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Why is it necessary to correct your estate plan on the eldercare journey?
Because most people’s estate plans plan for death. Most attorneys will draft these plans well and accomplish the goals of asset transferring upon death. However when you’re on the eldercare journey, and death is not imminent but you face long-term care and the costs of $5,000 to $15,000 a month (in a facility located in Chicago and the surrounding Chicago suburbs and Chicago metropolitan area in general), estate planning documents that serve you well at death may not serve you so well when the healthy spouse may unexpectedly may die before an ill spouse who is residing in an Illinois nursing facility.
 
So the question remains how do we correct your estate planning documents when you begin the eldercare journey?
First we make sure that upon death assets do not go directly from the predeceasing spouse to the surviving spouse. Rather, upon death, assets are transferred from the predeceasing spouse to supplemental needs trust (SNT) for the benefit of the surviving spouse. Please note that the supplemental needs trusts for spouses must be found in the will of the predeceasing spouse. So instead of doing pour- over wills where assets controlled by the will pour -over to the trust, we do the reverse: assets controlled in the trust pour – back to the will, where the supplemental needs trust are found for the benefit of the surviving spouse.
 
Why is it advisable to do this as couples age?
Because if at the time of the death of the predeceasing spouse, the surviving spouse finds themselves either in a long-term care facility or soon to enter a long-term care facility, we are not enriching the surviving spouse directly and causing more potential costly spenddown. Rather, we are leaving assets in a supplemental needs trust for the surviving spouse so the surviving spouse can apply for governmental benefits to cover the devastating cost of long-term care ( $5000 to $15,000 per month in Chicago and the Chicagoland metropolitan area and in other parts of Illinois as well), while at the same time having the benefit of the assets and the inheritance left by the predeceasing spouse to be found in supplemental needs trusts left for their benefit.
 
Don’t fall into two traps of erroneous thinking!
First, don’t fall into the trap of thinking that if one spouse becomes ill, the couple can leave assets directly to the children. This is a formula for disaster because it may create immediate ineligibility for any governmental benefits related to long-term care under the Medicaid rules. Medicaid will not permit you to do this.
 
Second, don’t fall into the trap of thinking that if one spouse becomes ill, we must completely disinherit that spouse or watch a complete spend-down without any assets being left for the surviving spouse. That is not true either. The reason is spouses are allowed to leave assets for each other in supplemental needs trusts (SNTs) as described above. Thus, there is no need to completely disinherit your loved one, you can leave them assets (in an SNT) that will improve the quality of their life if they need institutional care but at the same time allow them to remain eligible and qualify financially for governmental benefits because the assets that you left for them are not left directly in their ownership, but rather in a special needs trusts that I described above, which is perfectly permissible under the Medicaid rules.
 
Sounds complicated?
It is not complicated. It’s just different than what you have most likely done with your “traditional” estate planning in the past. As we start approaching our senior years at around age 60-65, in addition to looking into Social Security and Medicare and other related topics for seniors, couples that are concerned about the devastating cost of long-term care you should consider correcting their estate documents so that assets are not left directly from one spouse to the other, but rather, transferred to supplemental needs trusts as described above. This type of planning can save assets by properly relying on rules left for the benefit of aging spouses by Congress in its legislation of the current Medicaid laws that have provisions intended specifically to help avoid this type of spousal impoverishment.
 
 
Conclusion
Take advantage of these generous Medicaid provisions and correct your estate plan documents as you begin the eldercare journey around age 60 to 65. Note: If there is a diagnosis of illness prior to age 60 sometimes it is prudent to do this type of planning even earlier.
 
And once again, this is not the kind of drafting that one will try on their own, rather you need to seek elder law counsel to draft these documents because these documents will be closely scrutinized by governmental agencies.
 
Best to you and your loved ones,
 
Anthony B. Ferraro
 
 
PS: in the month of May 2019 we have presented at least six times to various audiences on the issues pertaining to Elder law and Elder care. Please contact our offices if you would like to become aware of future speaking engagements that you may wish to attend.
 
Also please be aware that it is our practice that before clients retain us that we offer them a free 15 minute telephone consultation before they even have to come into our office. If this will help you or one of your loved ones please feel free to take advantage of it by calling our offices.
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Alzheimer's Care, Asset Protection, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Guardianships, Medicaid and Paying for Nursing Home Care, Nursing Home Admissions, Nursing Home Contracts, Probate, Estate, and Trust Administration, senior estate planning
In most people’s experience the creation of an asset inventory is nothing more than creating a list of assets, account numbers and account balances as of a beginning date.
 
