We can answer this common question, “Can the nursing home take my living trust assets?” in one word.  “Yes.”  Assets titled in your own living trust (or in your name) can be taken by the nursing home.  They must be spent first, before you can qualify for MediCal to pay for your nursing home care.   This means that the assets must be spent down for living expenses, nursing home care, or exempt assets before MediCal kicks in.

Nursing Home Planning Strategies

However, there are other ways to protect your assets and the sooner you meet with an estate planning –elder law attorney, the more options you have and the more money you can protect.  Common nursing home planning strategies include long term care insurance, income only trusts, gifting programs, annuities, and the purchase of exempt assets such as a new roof for the house, a television for the room, and a lift chair as well as paying off the mortgage or car.

Are You the Beneficiary of Someone Else’s Living Trust?

On the other hand, if you know you’re someone else’s beneficiary, you may want to have a chat with him or her and ask that the assets come to you in an asset protected beneficiary trust.  If you receive assets in trust, they can’t be taken by the nursing home, divorcing spouse, or another creditor.

Conversely, if you receive an inheritance or gift outright, in your individual name, it can be taken by the nursing home, divorcing spouse, car accident creditor, bankruptcy creditor, and the like.

A Loved One Can Give You Protection You Can’t Get for Yourself

While your own revocable living trust cannot protect against your creditors such as the nursing home, someone else’s can.  Consult with a qualified estate planning attorney to determine the best way to own your assets, plan for nursing home care, and give/receive an inheritance or gift.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Many folks such as spouses attempt to use jointly owned property to avoid probate.  Jointly owned property avoids probate, but only at the first death.  If probate is avoided at the second death, it’s, likely because the assets have been placed in joint names with a new spouse and your children may be disinherited.

The best way to avoid probate is with a fully funded revocable living trust.  A trust is funded when all assets are either titled in the name of the trust and the beneficiary designation (of contract assets such as life insurance and retirement plans) is changed to the name of the trust.

In addition to not working to avoid probate, jointly owned property (i.e. joint tenants with right of survivorship) should be avoided for its many pitfalls such as accidently disinheriting your children.

For example,

Sally owns her investment accounts, bank accounts, and real estate jointly with her spouse, Frank. They have three children. 

Sally dies and Frank inherits all the assets, outright, and in his individual name. 

Frank remarries; his wife’s name is Jane.  Being used to owning everything jointly with a spouse, Frank puts all of the assets that he and Sally owned together in joint names with Jane.

Frank dies.

Jane inherits everything.

Frank and Sally’s three children are totally disinherited.

The above example is of a first marriage with jointly owned assets.  In a second marriage with jointly owned property, if you die first, your children will absolutely be disinherited.

Instead, look what happens if trust planning is used to avoid probate.

Sally and Frank set up a revocable living trust and fund it.  Sally dies.  Frank and the children inherit Sally’s share of the assets in trust.

Frank marries Jane.

Per trust instructions, the assets remain in the trust to benefit only Frank and the children.

Frank dies.

The children receive Sally and Frank’s assets in their own individual lifetime trust shares.  All is well.

If you want to avoid probate, but not disinherit your children, consult with a qualified estate planning attorney and avoid jointly owned property.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Funding your revocable living trust is almost, but not quite, as important as establishing your trust in the first place.  If you want your estate plan to work, your trust needs to be funded.  Failure to do so creates a hassle and costs more money.

Consequences of NOT Funding Your Trust

• The trustees you’ve named as disability trustees in your revocable living trust will have no authority to manage assets not funded into your trust.

• A conservatorship proceeding will be required if you become incapacitated and make your own financial decisions.  This means that your loved ones will have to go to court to have someone named to take care of your money and other assets.  The court may not necessarily name the same person you would have chosen.  In fact, in some circumstances, a stranger may be named to handle your money.

A conservatorship is a loss of control, takes time, is a hassle, and can be emotionally traumatic for you and your loved ones.  It’s costs a lot of money too.

• If you own assets in your individual name when you die, probate is guaranteed.  Many people seek to avoid probate because it’s extremely expensive in California.  In addition, it takes a long time to settle and get assets to the beneficiaries; and, it’s a public process, with personal financial and beneficiary information published at the court house.

