My parents and sister and I had another session with a lawyer to try to figure out how my parents should best prepare themselves for the future. As I wrote a couple months ago, my father had done no estate planning whatsoever and at the age of 74, was totally without a will or even a health proxy a few days before having to have surgery for a highly malignant brain tumor-- not good. I frantically tried to help him get his affairs in order. Because of my mother's debt troubles in the last few years, my father did not want her to be able to blow all their money. The lawyer we saw before his surgery didn't have time to set up any sort of trust, but to try to comply with my father's stated wishes, he ended up drawing up a will that basically disinherited my mother. In retrospect, this was a dumb idea, as you can't just disinherit a spouse without going through probate and if my dad had died with that will in effect, it probably would have led to exactly the sort of complications we were trying to avoid.
Also, it caused some stress with my mom. She was upset that we didn't trust her (though that lack of trust is arguably justified.) And it did look kind of bad-- we were rushing this through with my dad under a lot of stress, and it all happened before my mother could get home to be with us when he went in for surgery.
Recently, we went back to a different lawyer to revise the whole plan. Since my mom's been back and taking care of my dad, I guess she convinced him that his earlier impulses were wrong. The new lawyer seemed a bit suspicious that my sister and I had been trying to stiff her, which we weren't, but of course it is his job to think that way and advise both my parents as a couple as to what is best for them.
To make a long story somewhat less long, new plan is to set up a revocable trust, with both my parents as trustees/beneficiaries and my sister and I as successor trustees in the event that neither parent is competent. All their assets will be held in this trust-- it just simplifies matters if anything happens, without restricting how they can use the money.
Other options we discussed were some sort of irrevocable trust. At first I had thought that might be a way to protect some of their assets from being at risk if they needed a nursing home, and I thought it would just give my sister and me control of the money but let us spend it however necessary to ensure our parents' comfort. But it turns out we'd only be able to spend the income from that money, not the principal. My parents don't have that kind of money-- they'll need to spend down the principal towards the end of my mother's life most likely.
As for the whole Medicaid/nursing home issue, it's very complicated. And it's hard to know when the right time is to try to protect your assets. When I wrote about this previously, some commenters questioned the ethics of trying to shield assets and make Medicare [typo-- I meant to say Medicaid, as a commenter points out below] pay for a nursing home. As far as I am concerned, if the tax laws allow for legal ways to do this, I don't have a problem trying to take advantage of it. My parents aren't rolling in money and though they have enough now to live in reasonable comfort, their savings could be decimated if one of them was in a nursing home for a year or two. They've paid their share of taxes over the years
Right now, the person most at risk for that is my Dad. He's got very serious health problems and his treatments are making him weaker and weaker. I don't know how long my mother will be able to care for him at home even with help from visiting nurses. But Dad's life expectancy is pretty short-- it would be really good news if he lived more than another couple of years. If he needed a nursing home, the lawyer told us, the assets required to pay for it would not include the house, since my mom still would be living there, and she'd get to keep half of his income. But by his math, that left about $150,000 of savings that would have to be used to pay for nursing home expenses before Medicaid kicked in. That would cover maybe 2 years, as nursing homes can be over $80,000 a year. (My dad never had any long-term care insurance, and he'd certainly never be able to get any now!)
If my dad was expected to live longer, it might make sense for my parents to put some money in an irrevocable trust, or give some money to my sister and me in smaller increments, but with the 5-year lookback for Medicaid, it doesn't make sense right now. We just need to suck it up and pay the big bucks to a nursing home if it comes down to it. As for my mom, she's still in relatively good health, and she's 10 years younger than my dad. It's a bit early to think about nursing homes for her, but over the next few years, I'll be thinking about whether it would make sense for her to take any additional precautions to protect her assets.
Meanwhile, I have strongly cautioned her not to make any financial decisions without consulting me! She says she can be trusted and is an adult who can take care of things for herself: "I'm not stupid!" she protested, when she found out Dad had wanted my sister and me to control things. And she's not stupid, but she has no experience with these matters, and during the conversation with the lawyer, she was totally confused and kept getting things wrong after repeated explanations, and afterwards she herself said the experience made her "feel stupid." I can't help but worry that she would make the wrong decisions or be taken advantage of.
I do want to keep researching all these issues, and I will need to revise the budget I created for my parents with all this in mind. I wish I could be writing this post as someone who has all the answers and is offering a clear explanation to help others, but unfortunately I'm in no position to do that! Please remember that I'm not an expert-- I'm just telling my story as it happens, as I make mistakes and try to learn from them. Every situation is different so please make sure you get your own legal advice if you are facing these questions in your own life!
Tuesday, December 02, 2008
Estate Planning Update
Posted at 9:30 AM
Labels: estate planning, family, health
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14 comments:
You have so much honesty here. Good for you. I know this is frustrating and hope to learn a bit from your process. My in-laws are the exact same way and I fear my husband and his brother will be dealing with this at some point. Only the in-laws like to keep their head in the sand and do nothing. Fine for now, but will be a nightmare after their gone. Good luck and I will keep reading.
