Studies have shown that almost 70% of adults turning 65 will need long-term care at some point during their lifetimes. While long-term care is an amazing resource to many Americans and their families, it is also extremely expensive and can cost around $266/day in the state of Alabama. However, if you are eligible, Medicaid can help pay for long-term care. While Medicaid’s income and asset restrictions are strict, there are estate planning tools—like the Medicaid Asset Protection Trust—that can help you qualify for Medicaid, while also preserving your life savings.
What is a Medicaid Asset Protection Trust?
A Medicaid Asset Protection Trust (MAPT) serves to protect your assets if you or your spouse needs long-term care. A MAPT is designed to help you avoid draining your assets if you don’t have long-term care insurance, but need to pay for nursing home care.
Medicaid pays for long-term care, but it can be difficult to qualify…which is where the MAPT steps in to play. To qualify for Medicaid, the state will generally look at your income and assets. If you’ve worked hard to obtain a healthy savings account and own your home, you may not qualify, unless you spend down your assets. A MAPT, however, allows you to avoid that potential scenario.
How Does a Medicaid Asset Protection Trust Work?
A MAPT is a type of irrevocable trust, which means that once you place your assets in the trust you cannot take them back out. The type of assets you can include in a MAPT are:
Savings Account
CD’s
Investments accounts
Cash value life insurance policies
Your primary home and other real estate
Benefits of a MAPT
The main benefit of a MAPT is that it protects those assets placed into the trust so they are exempt when you attempt to qualify for Medicaid. When a couple has to spend-down their savings and assets, this can shrink the size of the estate that is left to a surviving spouse or family members. Selling off assets can also have certain tax implications if you’re required to pay capital gains on the sale. A MAPT allows you to avoid these situations.
Special Considerations to Keep in Mind
While MAPTs are put in place to help you protect your assets in order to qualify for Medicaid, it’s important to remember the look-back period. The look-back period for Alabama is 60 months prior to your Medicaid application date. So, if you want to use a MAPT to protect your assets, then it’s wise to create one sooner rather than later.
Another important consideration is that this type of trust is irrevocable, which means that once assets are placed in the trust, they cannot be taken back. It is vital to ensure that you are comfortable with the permanent transfer of your assets into this trust.
Talk with an Estate Planning Attorney
Everyone has a unique financial situation and estate planning needs, so it is extremely important to talk to an estate planning attorney who can help you understand all of your options, and which may be best for you, your family, and your assets.
If you have questions about creating a Medicaid Asset Protection Trust—or an estate plan altogether—we encourage you to contact Miller Estate & Elder Law at (256) 251-2137 or register for one of our free estate planning workshops.
When most people set up their estate plan, they do so with the intention of making sure their assets are “passed down” to friends and family members in alignment with their wishes. However, there are several critical (yet easy-to-make) mistakes that could derail the entire estate planning process and leave your loved ones scrambling through a time-consuming—and oftentimes costly—probate process.
Here are 4 estate planning mistakes you’ll want to avoid:
#1. Failure to Create a Plan in the First Place
By most estimates, 50-60% of Americans do not have a last will and testament in place. While thinking about how you would like your assets distributed after you die is uncomfortable at best, it is necessary. If you die without a last will and testament, neither your family nor the courts will know how you want your assets distributed. Your estate will have to be probated using estate administration, which can be stressful, time-consuming, and costly for your family members, and your assets will be distributed following the state’s intestacy laws rather than your own wishes. As a result, your assets could go to heirs that you do not want to receive them!
#2. Lack of Communication
Communicating with your family and loved ones about the wishes and intentions outlined in your estate plan can eliminate surprise and hurt feelings later. Not explaining your plan could create a rift between your family and friends after you die, especially if the estate plan is not what they expected. Even though open communication may be uncomfortable at first, it can mitigate any negative feelings and allow for a much smoother transfer of assets when the time comes. No one wants their legacy marred by drama or altercation, and clear communication can prevent that from happening.
#3. Overlooked Essentials
One of the most common mistakes made in regard to estate planning is overlooking important tax implications. Consulting with an estate planning attorney or financial advisor can help you make decisions that will ultimately prevent your family from owing hefty taxes at your death.
#4. Setting it and Forgetting it
Another common estate planning mistake is forgetting to update your estate plan. Just because you created an estate plan doesn’t mean that the work is done. When life changes occur—whether that be divorce, the addition of a new family member, a family member struggling with addiction issues, etc.—you should make it a priority to update your estate plan to reflect those changes. Having an ex-spouse inherit your hard-earned assets after a tragic accident would only add insult to injury. We recommend an annual review of your estate plan.
