I am constantly asked by many of my clients how, when, and what elder law issues should be discussed with their aging parents. This is never an easy conversation to talk about with your parents. It is never easy to have the discussion with your parents on what it will be like when they are gone and what they are doing to protect their assets and the wealth that they spent a lifetime to accumulate.
First, it is important to make sure that your parents have their final affairs in order. This includes having at the very least a Last Will and Testament. All of us are familiar with a will. This is a legal document that states where your stuff will go and who will be in charge when you pass away. However, the main issue with a will, is that the family will have to go through a long and drawn out probate court process. Probate is public, meaning anyone will be able to go to court and see how much money you owe and who is getting your assets and in what proportion after you die. In addition, probate lasts anywhere from six months to two years or more and costs on overage more than $10,000 or $20,000. Due to the increased delay, complexity, and cost of going through probate, a majority of our clients prefer a revocable living trust in order to avoid the probate process entirely for their family after death.
Second, it is important to make sure that your parents have their disability legal documents in place. These documents include the Health Care Power of Attorney, Durable Power of Attorney, and Living Will Declaration. These documents allow you to state a person of your choosing to make important health care and financial decisions when you are no longer capable to do so. In addition, the Living Will Declaration allows you to state your wishes when it comes to the withdrawal of life support systems. Having these documents in place prevent your loved ones from having to make these decisions without knowing your wishes. Also, without these documents in place, your family members would have to go to court to have a judge appoint a guardian to make these health care and financial decisions.
Finally, it is important to discuss Medicaid and future nursing home expenses with your aging parents. As we all know, average life expectancy has been increasing, and due to advances in modern medicine, many more people will require skilled nursing home care in the future as the baby boomer generation gets older. Therefore, many of us will continue to require skilled nursing home care. For this reason, it is important to discuss protecting your parents’ assets from nursing home expenses.
The rules of Medicaid (or TennCare as it is called in Tennessee) allow an individual to own a home, a car, a prepaid funeral, and no more than $2,000 of other assets in their name while still qualifying for Medicaid. If you meet these requirements, then Medicaid will cover your nursing home care expenses. However, if you do not meet these requirements, then you will be required to pay for your own nursing home expenses until you have no more than $2,000 worth of assets in your name. In addition, due to increasing costs of nursing home facilities (average is $5,000 to $8,000 per month), life savings of $450,000 can be spent on nursing home expenses in just a few years.
In addition, another rule of Medicaid requires TennCare to recover the costs that were paid to the nursing home during your life by requiring your estate to sell your home after you die so that TennCare can be reimbursed for all of their costs.Due to these concerns, an Irrevocable Medicaid Trust can be beneficial to protect assets from these future nursing home expenses. An Irrevocable Medicaid Trust allows you to protect your assets from future nursing home expenses by establishing this trust and funding all of your assets into this trust. However, in order to protect your assets in this way from future nursing home expenses, you will be required to establish this trust and fund this trust with all of your assets at least five years before nursing home expenses begin.