The Law Offices of
F. Michael Hanson 

Elder Law, Nursing Home Asset Protection Planning 
Nursing Home Medi-Cal Eligibility and Benefits Planning
 Medi-Cal Lien Avoidance, Special Needs Trust Planning
Protective Living Trust Estate Planning
(925) 973-0969

Protective Living Trust Estate Planning and Nursing Home Asset Preservation Planning for California Residents
Words to the (Long Term Care and Estate Planning) Wise

Here are some thoughts I want to share with those who are retired, or who are assisting parents or friends who are retired, or who someday plan on retiring themselves:

1) Long term care insurance may be too expensive for you.  Before you purchase long term care insurance, be absolutely sure that you can comfortably afford the premiums that you will, forever thereafter, be paying.  To help you make this determination, pretend first that you are retired right now, and on the fixed retirement income you would be receiving right now.  Under these circumstances could you easily (and I do mean "easily") afford the long term care insurance premiums you would have to pay?  Remember that the cost of all other items you purchase (food, utilities, gasoline, etc.) will have a tendency to increase as time goes on - especially the cost of medical care, medical insurance, and the prescription items you will need (these costs always exceed the overall inflation index).  The premiums for long term care insurance may later become a burden if you do not have income adequate to handle the increases in all of the other necessary items you need.  And if you have to stop paying these premiums because you can no longer afford them, the long term care coverage disappears (there won't be even a little of it available for your use, and there will be no refunds, or a return of a cash value for all those premiums you paid out).  Long term care insurance is an "all or nothing" deal, so you want to make sure you can comfortably afford it.  If not, back away! 

Think about it.  Does it make sense to make yourself "poor" now (and cripple your lifestyle from this day forward) so you'll have "some" money to help you manage a possible disability later?  Also remember that long term care policies often do NOT pay enough benefits to "keep you home" if you become disabled.  And this is even more the case if you can only afford to buy "a little" coverage.  Furthermore, if you do have to go into a nursing home and Medi-Cal coverage needs to be obtained, the long term care benefits will often wind-up being paid to the nursing facility (for the spouse who is ill) and not to or for the spouse who remains at home;

Long term insurance is oversold!  Be careful.  Purchase long term care insurance NOT out of fear, but with a mind to its true economic benefit.  Don't throw your money away on a product which you can't afford, which will uncomfortably decrease the financial freedom you now have, and then later, if you become disabled, not be adequate to keep you at home.

2) Annuities may not be for you (unless you have other abundant sources of ready cash)! Annuities may sound like great investments (it's true, their tax-deferred rates do seem attractive), but once your money is in one, it's tough to get it out.  What if you needed to withdraw a sizable portion of the annuity money in order to pay for your in-home care?  Would you want to lose your invested money to the annuity "penalties" which (always) apply?  Ask questions about, and pay close attention to, the consequences of having to withdraw your money from the annuity product being sold.

Annuities are oversold!  Remember, as you get older, you may need your cash to help care for you at home, and if that's the case,  you won't want to ask an insurance company for your money back, you'll just want to go to the bank and get it!

3) Beware the deluge of fraudulent junk-mail. That letter you received in the mail - the one about the lottery you have won - and most of the other unsolicited mail you are receiving which promises money or prizes, or includes checks, IS FRAUD!  Do NOT send the money they say will guarantee your lottery prize (or any other prize or benefit).  And do NOT call these solicitors and provide them with your private information like bank account numbers, social security numbers, etc. 

These days, you (in your golden years) are the most popular target for scam artists and con-men.  These people were not raised with the same values and moral principles you were.  So be careful!  Remember, the old saying: "if it sounds too good to be true, IT IS!"

4) If you've suffered a stroke or other debilitating injury, do NOT think that it is necessary to gift away your cash, investments, and real property immediately.  Remember, the State of California cannot make a claim against any of your property until it spends "dollar one" on your care through the Medi-Cal (not Medicare) system (don't worry about Medicare - neither the State nor the federal government attempts to recover for your Medicare coverage).  And if the State starts spending money on your care, it can only later recover the amount of money it actually spent on your care.  It is not entitled to a "windfall"; it can't take your "entire house" simply because you've become Medi-Cal eligible and are receiving benefits.

Consider first, and very carefully, the unfavorable aspects of giving away your property prematurely: the adverse income tax consequences to the person who receives the gift; the fact that gifting money or property away can make you ineligible for Medi-Cal benefits; but, more importantly, the fact that your gifts will result in the loss of the very assets which would be used to keep you home (and where their loss might well condemn you to a nursing home sooner than you would otherwise need it!)

Wouldn't it be better to have an estate plan which preserves your assets for your use first, allows your children to transfer your assets at the time when those transfers become exactly necessary, and then with the income tax benefits you would want them to retain, and without State liens or estate claims?  You might want to make sure your estate plan documents provide these options (and yes, that's where I come in).  An updated and more complete set of "asset protective" durable power of attorney documents will serve to better preserve and protect your assets for your husband or wife, and also for your children, in the event you should become permanently confined to a convalescent hospital or nurisng facility.

