Elder Law's Most Frequently Asked Questions
1. Do I need a will?
2. Do I need a living trust?
3. Should I add a family member's name on my assets and avoid a will?
4. If I need nursing home, will my spouse and children lose everything?
5. Will my family have to pay estate taxes at my death?
1. Do I need a will?
You may find it difficult making time to prepare a will because of the busy world we live in and the natural tendency to avoid anything to do with sickness and death. However, having an estate plan is important, regardless of how much money and property you own. Planning in advance keeps you in control and helps prevent unnecessary complications and family discord after your death.
Estate planning is not just signing a simple will. Estate planning involves reviewing your primary goals and your secondary goals in the event that one or more of your beneficiaries predecease you. Estate planning may include considering estate tax reduction techniques in the event you have a taxable estate. It may include drafting trusts for the protection of family members with creditor problems, or who are disabled. Estate planning may also include making provisions for charities. Estate planning always includes a review of how assets are titled. For example, jointly owned bank accounts, jointly owned real estate and life insurance or individual retirement plans with beneficiary designations have to be coordinated with your estate plan to make sure the assets go according to your wishes. Simply put, estate planning is different for each individual.
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2. Do I need a living trust?
A living trust is a way for you to manage your assets while you are living and competent. It provides for a person or trust company to take over the management if you become incapacitated. In Maine, living trusts are good tools if you do not have a trusted individual to name in a durable power of attorney. A living trust is helpful if you want a trust company or bank to manage your assets in the event of your incapacity. Living trusts are also more private than wills. Avoiding probate is commonly cited as the primary reason for a living trust. In Maine, however, probate and legal fees are reasonable and the probate process is not lengthy. In fact, it may cost more to create and transfer the assets to a trust than to go through probate. Also living trust are often subject to stricter rules by MaineCare (formerly called Medicaid) in the even that nursing home care becomes an issue.
Finally, living trusts do not reduce estate taxes. Estate planning involves evaluating each particular situation and weighing the advantages of a living trust with the costs and complexities associated with it.
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3. Should I add a family member's name on my assets and avoid a will?
Assets owned jointly with right of survivorship generally go to the survivor. This is a common and useful way to own assets between spouses. It is also common for seniors to place a child's name on assets for management convenience. However, adding your child's name to bank accounts and other assets means giving the family member an ownership interest and places your assets at risk from the family member's wrongful use and creditor's during your life. At death, the jointly owned assets or life insurance and other assets with beneficiaries go automatically to the person name din the instrument regardless of what your will provides. Generally speaking, a power of attorney is a better tool because it permits a trusted person to manage your assets for your benefit, but does not give him or her an ownership interest.
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4. If I need nursing home, will my spouse and children lose everything?
Nursing home costs average over $60,000 per year in Maine. Medicare and medical insurance cover only a limited period of skilled care in nursing homes. Long term care insurance covers nursing home care and is an option that should be seriously considered. However, it can be expensive and you often cannot obtain long term care insurance if you suffer from a chronic illness or have a memory issue. MaineCare (formerly called Medicaid) is a welfare program, but is the largest payer of nursing home care in Maine, as well as the nation.
A single person will not be eligible for MaineCare coverage for his nursing home costs or assisted living costs until the person's "countable" assets are less than $10,000. Although a person's home is not usually counted as an asset, the State usually has a claim to be paid back after the person dies and before the children or other beneficiaries receive the home. For a married person with a spouse not residing in a nursing home, the healthy spouse can retain the home, a motor vehicle, generally all their personal belongings, and $90,600 in countable assets. The nursing home spouse can also keep $10,000.
Within the MaineCare laws, there are legal ways to make "countable" assets uncountable. There are ways to protect part or all of the home and other assets. The options depend on a number of factors that need to be explored and discussed with each person.
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5. Will my family have to pay estate taxes at my death?
Under current law, if the gross value of all of your assets (whether or not subject to probate) is greater than $1,000,000, the federal and estate taxes may have to be paid at the time of your death. Although there is no estate tax for assets left to your spouse, without proper planning, you may be paying unnecessary taxes at the time of your spouse's death. The estate and gift tax laws are in a period of uncertainty. The $1 million estate tax exemption increases to $1.5 million in 2004 and will gradually continue to increase until estate taxes are eliminated in 2010. However, under current law, the estate tax is reinstated in 2011. Thus, if your estate is greater than $1 million, your estate plan should be reviewed to make sure that it meets your goals in this period of uncertainty.
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