What is the difference between a guardianship and a power of attorney?

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A guardianship and a power of attorney both enable someone else to make decisions and act on behalf of someone, but they are very different. The main difference is a guardianship is a court proceeding where a court decides someone is incapable of managing his or her own affairs, and appoints someone to act as guardian.

In a guardianship, the court hears evidence (including from a physician) that the person can no longer make decisions for him or herself. The person who is having a guardian appointed does not request a guardianship, and may even be opposing the appointment of a guardian.

By contrast, with a power of attorney the person creates a legal document appointing someone to act on his or her behalf. With a power of attorney, the person is giving someone else legal authority to act for him or her. The person does this while they still have the capacity to create legal documents and make decisions. A power of attorney can take effect immediately, even though the person still has the capacity to make legal decisions.

Guardianship and powers of attorney both play important roles in helping people who become disabled or incapacitated, but they are very different concepts that act in different ways. If you have questions about these differences, or are facing a situation where these may be necessary please contact us at (314) 436-8389.

What is an irrevocable trust?

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Many people are familiar with revocable trusts used for common estate planning.  While a useful estate planning tool, a revocable trust is of less benefit when conducting Medicaid planning to pay for long term care.  For Medicaid planning, we turn to the less commonly used irrevocable trust.  The irrevocable trust enables a person to place assets in a trust without those assets counting against Medicaid eligibility.

What are Revocable Trusts?

Revocable trusts are a useful estate planning tool.  Revocable trusts serve three goals:  avoiding probate; keeping taxes simple; and maintaining flexibility. 

First, by placing money or other assets in a trust and naming your beneficiaries, you are able to deliver those assets to your heirs without the expense and time of probate.  When you die, anything you have put into the trust will be given to whoever you named in the trust, in the manner you instructed in the trust.  So long as something is in the trust, your surviving family can receive the asset as you instructed without going through probate.

Second, most revocable trusts do not create complications come tax time.  During your life, you do not need to obtain a separate tax ID number for the trust.  In most circumstances, for tax purposes the tax treatment is the same for the property you place in the trust, and any income from that property.  Your income from property placed in the trust is treated the same as if you still owned that property in your own name.

Third, a revocable trust allows you to keep control of assets in the trust during your life.  You can move assets in and out of the trust, change the terms of the trust, change what happens to the assets when you die, and even end the trust completely.  You can make changes to the trust by simply following the instructions of the trust you yourself created.  The flexibility of a revocable trust is what makes it so useful for estate planning – you are able to control all of your assets during your life, while enabling your children to avoid probate when you pass away.

What makes a trust irrevocable?

An irrevocable trust will expressly say that the trust cannot be revoked.  Once the trust is created the person creating the trust will have no power to change the trust.  Someone looses the flexibility of the revocable trust.  While there are several downsides to using an irrevocable trust, they are used in very specific situations.  For example, in Medicaid planning assets transferred by a person to an irrevocable trust are not considered “countable” for purposes of establishing Medicaid eligibility.  The five year lookback still applies, but if a person has time they can transfer significant assets to an irrevocable trust without impacting Medicaid eligibility. 

Is a divorce needed to qualify for Medicaid?

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A common fear of married couples is that they will need to get divorced to qualify one spouse for Medicaid. Fortunately, this is rarely the case. Medicaid has policies in place to avoid “spousal impoverishment.” For example, Medicaid allows a married couple to perform a “Division of Assets,” which can enable the spouse who does not need nursing home care to keep half of the couple’s “countable resources.” Also, Medicaid-compliant annuities can be used to both qualify a spouse for Medicaid and create a revenue stream for the spouse who does not need nursing home care.

Advising couples regarding Medicaid eligibility can be one of the most rewarding aspects of elder law, but it is also one of the most complicated. Medicaid provides powerful tools to protect against impoverishment of a spouse while not requiring a divorce. These tools are found in complex rules that can be difficult to navigate on your own. Be sure to contact an elder law attorney to discuss these powerful but complex options.

Does a trust avoid probate?

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Does a trust avoid probate?

 Yes – but ONLY for assets in the trust.

