It is never too early to start planning for the future. And according to lawyer Ryan Coutlee, it is never too late either.
Coutlee, of the Estate Planning Law Center, recently presented at Woodside Hall in Cooperstown. Some topics he discussed included Medicaid and veterans’ benefits, home care, health care proxies, wills, gifts and trusts.
“I’m here to let you know what is even out there for you and how to achieve those benefits,” Coutlee said.
So who needs estate planning? According to Coutlee, everyone needs some form of it, whether it is a “simple” will, health care proxy or getting a power of attorney. He said anybody 18 or older should have a power of attorney and a health care proxy in place. From there, he said, the needs begin to become more individualized.
Coutlee said he is often asked whether someone has enough assets to worry about estate planning.
“If you have something you care about, then you have something you should do planning for,” he said. “It does not have to have any sort of asset threshold. There is no estate that is too big or too small.”
According to Coutlee, it is never too late to begin Medicaid planning — even if a loved one is already living in a skilled care facility.
“The sooner the better, and the more options you will have to protect what is important to you,” he said.
Medicaid is a federal program that provides health coverage for people with limited assets and incomes. Although it is a federal program, it is administered by the states and rules are done according to interpretation. This means that application of these rules can vary significantly from state to state, and in New York, from county to county because it goes one step further.
“The state can do more than federal law, but can never do less,” Coutlee said. “Counties cannot violate state or federal laws, but you will see different results in different counties.”
He said some states have a residency requirement making it so people have to live in that state for so long before becoming eligible to apply. New York does not.
“If you are here in our state and you apply while here and never end up moving here you can still be eligible. It is more of an intent element — If you ever intended to reside here you are eligible for the benefit. There is no durational time requirements,” Coutlee said. “New York is a very favorable jurisdiction. We have the highest resource allowance for a single person.”
One thing that Coutlee said is on the horizon is a shift to a managed Medicaid program.
“I think what they are trying to do is undo some of that discrepancy going on among the counties,” he said.
Assets generally fall into two categories: Countable and non-countable. To qualify for Medicaid benefits, a nursing home resident can have $14,250 in countable assets. The spouse of a nursing home resident can retain a minimum of $74,820 and a maximum of $113,640 of the couple’s joint countable assets. The spouse can keep up to $2,841 a month in income.
Certain assets such as personal possession and prepaid funeral plans are not counted in calculations for eligibility.
According to Coutlee, there is no “five-year look back period” when applying for Medicaid when receiving care at home. However, he said 100 percent of the care needs are not going to be covered under Medicaid.
“In New York state there was a push to encourage home care. The reason for that was because it was cheaper for them to pay for caregivers to come into someone’s home rather than pay the costs for nursing home care. It is an incentive for people to take advantage of home care.” Coutlee said.
The downside to at-home care is there are lower asset and income allowances, according to Coutlee. He said a couple can have about $21,000 worth of assets and an income of about $1,100 to be eligible. Those numbers get adjusted every year in January, he added.
Will someone lose his house if receiving Medicaid and that person or his spouse needs to go into a nursing home? Coutlee said if the person is married the home would be exempt to Medicaid’s calculation of what one’s contribution to the cost of care should be. If unmarried or widowed, Coutlee said a house may be exempt if following certain procedures. However, he added that even though a house is safe while one is residing at a nursing home, it will likely be lost to Medicaid after death.
“Gifting” may not be the best option, according to Coutlee. He said since major changes to laws in 2006, “gifting” away assets creates unforeseen circumstances and can make a person ineligible for Medicaid benefits for five years or more. He also said once someone “gifts” something, it is gone forever.
Do people need to avoid probate?
It is unpredictable, according to Coutlee, and that is why many people chose to avoid it. However, he said if all of someone’s heirs agree and assets are centralized, it can go smoothly.
Probate is the process of presenting one’s will to the court after death to authenticate it and appoint an executor. The executor must be appointed by the court to collect and distribute one’s assets as stated in the will. However, because it is a legal process, there are many steps that must be followed before an executor can be appointed.
