Traditional estate planning is based on concepts out of step with today’s realities.
Is the purpose of your estate plan to make it easier for your heirs after your peaceful death in your sleep?
Most of us won’t have the luxury of dying in our sleep. Thanks to modern medicine, most of us will survive conditions that would have killed us in the past. Our remaining years will be spent depending on others for our basic needs.
The type of estate planning that most people do today is based on a “healthy today / dead tomorrow” paradigm that creates unintended consequences for middle-income Americans. Most think Medicare will pay for all of the care you need during retirement. This is not the case. Medicare will not pay for long term care, which can cost up to $ 15,000 per month.
This will lead to financial ruin, especially if your estate is between $ 50,000 and $ 1.5 million. The best solution for those of us in the middle is to engage in legal planning that will allow us to access public benefits like Medicaid when we need long term care.
How do you qualify? In most states, a single applicant age 65 or older is allowed up to $ 2,000 in countable assets to be eligible for Medicaid. If a couple is married and both spouses apply for Medicaid nursing home, they are generally allowed to have $ 4,000 in book assets.
If you’re a single person who needs Medicaid to pay for long-term care, traditional advice will require you to spend assets to qualify. Many small and medium-sized domains are needlessly decimated by this outdated advice. If you’re married and your partner needs Medicaid to pay for their care, traditional estate planners can only offer one solution: spend your nest egg. An elder law attorney, on the other hand, recognizes that Medicaid only requires that your sick spouse be depleted, but with careful planning you, the healthy spouse, can keep most, if not all of your property, including the House.
But what happens when your sick spouse dies? The traditional estate plan leaves you, the healthy spouse, with all the advantages. This may seem like a non-issue until you get sick and need access to Medicaid to pay for long-term care. At that point, you will be forced to reduce your assets to $ 2,000. Another once healthy nest egg is gone – poof – all because you followed conventional estate planning advice.
Can you avoid this financial disaster? The answer is yes. A Safe Harbor Trust is an option. But don’t expect to hear about it from the traditional financial planning or estate planning industries. This legal planning tool does not fit their “healthy today / dead tomorrow” paradigm. Your best bet is to call an attorney who specializes in senior citizen law.
Rajiv Nagaich is an elder law attorney, author, assistant professor at the law school, and retirement planning visionary who has achieved national recognition for his pioneering work with retirees and contributions to the practice of elder rights. He is the founder of two Federal Way-based firms: Life Point Law, an elder law and estate planning firm, and AgingOptions, a firm that provides retirement-related education to consumers and professionals. For more information, visit AgingOptions.com, LifePointLaw.com or call 877-762-4464.