If you have created estate planning papers and they do not authorize your agent or trustee under limited circumstances and conditions to engage in planning to obtain government benefits, then you should probably re-visit your planning.
It is estimated that 70% of Americans who reside in nursing homes are enrolled in Medicaid.
There is nothing illegal or unethical about taking steps to try and make yourself eligible for government benefits. It is not always easy, and professional guidance is crucial to success in this arena. However, let us imagine that we are unable to take these steps for ourselves because, for instance, we are mentally disabled.
For instance, let us assume, John and Judy do their planning with powers of attorney and revocable trusts in 2003 while living in New Jersey. They do not have long term care insurance.
Now, let us assume they have moved to South Carolina and they plan on enjoying their retirement years in the warm glow of the Lowcountry sun. Let us further assume that many years later, John passes, leaving Judy as survivor.
Judy later becomes mentally disabled and is in need of 24-hour care. Judy's adult child, Maxine, is concerned about the costs of the nursing home, which can easily begin to approach $100,000 per year.
Maxine consults with an attorney to learn if her mother can do anything to qualify for Medicaid. The attorney reviews Judy's estate plan and discovers that the power of attorney and the trust does not specifically authorize her agent or trustee, Maxine in this case, to take steps for her mother to try to qualify her mother for Medicaid.
Accordingly, the lawyer informs Maxine that the legal authority to take these kinds of steps does not exist as the estate planning papers have been drawn up. Maxine is distraught, because she now knows that whatever she might have inherited will be consumed by the cost of the long term care.
This is an unfortunate result that could have been avoided with advance planning. Now, Maxine will likely not inherit anything. The state will also get her house as recovery for her expense. Fortunately, this too can be avoided with advance planning.
Aside from trying to avoid legal fees, court costs, judicial proceedings, taxes, and loss to in-laws, Judy's papers probably should have provided Maxine with the specific authority to engage in asset protection strategies on behalf of her mother.
If that authority is not in the papers, then there might be nothing left for the children.
The moral of this legal tale is that if your papers do not specifically authorize your agent to engage in Medicaid planning for you, or do not authorize your agent to do a reverse mortgage for your benefit, then they will not be able to do it. These issues are very sensitive, and without proper planning, the results can be devastating.
Mark F. Winn, J.D., Master of Laws (LL.M.) in estate planning, is a local asset protection, estate and elder law planning attorney. mwinnesq.com