Thursday Q&A: Estate Planning & Elder Law – June 18, 2020

Each week, Estate Planning and Elder Law attorney Bill Henry spends time educating the community about their estate planning options.

Estate Planning & Elder Law Q&A is dedicated to answering your questions. See what Coloradans asked on June 18, 2020. (A transcript of the event is available below.)

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All right, Bill Henry here, Robinson & Henry, back with another estate planning Thursday. I answer your questions on elder law and estate planning issues. So let’s get right into it. Got a lot of great questions today. A few of them from people that have emailed in. Also just things that I’ve heard throughout the week. Some of this stuff’s been posted to our website. But anyway, let’s get right into it.

When do you recommend someone begin estate planning, or at least begin to consider it?

So Shane from Denver wants to know, when do you recommend someone begin estate planning or at least think about it? Great question.

You Must Be Over 18

So to do any sort of estate planning, you have to be an adult, so you’d have to be over the age of 18.

For parents, and I think this is important, once your kid goes off to college, your rights as it concerns your child, for example, to get into their bank account, pay their bills for ’em, things like that starts to change because now they’re an adult.

Young People Should Have Powers of Attorney

So once someone becomes 18, we always recommend that even if they’re not gonna do a will that they at least do the powers of attorney.

What are Powers of Attorney?

So what are those? That would be your medical power of attorney, who can make medical decisions for me. And then your financial power of attorney who can make financial decisions for me.

If the child, really I guess they’re not a child anymore, then potentially also advanced directives. That’s what do I want that happen if I’m in a persistent vegetative state or terminal condition.

Having done this for a long time, I can tell you that oftentimes, I really don’t do that whenever it’s someone that’s relatively young.

First, it’s unlikely, of course, that they’re going to be in that sort of situation, but far more importantly, it just can be a little bit heavy for them to have to think about those things.

So the answer, Shane, would be that at the age of 18, would be the short answer to that. But oftentimes, of course, it’s the kids that are, or excuse me, the parents of the children that are kind of pushing to get the powers of attorney in place, if something did happen, that there’s no question as to who can make decisions for them.

Appointing a Guardian for Minors

So great question. As a concerns, sort of the will, anytime you have children, you want to make sure that you’re gonna appoint a guardian. So getting your will done at that point would be important, even if you don’t have a lot of assets. And then of course, over time, as you start to accumulate assets, then you’re gonna wanna put a will into place.

What if I find only a copy of the will? Can I use that?

Next question that I often get, and I normally answer it every time I do a signing is, what about a copy? So in other words, if I find a copy of a will, or if I can’t find the original will, and I just find a copy, or if nobody can find my will, and they can just find the copy of my will, is it good? Can I use that?

A Copy Will NOT Suffice

And the answer is no, you can’t use that. So, and I shouldn’t say no. In almost all circumstances, the answer is no.

So the presumption runs that if the will can’t be located, the original will can’t be located, then it is presumed that you intended to destroy it.

Intention to Destroy It?

So there’s another question that’s kind of related to this that we’ll talk about. And so if you intend to destroy it, well, then therefore it’s no good. And the courts really have to approach it in that direction. Because if we started allowing copies to be used, then well, what if you just threw it in the garbage, the original? How we know that you no longer wanted that will, or you didn’t want that to be valid any longer? So that’s where the presumption runs now.

If the house burns down, and the will was in the house last, well, there’s a way you could overcome the presumption.

So again, the presumption in Colorado is that if the will is in your possession last, we can’t find it, last being whoever’s will it was, if it was in that person’s will possession last and we can’t find it, then we presumed that you intended to destroy it.

So generally speaking, we do not use copies of wills. We need the original. Let’s see here.

If I qualify for Medicare won’t it pay for the nursing home?

Next question. Won’t Medicare pay for the nursing home? So this really came up from something I’d said last week, and really every week, talking about Medicaid, Medicaid, Medicaid. But what about Medicare?

Explanation of Medicare

So Medicare is the government program that everyone watching this in almost all likelihood will qualify for at the age of 65.