Thank you for sharing this story, all of this must be very difficult for you. I can't imagine making these decisions and it's not something regularly addressed in personal finance blogs. We'll all have to face these issues one day.
I think you are doing a great job under these stressful circumstances. My father has alzheimer's and I can totally relate to being thrust into a crazy situation and trying your best to make the right decisions for the one you love. My two cents is to pay for the nursing home (when needed) out of your dad's funds. Medicare doesn't pay for nice nursing homes and it's difficult enough to put a loved one into one let alone a less than stellar one. Also, keep a very short leash on your mother. My father always said that my mother would spend all of their money (they are still together) and I always thought he was exaggerating but he was right. Thankfully, my mother lets me handle the financial affairs and recently I had to put her on all cash system because she kept charging and overdrawing her checking account! But part of me wants her to grow up and take care of her own finances. My guess is your Dad is probably right about your Mom. Good luck to you. Your parents are lucky to have you.
Although I can't stomach the lady ... she does a pretty good job of assisting one through some required planning.
https://www.suzeormanwillandtrust.com/
Wish your dad a speedy recovery. I am surprised that you are the opposite of your parents when it comes to financial planning and responsibility. Coming from a different culture, I was constantly reminded by my parents to 'save' and 'don't buy things i can't afford'. My siblings and I each have a bank account, set up by our parents when we were little.
My understanding is that medicare will typically cover up to 100 days in a nursing home if the patient qualifies for what is called "skilled nursing care". You can talk to your dad's treatment team to determine whether he can qualify under this. (for example, if he would benefit from physical therapy, that could qualify as "skilled nursing care" inside a nursing home). I think it may also require recent (within the past 30 days) hospitalization.
Moving assets around to qualify for medicaid is difficult. In most instances, you need to do it five years before the medical problem occurs. There are some legal strategies that can help preserve some assets in some circumstances. The rules are convoluted. A good Elder Law attorney will know what is and is not possible.
Good luck... Your parents are lucky to have such a caring, responsible daughter.
Good for you. This sounds really stressful, but really necessary.
My thoughts and prayers to you and your family. We lost my husband's brother last year to liver cancer. It happened very quickly. He felt the first twang of pain at the end of May and was gone in the first week of July. He had no will, no POAs, and was a single dad with two kids. It was so hard to have to deal with all the administrivia on top of dealing with all the grief and emotional ramifications. Your family is lucky to have you to help them through all this. Good luck.
It seems like there's a conflict of interest with your parents' lawyer. A lawyer in this situation should probably only be representing one spouse, not both spouses, especially if there are issues like the ones you're describing. If possible, I'd look into getting your mother her own lawyer and having those two and your father and his lawyer sit down together to figure things out.
I understand how painful all this must be for you. My thoughts are with your dad.
Your situation sounds difficult and you're dealing with it bravely and level-headedly. Good luck.
Your parents are lucky that they have such a competent daughter to work with. If you are looking for additional resources, I suggest looking at Avvo Answers and Legal Guides on Estate Planning.
The best source to understand what Madame X is going through is to read this paper. It's long but covers everything. The basic points are the follows:
1. Medicare does not cover long term nursing home. Medicaid does.
2. To not go broke in order to qualify for medicaid that person need to start gifting away money when they are healthy (to someone they trust, obviously)
3. Long term care insurance only makes sense if you have a middle amount of savings. With a small savings you will qualify for medicaid anyways. With a large amount of savings (say >$2 million) you can afford to self-insure.
Now to convince my parents (who are healthy) to look into this is the tough part...
How much time did you spend with the lawyer? Did your sister's husband's uncle lawyer charge for his service?
Did you find the 2nd lawyer from the bar's referral service? What are the fees and services that s/he provided? Did you split the bill with sister, or had parents pay the lawyer bill.
I disagree that you just need to suck it up. I would set up the revocable trust in the offchance that it will be 5 years before dad needs it. If he does manage to hold on that long, there is a significant fin'l benefit to having the trust. and if he doesn't--well, it doesn't cost *that* much to set up. Really, I think you'd be a better successor trustee than your mom, although I don't know if you are ready to shoulder that burden. Having the trust would provide the legal structure that could potentially give you the authority to protect her somewhat from her own financial ignorance, if it is written in such a way that makes clear that the trust is to be used only for your parent's benefit while they are alive, AND you are designated the successor trustee, not your mom. It could be written in such a way that she gets a defined income from the trust while she is competent, and if she becomes incompetent you get full discretion, but only for her benefit. I'd strongly suggest taking a chance and setting up the trust if there's any kind of a chance that your dad can stay out of a nursing home for the next 5 years.
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