Asset Protection

Asset ProtectionAsset protection worries clients more than many other legal issues. They are afraid that what they have spent a lifetime to accumulate will be lost to creditors or predators. Some areas of concern are the following:

  • Remarriage of a spouse after the client's death
  • Financial abuse of a surviving spouse by a loved one or care provider
  • A child or grandchild who mishandles money
  • A child or grandchild in a troubled marriage
  • Liability of heirs due to creditors, medical bills or lawsuits
  • Taxes upon death or the sale of assets

There are planning strategies for each of these concerns. They are best explained in a face-to-face conference with an attorney who can thereafter tailor the remedy to your specific situation.

Asset protection for others after you die is a valid concern. An equally valid concern is protecting one's own assets while alive. This is discussed under the heading Medicaid Planning.

Medicaid Planning

Medicaid Myth #1: "If my spouse and I title all assets in my name, he will be eligible for Medicaid"

The facts: When a married person applies for MO HealthNet, assets in either or both spouse’s name are considered by the MO HealthNet agency. However, some assets won’t be “countable” and you may keep some as an asset allowance if your spouse enters a nursing home.

Medicaid Myth #2: "If I give an asset away, I won’t qualify for MO HealthNet"

The facts: It is true that in some cases a person can be disqualified for giving away property. However, Congress has created certain safe harbor transfers that are not penalized. In addition to these allowable transfers, whether a transfer is penalized depends on what was given away, who it was given to, and when the transfer was made.

Medicaid Myth #2: "If I give an asset away, I won’t qualify for MO HealthNet"

The facts: It is almost never too late to take planning steps, even after a senior has moved to a nursing home.

People live longer today due to advances in medicine and healthier lifestyles. That increased longevity raises these issues:

  • Will I outlive my money?
  • Can I afford a nursing home, assisted living facility or extended care at home?
  • How can I preserve my assets?
  • How can I qualify for Medicaid?
  • Should I purchase long term care insurance?

When at-home or nursing care is necessary, assets are at risk. Medicare covers little, if any, of these expenses. Most long term care is to assist people with support services such as dressing, bathing and using bathroom facilities. Medicaid (in Missouri it is now known as MO HealthNet) is a State and Federal government program that will pay for long term care. Eligibility is based on your income and personal resources.

We have assisted clients to develop an estate plan that takes into consideration the possibility that they may become disabled and unable to fully care for themselves personally and financially. Advance planning can alleviate concerns over future long term care costs.

When no advance planning has been done a crisis situation often develops: an individual has either been admitted to a nursing home or is about to be placed in a nursing home and has been told they have too much money or assets to qualify for Medicaid. Even then, it is not too late to do some planning. We know the legal rules to help qualify a loved one for Medicaid and to preserve the maximum amount permissible.

Timing is everything when applying for Medicaid. You will lose money and flexibility if you file for Medicaid too soon or too late. Call us before completing any Medicaid application.

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Veterans Benefits

Military Veterans Benefits There is good news here. Many veterans and their loved ones, including their widows or widowers, may be eligible for a special monthly pension benefit because they are over 65 years of age and are homebound, in assisted living facilities or in a nursing home.

Those veterans and/or their survivors only need to prove that their medical expenses exceed certain income and asset limitations.

As an accredited attorney with the Office of the General Counsel of Veteran's Affairs in Washington, D.C., Max W. Custer, Jr., can assist you in determining whether you are entitled to Veteran's benefits and which benefits may be available.

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Planning for Beneficiaries With Disabilities - The Special Needs Trust

Planning for Beneficiaries With Disabilities - The Special Needs Trust Estate planning by parents who have children with disabilities begins with a review of government programs - public benefits that may be crucial for a child's care and well-being. Supplemental Security Income (SSI) and MO HealthNet (formerly Medicaid) provide medical coverage and long-term support and services. These expenses may not be covered through any other source and could amount to many hundreds of thousands of dollars over a lifetime. Cash benefits, though modest, are provided as well.

SSI and MO HealthNet are what are known as needs based programs. In other words, the income level and financial resources of an individual with a disability, or a family who is applying on behalf of their child with a disability, must not exceed a certain level in order to qualify for these government benefits. Benefit recipients are allowed to retain only a total of $999.99 in assets, with some exceptions. If a person on needs based government benefits receives more than the minimum cash or assets allowed, that person may lose SSI and MO Health Net.

As crucial as government programs are in providing medical coverage and long-term supports and services, government cash benefits provide only for the bare necessities: food and shelter. They amount to less than federal poverty level income. As we all know, there are more things and activities beyond these basics that add to the quality of life. For a parent planning for the future of their child with special needs, this poses a problem. When parents are able to care for their child, they provide the extras beyond the bare necessities to make their child's life comfortable. But who will provide these resources when they are not there to do so? If parents leave more than $999.99 in assets to that child, they run the risk of disqualifying him or her from receiving government benefits.