It is a good practice to maintain an asset inventory for yourself and update it periodically.
 
Some Issues that can Complicate Your Asset Inventory
 
When someone is ill, and we are looking to establish eligibility for Medicaid for long-term care in either a supportive living facility or a skilled nursing facility, asset inventory issues become complicated in some cases.
 
In ALL cases:
 
1.  In cases involving individuals who are applying for Medicaid, their asset level must be down to $2,000 of assets as described above. Quite often the easiest way to get to those lower asset limits is to liquidate assets and convert to cash. However, in doing so, various issues arise that we will describe below.
 
2.  First, please recall that any liquidation of any tax qualified retirement account such as a tax qualified annuity, 401(k), IRA etc. will trigger tax, except for a few exceptions.
 
3.  In the payment of debts prior to the filing of the Medicaid application care, must be given regarding the order in which debts are paid. Sometimes certain creditors have priorities over other creditors.
 
4.  In the liquidation of assets, sometimes there are penalties associated with liquidation , depending on the time that you liquidate. For example, annuities can have early withdrawal penalties and surrender charges.
 
5.  Payment of outstanding debt such as credit card debt, mortgages and HELOC (home-equity) loans, may become an important part of your overall strategic spend-down plan when you’re seeking governmental benefits.
 
6.  Long Term Care Insurance: This can and should be considered an asset and income source for certain governmental benefits, but make sure when and where the policy terms will make payment available.
 
7.  Prior transfers or gifts and other uncompensated transfers of cash or property that were made before the date of filing a Medicaid application, to individuals or charities, in the past 5 years can be a liability when you look for Medicaid eligibility for long-term care.
 
8.  Homes unless occupied by certain allowable individuals such as adult disabled children, spouses, or minor children, may need to be listed for sale when an individual seeks Medicaid eligibility. Business assets may also need to be listed for sale.
 
In SPOUSAL cases : 
 
1.  As stated above, any liquidation of any tax qualified retirement accounts such as a tax qualified annuity, 401(k), IRA etc. will trigger tax except for a few exceptions. In a spousal case,  if we are going to apply for Medicaid for an ill spouse, then the ill spouse may have to liquidate or change the form of ownership of certain tax qualified assets such as IRAs and 401k.
 
Note: In order to accomplish this, it is sometimes necessary to open a limited guardianship proceeding in court. However, with IRA’s and other tax qualified retirement accounts we do not want to trigger the payment of taxes sooner than is necessary since the ill spouse may still be residing either at home or in a facility that does not take Medicaid or where no Medicaid eligibility is possible. Thus, why pay tax to the IRS earlier than you need to? Eventually however you may begin the process of transferring the IRA from the ill spouse to the healthy spouse with the assistance of the guardianship court and suffer the triggering of the tax (for example say, 20%) in order to save the bulk of the IRA account for the healthy spouse who is likely still living in the community.
 
Remember also that because many IRAs are structured as an “IRA annuity” by your financial adviser, there may be penalties and surrender charges on the transferring of such IRA annuity or the cashing out of such an IRA annuity
 
2.  Illinois Medicaid regulations provide that if the community spouse can remain living in the family home, then the community spouse is entitled to retain $109,560 of the couple’s nonexempt assets in addition to the family home, an automobile, personal and household effects, and Medicaid compliant prepaid burial arrangements. Because of these asset limitations, which can be exceeded with careful planning that is authorized under the Medicaid regulations, it is crucial that you be thoughtful in transferring assets from one spouse to the other and be careful about the timing of such transfers.
 
Conclusion: 
 
As we indicated at the outset, the task of preparing an asset inventory should not in and of itself be that complicated. The difficulties come in when one seeks to re-position or transfer certain assets that are found in your inventory. Many assets have contractual constraints, deferred tax implications built into them, or problems with access before the assets can be freely used for the benefit of you and your loved one.
 
