What's in Your Pot O' Gold? Trusts & Estate Planning

In this episode, a recording of a virtual seminar presented on April 2, 2020, Attorney Brittany Smith and Long-Term Care Planner Tammy Zilske speak about several types of estate planning documents that everyone should have, different types of trusts, how trusts can be used to affect taxes, trusts that protect inherited IRAs and provide for future generations, the importance of planning for potential long-term care, Medicaid eligibility for long-term care, and more. View the entire presentation with PowerPoint slides at https://www.youtube.com/watch?v=8giuceniSlc

Transcript

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uh well, welcome, everybody. Ah, we appreciate you guys taking a few minutes out of your data. Spend some time with us. We have a lot of good information. Toe. Give the guys today. Um, like Matt said, I'm Attorney Smith. I work a lot with our long term care plan or Tammy Selsky, and she'll be talking here in a little bit. And really, what we focus on is we help individuals who are really concerned about protecting their assets if they would ever need long term care. And that's really what we're gonna be talking about today. So the name of our presentation is what's in your pot of gold, and we're gonna be discussing planning strategies. It's really protect what's in your pot of gold if you would ever need care or from other concerns. All right, so let's go ahead and get started. So the first thing that we always look at if you were to come into our office and, you know, have ah conversation with us is we always want to start with your goals, you know? Who are you looking to protect? Are you looking to really save your assets for your Children? is it really grandchildren? Are you charitably minded? Um, we would always look at that first, and then we would take a look at your assets. So what assets do you have that we could look at? You know, some planning strategies for your really looking to protect your home. Do you have additional real estate that you're looking at? Um, or maybe you know, a cabin that you want to keep for your heirs. Well, all of that really starts by having good basic estate planning documents in place, and they're really the foundation of any protection strategy. So what I mean by state planning documents are really the power of attorney documents. And we're going to go through each of these what they mean, um and then also having a last will and testament in place, which is really a strategy for what happens to your assets when you pass away. And then if you're concerned about nursing home or other protection, we might explore trust. That's really what we use for that protection. So a power of attorney is really just a legal document where you outline who would take over and make decisions for you if you're ever at a point where you can't make those for yourself. So you know, if you're in the hospital and you can't talk to the doctor or if you're incapacitated and you can't pay your bills, that's where this stocking that really becomes important. So you leave it toe, look what happens. So if there's a crisis and you haven't signed a power of attorney, that's really where you find yourself in what's called a guardianship action. So if something were to happen and you don't have a power of attorney in place, someone would actually have to petition the court to be granted power to make decisions for you. So, as you can imagine, because it involves the court, it's very costly. It's intrusive. They're gonna ask about your medical condition, Um, and while you're in there, the bills so say you're already in a nursing home. Nobody can pay that bill. Those bills are going to be piling up until someone's appointed to do that. So, you know, all of that could be avoided if you just saw in a simple power of attorney document, which basically says if something happens where I can't do this, I want this first in the handle of for me. All right, So there's several types of powers of attorneys, and at our office, we make each of these an individual document that you would sign. So the 1st 1 that will go over is a financial power of attorney. And what I've been referencing is I've always been saying you need to have good legal documents and one of the main things I hear a swell. I have a power of attorney already. Aren't they all basically the same And they really aren't created equal. So a power of attorney is really only as good as what's in the document. So if you want someone to be able to do something specific for you, that power has to be outlined in there or they wouldn't be able to do that. So, for example, if you were to have a financial power of attorney that was drafted by any attorney, um, you know, just a standard document, it's going to include the basic powers. So it'll let your whoever you name open and close bank accounts. So real estate for you, Um, and make what's called limiting. Yes. So let many gifts are gifts under the annual I arrest exclusion so and her person and they don't care about it. You don't have to report it. It's not taxed. Nothing happens. But where that becomes an issue is say, you're in a nursing home. You haven't done any of the planning that we're going to talk about today, and now your agent comes to us and says, Hey, they have a house. They have 100,000 and a bank account. We want to do some planning right now. If they just have the limited gifting power, they could only protect $15,000. So what we dio is we put more customized language in our document that allows that extra nursing home protection if there was a crisis. So it's important that you have the power to make unlimited gifts, so that's any gifts in any amount. Now we do put that it has to follow your estate plan so they can't just give money to themselves or somebody random, but it would allow them to protect your house any and all investments as much as they would need to protect at that point. And then we're gonna talk later about your revokable will trusts and these air really the trust that we use to protect assets if you were looking at being in a nursing home or applying for Medicaid. But they have to have the power specifically to dio irrevocable trusts. And then in this day and age is also important to put in there about digital assets. So online accounts, email accounts, Um, if they don't have the power to get those passwords or access those accounts and you don't have those written down anywhere, they might run into issues if they try to do things online for you. So if you do have a power of attorney and place, it's important to note that there was a pretty substantial change in the law that took effect back in January of 2015. So what this law does is it kind of overhauled the execution requirements? What has to be in a power of a turning and you're older power of attorneys air supposed to still be honored and recognized if you signed one before 2015. But what we're finding is a lot of the companies, especially bigger companies, will refuse to accept it if it's dated before 2015 because it doesn't have any of those new standard rules and guidelines