True, they could leave assets to another family member or other person with the understanding that this person will take care of the child's extra needs. Even in close families where there are strong bonds of love and trust, there is a major flaw in this "moral obligation" approach. No one can control all events in their life. Divorce, health issues and resulting bills, bankruptcy, lawsuits and financial mismanagement are all risks that can threaten funds left to another for the benefit of a child with a disability. There may be tax consequences as well.

The Solution

Planning Pointer #1: Write down a care plan

All parents caring for disabled children are advised to write down what any successor caregiver would need to know about the child and what the parent's wishes are for his or her care. Should the child be in a group home, live with a parent, be on his or her own? What things have you found to be personally important to your child? Usually, the parent knows best, but needs to pass on the information. The memo or letter can be kept in the attorney's files with the parent's estate plan.

Planning Pointer #2: Coordinate planning with other family members

A well-meaning relative who leaves money directly to the child with a disability can sabotage even a carefully developed plan. If a trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest that they may like to leave to that child through the trust.
The solution to this dilemma is the Supplemental Needs or Special Needs Trust (SNT). Such a trust preserves government benefit eligibility and distributes assets that will meet the supplemental needs of a person with a disability; needs that go beyond food and shelter and the medical and long term support and services of MO HealthNet. A SNT is designed specifically to supplement, not supplant, government benefits. It is drafted in such a way as to give the Trustee complete discretion whether and when to make distributions to the beneficiary. In carrying out the terms of the trust, the Trustee pays third parties directly for goods and services to be used by the person with a disability.
  • Out-of-pocket medical and dental expenses
  • Eyeglasses
  • Annual independent medical check-ups
  • Transportation (including vehicle purchase)
  • Maintenance of vehicles
  • Insurance (including payment of premiums)
  • Rehabilitation
  • Purchase of materials for hobbies or recreational activities
  • Purchase of computer or electronic equipment
  • Pay for trips or vacations
  • Pay for entertainment such as movies, ballgame, concerts, etc.
  • Purchase of goods and services that add pleasure and quality to life such as videos, furniture or a television
  • Athletic training or competitions
  • Personal care attendant or escort
  • Items that improve the quality of life of the disabled person
  • Health insurance premiums, if available

When and How Is a Special Needs Trust Set Up?

Parents may consider setting up a SNT when they do their own estate planning. Such a trust may be included in the parents' wills or living trusts, or it may be a separate document. If their child with a disability will likely have long-term medical or support needs, the SNT can be a vehicle to supply the funding to provide lifetime quality care. Where a child's diagnosis and future needs are uncertain, the SNT can be drafted with appropriate flexibilities.

When a Special Needs Trust is established as a separate document during the parents' lifetime; it can serve as a receptacle for any inheritance or contributions that may come from a grandparent or other family member. When a parent dies, additional assets can be directed to the SNT by a will, living trust or life insurance or pension plan beneficiary designation. Therefore, the individual with a disability does not have to be left out of a will or estate plan, but can have their share of inheritance directed to his or her SNT. In the case of a life insurance policy, pension plan, or other source that would go to a beneficiary on death, the child's SNT should be the specifically named beneficiary.

Where the source of funds for a SNT are assets from anyone other than the trust beneficiary, that SNT may direct the distribution of assets left in the trust at the beneficiary's death.

Funding the Trust

A number of issues arise with respect to the question of how much to put into the trust. First, how much will your child with special needs require over his or her lifetime? Second, should you leave the same portion of your estate to all of your children, no matter their need? Third, how will you assure that there is enough money?

The first question is a difficult one. It depends on what assumptions you make about your child's needs and the availability of other resources to fulfill those needs. A financial planner with experience in this area can help make projections to assist with this determination. However, it is better to err on the side of more money rather than less. You cannot be certain current programs will continue. In addition, you have to factor in paying for services, such as case management, that you provide free-of-charge today.

If these assumptions mean that your child with special needs will require a large percentage of your estate, how will your other children feel if they receive less than their pro rata share? One solution to the questions of fairness and to the challenge of assuring that there are enough funds is life insurance. You could divide your estate equally among your children, but supplement the amount going to the Special Needs Trust for your child with life insurance. The younger you are when you start, the more affordable the premiums will be. In addition, if you are married, the premiums can often be lower if you purchase a policy that pays out only when the second of you dies.

Get Qualified Help

The laws governing trusts are complex and are subject to changes in legislation that may vary by state and which could affect a person's eligibility for the government benefits that they depend upon. New laws have considerably tightened the eligibility criteria for receiving government benefits and thus have affected many aspects of the way SNTs are drawn up. These regulations are complex and require a strong knowledge of the current legislation and how it impacts people planning for their child with special needs in order to preserve eligibility. Setting up a special needs trust requires coordinated planning with an attorney knowledgeable in special needs planning who can draft the necessary documents.

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