Be complete and seek guidance if you must to deal with any complicated assets in your asset inventory while you are on the eldercare or long- term care journey.
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Alzheimer's Care, Asset Protection, Chicago area, Chicago Elder Law, Chicago Elder law attorney, Chicago Illinois Hospice Care, Chicago Suburban Elder Law Attormey, Chicago Suburban Elder Law Attorney, Chicago Suburbs, Chicagoland Elder Law, Elder Law Articles, Eldercare Attorney, Estate Planning, Estate Planning Attorney, Guardianships, Medicaid and Paying for Nursing Home Care, Nursing Home Admissions, Nursing Home Contracts, Probate, Estate, and Trust Administration, senior estate planning
In the previous installment we mentioned how important it is to begin senior estate planning or traditional estate planning with the execution of powers of attorney for both property and healthcare matters. Quite often we take for granted the notion that these documents will be something that are easy to have signed.
 
However with diminished mental capacity, sometimes it is difficult and sometimes impossible to have such documents executed by a patient, resident, loved one or client due to the fact that they no longer possess the required cognitive capability to legally and ethically sign documents.
 
This is an impediment, even if we know that the documents would be good for them to have. But because cognitive capacity may not exist, the documents cannot be signed, legally or ethically, even if the individual is capable of going through the physical motion of signing their name. This is because even though they may be able to sign their name, they may not understand what it is that they are signing.
 
Sometimes circumstances are very clear-cut as to whether mental capacity exists, but sometimes the facts surrounding the behavior of a loved one are not so clear or not so well understood.
 
What can be done then?
 
In situations where it is not clear as to whether or not your loved one has mental capacity, the attorney involved may need to seek consultation from a medical professional or mental health expert.
 
If a formal assessment is desired, the attorney usually attempts to obtain the consent and cooperation of the client, if that is possible. Sometimes this can be upsetting or embarrassing to a client. Nevertheless, the determination of mental capacity is something that must be established before other matters that are encountered on the Elder Care Journey are confronted.
 
Assuming that either the consent of the client is obtained, or perhaps the client cannot consent, then who does the lawyer look to as a referral for consultation on matters of diminished mental capacity?
 
If the patient, resident, loved one or client is fortunate enough to have a physician regularly attending to them, then reaching out to that physician may be the first order of business. Sometimes however, primary care physicians may decline as they may feel that they are not trained sufficiently to administer psychiatric and psychological assessment tests.
 
If the attending physician will not undertake the assessment, you may look to other geriatric assessment professionals that can often take a multidisciplinary approach to determining mental capacity.
 
Keep in mind that the determination of mental capacity is sometimes complicated by the fact that mental capacity can vary from day to day and can often be task specific. This means that an individual can have the capacity for one type of task, for example, the execution of a power of attorney for healthcare, but may not have sufficient capacity for the execution of a power of attorney for property that has gifting and asset repositioning authorizations written into the document.
 
Why the difference?
 
The reason is: The former task (executing a power of attorney for healthcare) has a lower cognitive capacity standard or threshold that must be met in order to establish capacity. The latter task (executing a power of attorney for property) has a higher cognitive capacity standard that must be met, which standard is, for example, closer to the standard that must be met to knowingly execute a contract.
 
These varying degrees of capacity are why it’s important to select professionals that are trained to parse the levels of capacity needed based on the specific tasks that are being contemplated. As you can see this can become complicated.
 
The Takeaway: Obtain and sign powers of attorney for healthcare and powers of attorney for property, as well as any other estate planning documents that you need for either senior estate planning or traditional estate planning, as soon as possible. Waiting till one reaches the later stages in life creates the risk that in those later stages, you may not have the requisite mental capacity to execute the documents that you need.
 
The problem that arises: If you do not have the requisite mental capacity to legally and ethically execute documents, it may be necessary to engage in a protective action such as a expensive guardianship proceeding in the State of Illinois. Let’s assume the senior resides in the City of Chicago, at this time, in the Circuit Court of the County, the waiting period for a hearing on a guardianship petition can take as long as 4 to 6 weeks due to tremendous case backlog in Cook County. This creates unnecessary expense and time delay that can be avoided with the timely execution of estate planning documents such as powers of attorney for property and powers of attorney for healthcare.
 
In our office we recommend people execute powers of attorney when they are 18 years of age! Obviously the type of power of attorney that an 18-year-old may need will be quite different than that of a 88-year-old, but the point is you need to get these documents in place sooner rather than later.
 
Don’t fall into the trap of helplessness that diminished mental capacity can create, and possibly be permanently locked out of your constitutional right to self determination, regarding your own health needs, property matters, estate plan, and other related matters.
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Do you have powers of attorney in place?
 
