If you missed Part 1 of this series, you can find it here.

Part of Carolina Family Estate Planning’s mission is to provide free education and resources to the community. We believe strongly that best way to help the elderly is to clear up the many misconceptions about the Medicaid program. These myths cause too many of society’s most vulnerable citizens to make mistakes that can cost them thousands of dollars or cause them to spend every last dime of their life savings before seeking help with nursing home and medication costs.

That’s why we’ve again chosen to write about the common Medicaid myths we hear in the community:

“I have to give away everything I own before I can get Medicaid”

All Medicaid recipients are able to keep some of their assets and still qualify for benefits. The key is understand what Medicaid considers an “exempt” versus a “non-exempt” asset in North Carolina.

For instance, a single person in North Carolina can keep a few items, including the house they lived in before going into the nursing home, one automobile, a specific type of pre-paid funeral plan, personal belongings and up to $2,000. The laws surrounding what a married couple can keep are even more complicated and vary depending on each individual’s specific set of circumstances.

That’s why it’s important to have an elder law attorney review your financial situation before you apply for benefits.

“I can only give away $13,000 per year or I won’t qualify for benefits”

We frequently hear from individuals who have lost the opportunity to preserve thousands of dollars because they believed this myth. In fact, the $13,000 figure is an IRS rule regarding when a gift tax return should be filed and has nothing to do with Medicaid law.

The truth is that every state has a different amount of money that seniors can give away without creating a long period in which they are ineligible for benefits. When done correctly, the state allows individuals to give away far more than $13,000 a year.

In fact, North Carolina has laws in place that allow individuals with a disabled child to give away their assets, including their home, and still qualify for benefits. But this must be done with the assistance of legal advice from a qualified elder law attorney.

“Our pre-nuptial agreement shows that everything belongs to my husband”

North Carolina does not take pre-nuptial agreements into consideration when determining Medicaid eligibility. All assets owned by either spouse are considered jointly owned and must be divided and spent-down exactly as they would if there was no pre-nuptial agreement in place. The only way a pre-nuptial agreement is effective is if the couple actually divorces.

Proper estate planning and expert legal advice can ensure that the wishes of both spouses are honored regardless of which one needs nursing home care.

Medicaid was considered a complicated program when President Lyndon B. Johnson first signed it into law at the Truman Library in Independence, Missouri, and it has grown even more complex during each of the thirty years since.

Although it is a national program, it is administered by each state. The rules and regulations are constantly changing and can vary widely from state to state. So, it’s no wonder there are many myths and inaccuracies surrounding the program.

This month, we are taking a look at the common misconceptions we hear frequently about Medicaid.

“My mother heard about someone who…”

All too often, we meet people who have heard horror stories about Medicaid from well-meaning friends or family members. These stories are often filled with inaccuracies and half-truths that frighten people into spending every last dime on nursing home care for themselves or a loved one before turning to Medicaid for help.

Similar stories have also prompted people to assume that what worked for a friend will work for them as well. So, they may give their house or all of their assets to a child in hopes that impoverishing themselves will immediately qualify them for benefits. Unfortunately, they soon find out that these transfers mean they are unable to receive benefits for several months or even years after the money is gone.

That’s why it is important to contact an attorney who concentrates his or her practice in elder law. With a clear picture of your specific situation, an elder law attorney can explain those laws that should allow an individual or married couple to preserve their house and enough of their assets to live comfortably for the rest of their lives.

“My father is already in the nursing home so there’s nothing we can do now.”

It’s true that a family can wait longer than they should to contact an elder law attorney but it’s rarely ever too late to establish a good plan. A good rule of thumb is that the earlier a plan is put in place, the more assets can be preserved.

So, when is the right time to call an elder law attorney? You should pick up the phone right now if you or a loved one does not have a Power of Attorney in place for financial and health care decisions. It’s important these documents are put in place before a gradual or sudden decline in mental competency occurs. It’s also important to make sure the financial Power of Attorney contains the right language so Medicaid planning is possible–most of the ones that we review in our office do not include the required language.  If you’re unsure, you should have your power of attorney reviewed by an elder law attorney right away.

You should also call right now if you think that nursing home care will be needed by a loved one. This may be due to a diagnosis of a terminal or debilitating illness, such as Alzheimer’s, Parkinson’s or ALS. It may also be that your loved one is being discharged from the hospital and told he or she will be unable to care for themselves at home. All of these situations should be reviewed by an elder law attorney to determine what type of planning can be done.

“The Medicaid office can just give me the paperwork.”