included. So it's good just to get it updated just to make sure that it has everything in there. Um, if you've had one signed before, that will change. All right, so then the next power of attorney really covers health care decisions. So again, if you're ever in a hospital and you're at a point where you can't tell the doctor what your wishes are, you can't consent to surgery or make any medical decisions. That's really when this document is important, because again you appoint somebody who can really tight takeover talk to the doctor. Um, and really make any decision on your behalf that would be in your best interest. Now it's important to include a hip of release in this document. You've probably all heard of the hip of privacy walls. But what this does is this guarantees that whoever you name can get access to your medical records and anything that they would need to make that informed decision for you. All right, so then the next one is relatively new in Pennsylvania. This is a mental health power of attorney, and we see this one used most often. If you're ever diagnosed with Alzheimer's dementia, you have, um, interaction with your medication or you have to get treatment for behavioral issues. Anything along those lions is where this would become important because what this does is this would allow whoever you name to get you specialized treatment. So if you would have to be committed for inpatient treatment and you're not able to consent to that, or if the doctor would say, Oh, you know, this experimental drug is out there and it might help, they could consent to that as well. So that's all things that you could put in the document and you could specify. You know, if the doctor said maybe electroshock therapy or a drug trial might work, would they be able to consent to that now whenever they passed the law, they did have in there that these documents automatically expire after two years just because there's kind of an extra level of privacy and they want to make sure that you know your capacity is re determined every two years. So if you would sign one with us, we try to keep track of when you signed the initial one, and then you would get a notice that it needs to be updated if it's able to be updated now, all the other ones that we talked about their good, they don't expire. It's just this mental health power of attorney, and this one also has kind of a built in extra layer of protection. So it's what's known as a springing power of attorney, which basically means whoever you've named doesn't have any authority to make decisions for you until your capacity is conclusively established. So their power springs and action when you become incapacitated. So normally, what we put in ours is that to physicians would have to certify that you can't make that decision for yourself. And then that's whenever you're agent could take over and make that for you, all right, and then the last power of attorney is a living will. So this is really just written instructions about end of life treatment. So if the doctor would say you're permanently coma toes or you're at a point where there's really no realistic open recovery, would you want C P R. Life support anything like that? All of that could be outlined in this document, and we like to specifically put in there that you can have artificial hydration just if you were to be administered pain relieving drugs. And that's really for easing for comfort. And a lot of times morphing might have artificial hydration of water in it. So there's just guarantees that you would be able to be at ease and comfortable if he would get in that situation. But other than that, you can specify. Would you want CPR, life support, breathing machine, any of those life sustaining measures? All right, And then a common question I get is, Well, who should I appoint for all of these documents? Is there somebody specific? What if I appoint my oldest child was ill feel left out if I don't appoint them? Or maybe I should appoint all of my kids because I don't want anyone to be left out. Um, I always tell people just appointed the individual. That would do the best job for you. You know it doesn't have to be your oldest child. Maybe your youngest child is better with finances, and your oldest one is better with health care decisions. um, it's really whoever would make the best decision. Um, and then some people say, Well, I do want both of them to maybe agree on things, or if one's not available, the other one conserve, so you can really customize it where they conserve jointly. If you appoint more than one person or you can say, well, all point these two. But if one is available on one's, not, they conserve as they're available, and that really provides the greatest flexibility. Um, but they are really customizable on your your circumstance, whoever you would trust, whatever you would want Teoh to do in a point. But it's important to remember that whoever you dual point, it has to be someone that you trust, because you are giving them a lot of power, especially over your finances. If you appoint them over your finances because they could cast checks for you, they could sell real estate. So you want to make sure it's someone who's going to do a good job, someone who is responsible and somebody who's really skilled enough to make those decisions and would do what is in your best interest. And we talked about this a little bit earlier, but it is important, even if you have these documents in place to go ahead and get them reviewed every couple years just to make sure that whoever you appoint is still the best person for you. Um, you know you haven't appointed somebody that's passed away or sick or wouldn't be able to serve for you or if there hasn't been any wall change just like we talked about for the financial, it's good to make sure that it has everything that it needs. So if that crisis hits, everything is good to go now. Power of attorney documents are really only effective during your life. So as soon as you pass away, whoever you appoint their authority is going to end at that point so they won't be able to do anything else on your behalf. That's really then, when your last will and testament takes effect and you will point what's known as an executor, and they're the one that can take over and handle your assets whenever you pass away and then trust trust. Depending on how we establish him, they could either be managed during life again. If you're looking for that nursing home protection or if you're just looking for controlling distributions. If something were to happen to you, they can be effective after death as well. So we'll talk about that more here in a bit, too. So the last will and testament is really just a set of instructions where you want your property to go. And I hear a lot from people. Well, if I just want everything to go to my spouse and then my kids, doesn't it kind of just go that way anyway? So I really need a last will and testament. Um, and I was told it is important to have this document even if you do want everything to go to your spouse or your kids because Pennsylvania has kind of a default wall that