When to Make and Appointement
Probate: Many people have heard of it, few know what it is.
Probate is the court supervised procedure in which your property is inventoried, your debts are paid, and your property is distributed to your beneficiaries. If you die with over $150,000 of assets and you do not have a living trust, your estate will most likely go through probate, even if you have a will. If your estate is less than $150,000, or if you are married and it is your spouse that died, there are a variety of summary administrative procedures that can be used to transfer property to your spouse or your heirs.
The two main problems with probate are time and expense. A typical probate will take nine to eighteen months from start to finish. Probate attorney fees are based on the gross value of your estate.
For example, an estate consisting of a $500,000 house will generate probate attorney fees of $11,150, even if there was a mortgage on the house. This attorney fee does not include fees for extraordinary services, such as fighting a will contest, selling real property, or preparing tax returns. These are all billed at the attorney’s hourly rate.
In addition, your personal representative is entitled to the same percentage fee as the attorney. In the above example, your personal representative would also be able to receive a $11,150 fee for a total of $22,300 in fees. In the case of a living trust, the fees to settle the trust, including the fees payable to your trustee, would typically be $2,000 to $10,000 and the trust would be able to be distributed within six months (in many cases).
In most cases, probate should be avoided. In all cases, it can be avoided through proper estate planning. Sometimes, however, you have no choice. It is at those times you need an attorney who is familiar with probate and who can navigate you through the process.
Special Needs Trusts
A special needs trust (often referred to as an SNT) is a trust that is setup for a person who is disabled (or might become disabled) as a way to set aside money for that person without jeopardizing their ability to continue to receive or apply for needs based public assistance such as SSI and Medi-Cal (Medicaid). SNTs are used for a variety of purposes. These include paying for traveling companions, clothing, furniture, medical costs not covered by Medi-Cal, transportation, home electronics, paying for a private room in a nursing facility, paying rent and other housing costs, buying groceries, paying utilities, etc.
There are two major types of SNTs. The first type is a third-person SNT. This is setup by a person as part of their estate plan to benefit another person (typically a parent setting one up for a child). The SNT can be created directly in the creator’s will or trust or it can be created as a separate, standalone trust. Both options have advantages and disadvantages which can be explained during a free consultation.
The second type is called a first-person SNT. These types of SNTs are created on behalf of, and funded with, the money of the disabled person. Because of this, there are several differences between these and third-person SNTs. Typically, this type of SNT will be needed when the disabled person receives a large sum of money that they may or may not have been expecting. Typical examples include receiving a personal injury settlement, receiving a death benefit from life insurance, or receiving an inheritance. There are a number of requirements that need to be met in order to create this type of trust. These requirements, as well as the applicability of this type of trust, can be discussed during a free consultation with me.
If you can qualify and afford it, long-term insurance is a good investment for you and your family. In addition to paying for skilled nursing care, a good long-term care policy will pay for in-home care and stay in either residential care or assisted living facilities. Most long-term care policies expire after a pool of benefits has been paid out (typically two or four years). Also, your long-term care policy may not cover the entire cost of skilled nursing care.
The last option to pay for skilled care is to apply for and receive Medi-Cal. In order to receive Medi-Cal, you must meet certain eligibility requirements. First, you must meet certain asset requirements. Assets are divided into two categories – exempt and non-exempt. Exempt assets are not counted in determining Medi-Cal eligibility while non-exempt assets are counted in determining eligibility. A single person is entitled to have $2,000 of non-exempt assets. A married couple can have $111,560 in non-exempt assets ($2,000 for the ill spouse and $109,560 for the healthy spouse). In addition, the healthy spouse is entitled to have a minimum monthly income of $2,739 and may be entitled to keep assets over $109,560 in order to generate enough income to make-up for any shortfall in income the spouse may have.
In order to qualify for Medi-Cal, it is often necessary to take non-exempt assets and convert them to exempt assets. It is also possible to give away assets in order to qualify for Medi-Cal. If you, or your representative (with proper legal authority) give assets away, you will be ineligible for Medi-Cal for a period of up to 30 months. Done properly, with the advice of an elder law attorney, a gift that would otherwise generate 22 months of ineligibility may only generate 4 months of ineligibility. In all cases, it is important to remove the Medi-Cal recipient’s name from assets after qualification in order to prevent the state from attempting to file an estate claim after death for reimbursement for benefits paid.
