July 2022 Newsletter
July 2022 Issue
Protecting Your Child’s Inheritance
Protecting Your Child’s Inheritance
A number of our clients have expressed concern about protecting the inheritances of their children. Sometimes, they worry about the security of a child’s job and what will happen if he or she loses that job in a tough economy, cannot pay bills, and loses the inheritance to creditors. Other times, they worry about the influence sons or daughters-in-law have over their children, and what would happen if their child got divorced. Some parents wonder if their children are mature enough to handle an inheritance and if they can make sound, long-term decisions on their own. Fortunately, there are a number of ways for you to leave an inheritance to your children and protect that inheritance against threats such as these and more. In addition to their ability to avoid probate and minimize taxes, trusts are some of the most effective tools to protect your children’s inheritances. Here are a few examples.
Discretionary Trusts
With these types of trusts, the trustee has complete discretion to determine trust distributions and the beneficiary cannot demand distributions. The settlor of the trust can provide guidance about distributions and withhold distributions if a child is facing divorce, bankruptcy and/or personal problems that may impact his or her ability to manage the inheritance wisely. In addition, creditors cannot access trust assets.
Support Trusts
In the case of a support trust, the trustee is required to make distributions for health, education, support, or maintenance to the beneficiary if so desired by the beneficiary. Only certain creditors, known as “super creditors,” can access the trust assets. Examples include child support/alimony payments, claims for services that “protected, preserved or enhanced the beneficiary’s interest,” and state/federal government debts such as tax liens.
Spendthrift Trusts
These trusts prevent the beneficiary from voluntarily or involuntarily transferring his or her interest in the trust and protect trust assets from most creditors, excluding the super creditors described above.
If you are concerned about protecting your children’s inheritance against threats posed by creditors, predators, or even their own poor decisions, we can structure your estate plan to provide the level of protection ideal for your particular situation
Managing a Medicaid Crisis
In the United States, the median monthly cost of a semi-private room in a nursing home is currently more than $7,700. The cost of a private room exceeds $8,800 per month. In the Commonwealth of Massachusetts, the cost of a private room is $15,000 per month and climbing. These costs vary by state. In addition, costs rise according to the level of care needed and they are expected to increase dramatically in the future. According to local home care agencies, in-home care in Massachusetts costs upwards of $600 per diem (or $18,000 per month). To make matters worse, nearly 70 percent of us over the age of 65 will require long-term care at some point in our lives and 20 percent of us will need long-term care for five years or more.
All of this helps explain why so many families exhaust their life savings within a few years of a family member entering a nursing home. And why more than half of all nursing home stays in the United States are now funded by Medicaid (called MassHealth in Massachusetts).
A MassHealth Crisis is a situation where a person has already moved to a nursing home, or must enter one in the very near future, and has been informed that he or she owns too many assets to qualify for assistance from MassHealth to pay for it. Given the high cost of nursing home care, this situation is indeed a financial crisis for all but the wealthiest families.
If you or a loved one is facing a MassHealth Crisis, try to remain calm. Much of the information we hear about from friends, relatives, nursing home staff, caregivers, and many others is outdated or incorrect. A qualified elder law attorney can help you obtain assistance from MassHealth if you must enter a nursing home next month, next week, or tomorrow. In fact, it is possible to get MassHealth assistance even if you are already in a nursing home. And if you have applied for assistance in the past but you have been rejected, it is entirely possible that a qualified elder law attorney can still obtain the financial assistance you need.
You’ve worked too hard to lose your life savings to the nursing home. Don’t let misinformation or unexpected life changes prevent you from getting the financial assistance you need and deserve.
A Personal Note From Susana
It’s not just the documents
I often receive calls like this: “Mom or Dad is in their 80s; and they have no documents. They need fill in the blank, and how much do these pieces of paper “cost?”
First, I have never met Mom or Dad. Second, I don’t know if they have the legal capacity to understand what they might sign; Third, what some people want will not work with their life-style, financial situation and health issues. And, when I receive a call like this, I generally view Mom or Dad as the client, no matter who foots the bill. (that’s legal ethics—and it is still alive and well in my office!) In our business being a “paper mill” without a plan and without understanding who Mom or Dad are means we cannot effectively serve what really might be their needs.
At Lannik Law, we want to find the best solution for a client’s particular need. If you are looking at Estate Planning, then there might be some serious tax considerations that attend what we do. If it’s Medicaid planning, it is even more tricky. While the IRS can cost your family money, the Massachusetts Division of Medical Assistance can deny support for your care which could run upwards of $15,000 per month in private pay for at-home care or for help in a facility. For example, after a thoughtful discussion and review we might conclude that a trust or durable power of attorney (which you may have originally asked for!) is an appropriate resolution of the problem you present. And if it is not, then we can make other recommendations. We can help with the Medicaid spenddown process without causing a disqualification. And we can work through an estate plan to minimize or eliminate potential estate taxes.