Asset Protection Planning

Monday, August 10, 2015

Disposing of Tangible Personal Property in an Estate Plan

I am not sure how I would like to distribute my fine china and jewelry. Do I need to decide this at the time of drafting my will? 

When it comes to estate planning, there are two types of property: real and tangible. Basically, anything that is not land and/or a structure falls within the tangible personal property category – including cash, accounts, assets, boats, cars, jewelry, furs and so on. Generally speaking, testators (those creating a will) are pretty set on how to transfer the family home or vacation property – and, if not, will direct the executor to liquidate the property and add it to the residuary estate. 

However, when it comes to heirlooms and tangible items of great sentimental value, making the decision can be more difficult and may take more time. As well, a testator’s feelings may change over time, or the intended beneficiary might predecease the testator. Therefore, Michigan law allows for a document known as a Tangible Personal Property Memorandum (or a Memorandum of Wishes) to accompany the Last Will and Testament, which may be changed and amended over time according to the testator’s wishes. 

Basics of a Memorandum of Wishes

A Memorandum of Wishes must be signed by the testator, and may be handwritten or typed. Under Section 700-2510 of the Michigan Compiled Laws “a writing in existence when a will is executed may be incorporated by reference if the language of the will manifests this intent and describes the writing sufficiently to permit its identification”.

With regard to the first requirement, an experienced estate planning attorney can help ensure that a Will is drafted to contain a section referring to a Memorandum of Wishes, which is quite simply accomplished by including a small section explaining that any accompanying Memorandum is to be upheld along with the Will. 

Secondly, the Will must include language to assure the executor that the testator, in fact, intended to create the Memorandum of Wishes and that his or her tangible personal property should be divided based on the language of this document. Oftentimes, these two requirements are combined into one short Article contained in the Will, and a blank Memorandum will be included along with the estate plan for the testator to use as needed. 

If you would like to discuss the specifics of a Memorandum of Wishes, or would like to review your current plan, please contact Auburn Hills, Rochester Hills and Troy estate planning attorney Andrew Byers: (248) 301-1511. 

Thursday, June 18, 2015

Married Couples Should Consider Separate Trusts

What are the benefits of separate trusts?

Estates worth less than a certain amount of money are not subject to Federal estate taxes.  This is called the estate tax exemption and while this amount has changed numerous times over the past few years. it currently stands at $5.43 million.  Therefore, all estates with a total less than $5.43 million are not subject to estate taxes.  The exemption is portable between spouses meaning that a married couple benefits from an over $10 million dollar exemption together.  

Beneficial tax treatment under a lower estate tax exemption was one major reason why using separate trusts for married couples was a popular tool in the past. Now, with the increased estate tax exemption, some might think that separate trusts are no longer needed.  But, even with the decreased need due to an increased exemption amount, separate trusts still have many benefits. For example, separating assets into respective spousal trusts can help protect assets from creditors.  If one of the spouses dies the surviving spouse can access the deceased parties trust .  But, the surviving spouse’s creditors cannot.  Many joint trusts do not include this protection from creditors.  

Using separate trusts can also protect families in the event of remarriage.   Many times, an individual remarries after the death of his or her original spouse.  By using a separate trust model, the individual’s new husband or wife may be prevented from benefitting from the dead spouses trust after the death of the surviving spouse. While the trust can be written to allow the surviving spouse the ability to amend the beneficiary distributions from the original trust, it is rarely done.  However, separating trusts also allows the surviving spouse the ability to amend his or her own trust to provide access to the second husband or wife.

In contrast, many joint trusts are irrevocable at the spouse’s death meaning that the surviving spouse is prevented from changing anything regarding the joint trust.  With separate trusts, the spouse can amend or revise his or her trust up to the point of his or her death. 

Separate trusts can also be useful in the event that the surviving spouse needs nursing home care.  If special provisions are included in the Last Will and Testament of the first spouse to die, the assets that were contained in that spouse’s separate trust can be protected from a Medicaid spend-down in the event that the surviving spouse needs nursing home care.  Such provisions should be considered whenever either spouse is diagnosed with a medical condition that could result in the need for long-term care.