I know it sounds simplistic, and we have all heard this before, but perhaps the most important document that you can have upon beginning the long term care journey is the power of attorney. This is the first matter we suggest to our clients in the Chicago and Park Ridge metropolitan areas who are on the long term care journey.
 
Why is the power of attorney so important?
 
Because a power of attorney is a legal document where one person called the “principal” legally authorizes another person called the “agent” to act on their behalf with regard to either financial or health related decisions.
 
Without these powers of attorney in place, no one has the legal authority to act on another’s behalf and therefore we may have to resort to a court guardianship proceeding where a person appointed by the court, usually a family member, called the “guardian” has the power to make personal decisions for another usually called the “ward”. Guardianship’s are expensive, require the testimony of physicians, the appointment of a Guardian “ad litem” to investigate and protect the ward’s interest, and many other formalities have to be observed, all in the interests of protecting the ward.
 
These court efforts are all well and good, but if you can avoid all of this by simply having created valid powers of attorney for property and finance and healthcare matters (this may not be possible in all cases), you can streamline matters during your long-term care journey, later on.
 
How many different types of powers of attorney are there?
 
In Illinois we have two types of powers of attorney one for health and one for property (and financial matters). Sometimes these documents are called statutory powers of attorney and at other times these documents are called durable powers of attorney. The difference lies in the type of form selected to draft the power of attorney. Most of the time we recommend you stick to the statutory form power of attorney because this is the one the doctors, other health providers, nursing homes, assisted living facilities banks and financial institutions most readily recognize.
 
Can I create my own powers of attorney?
 
Yes you can, however they will not contain the necessary language that Elder Law Attorneys put into such documents such as: the power to make gifts to family members and others in order to qualify for Medicaid eligibility, the power to remove and add assets to a trust, and the power to apply for public benefits and then appeal any decision on public benefits. Unfortunately your standard power of attorney forms do not have these provisions built into them. Worse yet, if these additional powers are not built into the power of attorney, then you cannot engage in these powers under the power of attorney. They must be expressly listed in the power of attorney.
 
What’s the take away?
 
Get powers of attorney in place immediately. You could wait until later when you I need them, however if you lose the cognitive capacity to legally and ethically execute documents like these, then you may never be able to have these types of documents and hence we are left pursuing an expensive and complicated guardianship process.
 
Get your powers of attorney in place now.
 
How old should you be when you start executing powers of attorney?
 
18 years of age. Most people don’t realize that at 18 they cannot make either financial or medical decisions for their children. But that is in fact the law, because at 18 children have reached the age of majority and without legal authorization nobody can make decisions for them as they are now adults.
 
Ask your adult children to have their powers of attorney done now, as well.
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Do you have the right kind of trust?

Many of our clients come into our office with trusts. Most of the time these trusts are what are called revocable living trusts (RLTs). These types of trusts offer no asset protection even though seniors are often ready to conclude that they have protected their assets with such a trust.

Only certain types of irrevocable living trusts (IRTs) provide asset protection for long-term care. Irrevocable trusts, if drafted properly, may be considered a complete gift by the senior to the beneficiaries of the IRT, and thus out of the senior’s estate permanently. If, however, the senior has any access to principal in the IRT, then the IRT will not provide any asset protection from the costs of long-term care.

It is possible to allow seniors to maintain an income interest in the IRT, as opposed to an interest in the principal of the IRT, but this creates a more complicated audit process if and when the senior ever needs to look to the Medicaid program to pay for the costs of long-term care.

About 66% of all US citizens will be looking to the Medicaid program if long-term care is needed. Therefore, it is increasingly important to properly draft an IRT and also understand the time of the creation and funding of the IRT so that the creation of the trust will not interfere with a possible application for Medicaid to cover the costs of long-term care.

Seniors also have to keep in mind that there are significant issues in the drafting of an asset protection trust that deal with the following:
  • Income tax issues
  • Gift tax issues
  • Estate tax issues
  • Medicaid eligibility issues
  • Issues about the right beneficiaries, receiving the right assets, at the right time
  • Trustee issues
  • Using the IRT in a period of health for the senior versus a health crisis for the senior
  • Issues regarding selecting the right assets to place in the IRT