if you don't have this document, the law tells your executor where it has to be distributed, so it doesn't necessarily mean that it will go to your kids or it will go to your spouse in might go part to your spouse part to your kids part to somebody else. So this just guarantees that it goes exactly how you want it, and the wall doesn't have anything to do with it at that point. And then we did touch on this. So you do appoint an executor so that somebody who again takes over and manages everything When you pass, they make sure that all of your assets are either sold or liquidated or transferred as they need to be to your beneficiaries. And then if you have minor Children, it's always important to name a testamentary guardian in your last will and testament. This guarantees as somebody can step in, even if it's a temporary amount of time until somebody can get formally appointed as the legal guardian. So just make sure somebody is gonna be there to take care of your Children. And then a lot of people want to leave assets to grandchildren or a miner, somebody who's under the age of 25. Um, we always recommend that you will point a custodian who kind of manage those funds for them until they reach an age where they might be responsible, are able to manage that for themselves. So in Pennsylvania, under this law, you can appoint a custodian for anyone who's eight under the age of 25 so you can do it from any age. So 21 if you would feel more comfortable at 21 it's just the highest age you could do is 25 then what happens is that custodian would really receive those assets. Manage it for that child until they reach the age that you designate that they could then get it. AL trait. So it's just an extra protection measure. And if you do have a last will and testament, I always like to review them to make sure that their self proving. So this is important because if you were not to have signed your will in front of two witnesses and a notary, um, what happens is whenever you pass away, your executive would have to track down somebody who could attest that that was your signature and, you know, or if it was witnessed but not notarized, they would have to track down those original witnesses. So you can imagine that if you signed a will in 1970 or 1980 those people might have retired or they might have passed away at this point. So as long as it's two witnesses in a notary, it kind of tells the court that, Hey, this is presumed to be the last woman testament, and we don't need any additional proof so itself, proving at that point and then a lot of people want to leave assets to their spouse, which is good. But we always like to take into consideration. What if your spouse it excuse me sick or if they're in a nursing home, you don't want to leave assets to them, and then they would just have to spend it on their care. So I call these I love you, but I love you. But Will's, um, and what that means is that you can leave everything to your spouse. But if they're in a nursing home and they're receiving Medicaid benefits, we put in a bypass clause, which really means it bypasses them and will go to whoever you name. Next to it will go to your kids or grandchildren, whoever you're going to receive the assets and not just guarantees that it really protects it if they're in the nursing home Now. Unfortunately, in Pennsylvania, you could never completely disinherit your spouse. They are entitled to what's called a spousal election, and that's 1/3 of your estate. Um, and Medicaid's aware of this so they do force this vows, even if you put in this bypass clause to take 1/3 of your estate, so they would have to be extra planning for that. But this bypassed clause would protect at least 2/3 of your estate from happen to go the nursing home. And then there are several assets that aren't controlled by what your will says. So they passed outside of your last will and testament. And that's anything that has a beneficiary designation. So life insurance, annuities, retirement accounts, anything where you can name an individual to receive those bad account will go directly to who you have named, regardless of what your last will and Testament says. So if you left, you know an ex spouse on a life insurance policy, even though your will says everything goes to your current spouse, that policy is going to go to your ex spouse. So you want to make sure that you have those reviewed and up to date um, to match where you would actually want that policy to go. And then some accounts you can set up as what's called a transfer on death. So a lot of investment accounts, some bank accounts can be set up this way. And what this means is you. You essentially appoint a beneficiary. So whenever you pass away, that account transfers to whoever you have named. So that's just an automatic transfer. And then, if you want real estate with another individual, it would be good to take a look at the D that you have to see how you guys own that property because there's several different options in Pennsylvania. Eso, for example, bulls say you loan property with two of your siblings, and you own it as joint tenants with the right of survivorship. What that means is, whatever you pass away, your 1/3 of the real estate goes back to your siblings. It's really a last to survive scenario. Whoever survives the longest receives that property and owns at 100%. What kind of on the flip side of that would be a tenants in common? So again, you and your siblings own it, but if it doesn't specify how you own it or it says tenants in common, then when you pass away, your 1/3 goes according to your last will and testament. So it stays in your family line and goes where you would want it kind. Um, And then if you own property with your spouse, the default is tenants by the entirety. Ease. So again, if it's not listed, or you and your spouse on property, this is the default. Um, and all that means is that whenever you pass away, your share those automatically to your spouse, they own it 100%. So it is going to review all of this just to make sure that everything is set up the way that you would want it to go. Because again, none of these assets go according to your will. So even if you say I want my property to go to my son, but it's set up as a joint tenancy, it's going to go to the other joint tenant. All right, so those are really just the basic of state planning documents there, really the foundation. But we always like to take a comprehensive look to see Well, what else is out there that you might want to look at protecting? Are you really worry? You know, if you would become disabled and you would need long term care. Or is your main concern really? You know, if you pass away, do you have a beneficiary that might be looking at divorce or have creditor issues? Are you looking to really control the distributions for them? Still, when there for we look at protecting assets, The main thing that we hear is, well, I want to get this out of my name. That way the nursing home can't get it. But what I'll do is I'll just transfer it to my child, or I'll just put my child's name on it. Well, that that is an option, but