On Wednesday, Jennifer McKinley of Hook McKinley LLC out of St. Joseph came to the Worth County Care & Rehab Center to give a talk about estate planning. She said that with the changes in estate law, all people should get a Power of Attorney and have a will, so that people will know what to do to carry out their wishes.
Power of Attorney documents can be drawn up one of two ways. It can either be Durable, which gives someone the power to act as an agent on their behalf, or Springing, which doesn’t come into effect unless the person becomes incapacitated. Another thing McKinley said was necessary was a Living Will, which contains instructions for if someone becomes incapacitated in the event of a terminal illness.
People can create their own Power of Attorney documents. It needs to be dated, signed, and notarized. McKinley said it was not too early to have a Power of Attorney; she said anyone over 18 should have one. You can designate anyone over 18 to be your Power of Attorney, such as a friend, neighbor, or a pastor. Some people have multiple Power of Attorneys.
If there is no Power of Attorney, then guardianship or conservatorship goes through court. In that case, a judge appoints someone as Power of Attorney if they find that someone is incapacitated.
One of the big decisions on assets is how to transfer assets on death. Some bank accounts have joint ownership; that allows ownership to transfer to the other owner on someone’s death. However, the other person can draw money out of the account at will, meaning that it has to be someone you trust, such as a spouse. Other bank accounts can be done Payable on Death, meaning that a designated person is paid upon the death of the account owner, such as a child. McKinley said it was important to keep Power of Attorneys, wills, and asset transfer instructions up to date regularly; for instance, the instructions could change if one has another child or grandchild.
A Trust allows a private trustee to transfer assets to a designated person upon the owner’s death without probate. It can be revocable or irrevocable. A will can allow a person to choose their own beneficiaries. If there is no will or trust, the court will choose heirs according to the law, and such heirs have to prove that they are really the heirs. If there is a will, the court will authenticate the will, pay off creditors, and distribute to the heirs.
If someone passes away, McKinley listed off the following people to notify – Social Security, annuity and pension companies, insurance companies, financial institutions, banks, the Post Office, and subscriptions. Children are not legally responsible for their parents’ debts on death. McKinley said to keep originals in a safe deposit box and keep backup copies at home, possibly in a safe with a combination that you tell someone you trust.
McKinley said that since we are living longer, nursing home care was getting more and more important. It can cost as much as $5,000 a month, and one can lose everything if they don’t protect their assets. Laws are different from state to state; for instance, Missouri does not protect IRA’s from Medicaid’s rules; however, Kansas does. That can mean hundreds of thousands of dollars worth of difference.
Medicare only covers the first 100 days of acute care, hospitalization, and meds; then, Medicaid only kicks in when one is down to $4,000 in Missouri. This varies from state to state. There are various ways people can try to pay for nursing home care. Besides Medicare and Medicaid, other ways include VA, private insurance, and supplementals. Recently, some insurance companies have started to sell life insurance that allows the purchaser to take the life insurance proceeds out to cover their nursing home care.
Some people take on long-term care insurance. But these plans run out after 3-5 years, which means that people can be left footing the bill for nursing home care if they do not plan ahead. The other risk is that some older plans might be too low, giving $60 a day in benefits, when the cost of nursing home care can be as high as $150 a month.
The VA has a program for wartime veterans and spouses for qualifying individuals. All benefits are tax free. It is based on household income, wartime service, and assets. You have to have difficulty performing basic functions such as dressing/undressing or taking a bath, for example.
The VA looks at your gross household income and subtracts expenses for out of pocket medical expenses if you’re eligible. If you have a negative income, then you’re eligible for VA income.
In Missouri, if you spend down all your assets down to $4,000 or less, then you’re eligible for Medicaid, which covers nursing home care and associated prescription drugs along with some in-home services. Under Medicaid, your house, one care, life insurance, household goods, and any land that is contiguous to your house is exempt from asset calculations. Everything else is included. This includes money in the bank, land that is not contiguous with your house, and second homes, for instance.
If you’re married and your spouse has $126,420 in assets, then you still become eligible for Medicaid once you spend your assets down to $4,000. These calculations are made when you go to the nursing home. Under Medicaid rules, you must spend down money on yourself; for instance, if you give money away to your kids, Medicaid has ways of finding out that you did. Some people set up Single Premium Annuities for their spouses, which turns into an income stream for their spouses and allows Medicaid to kick in. Once these are purchased, they are irrevocable, even if the nursing home patient passes away.
Gifting to children can be done under Medicaid, but there are certain penalties that apply. Gifting can be such things as money, deeding over real estate, debt forgiveness, and even selling things to children at below cost. The IRS requires you to report gift income over $14,000, while Medicare requires you to report gifts from parents. For every $6,000 that you give away to children, you’re ineligible for Medicaid for one month. Some families do a gift and annuity plan, which offsets the penalty and allows children to get something.
It used to be much lower, but in the US, the Estate Tax is now $11 million. It used to be much lower until the mid 2000’s, when it was raised under President Bush II. Missouri does not have an Estate Tax.
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