If you are planning an estate you should consider all of your options including a joint trust, separate trusts and various other options.  Andrew Byers is an estate planning and elder law attorney in the Auburn Hills and Troy, Michigan area. Contact him today at (248) 301-1511 with for all of your estate planning needs.


Wednesday, June 03, 2015

Recent Holding by Michigan Court of Appeals Upholds Medicaid Eligibility Penalty for Home Health Aides

How do payments to home health aides impact Medicaid eligibility in Michigan? 

In Michigan, as is the case elsewhere, eligibility for Medicaid enrollment is entirely needs-based, meaning an applicant must be financially unable to pay the costs and fees associated with his or her medical care. Currently, Medicaid is the only government-funded healthcare program that covers the costs of long-term care, as Medicare only covers a nursing facility stay up to 120 days. 

In order to qualify for Medicaid, an applicant must show a lack of personal assets and a total inability to pay for medical bills individually. Accordingly, state and federal authorities will closely scrutinize an applicant’s financial situation, primarily focusing on any transfers or divestments made over the past five years. If an asset transfer or divestment has occurred, and the applicant could have used those funds toward his or her stay in the long-term care facility, a penalty will apply congruent with the amount of time those funds could have covered daily nursing home costs. 

Home Health Aides and Medicaid 

A home health aide is someone who regularly visits an individual’s home for purposes of providing routine medical care and/or assists with the administration of medication or other treatments. Home health aides are generally not expected to provide round-the-clock care, and are usually only appropriate for those individuals who are still able to manage several daily care tasks on their own. 

In one recent case, an elderly Michigan woman with dementia paid over $19,000 for home health services prior to her admittance to a nursing home. Once her funds were depleted, her family applied for Medicaid to cover the costs of her stay. However, agents concluded that the money she spent for the home health aide did not meet the stringent test set forth by Medicaid regulations, and she was penalized for 7 months before her benefits would be accessible. In the interim, she passed away leaving her family with an enormous debt to cover from an already-depleted estate. 

Thereafter, the family’s elder law attorney appealed the decision to the local Circuit Court, which held that the burdensome five-part test for home health aide divestment eligibility only applied when the caretaker is a family member related by blood or marriage, as the risk is higher in these situations for fraud to occur. 

Unfortunately, the Court of Appeals was given an opportunity to review the case as well, and agreed with the original opinion by the administrative law judge tasked with deciding the applicability of the home health aide eligibility penalty. 

If you are concerned about Medicaid eligibility and would like to speak with a qualified and experienced elder law attorney that serves the Auburn Hills area, please contact Andrew Byers by calling (248)301-1511 today. 

Tuesday, June 02, 2015

Using the Michigan ‘Lady Bird’ Deed as a Medicaid Planning Tool

What is a ‘lady bird’ deed? And how can it help me with Medicaid eligibility? 

Under Michigan law, a ‘lady bird’ deed is an elegant-sounding designation for a relatively common type of real property interest formalized in a document.  This interest is that of an enhanced life estate interest. 

A life estate is a type of real property interest that may be granted to a person for the duration of a person’s life. For example, a parent might transfer a piece of lakefront property to his or her son that includes a life estate, allowing the parent to use the property exclusively until his or her natural death, at which point, the ownership would transfer directly to the son. However, a traditional life estate is incredibly limiting for the grantor, and essentially prohibits him from encumbering the property with a mortgage or allowing it to fall into disrepair without the threat of liability. Moreover, transferring a real property interest subject to a regular life estate to a loved one during the five-year Medicaid “look-back” period could trigger a temporary penalty congruent to the value of the property. 

By contrast, an enhanced life estate – known as a “lady bird deed” in states like Michigan, Florida or Texas – is far less restrictive. For instance, the party grating the life estate may encumber the property, sell the property, or otherwise maintain complete control over the asset for the duration of his natural life. Perhaps a confusing type of property interest transfer, the Lady Bird deed allows for a number of benefits, particularly with regard to Medicaid eligibility. 