So you see, asset protection trusts are essential for many seniors, because they may be the only way assets can be protected, not only from the cost of long-term care but also the predators and creditors of their beneficiaries. But the drafting of an IRT is much more complex than the drafting of an RLT and seniors need to make sure that they retain an elder law attorney to maximize the chances that their trust is the right trust for them at that point in their life.
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Applying for Medicaid for long-term care in a nursing home is a complicated matter. This article will limit itself to describing the basic eligibility requirements. The eligibility requirements break down into four categories:
  1. Medical Eligibility
This requires a demonstration of meeting the determination of need score, also known as the DON score, which is applied to decide whether or not someone is ‘needy’ enough, from a care standpoint, to be eligible to qualify for long-term care in a nursing home. This assessment may be administered by Catholic charities, nursing homes, and many other organizations.
  1. Income Eligibility
The income eligibility requirement is to ensure that the amount of income that a person has does not exceed the private cost of care. For example, if the private cost of care in a nursing home is $8,000.00 a month and your income is also $8,000.00 a month, you have no need for Medicaid because your income will pay the monthly nursing home costs. Alas, for most middle-class Americans, there is not enough monthly income to meet an $8,000.00 a month nursing home bill, and therefore Medicaid eligibility is a necessity. Please note, income eligibility varies depending on whether or not someone is single or married.
  1. Resource Eligibility
Resource eligibility requires an examination of all of the assets that you have had over the last five years, but focuses on what there is at the time of the application. At that point, Medicaid will break assets down between exempt assets and countable assets. Exempt assets are those that applicants are allowed to keep, such as the $30.00 a month resource allowance, personal belongings, life insurance that has no cash surrender value, life insurance that has a face value of no more than $1,500.00, automobile, etc. On the other hand, countable assets are everything else that is considered to be nonexempt. However there is a limitation on the amount of countable assets one is allowed to have—that limit is $2,000.00 a month for a single individual, and $109,564.00 for a married couple, where one spouse is in a nursing home and the other spouse can continue to remain in the community. Please note, there are many exceptions to this general rule and it’s important that you find a law firm, like ours, that is well-versed in these exceptions in order to preserve as many assets as you can.
  1. Penalty Eligibility
Penalty ineligibility arises from what are called ‘uncompensated transfers’ by the Medicaid applicant. Uncompensated transfers are those where the individual made a transfer but did not receive a transfer of equal value in return. Gifts are the simplest example of an uncompensated transfer – the applicant gave something away but did not get something back in return. Also, there are penalties associated with uncompensated transfers, and the penalties are not imposed, or do not begin, until the applicant is in a nursing home or at least five years have passed since the uncompensated transfer. Medicaid audits all transactions during the prior five year period, thus there is a five-year audit that is quite substantial. If all of this seems confusing, it’s because it is. Qualifying for Medicaid for long-term care in order to cover nursing home costs is very complex and requires the expertise of an elder law attorney who focusing focuses on Medicaid asset protection planning and eligibility.
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Installment 8 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

Picking a strategy is not something one can easily do on their own. Selecting strategies in order to minimize the cost of long-term care requires an understanding of both the requirements of sophisticated estate planning and access to governmental benefits. However in order to provide an overview of how strategies are selected, you must understand that strategies will vary depending on whether or not the senior is in one of the following phases:
  1. Preplanning Mode
  2. Wait-and-See Mode
  3. Crisis Mode
Preplanning can be done when there is no threat of a long-term care stay that is imminent.  Wait-and-see mode exists when there is a diagnosis but the senior will not be leaving home in the near term, and crisis mode is when the senior is in a nursing home or soon to be in a nursing home. In preplanning, because time is on our side, we can engage in such strategies as looking for long-term care insurance to cover all, or part of, the cost of long-term care. Perhaps a long-term irrevocable trust that will put assets outside of the estate may be useful. Sometimes purchasing certain types of assets that are exempt non-countable is advisable. In wait-and-see mode, because there is often a diagnosis, good powers of attorney for health and property and the preparation of wills and trusts that bypass the ill senior are essential. Also, changing the beneficiary designations on various assets so that they do not pass automatically on the death of the healthy spouse to the ill spouse is another consideration. It may be even possible, at this point, for the healthy spouse to obtain long-term care insurance. In a crisis mode, it is essential that the ill senior be made eligible for Medicaid in order to cut the costs of long-term care. The only way a senior can be eligible is to be an asset level of no more than $2000, exempting non-countable assets like prepaid burial arrangements, personal effects, very small life insurance policies, and limited other resources. All other assets must be converted to a non-countable status. This is not always possible, so quite often it is necessary in crisis mode to transfer assets from the senior. You must understand that this will result in a period of ineligibility for the senior. However, with the assistance of competent elder law counsel who specializes in Medicaid asset protection planning, it is possible to transfer assets while at the same time retaining enough assets in a form that will allow the penalty period to be paid down and the transferred assets to be protected. Selecting a strategy for asset protection planning in long-term care is not an easy matter, but with the proper planning our office does it all the time. It is essential that Medicaid rules be followed strictly. This sounds like a heavy task, and it is, but the alternative of not selecting a strategy to protect assets from long-term care costs results in the impoverishment of seniors at a time in their life when they should not be destitute for such simple quality of life items, like hearing aids, eyeglasses, podiatry care, medications and certain therapies not covered by Medicaid. Plan ahead, it’s your quality of life that is at stake in your senior years.
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Installment 6 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

