Asset Protection Planning

No. The typical scenario is when a Veteran is getting in home care or is in an Assisted Living Facility they are typically eligible for VA Aid and Attendance Benefits but not typically eligible for Medicaid (Medicaid will sometimes pay for very limited amounts of in home care and limited amounts in an Assisted Living Facility but many Veterans will not qualify for this type of Medicaid). If the Veteran later goes to a Nursing Home he can keep his VA Aid and Attendance Benefits and will probably get the maximum benefit. However, in most cases this will not be enough to pay the $4,500 to $6,500 monthly nursing home bill, causing the Veteran to eventually spend all his savings to pay his monthly nursing home bill. Upon entering a Nursing Home most Veterans will choose to apply for Medicaid which will cover the entire $4,500 to $6,500 monthly nursing home bill. However, once he qualifies for Medicaid he will lose all but $90 per month of his VA Aid and Attendance Benefit. A Veteran cannot receive both Medicaid and VA Aid and Attendance Benefit at the same time. They must choose one or the other.

Yes you can but any gift to your children will disqualify you from receiving or qualifying for Medicaid benefits. If you are concerned about gift taxes you can give away up to $1 million dollars and pay no gift taxes. If you give away more than $10,000 a year to any one person you are required to file a Federal Gift Tax Return for that year. Gifts of $10,000 or less do not require the filing of a Federal Gift Tax Return. This $10,000 amount is called the Annual Gift Tax Exclusion Amount. It is indexed for inflation and is currently set at $13,000 per year. Even if you give away up to $1 million dollars and file a Federal Gift Tax Return that year, you do not owe any gift taxes. Only when total gifts exceed the $1 million dollars will you pay gifts taxes. However the real problem can be the future income tax problems you are creating for your children. If you give a child an appreciated asset such as your home or appreciated land or stock your child will take your cost basis in that asset. When your child sells that asset he will pay income taxes on the difference between the sales price minus his cost basis. This is known as capital gain. For example if you give your home to your child and you paid $50,000 for your home the cost basis of that gift to your child is your cost basis $50,000, what you originally paid for the home. When your child sells that home for say $100,000 whether sold before you die or after you die your child will pay tax on the amount of capital gain which would be $50,000 ($100,000 - $50,000). However if you sell your own personal residence and you have lived there at least 2 of the past 5 years you can sell your own home and pay no tax. This is a tax free sale under Internal Revenue Code Section 121. In addition if your child receives your home or any appreciated asset after you die thru your will, a probate or a trust (anything as a result of your death) he will receive a stepped up basis to the fair market value on the date of your death. This usually saves your child thousands of dollars in capital gain taxes when he sells that appreciated asset. For example if your child inherits your home after you die then your child’s cost basis would be $100,000 which was the fair market value on the date of your death. If your child then sells the home for $100,000 his gain would be $-0-. If he held the property for say 10 years then sold it for $150,000 his gain would be $50,000 ($150,000 - $100,000). Proper planning can help avoid all of these tax problems.

When qualifying for Medicaid whether married or single you can have a home, a car, household furnishings, a prepaid burial contract or a life insurance policy with no more than $1,500 in cash surrender value and $2,000 in money if single and a little more if you are married. Any other assets will disqualify you from Medicaid. For example here are some things people owned which caused then not to qualify for Medicaid. A bass boat, a camper, an outboard motor, more than one vehicle, old trucks and cars, four wheelers, a mule(4 wheel vehicle), a life insurance policy with $1,600 in cash surrender value, $2001 in a checking account, $3,400 in cash in a safe and old savings bonds.

Peace of Mind. Many people spend a lot of time worrying about what is going to happen if they die or become incapacitated or go to a nursing home. Those who plan now have the peace of mind knowing that if something happens to them everything has already been taken care of. Don’t spend the next several years worrying and “hoping” things will work out. Do your planning now and “know” that things will work out “exactly as you planned them”. Don’t leave your family and life’s savings to chance. Plan now and protect your family, loved ones and hard earned assets from the devastating effects of Long Term Care, Probate, Guardianships and the uncertainties of life. Things Happen. Plan now and get that “Peace of Mind” you deserve.

