Planning for Boomers and Beyond

Most people view estate planning as merely disposing of assets after death.  This misplaced understanding leads many people to take the most expedient and elemental path with their Will.  Many people will simply go online to fill out a basic Will.  They think nothing of the risks to their assets and the role a well thought out estate plan can play in addressing these risks. 

Mind you there is nothing wrong with having a basic Will and it will work for some people.  However, those in the baby boom generation and many others are missing a tremendous opportunity.  An opportunity to protect their assets from creditors, unforeseen future spouses, the IRS and the State.  They will miss the opportunity to retain more control over their assets if they become disabled.  They will may miss out on a significant amount of money that can enhance their retirement years.  All of these missed opportunities inevitably lead to a lower quality of life in one’s golden years and a correspondingly greater burden on loved ones. 

Sadly many people are not even aware opportunities exist to protect assets, retain control and increase income.  Or they believe the opportunities are not available in their situation.  The truth is these opportunities exist not merely for the very rich, but for most hard-working individuals and families.  People from all walks of life who are serious about addressing their future know about and take advantage of them.

Let’s take each opportunity in turn.

Asset Protection

If your Will leaves your assets to your spouse or children outright, those assets become theirs to do with as they please; there are no restrictions and no protections.  A child can spend that money all at once and it’s gone forever.  A spouse can remarry and blend those assets with those of the new spouse, die and wind up with the new spouse and his or her family getting everything.  Even if your spouse doesn’t remarry and winds up having to pay the full cost of long term care or other uncovered medical expenses, the assets will most likely be depleted.  In each of these scenarios, you have protected nothing.

However, if you leave your assets to a spouse or a child as a beneficiary of a trust those assets are under the control of a trustee.  If properly drafted, the trust can allow a spouse or child access to certain money, but protect the balance of the assets.  The assets sitting in a trust are generally protected from the beneficiary’s creditors, new spouses and, possibly even the government.  This type of asset protection is available to everyone, and there is very little reason not to take advantage of this opportunity to protect the property you worked so hard to acquire.

Just as important, if the trust is drafted as a “safe harbor” trust for Medicaid purposes, your spouse or child, if either are or become disabled, may receive or continue to receive the medical or long term care benefits provided by the Medicaid or VA programs.  Moreover, if the trust is drafted properly, the assets in the trust will not be available to the repay the State or for other creditors.  This is a tremendously powerful asset protection opportunity that many people can use to their benefit.

This type of planning works best with married couples.  Single individuals have fewer options available to them which means early planning essential.  If you are single and plan early enough, you may still be able to use a trust to provide for loved ones while enabling yourself to qualify and receive Medicaid or VA benefits.  In such a situation you may be able to create an irrevocable trust while you are alive, transfer certain assets to that trust (retaining other assets to live off of and pay for care) then once those remaining assets are depleted, qualify for benefits. 

There are many other tools one can use to gain asset protection:  IRAs, 401k’s, permanent life insurance, limited liability companies, etc.  None of these tools will enable a person to retain the assets and qualify for Medicaid or VA benefits.  Even if a person does manage to qualify all assets in the person’s name at death will be available to repay the State for benefits paid during life.  To obtain the benefit of this planning, it is important act early and obtain the assistance of an attorney experienced in this area of law.

Control

The standard thinking about a power of attorney is it gives control over your affairs to someone else.  Often a power of attorney sets out a standard list of authorizations to deal with real and personal property, paying bills, opening accounts, etc.  But here is the missed opportunity.  These documents are your ticket to telling your attorney-in-fact (the person who acts for you) how you want your money and assets used while you are alive. 

You have the opportunity to empower the attorney-in-fact to obtain in home care (if appropriate) or to hire a geriatric care manager/coordinator who will assess your physical and mental situation.  A care manager will be your advocate with doctors, social workers and the state to get you the care and support you need.    The attorney-in-fact will be directed to expend resources to improve your quality of life.  And, you can also give the power to take actions to help you qualify for Medicaid and VA benefits. 

Equally if not more important, you will state, through your Health Care Directive, otherwise known as a Living Will, what medical treatment you want or don’t want in the event you are in a terminal or permanent unconscious condition.  Your family will not have to guess what to do in that situation.  You will have already spelled out your wishes.

Retirement

Good financial planners will ask if you have a Will, power of attorney and health care directive.  If you do not, they often give you the names of a couple estate planning attorneys and encourage you get these done as part of your overall financial and retirement plan. 

An exceptional advisor will know that these documents can be used as part of a coordinated plan that will not only transfer assets at death, but protect those assets and increase the chances of obtaining additional financial resources to supplement your retirement income. 

Using the techniques set out above you may be able to qualify for Medicaid and/or VA benefits that will add monthly income and enable you to stretch your retirement dollars further.  As well as enabling more assets to be passed to your family.

Quality of Life

What does all of this planning mean for you?  Improved quality of life.  You will have more money to help pay for medical and long term care costs, more assets will be retained to pass to your family, fewer burdens will be placed on your loved ones as your resources will go farther and your wishes and desires will be set out in advance.    

If you are serious about taking care of your future, we look forward to meeting with you.