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A few things I've learned about estate planning and many people:
1. They are convinced that lawyers are absolutely ripping them off if they want $300 to write a Will.
2. They will want a trust out of generally mythical fears about probate when a Will would serve them better and be cheaper to prepare.
3. They will call constantly on the phone and try to get advice on things like how to write a holographic (handwritten) Will. When you try to explain the technical requirements the law imposes on such documents to make them effective, you'll usually be questioned until you are blue in the face and the questioner will generally still not understand when the conversation is over. Its better to never allow yourself to have such a conversation on the phone at all.
4. They will ask things like "How can I get all the advantages of an irrevocable trust without making it irrevocable?"
5. They will try to skirt the law by doing things like writing out a deed to their children--shoving it in their bureau drawer-- and than telling the children to file and record the deed when they die in an effort to avoid probate. Unfortunately, the law (at least in all the states I know of) does not recognize this device as a substitute for probate.
6. They often expect a run-of-the-mill lawyer to be able to answer detailed questions about tax law over the phone about some trust they've set up.
7. In the end, though, most lawyers are grateful for people who try to their own estate planning without seeing a lawyer. They end up creating far more work for us than doing things right and legally in the first place would have resulted in. I previously mentioned my friend who does trusts for people (that he does not believe in) simply because he is smart enough to realize they will just go somewhere else if he won't do it.
The truth is most lawyers don't look at estate planning as an opportunity to gouge people for every last dollar we can get out of them. We simply want to recover the economic costs of doing the work (economic costs include a reasonable profit margin).
Wow. Okay. As I prepare a revocable trust to keep my property, etc. from going through probate on my death, I am going to pay. The lawyer (as others before him) have told me it would cost my heirs 3 x as much to go through probate as it would cost to get this kind of trust. I wish I could get the final lowdown (my state is Mass.).
This only applies to a married couple. Once one spouse applies for Medicaid the state does a resource assesment. Let's say you have $500,000. In AZ you are allowed to keep around $109,000 for the community spouse. The rest must be spent down before the nursing home spouse qualifies for Medicaid. If the community spouse purchases an Immediate Index Annuity in their name only, that money is sheltered from Medicaid. You have to be very careful and use the actuary lifetime tables to determine the timeframe for the annuity. It cannot be more than their life expectancy. The payments must be monthy, equal payments that are in the community spouse's name only. The annuity can be purchased for as short as 3-5 years. You must use someone who is well versed in Medicaid annuities. That will impoverish the nursing home spouse and they will qualify for Medicaid.
Trying to time it is difficult at best. Escort and others make good points that you can *********rself in the process in multiple ways. Having a planned orderly plan for asset management makes more sense. You just have to be aware that the last five years of gifting/trust might be subject to a five year look back. If you do it over a 15 year period it's only the last five. Doing any of this in a purposeful plan is a lot different than trying to shield from Medicaid. My sense is that a pure Medicaid play more often could be the kids idea.
I see no difference between giving away your assets over the years in order to spend down, and giving them away 6 years before entering a nursing home (if that could even possibly be known). One may call the former "financial planning," but so is everything else that might be done under the "kindly" and expert guidance of estate planners, who devote quite a bit of time with their clients over the Medicaid thing.
I am not advocating cheating the system, I'm playing devil's advocate in debate. The wealthy usually have a reasonable explanation for what they do (under the cover of "planning"), the less wealthy are seen as those trying to cheat the system. At any rate, what the system legally allows is what is legal. Corporations and banks certainly look out for their best interests under the umbrella of "legal" so why should individuals be held by another standard?
Seems to be that there is a subtle and somewhat ethical distinction between 'shielding one's assets' by taking advantage of various tax or other legal loopholes ... and 'hiding one's assets' by pretending they do not exist.
Would you, for example, consider 'concealing' one's assets to protect them against a divorce settlement, lawsuit or legal attachment .... to be 'shielding' or 'hiding'? ... and/or to be ethical or unethical?
Similarly, 'hiding' one's assets so that one seems to lack the ability to pay for healthcare ... and thus, qualifies to have others pay for their healthcare --- is legal, but, seems just as unethical as anyone else taking advantage of loopholes to 'tap into the public dole' ... for which they would otherwise not be qualified.
Yes, there is legal and there is ethical, no denying that. Attorneys who make a lot of money on estate planning appear to focus on the legal. I doubt there are many who lie awake at night worrying about ethical.
Just curious does congress debate and pass loopholes? Or are loopholes laws and regulations passed by congress that someone disagrees with? I understand debate/discussion about whether the use of the applicable laws are ethical or not but they were passed to be used and it seems strange to call them loopholes when exercised in the context of their purpose. I know this happens all the time but doesn't it create confusion cause some who otherwise might take advantage to not?
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I had to have one of my older couples create a 'partnership' for a home asset. (not to shelter the asset, but to allow qualification for subsidy / assistance)
They had a son who passed away @ age 48 and their DIL and family were still in the house that showed ownership to the older couple; who needed assistance and didn't have 5 yrs to wait (legal 'asset-transfer-process').
They desired the home to eventually go to the DIL, but their assets were spartan and they also wanted to keep this house asset in case needed.
Forming a partnership with DIL allowed both to retain asset and NOT affect the 'qualification; for the older couple.
Just curious does congress debate and pass loopholes? Or are loopholes laws and regulations passed by congress that someone disagrees with? I understand debate/discussion about whether the use of the applicable laws are ethical or not but they were passed to be used and it seems strange to call them loopholes when exercised in the context of their purpose. I know this happens all the time but doesn't it create confusion cause some who otherwise might take advantage to not?
Certain annuities, irrevocable trusts, invoking the right of spousal refusal to support (NYS), prepaying your funeral(s) are all apparently legitimate Medicaid strategies, according to estate lawyers. In my consultations I never heard the word ethical, only legal (of course). The ethical debate continues.
Just curious does congress debate and pass loopholes? Or are loopholes laws and regulations passed by congress that someone disagrees with? I understand debate/discussion about whether the use of the applicable laws are ethical or not but they were passed to be used and it seems strange to call them loopholes when exercised in the context of their purpose. I know this happens all the time but doesn't it create confusion cause some who otherwise might take advantage to not?
I believe it is a given that most laws have unintended consequences. The idea is that Congress (or any other legislative body) can go back and amend the law or regulation as needed. This usually occurs when someone notes a "loophole" that allows for a result that was not intended when the law or regulation was passed.
Clearly, Congress accurately predicted that folks would attempt to shelter their assets in order to qualify for Medicaid when it tried and failed to criminalize the sheltering of assets. Thus, IMO, sheltering one's assets in order to qualify for this particular welfare program could not be considered a loophole.
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