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By John M. Bigler As promised, I would like to continue with another in a series of examples of typical fact patterns faced by people who consult with elder law attorneys.
Frank is a widower and has two children, a son and daughter, both of with whom he has a good relationship. The son lives one town over and his daughter lives in New Jersey with her family. Frank has brought his son, Joseph to the consultation to help him digest all the information. A review of Frank's assets shows that he has a home. The home is valued at $200,000.00. He also has bank accounts joint with his son Joseph for $200,000.00. A review of Frank's will executed prior to his wife's death, shows that the will leaves everything to the deceased wife and then equally to the two children. It names the wife as executrix and if she is unable to act, the two children as co-executors. Frank is a healthy, active man who likes to go to the senior center and enjoys an occasional trip to Atlantic City and infrequent vacations. My suggestion to him is that he retain his liquid assets and consider taking some action in regard to his home. The home is an exempt resource should he need long-term catastrophic care. The danger is that a lien could be attached to the home by Medicaid after his death to recover whatever money they have laid out on his behalf. I suggest that he consider transferring the home but not outright to his children for then he will lose control. I explained that even though his children may be highly trustworthy, the loss of control is not good, not only from a psychological standpoint, but financially. If he does that, Frank will lose whatever senior citizen, veteran or STAR program real estate reduction that he has. Also, the children will receive the house with a basis representing the original cost. I suggest that Frank consider transferring the home and retaining a life estate which gives him exclusive possession of the property, or transferring the home into an irrevocable asset management trust. The life estate will accomplish the goal of protecting the house from a Medicaid lien, but will restrict the sale of the home in the future. Should Frank want to sell the home, he would need the permission of his children. Also, Frank's capital gains exclusion of $250,000.00 will only apply towards that percentage of the home representing Frank's life estate. At 82 years old, Frank would be considered a 40% owner of the property with that percentage decreasing each year. If Frank is in a nursing home and receiving Medicaid, then his children would not want to sell the home because that percentage of the profit representing Frank's life estate would be assigned over to Medicaid. The trust would allow Frank more flexibility. Although the period of ineligibility will be somewhat longer, if Frank is in good health, then it would be a viable option. The trust would allow Frank to make decisions on his own without seeking consent from the children. The trust would allow flexibility to sell the house because it would protect Frank's full capital gains exemption of $250,000 and also protect the entire profit from a Medicaid assignment if the property were sold while Frank was in a nursing home. By transferring the home in some manner now, Frank will start a period of ineligibility for Medicaid in the nursing home running now while he is in the community and in good health. In regard to Frank's liquid assets, I suggested that he retain them as they are. Although I believe that it is important for Frank to be knowledgeable about catastrophic illness and to take some action such as the transfer of the home, I wouldn't want him to over-react. I believe that the liquid assets are important for Frank to maintain his sense of independence and dignity. It's never a good idea for a senior to transfer all of their assets and become totally reliant on the children no matter how trustworthy and dependable the children are. Should Frank need nursing home care during the period of ineligibility from transferring the home, then the cash should be available to pay for the institution. After the period of ineligibility for the home is over, then Frank might consider making some transfers to his children, but with an eye towards retaining enough in his name so that he feels comfortable. Next, we review Frank's will. I point out to him that although the will is ten years old, there is nothing wrong with it. The possibility of his wife predeceasing him has been dealt with in the will and those provisions pertaining to her simply drop out. As the will stands, all of Frank's assets would pass to his two children equally. However, I point out a problem: He's decided to transfer the home into a trust that names the two children as equal beneficiaries of the proceeds in the trust on its termination at Frank's death. However, the liquid assets are held jointly with Joseph for convenience. I explained to Frank that those assets will not be subject to his will and will not pass through his probate estate. Instead, they will go to Joseph as the survivor of a joint account. That means that Frank will have to trust Joseph to distribute the assets with his sister. Even if Frank is comfortable doing that, for Frank's estate planning purposes, that is not advisable. I suggest that if Frank wants Joseph to have access to the account that he go to the bank and appoint Joseph as his agent with a bank power of attorney. If Frank wants to avoid probate, he could name his son and daughter as equal beneficiaries of the account or he could simply take both names off and and let the account pass through the will. If he's transferring the house, it would make sense to avoid probate completely by simply naming the two children in trust on the account. At the conclusion of the consult, I advised Frank that he should name make any immediate decisions until he reviews a written summary of the consultation and I encourage him to call with questions before making any final decision. Reprinted with permission of the Suffolk Times © 2000 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
Frank is 82 years old and in excellent health. He comes to the consultation with his son. Several of his friends at the senior center have advised Frank that he should get his affairs in order. He is concerned with having a new will to replace the will that he executed ten years prior.