5) Are your existing estate plan documents truly protective? Your existing estate plan documents (if you have such) no doubt leave your trust estate to your loved ones, for instance, your children, and then maybe your grandchildren (if one of your children should unexpectedly predecease you) .  But are your existing estate plan documents written in a manner which will protect your children's or grandchildren's inheritance?  For instance:  

  • where one or more of them might be "under age" and you would prefer that someone else manage their share of the estate and pay for their health, education, and support expenses until a specified age - such as 25 or 28 or 35, etc.?   i.e. to prevent a young child's mismanagement of his own money; 
  • where one or more of them is in the midst of a divorce proceeding and child or spousal support is an issue; 
  • where one or more of them is suffering from a chemical dependency or substance abuse problem, or has an appreciable history of the same, and a substantial inheritance would be seen as exacerbating or re-creating the problem; 
  • where one or more of them is suffering from large debts or creditor problems, has a judgment or tax liens pending, is involved in litigation, or is in bankruptcy; 
  • where one or more of them is suffering significant emotional distress, or living riotously or irresponsibly, or has demonstrated significant financial instability; 
  • where one or more of them has joined a "cult" type group or appears to be under the influence of persons who would attempt to deprive the beneficiary of his or her inheritance; 
  • where one or more of them has suffered an accident/disability and is receiving governmental benefits which would be terminated by an inheritance (and whose share should therefore be converted into what is commonly referred to as a "special needs trust" so the governmental benefits will not be lost, but instead supplemented); 

And there are other examples which indicate that protective measures be installed in your estate plan documents.  Of course, we never expect that any of these misfortunes will befall our families (and in my documents you would recite that you are adding these provisions out of caution and not because you doubt the integrity of your children or other beneficiaries).  However,  pressures, problems, mistakes, and poor decisions, as well as just "bad luck" can (and do) happen. 

Because I do not expect that Social Security and Medicare will be viable enough to assist my daughter when she retires, I want to make sure that I pass as much of my estate on to her as possible, and see that it is protected in light of any misfortunes she or her family may be suffering at the time.  Your children deserve the same.

It might be time to create estate plan documents (or update the ones you currently have) to provide a measure of protection you (and your beneficiaries) do not now have.  I have saved my clients and their families literally millions of dollars with careful and effective estate planning, and I create estate plans which utilize extensive protections for the benefit of my clients and their families.  My fees are reasonable.  I realize and appreciate that my elder and retired clients need not (and should not) spend inordinate amounts for quality estate plan documents - or for the services which follow. 

6)  Are professional legal fees necessary, appropriate?   There is a common fear that attorneys will over-charge for their services, or that their services are more expensive than one would ever want to experience.  But remember that the ordeal of overly large attorneys fees typically comes in the area of litigation - where attorneys "spar" against each other, almost uncontrollably at times, and all "on the clock", and all on "your dime".  In estate planning and asset protection, fees are comparatively less expensive, but are very necessary because of the "system" which stands to consume more of what you have if you're not careful: estate taxes, income taxes and the income tax consequences of actions not carefully taken, property taxes and property tax reassessments, Medi-Cal spend-down requirments, Medi Cal ineligibility, Medi Cal estate claims (sometimes referred to as Medi-Cal "liens"), inadvertent loss of assets or the control of your assets, probate expenses, and expensive conservatorship proceedings.

It is always pleasant to think that a single annuity purchase, or one simple transfer, or "cheap" estate plan documents prepared by a "trusts-R-us" document preparation service will solve "all the problems".  But this is simply not the case.

For instance, if you purchase an annuity in order to obtain additional Veteran's benefits (to help with assisted living expenses), did you know (were you even told?) that if you later need skilled nursing care that most, if not all, of what is left in that annuity will have to be paid to the nursing facility, and even if you are eligible for Medi-Cal benefits?    Whoops! 

For instance, if you gift your home, or an interest in it, to your son (because you fear you may someday need nursing care), did it occur to you that if your son is in an authomobile accident and has no (or insufficient) insurance, that his judgment creditors can levy their judgment on your home?    Whoops!

An English Philosopher (John Ruskin 1819-1900) wrote:
    "It is unwise to pay too much, but it is worse to pay too little.  When you pay too much, you lose a little
    money - that is all.  When you pay too little you sometimes lose everything because the thing you bought 
    was incapable of doing the thing you bought it to do.  The common law of business balance prohibits 
    paying a little and getting alot - it cannot be done.  If you deal with the lowest bidder, it is well to add 
    something for the risk you run, and if you do that you will have enough to pay for something better."

We have all heard this, simply, as: "you get what you pay for", or... "don't be penny-wise and pound-foolish".... 

        (By the way, John Ruskin also said: "Say all you have to say in the fewest possible words, or your
         reader will be sure to skip them; and in the plainest possible words or he will certainly
         misunderstand them"
.....  I may have violated this piece of wisdom already...)




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