we don't feel that it's the best option, cause there are several things that come with that several concerns that we have. So we call them the four D's. So, um, say you have your house and you transferred over to your son. Uh, and then your son gets a divorce. Now, that asset is part of his divorce action. So you could potentially lose your house that you were living in to your ex spouse. Okay, so nobody wants that, um or what? If you would transfer it to your child and they would get in a car accident or they would have to file for bankruptcy. Now again, your asset is there's so it's subject to their creditors. Um, or if they would pass away, say they have a will. They really like their neighbor. They say I want to leave everything to my neighbor, Bob. You know, you might not even know Bob, but everything is going to go to him because it's now in your child's name. OK, so these are all things that we wanna kind of stray away from. Um, whenever you're looking at protecting your assets, Um, and again, if you went outright, transfer your assets to your child. There is still the Medicaid five year look back. So what they do is if you were to apply for Medicaid, they take a look at everything you've transferred out of your name from five years from the date that you apply. And what they do is they take the total amount that you transfer, and they divided by this $10,732. So for every $10,000 you transfer many cable say, I'm not gonna pay for your care for one month because that's really assets you could have used to privately pay, so they're not gonna pay. Now, there are some exceptions to that. So say you want to transfer your house to a child whose under 21 now we don't see this a lot, and a lot of times we don't really recommend it. Um, but there is an exception to that because they are considered minors or dependence at that point so you can transfer it to them. And there's no penalty for that. Um, what we see a lot. If you have a child that has a legal disability, um, receiving Social Security benefits, you can transfer as much assets to them to make sure that they're provided for. And there's no penalty for those transfers. Ah, the same if you have a child that lives with you. So say your child lives with you for two years before you go in the nursing home and they're providing care. That really helps you stay out of the nursing home. You can transfer your house to them, and there's no penalty for that as well. But what we like to do instead of doing outright transfers where again it might be subject to death. Divorce, disability. We utilize a trust That's really the main thing that we use on, and that tends to scare people that were trust a little bit. But we're gonna go through what it means, and we try to make ours as user friendly as possible. But really ah, trust kind of has several benefits. So the first benefit is it does avoid probate because the asset is no longer in your name alone. It's not considered something that you would have to probate. So probate is really just where your executor would take your will to the courthouse and they would get formally appointed as you're in secular. Um, So what that does is, er, Cem fees With that, things become public at that point. Um, but anything like by a trust, they don't have to do that because you appoint in the document who really controls and where it goes. Um and then the main thing that we use it for really is long term care protection. So we're gonna go through an asset protection trust and how that works. But if you transfer it to a trust keep in mind the five year look back and we'll go through some examples. But that asset is out of your name, and then it's protected from your nursing home care. And then a lot of people are worried again if your assets would go out right to your Children when you pass away. Well, they say, Oh, well, she's not really good with money. I want to make sure that, you know I can control how much she gets, so it lasts a long time. You can set up a trust where it really can stay in trust for however long you would want, and you can really set the terms. So if you would want your beneficiary to get $5000 a month or 5% here, all of that's customizable. And then two if you have a beneficiary who does have special needs. So somebody who's receiving public benefits of receiving S S I where they have asset and income limitations, you can set up a special trust. What is a supplemental needs trusts where you can still provide for them, and they can use that for anything that they're Bennett. Their benefits don't cover so if they need clothing or to go on a trip that's really there for them, and that's an option as well. And then the federal estate tax is not really a huge concern anymore, so we're not going to go over it much. But that's really a concern for anyone who's over 11.58 million. So if you have over $11 million you can come talk to us and there's planning for that. But we don't run into that a lot, All right, so the asset protection trust So this trust is irrevocable. Um, and what that means is that you you're not allowed to do certain things regarding the trust, but we try to give you as much power over the assets as we can. So by being aerial, we'll all it means, is once we put the assets into the trust, you yourself cannot take it back out, because if you have full access to take whatever is in the trust out, they would say great, get everything out of their use it for your care, so it has to be locked in there. But you'll see later. We try to put in a way that you can still get access. It's just not you directly, um, and then what it does is it does protect your assets from creditors so the nursing home wouldn't be able to get at the assets. Um, and you still out? You can still have control over the assets. And then if you do go on a nursing home and you apply for Medicaid benefits, what the state does is they will put a lien against your estate when you pass away, uh, up to the amount that they pay for your care during life. So, say you were in the nursing home for five years. Nursing home costs 100,000 year. When you pass away, the state's gonna send your executor of Bill for about $500,000. So at that point, anything that's in your name alone would have to be sold, and the money would have to be sent back to the state at that point to satisfy their claim. So the biggest thing that we look at doing is especially house cause a lot of time. That's the biggest person. That's the biggest asset that you would have. Um, anything in your name alone. We like to get into the trust. That way it cannot be recovered whenever you pass away on and then again nursing home care. It protects from nursing home care and any concerns that you might have with your beneficiaries creditors, death or disability. All right, So what is a trust? Well, a trust is really just a legal document, So it's just a set of a piece of paper on and it just set outlines the rules. So what happens to the assets when you pass away who controls him during life and it really doesn't have any effect until you actually transfer assets in the name of the trust, Um, and that stuff our