If you have questions about your own estate plan or are interested in starting your own, we encourage you to contact Miller Estate & Elder Law at (256) 251-2137 or register for one of our free estate planning workshops using the brief form below:
A power of attorney is one of the most critical documents you can have. A recent study showed that only 33% of Americans over the age of 55 have a durable power of attorney in place. Tragedy or illness can strike at any moment. Obtaining a power of attorney—or POA as it is often called—is a proactive way to save you and your family a lot of stress and heartache in the event that you become incapacitated, or otherwise unable to make decisions for yourself.
A POA allows you to designate an individual—or several individuals—who could take control of your assets, conduct legal transactions, and make decisions on your behalf if you were unable to do so. However, without this document in place, things can quickly become complicated in the event that you become incapacitated.
Your Family May Have To Apply for Guardianship of Your Children
Without a proper POA in place, your family (yes, even your spouse) may have to apply for guardianship with the courts in order to make decisions on your behalf. This can be a costly process, and could take several months to complete. However, time is often of the essence in situations where a parent becomes incapacitated. You can avoid a problematic situation by having the proper documents in place.
You Could End Up With Major Financial Problems
Having the proper POA in place would allow you to designate an individual to step in and handle your bills—such as your mortgage, insurance, etc.—on your behalf. Without a POA in place, bills could potentially go unpaid, which could result in bad credit, lapse of insurance coverage (which is needed more than ever during these times), foreclosure, and even being forced into bankruptcy.
You Could Be Denied Medicaid
If you are being sent to a nursing home in need of long-term care, it is imperative that you have Medicaid in place to help pay for care. Nursing home care in Alabama costs, on average, $266/day. If you are incapacitated and unable to make medical decisions for yourself—and have not already applied and been accepted to receive Medicaid—it is vital that you have a POA in place. The Medicaid application requires copious amounts of documentation and records. A POA will grant a trusted individual with the permission they need to access these documents and records. If no one is able to access these important documents and records, your application to Medicaid may be denied..
Your Loved Ones Could Be Unable to Access Your Medical Records
In order for your designated POA to gain access to your medical records, you will need the POA to include an authorized Health Insurance Portability and Accountability Act (HIPAA) form. With a HIPAA authorization on file, your named POA will be able to obtain all of your medical records, as well as oversee your treatment and care. This can be critical when needing to transfer medical records to new providers or specialists. However, without this form, not only would the designated POA be unable to receive your medical records, but some doctors will refuse to release sensitive medical information, even with a POA in place!
You May Not Be Able to Transfer Assets
There are several circumstances where an estate planning attorney may recommend transferring assets out of an incapacitated person’s name. For example, if you are incapacitated and in the nursing home for an extended period of time, and your designated POA is applying for Medicaid on your behalf. If you have a POA in place, he or she can transfer assets as recommended by your estate planning attorney in order to prepare your estate for the Medicaid application. However, without this POA in place, no one would be able to transfer assets, and—therefore—your Medicaid application could be denied.
While many of the situations that require a power of attorney are less than ideal and can be stressful in and of themselves, having a plan in place before it’s needed can make the process much easier on your family and friends.
If you have questions about a Power of Attorney or want to include one in your estate plan, then contact Miller Estate & Elder Law at (256) 251-2137 or register for one of our free estate planning workshops.
With each year —and each new administration—come new tax plans and new proposals. However, this year, President Biden is proposing a major tax change in terms of a “death tax,” that could greatly affect your estate plan.
Proposed Changes
President Biden’s proposed tax plan could eliminate the loophole that currently allows Americans to escape taxation on their wealth by setting it up as an inheritance for their heirs. The proposed tax plan would also increase capital gains from 23.8%—at least for most estates—to 40.8%, which is higher than the current maximum estate tax of 40%.
In addition to these inheritance tax increases, Biden’s tax plan aims to eliminate the carry-over-basis. Currently, heirs do not have to pay capital gains if they sell inherited property (for example, a house, a stock portfolio, etc.) for its appraised value. If they sell it for more than the appraised value—for example, they sell a home for $300,000 when its appraised value is $250,000—there would be long-term capital gains tax on the $50,000 overage. However, with Biden’s proposed changes, the heirs would be taxed on all capital gains since the original time of purchase. So if the inherited house was originally purchased for $50,000, the heirs would be taxed capital gains on the $200,000 at 40.8%, thus making death a taxable event.