• If you own assets in your individual name in a state other than the one you resided and died, ancillary probate will be guaranteed.  It’s double the trouble:  2 court systems, 2 lawyers, 2 accountings, and the like.

• You may unintentionally disinherit your children.  If you own assets jointly with your second spouse (i.e. not the parent of all of your children), and you die first, your children will be disinherited.

• You may waste your full federal estate tax exemption and all the good tax planning in your trust.  If you own assets jointly with your spouse, they will pass tax free at your death.  That may sound good, but, in reality, that just means that the taxes were delayed, not eliminated.  The taxes must be paid at your spouse’s death.

Where to Get Help with Trust Funding

Your estate planning attorney, banker, financial advisor, and insurance agent can all assist you with the funding of your revocable living trust.  It’s a lot of paperwork, but it’s worth it to make sure that your estate plan works.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Life changes as it unfolds and estate planning must reflect changes in your family, finances, and the law.  It is accepted principle to update your estate planning every three to five years or earlier if you have a significant life change.

Ronald and Rianne did their original estate planning when they moved in together after college.  They weren’t married at that time; so, they knew that they had no marital statutory (i.e. legal) rights.  They wanted to be able to make health care decisions for each other in the event of an emergency.

At what felt like the blink of an eye, it was 11 years later and Ronald and Rianne were married with three children.  One of the children has autism. Ronald has his own business as a landscaping contractor.

On a Tuesday evening, one of Ronald’s employees, while driving a company truck, falls asleep at the wheel.  The truck plows into a line of cars, waiting to make the exit to the Orange County fair.  A college student is killed, other drivers and passengers are injured, and there is much property damage.  Lawsuits are filed.

When Ronald’s lawyer begins to investigate, he determines that all of the company trucks are in Ronald’s individual name, not the name of the landscaping business.  Therefore, Ronald is personally liable for damages caused by the accident.  Fortunately, all lawsuits were settled for just under one million dollars, which was the coverage on Ronald and Rianne’s umbrella liability policy.

If they didn’t have the umbrella liability policy (i.e. personal catastrophic insurance) in place, they could have lost everything.

Shaken, the grateful couple came into our office for an estate planning review and update.  Updates included naming guardians for the minor children; creating a revocable living trust with provisions for their special needs child, pet, and asset protection trusts for the surviving spouse and children.

They also separated all personal and business assets and liabilities and completed a full insurance analysis, realizing that they needed additional life insurance and disability insurance to protect themselves and their children.

If your life has changed significantly since you last did your estate planning; or, it’s been more than five years since your executed your documents, be sure to consult with a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Many people, especially married couples, choose to own property in joint tenancy never considering that proper asset ownership is related to their estate plan.  While there are benefits of joint ownership, it’s important to understand some of the risks.  You may find that joint tenancy creates more problems than it is worth.

Take a look at the information below to better understand the possible risks, including loss of control.  Other risks include the unintentional disinheritance of children and seizure by the joint owner’s creditors.

Joint tenancy gives two people control over an asset subject to the other person’s ownership interest.  Each person owns 100% of the property.   If you own property on your own and then decide to form a joint tenancy ownership, you’re giving up some control over your property.

Take a look at the following example:

Susan decides to jointly own her home with her niece, Tara.  She makes this decision because they’ve always gotten along well and her niece is very responsible.  She’s hoping to make things easier when she gets older.

After a few years, the two are involved in a serious disagreement.  Susan decides that she wants to regain full control over her home.  Tara tells her that she won’t agree to transfer her interest back to Susan.

The most Susan can do is to ask the court for a partition so that she then owns 50% of the house as a tenant in common with Tara’s 50% interest.  Susan can then devise or sell her 50% interest.  But who would want it?

Joint tenancy is a loss of control.

Before agreeing to own an asset in joint tenancy, make sure that you carefully think through the decision. You likely want to make sure that you and your asset are always protected so joint tenancy may not be right for you.

If you have any questions about the dangers of joint ownership or how joint ownership may or may not fit in with your overall estate plan, consult with a qualified estate planning attorney.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.