Personal Finance, Retirement and Living Wills

Personal Finance, Retirement and Living Wills

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Published on September 4, 2013 by
Categories: Financial Planning

No one wants to think about the logistics, legalities and massive paperwork that comes with growing older. With the uncertainties associated with the new healthcare laws, it’s little wonder that both financial planners and estate planning lawyers are coming together for the greater good of those planning to retire in the coming years.

This week, we thought we’d explore a few of the eventual realities we’ll all face to some degree. With the National Estate Planning Awareness Week coming up in a few weeks, it’s even more important to understand where things are and where they’re going so that we’re empowered to make the right choices for our retirement.

One of the first questions asked by many who are applying for Medicaid (and more on Medicaid itself a bit later in this post), is whether or not they may keep their checking account, followed by questions on reducing their assets via gifts in order to qualify for Medicaid. First – it’s important to understand that while there are greater universal guidelines, each state still has its own laws that govern estate planning and qualifying for Medicaid. A financial adviser or estate lawyer can provide further insight into the specifics of your state.

The Cash

Medicaid does allow you to maintain your bank account. You cannot, however, allow your balance to be more than $2,000 (and again, check with your state for specifics). Even if there is another person on the account, the same rules apply. Having more than the allowed amount could jeopardize the approval process or you could have your coverage rescinded in its entirety. Also, recipients are allowed to keep around $70 each month from social security while the rest of it is relinquished to Medicaid for covering nursing homes and other expenses.

Medicaid and Look Back

Medicaid is a federal insurance program that provides coverage to those over the age of 65, who have limited income and who may or may not be disabled. There are other requirements for those under 65 and who wish to qualify for Medicaid. Most states incorporate the federal guidelines for poverty as their measure of eligibility.

After you’ve applied for Medicaid, a case worker will be in contact. One of the first things that case worker will do is begin a “look back”. Because it is illegal for Medicaid applicants to give away their assets in order to qualify for Medicaid coverage, new laws now require a period for investigating the financial specifics as far back as five years. Penalties and denials could result if it’s discovered you’ve given assets away. It’s not so much as giving it away that’s problematic, but rather, only giving your assets away while keeping them in your possession.

Paying Down Debt

That’s not to say, however, that you can’t pay down your debt; in fact, most estate planning attorneys encourage clients to pay off their credit card debt, personal loans, car loans and any other payables. Plus, you can also name an executor to serve as part of your living will or trust, which can help your family avoid the time consuming and expensive probate process. A living trust is a compilation of those who manage property and other assets for your benefit. Essentially, one creates the trusts while they’re still able to do so and then transfers the assets or property to the trustee named in the living trust. It’s a way of pulling it all together so that your wishes are honored upon your death. It also allows for your named executor to continue paying down your debt.

Many people are turned off by the fact that they’re basically giving up ownership. While that’s true, it’s also true that you maintain complete control over your property as long as you’re alive. You can continue to do with it what you wish.

No one wants to be forced to spend down their assets on nursing home bills or other considerable medical expenses not covered by insurance. The good news is that if there is a spouse who will not be living in the nursing home, they will not be required live in poverty just to pay for your care nor will they be forced to sell the home you share; however, Medicaid can bill the estate if that spouse dies. That means there may not be a lot left to will to your heirs.

Avoiding Probate

Finally, and this is perhaps the one bit of advice layers and financial counselors wished their clients understood. You can avoid probate simply by having your legal bases covered. Put into place a living will and a simple will. You can outline your expectations in terms of how the estate will settle unpaid debts and other expenses. Remember, too, that if your assets have someone else’s name on them, your heirs are not guaranteed to benefit monetarily or materialistic.

Not sure of the difference between a living will and a simple will?

A living will is a legal document that spells out all of the details on the kind of care you would like to receive should you become incapacitated. It also provides information on what you don’t want. For instance, if you’re stricken with a disease that offers no hope for recovery, a living will can serve as a roadmap, of sorts, that directs your medical team on what they should and shouldn’t do. You need to decide if a feeding tube is acceptable or maybe your survival rests on a machine that keeps your heart beating. provides the detail. Many opt for a living will because they want absolutely no extraordinary measures taken on their behalf. After all, there’s a difference in living and being alive. Grieving family members may not be able to make that distinction.

On the other hand, a simple will (or just ‘will’) speaks for you after your death and when it’s filed properly, it allows you to leave your property to whomever you choose.

Of course, it’s absolutely crucial that you seek out legal assistance via an estate planning lawyer. Be sure he knows exactly what your assets are so that can work with you to devise the ideal plan for your needs.

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