I met with Roger 8 days ago. He is 89 years old, a veteran of WWII, and married to Sylvia. Roger has end stage lung cancer and a prognosis of less than two months to live. He is receiving in-home hospice. His wife, Sylvia, is 83 years old and has early to mid-stage Alzheimer’s Disease. She also lives at home. They each have 24/7 home health care, which costs approximately $13,000 per month. When Roger dies, Sylvia’s home health care expense will be reduced to $9,000 per month, but she will still have the expense of maintaining the home and other daily living expenses.
In 2001, Roger and Sylvia, engaged in sophisticated estate planning to minimize estate taxes and to take advantage of the marital deduction rules. Their plan consisted of a qualified personal residence trust (QPRT) and an irrevocable life insurance trust (ILIT), with basic wills and powers of attorney. Due to the rise in the estate tax exemption, these sophisticated tools are no longer necessary because their taxable estate is under the $10,000,000+ limit for a married couple, and even under the $5,000,000+ limit for a single person. However, they do have assets of about $600,000 that are not in either of the trusts, and which are not protected from long-term care costs.
Since Roger is a wartime veteran, his widowed spouse, which will be Sylvia, may be eligible for a widow’s death pension, commonly referred to as Aid and Attendance. But, their assets must be below certain limits. Moreover, should Sylvia’s physical needs exceed that which can be provided at home and she later moves to a nursing home, she may benefit from qualifying for Medicaid.
When we know with reasonable certainty that one spouse may die sooner than the other, and the death is relatively imminent, we have the perfect situation for asset protection planning for the survivor. In Roger and Sylvia’s situation, we want to protect the extra $600,000 upon Roger’s death so that Sylvia can immediately qualify for VA benefits or Medicaid benefits without unnecessary spend down or penalty from making lifetime gifts.
To do so, we must put all of the assets into Roger’s name. Then, Roger can create living trusts that will pass the property upon his death into special needs trusts for Sylvia, and also trusts for his child and grandchildren. Transfers upon death do not trigger a look-back penalty for Medicaid. And, assets maintained in a third party special needs trust are protected as well.
We do not intend for Roger to gain access to any government assistance programs while he is alive. Instead, the benefit of the planning is for his wife, Sylvia. The VA widow’s pension will pay Sylvia up to $1,113 per month to offset the cost of her home health care. That will allow the other assets to stretch out further. Then, if Sylvia moves to a nursing home, not only can she qualify for Medicaid, but the assets that were preserved can be used to pay the differential in price for a private room, as well as continue to pay for home health care at the nursing home so that Sylvia does not have to wait 30 minutes to answer a call button, or be sitting in front of a tray of food she no longer knows how to eat without assistance.
Estate planning, asset protection planning, and long-term care planning are all distinct planning strategies, each used for a specific purpose. As our lives and circumstances change, often our planning needs to change too. Lawyers with Purpose has the training, software, systems, and support necessary to assist lawyers who have clients that are healthy and then progress through the need for assistance from others. By using these systems, I was able to convert Roger’s outdated estate plan to an asset protection plan in seven days, fully executed. When a person is receiving hospice care, you don’t know how much time you have to execute a plan. Therefore, you must have the systems in place to act swiftly.
Victoria L. Collier, Certified Elder Law Attorney, Fellow of the National Academy of Elder Law Attorneys, Co-Founder, Lawyers with Purpose, LLC, Veteran of the U.S.A.F. and author of 47 Secret Veterans’ Benefits for Seniors…Benefits You Have Earned but Don’t Know About.