 One of the great advantages of a trust is the ability to avoid probate.  Administering an estate in probate can be a lengthy and expensive process.  At a minimum, a probate estate will take 9 to 12 months to complete.  The probate process is also open to the public.  By contrast, assets held in a trust can be passed on to loved ones relatively quickly in a private matter.

You must remember, though, that the terms of a trust only apply to assets that have been transferred into the trust. All too often, people believe that once they have executed their trust they have completed the estate planning process.  Properly transferring assets into a trust is just as important as creating the trust. You can have a trust that states
exactly how you want your estate to be administered, but it will not meet your goals unless you have transferred assets into the trust.

For example, let’s say you want to use a trust to give your home to your children. You create a trust that says your home will be given to your children when you die. The trust might even specifically identify your home, and say how you want it divided among your children.

Even though you have created the trust and expressed your wishes in the trust, there is still one vital step. You would need to transfer title of the home into the name of the trust. For example, instead of the home being owned by John Smith, it would now need to be titled in the name of John Smith, as Trustee of the John Smith Revocable Trust. 
Alternatively, a beneficiary deed could be recorded stating that when you die the home would go to the trust. Without taking that next step of actually titling the home in the name of the trust, the terms of the trust will have no impact on how the home is inherited when you die.

Next, assume you have created a trust and transferred property into the trust. Five years later, you open a new bank account or buy a new car, but you title the bank account and the car in your own name instead of in the name of the trust. Or, you failed to put a payable on death designation for the bank account, or a transfer on death designation for
the car. Even though you created a perfectly valid estate plan and transferred assets into the trust, these assets you acquired afterwards but did not place into the trust will not be passed on under the terms of the trust. 

Think of a trust like a banker’s box. You unfold the cardboard and create the box. On the box, you write the names of
your children to show you want everything in the box to go to your children. When you die, the box is given to your children. When they opened the box, however, they will only receive whatever is inside the box. Just like you would need to put items into the box to give them to your children, you must title assets in the name of a trust for the terms of the trust to apply.

I have a trust – why do I still need a will?

Nearly any estate plan that includes a trust will still include a last will and testament. This may seem unnecessary since you have painstakingly created a trust that specifically says how you want your property to be transferred. The will serves as a fallback plan just in case you fail to transfer all of the assets you want to be governed by the trust, or you obtain assets long after you created the trust and do not put them in the name of the trust.

Often, when an estate plan includes a trust, the plan will also include a simple pour over will. The pour over will is designed to transfer assets outside of the trust into the trust through the will. The will would still need to be presented to probate to be authenticated, but then the terms of the trust would apply to those assets.

What is a Medicaid-compliant annuity?

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With few exceptions, holding a financial investment in excess of the asset limit (currently only $4,000 for single persons) will disqualify you for Medicaid in Missouri. One of the most powerful exceptions to this rule is a Medicaid-compliant annuity. With a Medicaid-compliant annuity, money that otherwise would need to be spent down to qualify for Medicaid can be used to purchase an annuity that creates a revenue stream. The revenue stream can either go to a spouse to help replace the lost income of the person going into the nursing home, or to help pay for a penalty period if necessary.

To be a “Medicaid-compliant” annuity, the annuity must be irrevocable, payout during the expected life expectancy of the annuitant, not have any balloon payments, and name the State of Missouri as the first beneficiary when the person dies. If the annuity pays out completely within the person’s life-time then there will be no payment to the State.

A Medicaid-compliant annuity can be a powerful tool as part of an overall planning strategy to ensure the health care a senior needs is paid for while protecting the senior’s life savings. To learn more contact us today.

What is a payable on death designation?

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What is a payable on death designation?

     A payable on death designation, or “POD,” is a method for naming a beneficiary on a bank account.  When you pass

away, the person identified in the POD takes ownership of the bank account without the need to go to probate.

How do I create a payable on death designation?

     A POD is a beneficiary designation provided to your bank.  Your bank will have a form to name a payable on death beneficiary for your bank account.  You should ask your bank for this form.

How does the payable on death designation work?