Why create an inventory of your assets for long-term care planning? Often we go to the doctor thinking I feel fine. However as you are aware the doctor doesn’t take your word for it, rather the doctor will do a blood workup to see if he agrees with your assessment that you are fine. Likewise, the equivalent of a blood workup for legal and financial advisors professionals is a thorough inventory. You see, some think that by listing assets on a piece of paper that they have created an adequate inventory of what their assets are. This list certainly is a starting point for the creation of an inventory, but at this point is far from complete. And, like a doctor, your legal and financial professionals will not take your word for it when you say that you have an inventory, rather they are going to establish expectations for what that inventory should look like and what sort of information it must contain, so that they can agree with your assessment of exactly what your assets are and what can be done with them for various legal and financial reasons. A mere list of assets will not reflect all of the information that’s is needed for various professionals to make the judgments on how to best advise you. The more detail you can give a professional the more likely they will be able to interpret the positioning and nature of you assets, in order to give you guidance on planning strategies. How to create a proper inventory:  In order to create a proper inventory of assets the following parameters should be kept in mind:
  1. Ownership of assets: Husband, Wife, Joint, or Other
  2. Types of assets: cash on hand, bank accounts, certificates of deposit, money market funds, brokerage accounts, stocks, government bonds, tax-free bonds, mutual funds, individual retirement accounts (IRAs), Roth IRAs, 401(k)s, keel plans, other tax qualified plans, immediate annuities, tax-deferred annuities, life insurance policies, real estate (primary residence, other real estate), passive real estate investments (such as limited partnerships, timeshares), automobiles, interests in closely held businesses, sole proprietorships, personal and miscellaneous assets of any value, miscellaneous intangible assets, etc.
  3. Debts: mortgages on real estate, credit cards, credit lines, etc.
  4. Beneficiary designation for each applicable asset: primary beneficiary, secondary or contingent beneficiary
There are many inventory forms that are readily available by commercial producers. Our office has its own type of form that we prefer to use. Conclusion While the steps we describe above may seem rudimentary and basic to a lot of our readers, I can assure you that most of the people that come into our office with an inventory of their assets really have no idea what they own, what the nature of the asset is, and what the flow of the asset may be in the event of either disability resulting in long-term care or death. It is for this reason that we have taken the time to suggest what an inventory can look like and for what purposes it can be used. A good idea would be to start with some sort of inventory, place this in a three ring binder and document every asset that you list on this inventory with a copy of a statement or evidence of the ownership of the asset so that in the future, your heirs or professional advisors can use this compilation or inventory of assets for your benefit and the benefit of your loved ones.
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Installment 5 of 10

In Our Series:

“Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection through Medicaid in Illinois, for Middle Class Seniors and Boomers”