The sooner you plan the more assets you can protect. If you plan five years in advance of going into a Nursing Home you can protect 100% of your assets. If you wait till you go into a Nursing Home to do Medicaid planning most people will lose 50% or more of their assets. If you go into a Nursing Home and do not plan immediately upon entering the Nursing Home most people will lose everything. Therefore if you have just entered a nursing home or been in a nursing home for a while start now and plan today. You may still be able to save a portion of your remaining assets. If you do not plan you will likely spend all your assets on long term care expenses. The sooner you plan the more you can protect.

The best way is with Long Term Care Insurance. If this is not affordable or due to poor health you cannot qualify for Long Term Care Insurance then we must look at other options. There are many options depending on what stage of life you are in. If someone is pre-planning which means they feel confident they will not be in a nursing home within the next five years this is the best case scenario. We have five years to plan and if we use an Irrevocable Trust we can protect virtually all of a person’s assets from long term care costs. If someone believes they will be in a nursing home within the next 1 to 4 years this requires a pre-crisis plan and even with planning a portion of assets may be lost to long term care costs. However the sooner a person plans the more they can usually protect. If someone is already in a nursing home or believes they will be within the next year this requires a crisis plan. Most people in this situation will spend their entire life savings within the first two to four years in a nursing home. If they plan now they may still save 40% to 60% of their assets but the average person will spend about 50% of their assets even with planning. The sooner a person begins to plan the more they can save. For most people in a nursing home if they do not plan immediately they will spend everything they have and impoverish themselves usually within a few short months. They should plan now to save what they can.

Both Revocable Living Trusts and Irrevocable Trust can protect you from probate if they are properly funded (all assets have been transferred into the trust or titled in the name of the trust). However an Irrevocable Trust can protect your assets from long term care costs such as an extended stay in a nursing home while a Revocable Living Trust will not protect your assets from long term care costs. If you have a Revocable Living Trust any asset in this trust will not be protected from Medicaid but will in fact disqualify you from Medicaid because you have “Too Many Resources”. If you are looking to protect assets from long term care costs you would choose an Irrevocable Trust rather than a Revocable Living Trust. If your only concern is avoiding Probate then a Revocable Living Trust will do.

Yes you can give all your assets to your children but it will probably cost you hundreds of dollars in real estate taxes each year and will probably cost your children thousands of dollars in capital gain taxes when you die. In addition if your children get sued, divorced, file bankruptcy, have IRS liens all of your assets could be lost forever. Most people want their assets to go to their children. People who do this type of “gift planning” do so because it is simple, easy to do and costs nothing (no attorney or legal fees). Unfortunately when this type of gifting is done without legal advice both parent and child will pay thousands of dollars in taxes. More taxes now for the parents and more taxes in the future for the children. With proper planning all of these taxes can be legally avoided and in addition the assets can be protected from your children’s law suits, divorce, bankruptcy and poor decisions.

The best way to give assets to your children is with an Irrevocable Trust. This will save you hundreds of dollars in taxes each year and your children thousands of dollars in taxes in the future.

The best way to give assets to your children is with an Irrevocable Trust. This will save you hundreds of dollars in taxes each year and your children thousands of dollars in taxes in the future.

We offer free workshops and seminars for Seniors and children concerned about their parents in Conway, Little Rock and surrounding towns and cities throughout the year. Check out our Website for dates, times and locations of our Free Workshops. If you have specific questions about your particular situation call for a Free Initial Consultation. Get Specific Answers to your Specific Questions. We also have free literature and DVD’s covering many Elder Law Topics. We will gladly mail this free information to you upon request.

Most people will lose everything they have unless they plan immediately. This requires a crisis plan. This is when someone goes to the nursing home who has done no planning. However, with a crisis plan a person can still protect 40% to 60% or more of their assets even after they have entered a nursing home.