     You complete a form at your bank to name a payable on death beneficiary.  You have the right to make any changes to that designation.  You can change your payable on death designee, or remove it completely.  When the last owner of an account passes away, the bank will normally require a death certificate.  Once they are provided the death certificate, they will transfer ownership of the account to the payable on death designee.  The account will be renamed in the name of your payable on death designee.

What are the benefits of a payable on death designation?

     A payable on death designation enables you to designate a beneficiary who will take ownership of your bank account.  Your beneficiary will not need to go to court to obtain ownership of the bank.  Naming a POD does not give the beneficiary any right to your bank account while you are living. 

What is the difference between a payable on death designation and a joint account?

     Many people will name a loved one as a joint owner of an account.  This can be useful if you need help managing your finances.  For example, an aging parent might create a joint account with their child so the child can help manage their finances.  When the parent passes away, the child who is the joint owner of the account will now become the owner of the account.  The parent has managed to pass the account onto the child without any a planning or the need to go to probate. 

Joint ownership of an account can create problems, however.  For example, if you have more than one child but only one child on the account, when you pass away that account will become the account of the child named on the account.  This can lead to inadvertently failing to leave an equal amount to each child.  Also, by having joint ownership of a bank account with a child, you may be placing your money at risk to the creditors of your child.  Also, anyone on the account has complete access to all the money in the account.

What are the limitations of a payable on death designation?

     A payable on death designation is a simple way to pass on ownership of a bank.  This may not be an effective strategy if you have more complex planning needs.  For example, your beneficiaries may not be at an age where they should inherit a significant bank account.  A payable on death beneficiary designation simply passes ownership when you pass away. 

     By contrast, if you use a trust then you can put terms in the trust that ensure your child does not receive his or her inheritance until they are old enough to be ready.  Also, a payable on death designation may not be a good solution if you have a special needs child, or if you have concerns about the financial stability of your beneficiary.

     A payable on death designation can be an effective part of an overall estate plan.  You should consult with an estate planning lawyer, however, before relying completely on payable on death designations to pass on significant wealth.

The Medicaid Asset Limit Increases on July 1

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The Medicaid/MoHealthNet Asset Resource Limit for nursing home benefits increases on July 1, 2019. The Resource Limit is the amount of “countable” assets a person can have and still meet the asset limits for Medicaid nursing home benefits. The limits will increase from $3,000 to $4,000 for a single person, and $6,000 to $8,000 for a married couple.

The resource limit was set at $999.99 for a single person and $1,999.99 for a married couple in 1973. The resource limit did not change for MORE THAN FORTY YEARS. The Missouri Legislature recently passed legislation that made the first ever increase to the resource limit. The resource limit has been increasing over the past two years, and it will increase to $5,000 (single) and $10,000 (married) next year. After next year, the limits will automatically change each year based on inflation.

Remember that this limit only applies to “countable” resources. Anyone considering Medicaid as an option to pay for nursing home care should consult with an elder law attorney to learn what this means, and how the new resource limit can change potential eligibility.

What are “Physicians Interrogatories” in a Guardianship?

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One of the most important requirements to obtain guardianship and/or conservatorship over someone is the statement from a physician that the person is incapacitated or disabled, and a guardianship and/or conservatorship is necessary. In St. Louis County and the City of St. Louis, the court has a “Physicians Interrogatories” form to be completed by the physician. In the “Physicians Interrogatories,” the physician identifies the person’s diagnosis, the impairment, the limitations of the person, that the physician believes a guardianship and/or conservatorship is necessary, and the least restrictive environment where the person could safely stay. The “Physicians Interrogatories” must be filed with the guardianship petition, and the original Physicians Interrogatories must be delivered to the court at the hearing to approve the guardianship petition.

Does a will avoid probate?

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NO!! A common mistake is the belief that you need a will to avoid probate. In fact, a will must go through probate to be valid. A will enables you to decide where you belongings go when you die, but it requires your loved ones to go through the slow and costly process of probate. There are many ways to avoid probate and accomplish the same thing, such as a trust, beneficiary designations, and “non-probate transfers” such as transfer on death designations for vehicles or pay on death designations for bank accounts.