For example, the attorneys must obtain signatures from heirs signifying they agree the will is yours, and they will not contest it. Your heirs are your spouse and children and all must agree not to contest the will before your executor can be appointed. If you do not have a spouse or child, probate becomes more complicated. Even if your heir is not a beneficiary, his waiver is still required. This can be very different in second-marriage situations, if you have minor children or if you have a child you lost contact with. If a child dies before you, then, all of your deceased child’s children will have to agree not to contest your will. But if they are younger than 18, the court will need to appoint a separate attorney to represent them. The same is true if any of your heirs are legally incapacitated.
Upon receipt of all information (if no heirs contest it) the court will appoint the executor and estate administration begins.
“There is a minimum of seven months that the process has to stay open for. The reason for that is predators have the right to file against your estate within seven months your executor is appointed. If your executor were to release those contents to beneficiaries prior to that seven month time frame and a predator shows up they are personally held liable,” Coutlee said.
Planning for those with disabilities or special needs
In the past, families would disinherit disabled family members and leave assets to someone else who agreed to “take care” of them, according to Coutlee. He said if assets are left to a disabled beneficiary it could disqualify them from the state or federal programs they are receiving. However, in 1992 Congress enacted new laws that entitled disabled individuals to derive the same estate planning benefits as non-disabled individuals without affecting their eligibility for state or federal benefits. The law created Supplemental Needs Trusts, which according to Coutlee, can be created by an individual with his own funds or be created by someone other than a disabled individual — typically a parent or relative. Coutlee said there are different rights and restrictions to each of these trusts, but both ensure immediate qualification for federal and state benefits.
Living trusts come in two forms – revocable and irrevocable
A trust is a contract between the grantor (the person that created it), the trustee (the one who controls it) and the beneficiaries. As a grantor, one determines how the trust will be operated by the trustee and who benefits, how and when.
A person can create a trust that permits himself to be trustee and give himself the right to receive full benefits from it — this is a revocable trust. It is often used as a substitute to a will, according to Coutlee. He said it permits a person to keep total control and access to all their assets during their life and provides for the distribution of assets to beneficiaries after death. The advantage is the avoidance of probate, he added.
Other advantages that can be incorporated by an estate planning attorney include asset protection for one’s spouse after death, special needs planning for disabled beneficiaries, asset management and protection for children who are not proficient with handling money, protection of assets from a spouse’s subsequent marriage, disability planning, asset protection for children if in bad marriages or to ensure assets don’t go to the in-laws, keeping affairs private, no court intervention required and planning for proper management of one’s business.
While a revocable living trust has many advantages, Coutlee said it does not protect one’s assets from a nursing home, lawsuits, divorce bankruptcy or other creditors.
A irrevocable trust will. A irrevocable trust may prohibit one’s right to control the trust (as trustee) or have access to one’s assets, but one gets to decide to what extent.
According to Coutlee, it is a common misconception that irrevocable trusts, once created, cannot be changed. He said it is true of many irrevocable trusts created to avoid taxes, it is not true of all irrevocable trusts.
“An irrevocable trust is a trust that you create for the benefit of yourself or others and once created, you, as grantor, must give up your rights to something,” Coutlee said.
Coutlee said a typical income-only irrevocable trust permits one to receive the income on assets, but one must give up his right to his principal. In some irrevocable trusts, according to Coutlee, one can retain the right to change who gets assets during his life and after his death, and maintain 100 percent control of his assets until his mental disability or death.
Appointing a power of attorney
According to Coutlee: “You certainly want to trust the person or people you put in this position, which is to make decisions for you if you become sick or disabled, either temporary or permanently. This person or people will essentially be stepping into your shoes,” he said.
Coutlee said there are many different structures one can use when selecting a power of attorney (giving someone individual rights, use a majority rules, giving collective rights, etc.), but do not assume spouses will assume the role naturally.
“It is extremely important to have this document in place,” he said. “It is one of the most cost-effective document of an estate plan you can implement.”