The Takeaway
While Biden’s proposed “death tax” could be costly to your estate plan, it has not been passed yet by Congress, and only remains a proposal. If this new tax plan is passed, we would recommend speaking with your financial advisor and your estate planning attorney sooner rather than later. Speaking with your estate planning attorney as soon as possible can help your estate planning team implement strategies to save your beneficiaries money in the long run.
If you have questions about the proposed “death tax” and what this could mean for your estate plan, then contact Miller Estate & Elder Law at (256) 472-1900 or register for one of our free estate planning workshops.
If you were to pass away without an estate plan, your assets would go through probate court. Probate is required when someone passes away with assets in their name; it is the process of getting those assets transferred to the deceased’s heirs or beneficiaries. Probate can be expensive, time-consuming, and emotional. If you have a will, the probate process is a lot easier, but there are still court costs and hearings involved. So, how can you avoid probate in Alabama?
Own Assets Jointly with Someone Else
Many house deeds and joint bank accounts have a right of survivorship. The right of survivorship basically says that when one owner passes away, the remaining assets are transferred to the surviving owner. This right of survivorship is not automatic. The co-owners would need to request that it be put in place.
Beneficiary Designation
Beneficiary designations are typically used in life insurance, IRAs, and 401Ks. You would name a person as the beneficiary on the account. When you pass away, the beneficiary would just need to send in a death certificate to the company, and the proceeds would be paid directly to the beneficiary, thus avoiding the probate process.
However, it is important to remember that assets with beneficiary designations are not governed by the will. So, for example, if you want all of your assets (including those with beneficiary designations) split between numerous people, then you would need to name numerous beneficiaries on those assets and not rely on the will.
Create a Trust
If assets are owned by a trust, and the trust says which beneficiary will receive which of the trust’s assets upon your death, then these assets will not pass through probate. There are many options when it comes to setting up trusts. It is recommended that you speak with an experienced estate attorney about your needs and goals to learn more about the options that are available to you.
If you are interested in learning more about how you can protect your estate and assets, please join Miller Law for a FREE Estate Planning & Asset Protection Workshop on August 12, 2021 at 10am at the Oxford Civic Center. Space is limited, so please register now!
Life is extremely unpredictable, so it’s vital that everyone has three specific estate planning documents set up before tragedy unexpectedly strikes. These documents ensure that, if we become incapacitated or worse, someone in your life will have the authority to make medical and financial decisions on your behalf—and that they know how you would like them to make those decisions. By having just three estate planning documents in place, you can save your family time, money, stress and heartache by having these important decisions made ahead of time. Not only will you be able to rest assured that you will receive medical care and treatment in alignment with your wants and beliefs, but you will also gain peace of mind knowing that your loved ones and assets will be taken care of after you are gone.
The three documents that everyone needs are: a last will and testament, advanced directive for healthcare, and a power of attorney—or POA. These documents are crucial to setting out a plan for how you want your healthcare and assets handled.
Last Will and Testament
The last will and testament is a legal document that expresses how a person wants their estate to be distributed upon their death. If you have no will, it is called dying “intestate,” and a local probate court will determine how your assets are distributed. While the courts follow state laws to distribute your assets, your actual final wishes will be unknown. The only way to ensure your final wishes are followed through is by having a last will and testament.
Advanced Directive for Healthcare
The advanced directive for healthcare is a 2-part document and contains a living will and medical power of attorney, or healthcare proxy. The living will states what you do or do not want if you become incapacitated or injured to the point where you can or cannot survive without advanced measures. For example, your living will might state that you do not want a feeding tube, or to breathe with assistance. By setting out these instructions ahead of time, it will save your family a lot of stress and heartache, and they won’t have to wonder if they’re doing what you would have wanted. The medical POA names someone to help make these medical decisions. This person will work with your medical care team to make sure that your wishes are being granted, as well as ensuring that you’re receiving the best care possible.
Power of Attorney
A power or attorney, or POA, is designed to give someone else the authority to make financial decisions on your behalf while you are still alive. A POA will give someone else the ability to take care of your estate by doing such things as paying bills, signing important documents, selling assets, and more.
These three estate planning documents tell others what to do if you are incapacitated or pass away, leaving no questions or issues regarding your assets if drafted effectively. If you are looking for peace of mind knowing that your estate and health will be taken care of when you’re not able to physically make those decisions, then contact Miller Estate & Elder Law or register for one of our free estate planning workshops.