office takes care of. We help you throughout that entire process, but it's really just a legal document in the name several individuals. So we'll go through what each of these mean but names a trustee. Ah, the trust protector. Who is the one who can get money out for you, and then you have to list the beneficiaries, um, is who would receive the property of something were to happen. So the donor of the trust is you. That's really the individual who's setting up the trust and deciding what the terms are. You know who they pays to whenever you pass away, who can have access during life. Who manages the trust, your the one that sets all of that up. And you're the one that has control over all of those decisions. The trustee In our trust, we allow you to be the trustee. So the trustee is really the one that's really managing what you put in the trust. So again, if you transfer your house to a trust and five years down the line, you say, Oh, I want to sell my house, buy a new house or just down size. You don't have to get anyone's permission to do that. You would be the trustee, and you would be able to do that yourself. Okay, You would just sign everything just like you would if you owned it in your name. Ah, the same with investments. So say you would want to put stock in the trust or an investment account, and you'd want to switch up how that's invested, all of that. Your decision. You can invest it anywhere you would want. Okay, so you don't really have to give up control of any of the management, even though you would put it in a trust. But the one thing you would have to give up is the direct access to the money. So again, if you would put an investment account in the trust and you would say I want $10,000 out, you can't just go to that company and write a check and say, I want 10,000 out because if you could do that, then the nursing home would force you to do that, and you will lose the protection. But instead we kind of put in a back door so you can appoint an individual that you trust to be able to get money out for you, if you would need it. That's really called the trust protector. So a lot of times people appoint their kids, um, or one child if they really trust one child. But what would happen is you will go to them and you would say, Hey, I really need $10,000 out of my trust. They will contact the company and get the money out for you. So even though it is technically irrevocable, you still have a lot of control about how much you can get out and how much control you have over the assets on what's done with the assets. And again, if you would wanna do gifts during life, we always have to be considered of that five year look back. But the good thing is, once you transfer assets to the trust that starts your five year look back, so say four years down the line, you say I want to do an additional gift. You can go to your trust protectors and have them gift out of the trust without creating another five year look back, okay, because you just have the look back when that trust starts and when you put the assets in the trust. And ah, lot of people are concerned. Well, what if they take all the money out or they don't listen to me? Or if I would go to him and they say, I'm not getting that out? That's my inheritance. Well, the good thing is us the one who sets it up. You're allowed to remove them at any time, so they would not follow your wishes or they want to dio what's in your best interest. You consign something, removing them and adding somebody that would act in your best interest. So you still have control over that entirely, all right, And then you can control, um, how and when the trust pays out. So most of our trust terminate when you pass away and then your child just gets the assets outright. So if you if you're not worried about divorce or creditors, they can just receive that property and then it's it's theirs to do with what they want. But if if you do have concerns about that, so say you have a child that might be getting a divorce, but you're not sure when or that's a concern. You can actually have that trust continue. And then it would really be a trust for their benefit. And you would set the terms of how and when they can get money out of that trust. But because it's in a trust and it's not in their name alone, it would be shielded from some of their creditor issues. All right, so who decides what goes into the trust? Well, that's really your decision. So again we would take a look at what assets you have. We could make suggestions if you'd want suggestions, but it's really whatever you would feel comfortable with and what you're really looking to protect. So a lot of people, the house is really the main thing that they want to protect. So they want to put that in a trust, or if they have a large investment account or a bank account that they're not really using. It's really just sitting there. We can really put that into its whatever you would want to put in there as much as you would feel comfortable so you can really transfer anything to a trust. So again, real estate. If you have annuities, you can put them in a trust bank accounts, life insurance, investment accounts, savings bonds, anything like that. We can transfer to the trust and we can protect it. The Onley assets We can't transfer to a trust our retirement accounts, so I raise anything that is tax deferred that has to remain in your name alone, because if we were to transfer that to a trust that will cause all of that income tax to be dio and you lose the tax deferred status. So we always try to plan to protect maybe an investment account that you have and then leave the retirement account in your name to use because we really can't transfer that to a trust. The same with motor vehicles, anything that has a title in Pennsylvania. They do not allow the title to be transferred to a trust. So, um, vehicles. You can always keep those in your name. How the good thing for Medicaid as they allow you to keep one that's excluded and we'll talk about that a little bit later. But we can't transfer him to a trust the same with mobile homes because they have a title. Campers. Anything like that has to stay in your name alone. All right, So what are the advantages? So it's really protection from nursing home care, because again, once you get that asset out of your name and you don't have direct access to it, even if you were to go on the nursing home, they can't force you to liquidate that trust and pay for your care. It's really shielded. Whatever you put in there, Um, and the same whenever you passed away. So say you're You even received 500,000 and Medicaid benefits during your life. But you have a trust with 300,000 in it, because that's not your asset, and it's not in your name. They can't ever recover that when you pass away, so it has protection during life and protection. Then whenever you pass away and we keep hitting on this, but it's protected for your beneficiaries to. So if they were to get a bankruptcy action, it's not technically their asset. So it's not subject any of their creditor issues or their divorce actions. Now the only disadvantage we talked about