In order to implement these and other techniques, it is necessary for your spouse and/or your children and other beneficiaries to have legal authority to make gifts, remove assets from your name, and convert non-exempt assets to exempt assets. Most estate plans do not build in this flexibility because the attorney that drafted the document did not practice in the field of elder law. If your estate planning documents do not contain the proper provisions, it will be necessary for your spouse and/or your children and other beneficiaries to go to court to get legal permission to take these actions. It is very important to have an elder law attorney review your estate planning documents to make sure that these provisions are present. If not, your estate plan can be amended to include these provisions.
Even if you have a loved one already in a nursing home, many of the these techniques can still be utilized, although it will often involve seeking a court order.
An elder law attorney will analyze your situation and make recommendations as to the best way to reposition assets in order to qualify for Medi-Cal. Once the plan has been implemented and the time comes, an application is submitted. If the application is approved, Medi-Cal will begin to pay for the applicant’s skilled nursing care. If the application is denied, then the applicant or his or her representative may file an appeal.
In any case, this is a very complicated field of law and the services of an elder law attorney are vital, in particular since California will be implementing the Deficit Reduction Act later this year which will make sweeping changes to the Medi-Cal rules, particularly with regard to eligibility.
Call me at (408)513-3626 or contact our office today to make an appointment to discuss how this type of planning may benefit you. To get your copy of the “Consumers Guide to Medi-Cal Planning” Click Here
There are three types of conservatorships: probate conservatorships, limited conservatorships, and LPS conservatorships.
A probate conservatorship is brought on behalf of an adult who is unable to make personal and/or financial decisions for himself or herself. A probate conservatorship is often necessary in the event of a stroke, coma, or if a person suffers from dementia. The conservator may be given the authority to make personal decisions, financial decisions, or both. A conservator may not place a conservatee in a locked or secured perimeter facility nor authorize the administration of psychotropic medications unless the conservatee suffers from dementia and after the court has held a hearing regarding these issues.
If a conservator is given the authority to make financial decisions, the conservator will need to prepare and file an inventory with the court, will need to post a bond, and will need to prepare an accounting showing how the conservatee’s assets have been spent, one year after appointment as conservator and every two years thereafter.
A limited conservatorship is for developmentally disabled adults who were diagnosed with their developmental disability prior to turning eighteen. The limited conservator will be able to make personal and financial decisions for the limited conservatee, but only in those areas they ask the court to grant them power in.
Typically, a limited conservator will be able to make medical decisions for the limited conservatee, determine where the limited conservatee will live, access the limited conservatee’s confidential records, make educational and vocational decisions for the limited conservatee, and contract on behalf of the limited conservatee. Other powers may be asked for and will be granted at the court’s discretion. A limited conservatorship may also be used as a vehicle to create a special needs trust to shelter money or other assets the limited conservatee may have received, such as an inheritance. The special needs trust will allow the limited conservatee to continue receiving SSI, Medi-Cal, and other needs-based public benefits.
An LPS conservatorship is brought by the county in order for the Public Guardian (a county agency) to make medical, personal, and financial decisions for a person who is considered gravely disabled due to either chronic alcoholism or mental illness. Once the process has been started, usually through the County Counsel on behalf of the Public Guardian, a concerned individual, usually a relative, may petition the court to be appointed the LPS conservator, acting in place of the Public Guardian. If the court agrees, that individual will then be in charge of making medical, personal, and financial decisions for the conservatee. An LPS conservatorship must be renewed every year.
If the minor’s parents have died or are considered unfit, a relative or concerned individual may petition the court to be appointed guardian of the minor’s person. If granted, that person will have full authority to make personal decisions on behalf of the minor. Typical personal decisions include health care and schooling. A guardianship of the estate is usually not necessary in these cases as the minor will usually not have an estate of his or her own.
If a minor receives cash or other assets (typically the result of receiving life insurance benefits), a guardian of the estate will need to be appointed to receive the money on behalf of the minor. This will often be necessary even if the minor’s parents are still alive, particularly when dealing with insurance companies. In most cases, the money will be placed into a blocked account until the minor reaches the age of eighteen.