Using the Lady Bird Deed as an Estate Planning Strategy

Under Medicaid guidelines, an applicant is only eligible upon a showing of true financial need. In other words, the applicant has no personal assets to sell in order to pay for medical benefits, and has essentially met the “needs-based” guidelines set forth by state and federal authorities. 

While financial need is the hallmark of eligibility, applicants are not expected to be without shelter in order to qualify. Accordingly, an applicant’s primary personal residence is generally not “counted” against him or her for purposes of receiving benefits. However, any other residence (i.e., second home or investment property) must be disposed of for market value prior to the five-year look-back period in order to avoid penalties. If an applicant transferred property to a friend or loved one and retained a traditional life estate, this transfer will likely result in penalties when the party with the life estate applies for Medicaid benefits. However, if the life estate is under the terms of a lady bird deed, Medicaid views the property as under the control of the applicant, and will consider the property as a primary residence.  

If you are considering Medicaid eligibility, or would like to discuss long-term care options with an experienced Auburn Hills elder law attorney, please contact Andrew Byers by calling (248)301-1511. 

Tuesday, May 19, 2015

Forty Years After Death, Philanthropist Gives $13 Million

Can an estate plan provide for one's family and friends and still benefit charity in the future?

The passage of time proved no obstacle to a late philanthropist who was determined to give to charity.  Leave A Legacy, in Southeast Michigan, announced that it had received $13 million from Dick E. Morand, who died in Detroit, Michigan in 1977.  The funds will benefit five non-profit organizations.

Morand's wife had passed away in 1976 and the two were childless.  The founder and owner of D.E. Machinery Company, he had placed his assets in a charitable remainder annuity trust (CRAT), which provided payments to beneficiaries he had named, with the remainder to go to charity when they were deceased.  In 2013, the two remaining beneficiaries of the trust passed away.  That meant the assets could be distributed to charity.  Five organizations received $2.7 million each.

The delayed gifts is an object lesson not only in generosity but also in how one can preserve one’s wealth, leave money to friends and loved ones, and still give to charity.  Charitable remainder trusts enable you to generate a stream of income from assets, enjoy tax advantages, and specify the organizations that will ultimately receive your wealth.  Because of the tax treatment of these trusts, in addition to accomplishing worthy long-term goals, you may also receive a generous current tax deduction.

 A CRAT is one of a variety of such strategies that can help you benefit your family, a charity, or both.  Options may include a charitable lead trust (CLAT) and a variety of other revocable and irrevocable lifetime trusts and testamentary trusts, depending on your goals and wishes.

Regardless of how much wealth you have now or expect to leave behind, the law firm of Byers & Goulding, PLC can help you draft an estate plan in a way that meets your family and charitable giving goals.  From simple wills and long-term planning to complex trusts, we provide the sound, trusted advice on how to do the most good for your loved ones and the organizations you believe in.  For a consultation, call our experienced Michigan estate planning attorneys (248) 301-1511 today.

Wednesday, October 23, 2013

Changing Uses for Bypass Trusts

Every year, each individual who dies in the U.S. can leave a certain amount of money to his or her heirs before facing any federal estate taxes.

Read more . . .

Sunday, February 03, 2013

Asset Protection Planning with Trusts

Certain types of trust may be used by seniors who want to protect their savings and other assets from creditors and long-term care costs.  These trusts are referred to as “income-only trusts” or “Medicaid Asset Protection Trusts.  

Read more . . .

Wednesday, March 07, 2012

Mary and Don Plan Ahead

In my last post, I wrote about what you do with the home of a nursing home resident in a crisis Medicaid plan.  A crisis Medicaid plan is planning that is done when an older person’s move to a nursing home is imminent or after they have already moved to a nursing home.  While I, as an elder care attorney, can help save money in a crisis situation, since it is often better and less stressful to avoid a crisis, in this post I will discuss the options and benefits of planning ahead for long-term care.