is that you can have direct access to withdraw the money. But the good thing is, you have that back door, so you appoint somebody that you trust who would get it out for you. So even though you can't do it yourself, there is still a way to get access to it. If that's a concern with putting something that you might need later, you could get access, if you would need. All right, so how are But how does that trust versus a will really compare whenever you pass away? What do you have to do to administer them well, both of them are going to be subject to what's called Pennsylvania inheritance tax. So not a lot of people are familiar with this, but it is a tax that Pennsylvania has. So any time somebody passes away and they're resident of Pennsylvania, if their assets go to Children, siblings, anybody that's not their spouse, they impose this inheritance tax. So for Children, it's 4.5% and that's going to be imposed whether you do a trust or whether you do well, Um, now there are some trust that we could set up to avoid this. But that's something we would have to talk about in your particular circumstance, because there are some downsides to that as well. But in the most instances, it if the trust will be subject to inheritance tax with wills, you will have a feat of probate that we talked about earlier to have your executor appointed to administer your state. Usually it's a couple $100 is not real expensive in Pennsylvania, Andi usually takes about 10 to 15 minutes at the courthouse, so I don't really recommend doing a trust just to avoid probate and Pennsylvania. Um, but it is one of kind of the the side benefits is once it's in a trust. Your executor doesn't have to probate the trust they can just administered at that point. And then both do have attorneys fees to help with the administration. Ah, with Will's, your executor is entitled to a fee for their service. So this is defined by law. We have kind of a guideline toe look at It starts at 5% and then it's kind of a graduating scale based on how many assets you have when you pass away. I'm in the same with your trust. So any time you're trustee serves, they are entitled to feed for their service. Um, this just has to be reasonable. So whatever Abedi were serving for you, that's what's really considered reasonable at that point. And then both documents, Whoever you name beneficiaries, they can contest the document. If they're not happy with their distribution. Now you can put in what's called an in terror in clause. And basically, what that means is that you know, if you contest this document, um, and you lose your completely excluded, you don't get anything now, Um, or you can't contest this document now. The courts really don't uphold that. Ah, lot. Because if there's any probable cause for the benefit sharing to be able to contest So they say, Oh, well, bad didn't provide for me during life for this didn't happen. Then they're going to let them contest anyway, So I don't really use this clause alive. Um, but just be aware that if you're excluding somebody or just leaving them a minimal amount, they can contest that later on. All right, so now we're gonna kind of switch gears, and I'm gonna hand it over to Tammy's Selsky. And we're really gonna go through Medicaid. How you apply for that? Um, and some some spend down options.

spk_1:   40:56
All right. Thanks, Britney. You know, the one thing is with this cove in 19 pandemic, it's really taught us that being prepared in advance of a crisis is so important. And so the planning that Britney just talked about with your basic estate planning documents as well as the asset protection trusts well, really give you peace of mind If you find that you have a detour in life and you or your spouse need long term care services. So in this next section, we're gonna talk about wasted cases. Here as well is the Medicaid rules, which conceive very complicated. Uhm, I'm going to give you some examples of how we can help a married couple as well as how we can help a single or widowed individual. So the first thing for us to really understand is what is the five year look back? And Britney talked about this a little bit, but I know it's rather confusing for most people. So when you apply for Medicaid benefits for nursing home care or waiver program, you will have to provide the Medicaid office with five years worth of financial statements. And a caseworker will go over those statements. And if they find that you've made any gifts in excess of $500 a calendar month, then they will issue what's called a penalty period in that penalty period is a period of time that Medicaid will not pay for your care. So the example that we have for you here today is that if you were to transfer property and that property was worth $100,000 you need skill care. Within five years, you apply for Medicaid, and the Medicaid office will then deny your application for 9.3 months. That's a really big deal, because you're gonna have $100,000 nursing home bill that somebody has to pay. And at that point you may be out of money. Um, and so they're going to seek out and look for your family members to cover that. So there are different ways to pay for long term care. One way is out of pocket. That's not a very viable long term option unless you have millions of dollars on the average person lives in a nursing home for a little over three years. But I've known many clients over the years that have been in nursing homes for 8 to 10 years, so you know that that really could be a $1,000,000 that you would need you pay out of pocket. Another avenue is long term care insurance and, like asset protection planning that we talked about long term care insurance is something you need to do in advance of the crisis because long term care insurance you must meet underwriting qualifications and, um, you would not be eligible. Teoh. Get that if you needed care today. So we do not actually provide long term here insurance at our law firm. But we do work with many license professionals who could help you with that. Another avenue will talk about a little bit more details, veterans benefits, steady care and Medicaid benefits. So we have to first understand what is the cost of care. And many of you know that nursing homes air well over $10,000 a month in Pennsylvania. So if we total that for the years, it's a little bit more than 100 $28,000 that covers your room and board. But it does not cover supplies, medications or anything else that you might need, so the care could really be over $128,000. So again, without proper planning and advance, you really could run out of money very quickly. So I mentioned veterans benefits is one way to pay for care, and there are two basic pensions with the V A. The 1st 1 is a service connected pension. That's really where a veteran has become injured during their service time. If you receive a compensation for that, what we often help people with is the non service connected pension. And that is a pension where the V A will give a veteran and their spouse or widow of a veteran a pension because they need aid and attendance benefits. That means let's say you're at home and you