Be Prepared

You fall and break your hip. Or you have a stroke. Or you have a heart attack. Or you or your spouse end up in a nursing home. What are you gonna do? What are your loved ones gonna do?

According to an AARP survey, if you are over the age of 65, you have a 1 in 2 chance of spending some time in a nursing home, a 1 in 4 chance of spending at least a year in a nursing home, and a 1 in 10 chance of spending at least 5 years in a nursing home.

1 in 1,200 homes burn down. Do you have homeowners insurance? 1 in 250 cars are in an accident. Do you have automobile insurance? 1 in 2 people over age 65 spend time in a nursing home. Have you thought about long-term care insurance?

Do you have a will, financial power of attorney, health care power of attorney or trust? If you do not, then congratulations, you are with the majority of Michiganders. Unfortunately, over half of Michiganders have done no estate planning.

This reminds me of the Boy Scout motto from when my son Luke was working his way to becoming an Eagle Scout, Be Prepared. Someone once asked the founder of Scouting, Robert Baden-Powell, “Be prepared for what?” Baden-Powell responded, “Why, for any old thing.”

According to the Scouting Handbook, Baden-Powell wanted each Scout to be ready in mind and body for any struggles, and to meet with a strong heart whatever challenges might lie ahead. The Scout motto means be prepared for life.

Being prepared for life is not limited to just Scouts. It really applies to everyone. In our office, we regularly receive calls from people who are not prepared. They either have done no planning or haven’t updated their estate plan for a decade or more. One type of call we regularly receive is from someone who has a medical procedure scheduled in which they will be under general anesthesia. The procedure has been planned for months, but we usually get the call less than a week before the procedure.

The caller either does not have any estate planning documents and wants us to draft them, or they want us to update their existing estate planning documents. I received one of these calls this past week. Depending upon our existing workload, sometimes we can accommodate the request, sometimes we cannot. If we were contacted when the procedure was originally scheduled, we most likely would have been able to handle the matter for them.

Another call we regularly receive is from the family of a nursing home resident who has been in the nursing home 2 or 3 months receiving Medicare paid rehabilitation. We typically get called when Medicare paid rehabilitation is terminated and the nursing home wants 2 months private pay (at $8,000 per month) to keep them in the nursing home. If the family does not pay, the family will have to take them home.

I received one of these calls this past week on the same day that Medicare paid rehabilitation was ending. Unfortunately, it is going to take us 30 to 60 days to develop and implement an asset protection plan and file a Medicaid application to pay for the nursing home care. The family may have to private pay the nursing home for a month or 2 or 3 before Medicaid begins. Had we been called when they first went into the nursing home, we could have the plan in place and be ready to file the Medicaid application as soon as Medicare paid rehabilitation ends.

Luckily, there are still some people who do plan ahead. They call us when they are alive and well to see what their options are if and when they went into a nursing home. We call these Readiness Plans for asset protection and Medicaid qualification. Among other things, we have them provide us a list of assets and liabilities with current values, amounts of current monthly income and gifts made within the last five years. With this information, we can then show them what it would cost them if they did no planning, and give them one or more options that may protect substantial amounts of assets for a spouse or other loved ones.

I believe that for anyone over the age of 18 who is not legally incapacitated, being prepared means that they have at least a will, a financial power of attorney and a health care power of attorney. In most instances, you can avoid a court appointed conservator to handle your finances and other assets if you have a properly drafted financial power of attorney. Also in most instances, you can avoid a court appointed guardian to make personal and medical decisions for you if you have a properly drafted health care power of attorney, also called a designation a patient advocate.

Many people believe they are prepared because they have a trust. However, being prepared with the trust means that not only do you have your trust, but that it is fully-funded. Trust funding is completely and correctly designating your trust and individuals as owners, beneficiaries and insured parties of your assets. Basically, it’s putting your stuff in your trust. Your trust is a vehicle, a financial vehicle. It’s like that new car sitting in your driveway. It sure looks great, but it isn’t going anywhere unless you put fuel in it. The fuel for your trust is your assets. To properly fuel your trust, it must be funded with those assets.

The proper funding of your trust is critical in making your estate plan work and having the results you plan. Failure to properly fund your trusts may cause unintended results. These may include probate during your lifetime or after death; distributions not in accordance with your goals and objectives; additional taxes; and additional administrative, legal and other expenses.

If you have a fully-funded trust you can usually avoid probate after your death, and in most instances when coupled with a properly drafted financial power of attorney, during your lifetime, you can avoid a court appointed conservator to handle your finances and other assets. In my 31 years of practicing law, I have not seen even one fully-funded trust come into our office from another law office.

If you are prepared for life and have done proper planning, you can keep control of your property and other assets while you are alive and well, provide for you and your loved ones in the event you become mentally disabled, and when you are gone, give what you have, to whom you want, when you want, the way you want.

By Matthew M. Wallace, CPA, JD

Published edited April 23, 2017 in The Times Herald newspaper Port Huron, Michigan as: Be prepared in case life has unexpected turns

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