Now, I know you can qualify for it sooner, but we’re talking about at the age of 65, everyone’s going to be entitled to Medicare, not Medicaid.

How Much Long-Term Care Medicare Covers

And so the question is, will Medicare cover my nursing home care costs, my long term care costs and in Colorado, those can be long term care costs both in the home as well as in the nursing home itself. And the answer is yes, but only for 100 days.

Then You’re On Your Own…

So if you have Medigap and Medicare, then it will cover your long term care for 100 days, but after that you’re on your own.

When Medicaid Becomes an Option

And so why we always are so focused on Medicaid is because 100 days, is really not that long.

If someone’s going to the nursing home, it’s in all likelihood going to be substantially longer than that unless they’re just recovering from some sort of an injury.

Example:

Like, let’s say they fell down and broke their hip. But for most people, if you’re going into the nursing home, it’s gonna be for over 100 days.

Medicare will only cover you for 100 days, then you’re into private pay, unless you would qualify for Medicaid; you only qualify for Medicaid if you are income qualified.

Medicaid Qualifications

So you don’t make more than $2,349 a month. You have to have the asset qualified. And if you’re not married, that asset qualification means that you have no more than $2,000 of countable assets. And then finally, you have to be medically qualified.

And if you’re going into nursing home, you’re medically qualified. Now, although I gave you that low number on the income, just know that if I can get to it, we have a question on the Q and A, they’ll get into this a little bit more.

If you’re Caught in the Medicaid Income Gap

Just know that there are ways to overcome that income number, if that’s the hold up in qualification for Medicaid. So great question, a lot of confusion on that.

In these times of financial ups & downs, is it wise to have a fair amount of cash in the safe deposit box, “under the mattress”, etc.?

Let’s see here. What we have next is Jim. Jim, hope you’re doing well. Great to see that you’re listening in again.So, Jim, Jim’s in Lakewood. And his question is, in these times of financial ups and downs, is it wise to have a fair amount of cash in the safe deposit box, under the mattress so to speak? Great question.

Unfortunately, I’m probably not the guy to answer it. You don’t want my financial advice. So I get these kind of questions from time to time on investments and things like that. And some level, it’s not directly an investment.

Meet With a Financial Planner

But my best advice from a financial standpoint would be to do whatever the opposite of whatever I do. But in all reality, what you wanna talk to is more of a financial planner on that one. I have a great list of financial planners, if you’d like that list. I can definitely give it to you. Just email over to our team, and they will get that list too.

So good question. Sorry, I can’t answer it. But you wouldn’t want my advice anyway, Jim. So, but thanks for listening and again I really appreciate it.

Can you decline being appointed the trustee of someone’s estate?

Okay, this is someone from Aurora. Can you decline being appointed trustee of someone’s estate? So two different things in there.

Trustees & Personal Representatives

We’re never gonna be a trustee over an estate in Colorado. We’re gonna be a personal representative over the estate. We’re going to be a trustee over a trust. So what’s the difference?

The Personal Representative

So personal representative is the person that’s appointed executor, a lot of people have heard it termed in someone’s will, whereas a trustee is the fiduciary appointed in someone’s trust. Well, let’s answer the question. The answer is the same for both.

You are Never Obligated to Take on the Role

So you do not have to be the personal representative or the trustee. It doesn’t matter, either one. You have no obligation to assume those roles.

Likewise, if you did assume that role, you can also resign from your position. How you resign is really going to be laid out in the document itself, but for the most part, you’re just giving notice to the next person in line if there is one.

If the grant, the trust maker, the one that made the trust is still alive, you’re gonna give notice to them. And then if not, there’s gonna be some other ways that you do it that get a little bit more complicated but oftentimes, it’s really just laid out in the trust document itself.

When does a will become invalid? If you forget you have a will and create a new one, what happens? Does a new will cancel an old will?

So I’m gonna kind of handle these three similar questions. And I added a little bit in on this because I do get this a lot. It all has to do about when does a will become invalid?

