get an evaluation from a doctor who understands dementia.

 

Can you protect mom from financial exploitation?

“Mom had money in her account last I looked, but now it is gone!  What can I do?”

This is a too common issue for our older population.  Financial exploitation can come in many forms, including scams, theft, cons, and so on.  It can happen by phone or email, or in person.  For example, consider the sales person who offers to paint the house for an outrageous sum, and then does a poor job or simply never shows up.  Mom doesn’t want to complain because “he was nice a nice young man!”  And, she is embarrassed to ask you for help.  Yes, it happens more often than you think, and you don’t have to be incompetent to fall for a scam or a “nice young man”.

But maybe the most common form of financial exploitation (or financial abuse) is when a relative takes money from the elder’s bank accounts.  We have had several clients recently for whom this has happened.  As a family member, how can you prevent it?

Simply put, this is a hard issue.  It is nearly impossible to stop every kind of abuse and exploitation.   You can help best by staying vigilant while she can still make decisions and take advice.  Eventually, she may actually lack capacity to make financial decisions (also known as being “incompetent”).
If she is incompetent, then she cannot sign anything legal.  To get to that point, you have to have her declared incompetent by a doctor.  Then, future documents would be invalid (such as if a person got her to sign a deed or a new POA).  But, you’d still have to prosecute the event, by filing criminal or civil charges to reverse anything done.  In some cases that might be too late because the perp will have spent the money or be unable to comply with a judgment.
And, even if she is actually found incompetent, she can still take actions (like taking funds from the ATM) that could result in problems.
Guardianship is a reasonable solution, but sometimes doesn’t help much more because mom could still wield a pen or an ATM card, or she can give the ATM card to the exploiter.  Even if the banks and everyone else know that she is incompetent, it might be preventable, but, that is about the same result as for the POA document.  The advantage to guardianship is that you would have court oversight, so she would simply not have any ability to spend her own money without court approval.  But, that goes both ways … you are also under that same authority, and would need to manage and get approval for her entire life (literally).  And, it is possible that you would win a full guardianship in most courts … but most clerks prefer to make it limited, it is an adversarial hearing, and she will be defended by a lawyer during the process.  And it has to be held in the county in which she resides, which can be an issue for an out-of-state child looking to help mom.
Further, if she is incompetent, she won’t be of any help in explaining what happened or preventing issues or exploitation.  And she will likely deny any problems even if you bring them up in plain view.
If you wanted to proceed with protecting her more, I could suggest some or all of the following:
  • have her evaluated and found incompetent
  • get a formal letter from a doctor that states that
  • notify the banks she deals with and anyone else she might work with for financial matters that she has been found incompetent and that you are the proper authority, give them copies of the letter and the FPOA
  • Keep an eye on her bank accounts for improper activity
  • If she does sign or spend due to another person’s influence, file for the guardianship and press charges or get Adult Protective Services involved as needed.
Beyond that, you can only remediate, not prevent, when you are not physically in control.
How can you gain control?  If you are her agent under a Power of Attorney, then one way to get control is to move everything to bank accounts that you control and give her an allowance via a check, autodeposit to her existing account, or a reloadable credit card.  Most of this could be automated.
You might also want to apply to be the Social Security representative payee and move the SSA deposits to the bank account you control.  You may have the right to do this as her Financial agent under the POA, and you probably should do this once she is found incompetent.  Sooner, if you can get her to agree.  But be aware that such a move may create issues in the family, or could be closely scrutinized by Medicaid.   Taking control may be required, and it is a big step.
Ultimately, the finding of incompetence is an important first step that starts the ball rolling.
If you have questions, contact us.  We always suggest that you also find a Professional Aging Life Care Manager in her community to help.  Check out our resources pages for more information or this website.

Change the Will when the testator must downsize?

Downsize Needed?

Sometimes, people will have a significant list of items in their home to go to others. But, when it is time to downsize, and move to a new smaller residence or to assisted living, what should a person do with them?

In general, the advice I give is in two parts… sell it, or give it now.  Which choice depends on the answers to a couple of questions:
  1. Does the testator (the person writing the Will) need money that would be gained through sale of the items?
  2. Can the testator fit certain (or all) the items in the new downsize residence?  Does she even want to take them all?  Can she afford the cost of moving the items?
  3. Will the persons to whom the items were intended be a able to take them now, and/or be upset if the items were not available in the future?  This might happen, for example, when grandkids are the intended recipient and they do not have a place of their own or are still living at school.

Give the gift now!

Usually, the gift given during the testator’s life is more appreciated than after death.  And, the testator can enjoy seeing the recipient have the gift and use it.  Wonderful memories are shared when grandmother’s pearl necklace is given to a great-granddaughter along with the story of how she got it in the first place!  Or, of hearing the piano played by a grandchild who could not afford one for many more years!
And, if you do decide to give the gifts now, do these two things as well:
  • Gift them as instructed in the will  – it fulfills her wishes ahead of time, and it will prevent hurt feelings when the will is later revealed and everyone sees that the “wrong person” ended up with the necklace, piano, painting (or whatever).
  • Then, mark a copy of the will with gifts given out and identify which she still has with her.  That will make the executor’s job a lot easier in the future!

