15 Tips On Estate Planning From A Texas Elder Law Attorney’s Perspective

15 Tips On Estate Planning From A Texas Elder Law Attorney’s Perspective

Although planning for disability and death should always be considered in estate planning, the potential need for public benefits or loss of valuable public benefits (such as Medicaid or Veterans’ benefits) should not be overlooked. The following are a few examples of what planning options should be considered.

  1. Every will or trust should plan as if a beneficiary is disabled
    Contingent disability trusts in a will or trust should be considered if an individual is a beneficiary. Even if the beneficiary has sufficient assets or is not presently disabled, the beneficiary may not be competent or have the capacity to handle the assets or may lose capacity at a later date.
  2. Under Medicaid rules, a special needs trust for a surviving spouse can only be created through a will
    Although revocable living trusts are useful in planning to avoid probate and to avoid guardianship over the assets of a grantor should the grantor become disabled, a special needs trust (where assets held in the trust are non-countable and not subject to Medicaid spend-down) can only be established for a surviving spouse through a will of the deceased spouse (not by revocable trust). This is particularly important for those who have no long-term care insurance or inadequate income or resources to pay for care and want to preserve resources from Medicaid spend-down while also protecting remainder beneficiaries.
  3. Joint revocable trusts could be a problem for continued Medicaid eligibility
    Under Medicaid rules, if one spouse is on long-term care Medicaid and the other spouse is living in the community, then the countable resources of the spouse who is on Medicaid must be below $2000 within 1 year (often a married couple could have hundreds of thousands of dollars and be eligible). If the revocable living trust was jointly created, then it is likely the resources would be greater than $2000 and eligibility would be lost as a result.
  4. A homestead deeded into a revocable living trust counts as a resource
    While some elder law attorneys deed a homestead into a revocable living trust if there is a married couple if it is anticipated to get one spouse on Medicaid to purposefully count the home as a resource, many elder law attorneys think this is too risky. Most attorneys who are not elder law attorneys simply deed the homestead into a revocable living trust without considering long-term care Medicaid ramifications.
  5. Ladybird deeds and Transfer on Death deeds avoid Medicaid estate recovery
    Usually, the most valuable asset of many is their homestead. If Medicaid benefits are advanced, the state has a right to be reimbursed and recover the benefits advanced (i.e., nursing home care costs, drug costs, etc.). Under Texas law, the state has a right to make a claim against the homestead if it passes by probate (will or intestacy) to the extent Medicaid benefits are advanced. Ladybird (enhanced life estate) deeds and Transfer on Death deeds avoid probate preserving it for the intended beneficiary or beneficiaries.
  6. Financial Power of Attorney should consider the ability of agent to create trusts
    There are numerous types of trusts that could be useful in planning for public benefits ranging from qualified income only trusts to revocable trusts to various asset protection trusts. However, statutory forms do not include this “hot” power. This would be considered only if you trust the agent.
  7. Financial Power of Attorney could consider right to partition
    Since there is no transfer penalty between spouses and Medicaid requires transfer of countable resources from the institutionalized or ill spouse to the well community spouse within 1 year of eligibility, the ability to partition, coupled with a testamentary supplemental needs trust for the benefit of the institutionalized spouse, should be considered in future planning (assuming the agent and spouse are trustworthy).
  8. Financial Power of Attorney giving the right to make transfers
    There are numerous exceptions to long-term care Medicaid’s transfer penalty rules within a 5-year “look-back” period including transfers to (1) a spouse, (2) a disabled child, (3) irrevocable 529 (college education fund for grandchildren under 21), (4) UTMA account for anyone under 21, and (5) blind child. As a result, this “hot” power should also be considered. Also, if one is qualified for certain VA benefits, then transfers are permitted since the claimant did not make the transfer to obtain eligibility.
  9. Financial Power of Attorney giving broad power to create Ladybird deed
    Since Ladybird deeds avoid a successful claim from Medicaid estate recovery in Texas, the agent under the power of attorney should be given that power to protect the home. It should be mentioned that an agent cannot create a transfer on death deed under state law.
  10. Assets Protection Trusts for Medicaid
    For those who do not have taxable estates and have no long-term care insurance or inadequate income to pay for care costs, Medicaid asset protection trusts could be considered (subject to a 5-year look-back period).
  11. Asset Protection Trusts to protect against the loss of certain Veteran’s benefits if homestead is sold
    Wartime veterans or their spouses are often entitled to certain benefits that could be lost if the homestead (which is not countable) is sold during the lifetime of the veteran or his or her surviving spouse. Capital gains tax and other planning issues also should be considered.
  12. Declaration of Guardian in event of later incompetence or need
    Although most estate planning attorneys at least discuss this document (which tells the court whom you want as your guardian should the need for guardianship be needed at a later date), it should probably be considered in more estate plans as a result of the graying of American.
  13. Don’t forget to review beneficiary designations
    If a beneficiary is receiving valuable public benefits, an inheritance could jeopardize valuable public benefits. Life insurance policies, retirement accounts, annuities, paid on death accounts, etc. should be reviewed for proper planning.
  14. If your will didn’t have a special needs trust and a beneficiary is on Medicaid, your will can be modified after death at probate
    Texas laws permit modification of a will after death when probating so that public benefits are not lost.
  15. For those disabled at a young age, consider ABLE accounts in addition to Special Needs Trusts
    If one is disabled before age 26 (changes to age 46 on 1/01/26) and on Medicaid, an ABLE account can be established and the funds held in the account do not count as a resource. ABLE accounts are more flexible than Special Needs Trusts as it recognizes the significant cost of living. However, unlike Special Needs Trusts, only an amount up to the annual exclusion (presently $18,000) can be deposited annually. Special Needs Trusts can be established with funds of the beneficiary up to age 65. Both ABLE accounts and Self-Settled Special Needs Trust (unlike third party special needs trusts) must have the state as a remainder beneficiary to the Medicaid benefits are advanced.

If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.

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