So the question we got was, when does a will become invalid? But I also want to talk about, well, what happens if you create a new will, but you had this other will, you just forgot about it, or you couldn’t find it or whatever the case may be? And then does a new will cancel an old will. So they’re all sort of related.

When a Will Becomes Invalid

So let’s talk about it in line, so when does a will become invalid? It becomes invalid whenever the person that made the will has the capacity to revoke the will does so. Well, what does that mean?

So let’s say we take our wills and we go, I don’t like this will anymore. I can’t stand it. And you rip it up, and you tear it right down the middle and you throw it out. Well, you just invalidated the will.

On the other hand, let’s say you take the will and you throw it into the fireplace and you light it on fire, same thing. You scribble all over it, all through the material portions of it, then likely your intent was to destroy it.

Does a New Will Cancel the Old Will?

And then now kind of getting into the next one, does a new will cancel the old will? It just depends on what you wrote on the new will.

So if you say in your new will that this will revokes all prior wills and codicils, a codicil’s an amended to a will, well, then you just revoked all prior wills.

If the question though is, does a will become stale or old or does it become invalidated? The answer is no.

If that will was valid, the way that you did the signing ceremony and it met all the formal requirements of the will, and we’re talking about Colorado specifically, but oftentimes this applies to all states, then it’s gonna be completely valid. It doesn’t matter. It’s always going to be valid. It does not have an expiration date.

Updating Your Will

You may want to update that will, because life circumstance changes your beneficiaries change. You may have a new child, your personal representative or executor, or trustee may all of a sudden no longer be capable of that position. You may have a falling out with a family member and need to disinherit him.

So the rules need to change over time, and you definitely wanna update and review them. But if it’s meeting your goals, then it’s valid.

So and an attorney, when you talk with an attorney, they would be able to tell you that. So if you talk to them and say, well, here’s my concerns on this will, but do I need to update it?

The real answer to that question is, are there changes that you don’t like in this will, assuming that it was executed properly, so? So that’s the answer to that.

Are estate planning fees tax deductible?

Dennis. Dennis is in Colorado, and he wants to know, are his estate planning fees, his attorney’s fees tax deductible? The answer now, so current law is no. They are not tax deductible.

So let’s dig into that a little bit more. So the law before the Tax Cuts and Jobs Act was that estate planning fees associated with tax planning, the portion of those of the estate planning fees, those could be tax deductible.

They were subject to the miscellaneous itemized deduction.

That changed though, under the Tax Cuts and Jobs Act. That’s no longer deductible. That law then sunsets in 2025, which once again, they will become deductible.

But again, remember, we’re subjecting things to the miscellaneous itemized deductions.

So depending on how you file your tax returns, it may not really impact you one way or another, but great question on the tax. So let’s see what else here I have, if I could find the one. Let me at least, I’ll talk about a question that we got on the Q and A.

My mom is 95. She has too much income to qualify for Medicaid. Because I live with mom, is my income also hers?

I’m gonna paraphrase a little bit, but the woman’s mother was 95 years old. And she ran into a problem qualifying for Medicaid.

Mom Makes Too Much Money to Get Medicaid

And that issue was that she made too much money to qualify for Medicaid. So she made over $2,349. But she made less than the amount that nursing home wanted her to pay. And then there was the monthly fee.

So average costs of nursing homes in Colorado is about $8,500 a month. So what do you do if you make over that $2,349 but less than the cost of the nursing home care, that monthly cost. You’ve got a major issue there.

Here’s How to Handle It

So what we do is we create what’s called a Miller trust or, in Colorado, a income trust.

You may hear it termed a Medicaid qualifying income trust. Lots of different terms, but they all do the same thing.

We create a trust and we put the person’s money that’s going into the nursing home to the extent required into this trust and all that trust’s job is, the trustee over that trust, their only job is to take that money and to pay it over to the nursing home.

That allows you to get over that income prong that I was talking about before.