need somebody to assist you with your daily activities. Um, and you don't really need skilled nursing Carry. Just need a little bit of help. Well, the V a pension could be really beneficial because the pension rates are anywhere from $900 to a little over 2000. So we don't really see that we use this for nursing home care because it doesn't cover the $10,000 nursing home bill. But it's really beneficial for people who need some in home care as well as a personal care home or assisted living. But the V A, like Medicaid, does have Cem asset thresholds that you have to meet, and it's currently $129,000 the VA also has a look back period, and that is three years, so it works a little bit different than the Medicaid look back, period, and we'd be happy to talk with people about it, all right, and then the next way to pay for care just for a short period of time would be Medicare benefits. So Medicare is a federal health insurance program that insures individuals who are over 65 or under 65 who made Social Security's disability criteria. Now, if you are under 65 you have to be considered disabled for 24 months before your Medicare benefits would begin. Um, and Medicare is also available immediately for individuals who have end stage, renal disease or diagnosed with Lou Gehrig's disease. All right, so if Medicare is going to pay for care, there are some requirements to this, and the first is that you have to be admitted to a hospital for at least three consecutive days. Um, and we're finding that it's more difficult to actually need this three day criteria because most hospitals are actually putting people in for observation rather than admitting them. So if you are a loved one, are admitted into a hospital and you expect to use your Medicare benefits is the pay for what's skilled nursing care. Just make sure that you were actually admitted, and even if you have a room, that doesn't mean you're admitted. You need to fish for that. Um, all the paperwork is in line for you. So if Medicare does pay for your care in a skilled nursing home, the maximum amount of these will be 100. The 1st 20 days of your rehab will be paid in full with no questions asked. But Day 21 through 100 you are going to be required to pay a CO OK of $167.176 dollars a day. Now, if you have a Medicare supplement policy that will cover the co pays, so you won't have to worry about that. But any point from Day 21 through 100 you have to continue to meet the Medicare qualifications. And if you plateau it all during your therapy and you no longer are improving, Medicare benefits will end. Now keep in mind that you can always appeal that decision, and we always recommend that you do appeal it because it might buy you a couple extra days. But once Medicare benefits end, where you reach your 100 days, you become private pay. And that really leads into our discussion about Medicaid. Um, and if you have done the planning in advance of needing Medicaid, you've made it through the five years you'll be in good shape. But if you have not done that, there are still ways for us to help you, and I'll go through some examples of how we can do that. But Medicaid is a state and federally funded program, and it works different state to state. So what's true in Pennsylvania will not be true in other states. Um, it is managed through the Medicaid office, and they're known as the Pennsylvania Department of Human Services. And most people that are in long term care settings do eventually qualify for Medicaid. And we often get questions from our clients of Will. I get the same level of care if I'm Medicaid versus private pay, and the answer to that is yes. The staff out on the floor are not informed about whose private pay versus who's on Medicaid benefits, but it could limit you on what nursing home you go to. So all of the nursing homes that we have in Lycoming County do accept Medicaid benefits. But there are some counties that have nursing homes that are private pay only. So it is something that you would want to be aware of in advance. So what Medicaid pays for they do not pay for personal care homes known as assisted living. They do not pay for senior living facilities, for that would be an independent living environment. And they don't pay for in home care if you do not qualify for skilled nursing care. Um, so if you just needed a couple hours, a day or week, they do not pay for that. What Medicaid will pay for is nursing home care. Um, there's also a program called the Waiver Program that's an alternative to nursing home care, where services can be delivered at home. They'll pay for that. And then there are life programs, which is a comprehensive medical program, and we have one in Lycoming County. There are certain counties that do not have them, but those were also Medicaid programs, all right, so in order to qualify for Medicaid, an applicant must meet certain income and asset qualifications and they break this up into two categories. Accountable. Resource is versus non countable. Resource is and under the countable resource is it's basically anything that you have access to. Checking savings, money market CDs, savings on stocks, bonds, mutual funds, life insurance that has a cash value, any cash that you have on hand any property that's not your primary residence. Most annuities as long as they're accessible. Ah, your retirement accounts, but not of the spouse. Um, I'll talk about that. If you have vehicles, they're accountable, with the exception of one, your highest valued motor vehicle and any trust accounts that you have access to. So that would be a revokable trust, but not an irrevocable trust. The non countable resource categories, much smaller. Your primary residence is not countable when we're applying for benefits, but, like Brittany said, you do want to do some planning because your property could be subject to an estate recovery. Lean after you pass away. Based on what Medicaid pays for. The other thing that would be non countable would be some jointly held properties or properties that are income producing that are essential to self support. That would be like rental properties, but again they would be subject to an estate recovery. Lean, your highest valued motor vehicles exempt and your spouse's retirement accounts. So if you're married and your spouse has a retirement account, that's $500,000. It's not part of the countable assets, so that's a real benefit in Pennsylvania. And it's my understanding that not all states follow that rule. So we're pretty lucky to have that, and then irrevocable trust would not be accountable. So if you do not have access to them, they're they're exempts. And then to continue on the household belongings you have, they don't count those. I don't have us providing inventory of anything irrevocable burial accounts, cemetery plots, any term life insurance that does not have a cash value. And then if you have life insurance policies that had a face value of less than 1500 the cash value would also be exam. All right, so then what do they dio once they take a look at all of that? If you're married, there are spousal protection and really the goal of