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SUCCESS STORY OF THE MONTH – AN OUNCE OF PREVENTION IS WORTH A POUND OF CURE

Although this is a factual situation where assets are preserved even without proper planning, it is best to plan so the risk is reduced.

FACTS: 34-year-old single mother (“Susan”) gets hit by a car while walking in the street. Susan’s injury is so severe that she needs skilled nursing care. Susan lacks mental capacity and has a limited life expectancy. Susan has no long-term care insurance, but she also has no assets – so Susan gets Medicaid which helps pay for her skilled care (otherwise, the cost of care is $8,000 a month which she cannot afford). Subsequently, Susan’s mother (who was single) dies intestate (without a Will). Since Susan is an only child, she inherits her mother’s only asset – which is her mother’s homestead. If Susan had owned her homestead which she had lived before needing care, it would not count as a resource for Medicaid eligibility (although it would be subject to Medicaid estate recovery to the extent Medicaid benefits are advanced). Susan never lived in the home (although Susan’s 16-year-old son lived in the home with his grandmother who is Susan’s mother). Since it was not Susan’s homestead, it was a countable resource for Medicaid upon inheritance. Susan inherited the property as the only heir under the Texas laws of intestacy, which would jeopardize Medicaid eligibility since she could only have $2,000 of countable resources. If Susan’s mother had simply had a will with a special needs trust for the benefit of Susan, then there would neither have been the potential loss of Medicaid eligibility nor the need for guardianship of the estate of Susan. This is when we were called. We advised, upon receipt of the home after an heirship determination, Susan (through the guardian of her estate since she has no power of attorney) place the property up for sale since real estate placed for sale is not a countable resource for Medicaid eligibility. If Susan had financial power of attorney, a court proceeding would not have been needed. Furthermore, approval of the judge would be needed to place the property for sale. However (even if the property is placed for sale), when Susan dies (which could be soon) Medicaid would have a right to make a claim against the home (to the extent Medicaid benefits were advanced for Susan) that she inherited possibly resulting in the 16-year-old (who also would need a guardian) no longer being able to live in the home. Notwithstanding the same, we have advised that a minor child (her only child is 16) inheriting is an exception to a successful Medicaid estate recovery claim. So, if the homestead is never sold during Susan’s lifetime, Medicaid is maintained and Medicaid estate recovery would be avoided. If Susan sold the home through her guardian, then the court could have permitted the creation of a management trust so that the sales proceeds would not count and Medicaid eligibility would not be lost.

Although we believe the goals of Medicaid retention and that Susan’s home will be preserved for her son based upon the plan above, everything was risked and there are far greater costs as a result of the failure to plan. Susan’s mother should have had a Will with a special needs trust. Susan should have had a power of attorney and a Will. As a result, (1) an heirship determination will be needed since Susan’s mom died without a will and there were debts owed by her estate; (2) guardianship will be needed for Susan; (3) court approval to place the property for sale will be needed; (4) guardianship will likely be needed for Susan’s son since he is likely to have no living parent at the time of Susan’s death or he will need to be emancipated (be treated as an adult through a court proceeding); (5) there may be a need for court approval for the creation of a trust if the house is sold; and (6) there will be additional proof to the state in connection with Medicaid to avoid a successful claim by the state to recover the benefits it advanced. An ounce of prevention is worth a pound of cure. Simple planning could have avoided these problems.

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 virtual 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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