 Why create a Blueprint (Medicaid asset protection letter) for your asset protection planning? Just like in building a home, you don’t hire a contractor to start slapping bricks together until you have decided on the number of rooms, type of rooms, location of the rooms, etc. Likewise, many are quick to suggest creating a will, trust, powers of attorney, perhaps an irrevocable trust, or an annuity, etc. This can be very costly and foolish. How can you create a plan consisting of various documents that are supposed to protect you without a design in mind? Mindlessly putting together layers of documents accomplishes nothing except large bills. Before our clients create any legal documents we suggest to them that they do a blueprint, which is in effect a Medicaid asset protection letter. In that letter we outline the following:
  1. Planning strategies that can be done in preplanning mode, or crisis mode, depending on where you are in the long term care journey.
  2. Planning strategies available for single individuals, or the community spouse when an ill spouse is going into a nursing home.
  3. An outline of the current status of the law as it relates to Medicaid eligibility.
  4. Finally, planning recommendations that are broken down into things that you must do immediately and things that you may be able to defer until later.
Below are some examples of our final recommendations in our Blueprint: Immediate Action
  • Creation of powers of attorney for healthcare and powers of attorney for property. However, our powers of attorney have many more powers and are more substantial than the average power of attorney that most people have.
  • Creating wills and trusts that have special needs trusts built into them for a surviving spouse or a minor or adult disabled child. This takes advantage of certain relief that Congress intentionally placed into the Medicaid laws.
Deferred Actions
  • The purchase of a Medicaid compliant annuity or a Medicaid compliant promissory note.
  • Our office files a Medicaid application.
Conclusion As you can see from the above, there are strategies that we rely on that result in the savings of a lot of assets for middle class seniors and boomers who are going into long-term care. However, because these measures are complicated, it makes sense to have a blueprint laid out describing them in detail using your asset and income numbers before actually engaging in these actions. We want our clients to go into strategies and solutions with eyes wide open. The only way that can be accomplished in most cases is to create blueprint that lays out all of the Medicaid asset protection planning strategies in the form of a letter that the client can study, and ask questions about. We usually resolve all of the questions the client may have at our subsequent “Design Meeting.” Make sure you look before you leap.
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Installment 4 of 10

In Our Series: “Long Term Care Costs for the Middle Class: 10 Steps to Asset Protection Through Medicaid in Illinois, for Middle Class Seniors and Boomers”

In this part of our ongoing series of how to deal with the looming crisis associated with long-term care costs for the middle class, I would like to talk about when it may be necessary to revise wills and trusts.  Also, what should newly restated revised wills and trusts look like? First of all, we should remember that during our maturing years, most people, especially those with children, will prepare wills and trusts that deal with what happens to their assets upon death. This is a very understandable and laudable goal, especially for those people that are afraid of leaving small children behind. However, as we go beyond our maturing years and start focusing on our senior years, the focus is no longer “what happens when we die,” the focus now changes to “what happens if I don’t die and I need long-term care for a long period of time.” When that becomes the concern of someone going into their senior years, wills and trusts must be modified in few different ways.
  1. For single persons, there needs to be the ability to withdraw assets from a revocable living trust, or various types of asset management accounts, like pay on death accounts at a bank, transfer on death accounts at a brokerage firm, and IRA accounts. The reason for this additional withdrawal power is so assets can be withdrawn from these repositories and used elsewhere in accordance with planning techniques designed to preserve assets so that eligibility for Medicaid long-term care benefits, such as nursing home cost coverage, can be achieved. This would be a satisfactory result.
  1. In the case of married individuals, it becomes very important to be able to not only withdraw assets from various places, but also redirect assets in the event of the death of one spouse. Specifically, if we have two spouses, but one is in a nursing home, and the other spouse, who is otherwise healthy, should die unexpectedly, the assets of the deceased spouse will be transferred to the surviving spouse and those assets could be subject to a complete Medicaid required spend down for nursing home costs. This unfortunate circumstance can be avoided if the couple restates their wills and trusts. Rather than transfer assets to the surviving spouse directly, assets can be transferred to certain special needs trusts that are created for the surviving spouse who is residing in a nursing home. This type of special transfer will allow the surviving spouse to continue to receive benefits from Medicaid for their long-term care, and at the same time enjoy the inheritance left behind by the predeceasing spouse. This would also be a satisfactory result.
These types of more favorable results don’t happen automatically. They require very careful drafting by elder law attorneys who have familiarity with the Medicaid statutes and regulations. Careful drafting can allow people who need Medicaid for long-term care to, some extent, retain assets that can act as their lifetime “rainy day fund.” Again, this is planning that is done not for wealthy people, but rather  is done for middle-class individuals who have few remaining assets and would like to preserve them to elevate the quality of their life should they be in long-term or nursing home care for an extended period of time. Remember Medicaid does not cover the cost of the television, hearing aids, eyeglasses, certain podiatry care and other essentials that add to a senior’s quality of life. That is why the planning for the creation of a “rainy day fund” for this type of circumstance is so crucial. Caution: This type of planning must be done while you are able to do it. It cannot be done once you have diminished mental capacity to the extent of not being able to make financial decisions for yourself all. Start your planning now!
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