the spouse of protection laws are to help so that your spouse does not become impoverished because you need long term care. I would give you some examples of how this works. But before we do that, I just want to explain that under the spousal protection laws, the maximum that a spouse can keep would be 1/2 of the countable assets, and the maximum for that in our, uh, 2020 is 1 28 6 41 6 120,040 plus they can keep their retirement regardless of that amount. In the minimum that a spouse living in the community can keep is 25,728. Now the applicant. Whether you're married or single, they can Onley keep 8000 or $2400 in assets, depending on their income. So we have an example for you of what this looks like for a married couple. And if we had a married couple and they had 200,000 and countable assets, the community spouse would be able to keep automatically $100,000 and the applicant could keep $8000. But before Medicaid would pay for care, you would have to spend down $92,000 so that can be pretty devastating for people, if you know $200,000 is all they have, the have to get that that decision from the Medicaid office that they have to spend that down. So what we try to do in that situation is help them figure out a plan to spend it down as quick as possible so that they can really keep that money for things that they need. So in this example, we have them purchased irrevocable burial accounts for that, their self and their spouse, so that would take $20,000. They could also use $20,000 to trade in their vehicle to buy a new vehicle. They could make some home improvements. We have $20,000 allocated for that, and then there's still $32,000 left of that 92,000. And one of the ways that we often help people is through the purchase of a financial product called a Medicaid compliant annuity. Under the Medicaid rules, you're allowed Hughes to spend down to purchase an annuity as long as it needs certain criteria. So again, we don't sell those financial products here, but we can help you get in touch with somebody who does that, and we would help you with all the calculations. But the benefit of that is that the spouse keeps that $32,000 in the form of monthly income that they could use to to pay for anything that they need. And it's not subject to Medicaid. And you could actually have done that with the full $92,000 if they had wanted to do that. So often. Times people will do that. So once the spend down is met, now you qualify for Medicaid and Medicaid will then separate the spouses out, and they no longer will look at the spouses resource is or income. So in that example that I just gave if that spells had used the full 92,000 to buy an annuity and they got all that money back. Medicaid's not looking at their resource is anymore. So the applicant in the nursing home qualifies for Medicaid, and then the spouse living at home is really protected. Ah, $192,000. Okay, so what happens if you're not married? If you're not married, there are actually no protections for you, So you really would have to spend down all of your resource is, Well, let's say you did have a power of attorney that allowed your agent to make unlimited gifts as Britney talked about earlier than you really could engage our services to help you calculate a plan to protect some assets. So I haven't example here where we have a single female and she's in the nursing home and her cost per month. It's $9000. Her income is 2000 month, so she's got a shortfall of about 7000 of months. She has $200,000 in assets, and so we can show you how we could help you protect a good portion of those assets. So what we would dio is we would have her transfer or her agent $113,000 to a trust. No Medicaid will issue a penalty period because that gift is being made within the five year look back, and they will deny her benefits for about 10.5 months. The penalty doesn't begin until all of her money is gone, so we take the other $84,000 we use it to purchase that Medicaid compliant annuity that will pay for her care for the duration of the penalty period. So during the penalty period, she has her income and she has the annuity income. And that's paying the nursing home. So she gets through the penalty period and she's paid $84,000 for her care. But she's protected. Ah, $113,000. So once the penalty expires, then Medicaid issues a notice saying that she is eligible for Medicaid. And that $113,000 would be sitting in that trust in case she needs anything during her life. Um, or if she doesn't use it, then it would go to her beneficiaries. Okay, so they're store things that weaken dio, even if you need nursing home care. But you really don't want to leave your planning toe luck. Um, because if you don't have a plan, as we say, the state has a plan for you. But always keep in mind that we're here to help you and guide you along the way. So don't hesitate to call us if if you have questions about that before he turned it back over to Matt, I just wanted to thank you guys for taking the time today to spend with us on. Learn about this planning. And, um, when you do work with our wall for of you would work with a team of attorneys, certified Medicaid planners support staff, and we're all very knowledgeable about the legal planning, asset protection, benefits planning and the community resource is that are out there to help you. And one of the things we pride ourselves on is that we're not a cookie cutter law, for we really provide individualized planning because everybody who walks through the door has a different set of goals and circumstances and family dynamics. And so we really want to make sure that, um, you know, we individualize that plants were you and you get really great quality documents. And most important, you get peace of mind. Um, so you know that you're planning has been done in advance. And if we were with you in person, we would actually give you a survey to fill out. And what we're gonna do after this is Kyle Heppner will be sending you that survey via email, and he'll also be sending you a gift certificate that entitles you to 10% off any legal services that you should hire us for. But we do offer free consultation. And although we're not seeing clients in the office right now, Britney and I are meeting with clients via Zoom. So kind of like we're doing today or telephone conferences. And we do really encourage you to take advantage of that because we are available. Teoh, help answer those questions right now and then should you decide to do the planning, we can get you on our calendar and start working on your file right away so that your work is done as soon as possible. And you can start that five year. Look back. Um, so now I'm gonna turn it over to you, Matt, and he's going to facilitate the questions that you might have, so thank you so much. All right, Thanks. Tammy and Britney. And once again, also, just throw out our phone number told free if you have any questions. Ah, to follow up on this that you're not able to ask today. Our toll free phone number is 1 803 518334 And, uh, we're happy to answer any questions you may have so again, thank you all for joining us today. I just break in