The choice to downsize can be a difficult time for lots of reasons.  Derive immediate joy by gifting the important personal possession now.

Filling in your NC Health Care Power of Attorney

Sometimes I am asked about the Health Care Power of Attorney .. .that is the document that names an “agent” who will be able to make medical decisions for you when you cannot.  It is an important role.  But, what do you put in the various spots?

Here is the blank form used in NC for standard choices for the health care agent under a power of attorney.
For section 1, you would simply fill in the name of the advocate you choose, and if you would like a second or third, add those.  Please be sure to enter the contact information because if you need help, your doctors need to know how to reach the agent you are naming.
I advise NOT entering a physician in section 2.  The language allows your attending to start the process of deciding when to call on the agent … you don’t want to wait until your primary care doctor returns from his annual 2-week trip to Yellowstone…
If your family knows your wishes in section 5, no additional entries are needed.  But, you might have some religious or other limitations.  For example, if you wish to refuse blood transfusions, you can enter it in part B.  Also, you can (and should) tell doctors to turn off your pacemaker.
If you would like to specify organ donation chose one of the blocks to initial in item 6 (or leave them blank, it is not required).
Then have it witnessed and notarized.  The notary has to see all the people sign it, so don’t sign it and then take it to a notary.
Witnesses CANNOT be related to you, or be caregivers, or heirs.
You can often have the document notarized at a bank, the hospital, or of course, you can come to our office.
Once completed, you keep a copy for each of the agent advocate, and then send /give the original to the doctor’s office or any doctors you use as specialists.  Usually just your primary care doctor is sufficient.
Let us know if you’d like to come in to have it witnessed and notarized.  Call at 919-883-2800.
Or if you have more questions, schedule a complimentary strategy session on aging and long-term planning.

What is PASRR?

I’ve been asked a couple of times this week about admission to adult care facilities and this thing called “PASRR”… what is it?  Well, let’s check it out at the NC Health and Human Services website​.

​As always, if you have questions about VA benefits, Medicaid, or Estate planning, please give us a call!  919-883-2800

North Carolina Pre-Admission Screening and Resident Review (PASRR)
Who is subject to PASRR Screening?
The PASRR is a required screening of any individual who is being considered for admission into a Medicaid Certified Nursing Facility or Adult Care Home regardless of the source of payment. Please see the specific informaition below for each program.

PASRR Level I

Federal law (42 CFR 483.128) mandates that states provide a Level I screen for all applicants to Medicaid-certified nursing facilities to identify residents with serious mental illness (SMI), mental retardation (MR), or a related condition (RC). For residents with no evidence or diagnosis of SMI, MR, or RC, the initial Level I screen remains valid unless there is a significant change in status.
Referred to as the Level I or identification screen, specific diagnostic and functional questions about an individual are raised to identify those persons with mental illness, mental retardation, and conditions related to mental retardation. The Level I and, when required, the Level II screens must be performed prior to nursing facility admission (excluding those situations discussed in Section II.D.ii of this manual).
The Division of Mental Health, Developmental Disabilities, and Substance Abuse Services (DMH/DD/SAS) PASRR Unit is the agency which will make final determinations regarding appropriateness of placement and need for specialized services and, in cases where specialized services are determined as necessary, the DMH/DD/SAS will arrange for provision of those services.

PASRR Level II

The Level II screening is triggered by evidence of a serious mental illness (MI), mental retardation (MR) or condition related to mental retardation (RC) as defined by state and federal guidelines. The purpose of the Level II screening is to determine if the individual has any special needs due to his/her identified condition that need to be addressed in a nursing facility or if those special needs are so significant that they cannot be met in a nursing facility and can only be met in a psychiatric hospital or a specialized facility dedicated to the care of the developmentally disabled. For those suspected of meeting state and federal PASRR criteria for MI or MR/RC, Level II screens must be performed both prior to admission (PAS) to assess for both NF placement appropriateness and specialized service needs.​

When to update your will?

Here are some thoughts from St. Jude’s Children’s Hospital:

Does your will need updating?

Creating a will and estate plan is a good first step in protecting the people closest to you and the assets you’ve worked so hard to accumulate. But even the best will can become obsolete over time.
Consider the many life events that can impact a will and other arrangements:

  • moving to another state
  • changes in the value of your assets
  • a change in marital status
  • birth of a grandchild
  • a change in the real estate you own
  • new tax laws
  • changes in your charitable goals

If you need to update your will, there is no substitute for using a qualified attorney with estate planning experience in your state. A knowledgeable attorney can make sure that your revisions are properly recorded, which can reduce expenses and help heirs receive their inheritances sooner.

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