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According to studies, over 60% of Americans do not have a will. If you do not have a will, your assets will be divided according to state law. Having a will allows you to select your personal representative and divide your estate according to your preferences. A will also allows you to name a guardian and trustee for your minor children.
Should you write your own will or download a form from the Internet? Saving money often times does not save any money particularly when a will is poorly drafted or does not reflect Tennessee / Kentucky law. There is a huge difference in simply filling out a fill-in-the-blank template off of a website versus having a confidential consultation with an estate lawyer.
As an experienced estate attorney, Olivia Wann provides guidance on understanding the law and how your family can avoid estate planning mistakes that can result in family tension, broken relationships, devalued assets, and a lost legacy.
If you are married and have children from a previous marriage or relationship, and your will benefits your current spouse, please keep in mind that if you designate your spouse as the beneficiary, he or she is not obligated legally to preserve assets for your children. Learn the difference between a will and a trust and which estate planning tool better accomplishes your objectives.
A will is operative on death through the probate process. A general durable power of attorney allows you to designate an agent to act on your behalf during incapacity. Typically powers include banking, real estate, and personal property transactions, business operating transactions, retirement plan transactions, access of a bank deposit box as well as other powers depending on your personal situation. Having a general durable power of attorney known as a “POA” is important particularly to allow the agent to gift or otherwise spend down your estate for Medicaid eligibility and planning.
If the documents are signed during competency, this may prevent a costly conservatorship action.
The purpose in creating a health care power of attorney is to alleviate uncertainty that otherwise may arise in connection with decisions about your medical care, to promote family harmony, and to clarify instructions to your health care providers. Your Agent’s authority to act on your behalf concerning your medical care includes decisions concerning artificial life support, medical treatment, surgery, and other medical procedures; artificial nourishment and hydration; resuscitation decisions (including Do Not Resuscitate [DNR] orders and Cardiopulmonary Resuscitation [CPR] directives); amputation of limbs; blood transfusions; experimental drugs and medical procedures; the administration of pharmaceutical agents; and arrangements for your long term care.
Elder lawyers think of Medicaid as an interest-free loan. If Medicaid pays for your long term care, the State of Tennessee wants repayment after your death from remaining assets that are probated.
Your home is an exempt asset to qualify for Medicaid; however, recovery of benefits are paid out by a claim made against a probated estate. There are exceptions to a Medicaid recovery such as having 1) a disabled child or blind child living in the home, or 2) a sibling living in the home continuously for 1-year that prevented you from requiring long term care, or 3) having a child living in your home continuously for 2-years that prevented you from requiring long term care.
Some elderly folks have wondered, “Why not give away the house now to my kids??? My children will get the house anyway.” If you give away your house, you lose control of the asset. Your benefits may be penalized meaning you may end up paying out of pocket for your long term care for a period of time. Your children also lose the step up basis regarding capital gains. The asset is also at risk for your children’s creditors including a bankruptcy. So what seems like a great idea is not so great an idea after all.
Estate planners use special tools such as a Revocable Living Trust, an Irrevocable Trust, and a Testamentary Special Needs Trust. A Revocable Living Trust allows you as the Grantor to create and manage your trust. If you lose competency, your successor Trustee can manage the Trust and assure your assets are maintained. This is valuable in scenarios where one spouse may not be capable of managing his/her financial affairs. The Revocable Living Trust avoids probate and is particularly recommended in cases where individuals own property in more than one state to avoid ancillary probates. The Revocable Living Trust, however, does not provide asset protection.
The Irrevocable Trust allows the Trustee to manage the asset and such assets are now owned by the Trust, not the individual. As such, the asset can achieve protection. This is an effective tool for Medicaid planning, family planning for blended families, protecting family farms, as well as other numerous examples.
A Testamentary Special Needs Trust is an effective estate planning tool that can avoid a Medicaid recovery and make provisions for caring for a special needs spouse or child without disrupting government benefits.
Attorney Olivia Wann knows how important it is for you to care for your loved one while preserving the assets you have worked so hard to attain. Schedule your appointment today to learn how you can plan your estate.
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