The Medicaid Income Test

So again, for anybody that’s just tuning in, when we want to qualify for Medicaid, there’s three different tests we need to meet.

One is a asset test, we can only have a certain amount of countable assets. If you’re not married, that number is $2,000 of countable assets. We can only have income of $2,349 per month.

And then we must be medically qualified. Maybe we need to go into the nursing home. So if we have an issue with this income prong of the test that’s how we can get over it.

If you make more money per month, though, then what the nursing home care costs, you’re probably not gonna qualify for Medicaid, nor in that case would you need it. Great. Great question, though that came in on the Q and A this week.

I have a number of investment properties. I plan to leave them to my children. How do you work those into an estate plan? Are they handled differently from other real estate like, say, your residential property?

Okay, Gale from Denver. So she says that she has a number of investment properties and she wants to give them to her kids. How does she work them into her estate plan? And are they handled differently from other real estate like residential, primary homes and things like that? So great question, Gale.

It just depends on what your statement is and how you would handle that. Let’s kind of walk through a few examples.

So let’s say you have a trust-based plan. So the first thing we know is that they’re investment properties. So an investment property, most people, most people should hold them through some form of a company. That would be like a LLC or a corporation. And people are doing that for asset protection reasons.

So if we do that, and we put the properties into a company themselves, and they’re already in the company, we don’t wanna take them out of the company just to put them into the trust, because that trust isn’t going to give you a whole lot of asset protection.

So instead, what we do is we would put the interest in the LLC. The ownership of the LLC would go into the trust, meaning that the trust would own the company and the company would own the property. You would own the trust, so that’s one way.

If you didn’t like or wanna do that, and you’re like, well, I’m absolutely not putting these pieces of property into some sort of a company, well, in that case, you would just put them into the trust.

In other words, you’d retitle those properties, the deed will go into the trust itself. So that would be one way to handle it.

Let’s look at the question here and make sure there’s nothing else on that. But yeah, so that’s that would kind of cover it. So if we don’t have a trust plan, I guess we can talk about that.

So if you do not have a trust type of a plan, then the question is where would the property go in that case?

And that just depends on two things. How do you have the property titled? So if you have the property titled say in, let’s say, you’ve got two children. I don’t know how many kids you have. But you have multiple. So let’s say you’ve got three children, and property A you put in your name and your son’s name, and you’ve got two other kids, but your will says that I want this property or all of my assets to go to my three kids equally.

Well, then the question is, who’s going to get that house? Does the will override what it says in the title? And the answer is no, the will does not.

So in my example there, your son would actually end up with the house.

So we need to make sure we coordinate the asset with the entire estate plan or otherwise some funky things can happen and properties can go where you don’t want them to go.

Like I talked about last week, we also don’t want your son’s problems, his creditors in my example there, to become your problem.

So not always the best way to put your kids on title to your house. Generally, not really a fan of that. Sometimes there’s a few circumstances where it makes sense. But generally we don’t wanna do that.

So if you don’t have a trust based plan, then it’s going to go whatever your estate says. Assuming you’re the only person on title, we would look to your will in that case. So if it’s just you on the title, then after you pass where’s it gonna go? It’s gonna go through probate.

Probate’s gonna look to your will and your estate plan and what does your will say? Does your will say this particular property, property A, goes to one of my kids, or instead does it say, my three kids divide everything I have equally. Everything you have, of course would include that one property so, but really, really good question.

Feel free to email me if you have any follow ups on that. Let me see here quickly if we have anything else. All right, think I’ve got them all. Talked about the taxes. All right, that’s it. I think we’ve got them. All right. We’ll leave it at that. Relatively short. If you’ve got any follow up questions or additional questions on estate planning and elder law, I appreciate you sending them to me. Always gives me something interesting to talk about. So feel free to send them along, as many as you’d like. And I will talk to you next week. Assuming, of course, I can find the end of it. All right, I’ll talk to you next week. Again, Bill Henry from Robinson & Henry. Join us every Thursday at 11:00 a.m. for our estate.