Read more . . .

Sunday, March 04, 2012

What Do You Do with the Home of a Nursing Home Resident?

Many people are aware that an older person who is a nursing home resident can continue to own a home and qualify for Medicaid nursing home benefits.  Nevertheless, in assisting people in my elder care practice with paying for nursing home care, I have seen that the home is often the major asset at risk or that is lost, despite the protection provided to the home under Michigan’s Medicaid laws.

Read more . . .

Monday, March 21, 2011

Illinois Judges says the Property in a Trust that Prevents Distributions that Interfere with Medicaid Eligibility is an Available Asset

In the case of Vincent v. Department of Human Services, an Illinois appeals court found that a trust that prevented the trustee from making distributions if it would interfere with receiving Medicaid benefits is an available asset for Medicaid eligibility purposes. 

Mabel Vincent created an irrevocable trust with her daughter, Janice Reed, as trustee. The trust gave the trustee discretion to determine when to make payments from the trust, but it provided that the trust must not use trust assets if Ms. Vincent qualified for Medicaid. In Michigan, that type of language in a trust would be called "trigger" language, meaning an event (moving to a nursing home), triggers a provision in the trust (language providing the assets are protected). 

Ms. Vincent eventually entered a nursing home and applied for Medicaid. The state denied her application after finding the trust assets were an available asset, and Ms. Vincent appealed. The trial court found that the trust was not available because pursuant to the terms of the trust, no amount was payable to Ms. Vincent if it would interfere with Medicaid, so the trust's principal and interest were exempt from eligibility determinations. The state appealed.

The Illinois Court of Appeals reversed the trial court, holding that, due to the way the trust was drafted, the assets in the trust are available to be spent before Mrs. Vincent qualifies for Medicaid.  

These types of trusts are called by various names including Income Only Trusts and Medicaid Asset Protection Trusts.  In Michigan, a Medicaid Asset Protection Trust can be drafted to protect assets so they do not have to be spent down to the $2,000 level in order to qualify for Medicaid.  However, it is important to avoid including the triggering language that was included in Mrs. Vincent's trust.  The trust can be drafted so that the owner of the assets receives income from them or that the trustee can distribute the assets to a trusted individual, but the trust cannot have a trigger provision that removes access to the assets based on the event of moving to a nursing home.

When would an individual create a Medicaid Asset Protection Trust?  One instance when this trust would be a good idea is if you have an older person who is single and has some savings they want to protect.  For this example, assume we have an older widow with $60,000 in savings.  If the widow required nursing home care and no crisis long-term care planning were done, she would not qualify for Medicaid benefits until the $60,000 was spent down to $2,000.  However, if the widow had created a properly drafted Medicaid Asset Protection Trust in advance of needing nursing home care, the funds in the trust will be protected from the costs of the nursing home five years after creating the trust and registering the assets in the trust ("funding the trust").  In our example, the widow may have decided to register $20,000 of her $60,000 into the Medicaid Asset Protection Trust.  That way, she would still have $40,000 of funds in her name and direct control, but the other $20,000 would be protected from Medicaid.  If she later required nursing home care, she would not have to worry about spending the $20,000 in the trust before qualifying for Medicaid.  This is a much better result for the widow if she requires long-term care in the nursing home, in that she would qualify for Medicaid and could retain $2,000 in her name plus the $20,000 in her trust.  Upon her death, the assets remaining in the trust could be distributed to children or others as directed by the widow, without probate court involvement.

There are other situations when a properly drafted Medicaid Asset Protection Trust would be recommended in Michigan; the above is just one example.

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Elder Law attorney Andrew Byers assists clients in Auburn Hills, MI and throughout Oakland County, MI including Rochester Hills, Rochester, Troy, Bloomfield Township, Lake Orion, Oxford, Waterford, Clarkston, Independence Township, and Pontiac, as well as throughout the metropolitan Detroit area, including Macomb County and Wayne County, Michigan.

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