Those who work in the Medicaid office cannot offer you legal advice. You may not learn about laws that may allow you to receive Medicaid and still keep part or all of your spouse’s income as well as your own. Nor can they represent you or give you advice on the laws that, depending on your specific situation, may allow you to keep all of your assets without spending down a single penny. Medicaid has rules and regulations in place to ensure families don’t lose everything to nursing home costs. An elder law attorney can explain how those laws may benefit you and your family.

Let’s say that you have decided to follow your Physician’s advice and complete your Health Care Directive, thus providing a clear understanding of your wishes as they relate to life sustaining measures. You understand the significance of having a Health Care Directive, but as you research the process you are confronted with a lack of understanding regarding what life sustaining measures encompass.  This is a common frustration.

Life sustaining measures can be defined as, “Any medical treatment in which the primary goal is to prolong life rather than treat the underlying condition.”  In such cases an individual’s own body is not capable of sustaining proper functioning on its own without medical intervention.

Artificial nutrition and hydration are utilized when an individual is not receiving the nutrients necessary for health and well being. Artificial nutrition (tube feeding) requires a tube be placed into the stomach or the upper intestine.  Hydration (fluid replacement) involves tube placement intravenously (IV) via a needle.

Cardiopulmonary resuscitation (CPR) is used when an individual’s heart beat and/or breathing has stopped.  CPR includes treatments such as mouth-to-mouth resuscitation, chest compressions, electric shock and/or drugs to restart the heart.  CPR can be life saving, however, there is a risk of broken or cracked ribs, punctured lungs and death.

Mechanical ventilation supports a person’s breathing when they can no longer breath on their own. In this situation a machine called a ventilator forces air into the lungs via tubing in the mouth or nose.

Dialysis is the artificial process by which waste products and excess water are removed from the blood. It’s used when the kidneys are no longer able to do this adequately.

These examples of life sustaining treatments are just a few of the more common measures taken to continue life when one or more body systems are not working properly.  Deciding what, if any, treatments are right for you should depend on several factors:

Does the treatment relieve suffering, restore functioning, or enhance the quality of life?  If so, these would be some of the benefits of treatment.

Conversely, a treatment may be considered problematic if it is painful, prolongs the dying process or negatively effects the quality of life.

Other questions to ask yourself might be: What are my values as they relate to life prolonging measures?  Who will carry out my wishes should I become incapacitated?  If I start treatment and it does not improve my status will I want to continue that treatment? If so, when?  (It should be noted that it is ethically and legally acceptable to discontinue a treatment that is no longer of benefit. It is the disease not the withdrawal of treatment that causes death.)

How you choose to complete your Health Care Directive and what measures you choose to take are up to you.

Talk to your doctor and don’t be afraid to ask questions if you find the terminology confusing or you simply don’t understand.

Ultimately understanding your Health Care Directive and the medical terminology associated with it will enable you to communicate your wishes to those providing your health care and increase the likelihood that your wishes will be honored.

If there is an organization or charity that you support financially, as a Cary trusts lawyer, I would urge you to consider setting up a charitable trust.  A charitable trust allows you to give money to an organization whose work you admire and support, but there is also an additional benefit in that you may be able to reduce your estate taxes.

One way that people use charitable trusts is to set aside assets to produce income while they are alive, with the remainder going to charity when they pass away.  This allows them to receive tax benefits while they are still living from a gift that will be made when they die.  In this scenario, both the donor and the charity will benefit.

There are two main types of charitable trusts.  They are:

• Charitable lead trust. You can use a charitable lead trust to make a series of payments to a charitable organization while you are alive.  At some point in the future the remaining assets in the trust either given back to you or transferred to someone that you select as beneficiary.  In a way, the donor is lending the assets to the charity for a period of time during which the charity can use the income produced by the assets.

• Charitable remainder trust. In this type of trust, you set up two sets of beneficiaries called income beneficiaries and remainder beneficiaries.  The income beneficiaries, typically the trust owner and/or his or her family, receive income from the assets in the trust during their lifetimes.  When the beneficiaries pass away, all remaining assets are given to the charity who is the remainder beneficiary.  This option has the added benefit of missing estate taxes entirely.

The rules for these types of trusts are very complex.  If you are interested in charitable trusts, I encourage you to seek out a qualified trusts attorney and tax advisor who can guide you through the process.

I hear the same excuse over and over….

I don’t have an “estate.”

I have more debt than assets.

The only thing I have is my home.

As you may have guessed, these are excuses that people make for not preparing an estate plan. These people are sadly misinformed. They think estate planning is only about money. Estate planning does take care of financial issues, but the way I see it, the most important reason for doing an estate plan is for the benefit of the people that you leave behind.

Estate planning is essential for senior citizens who are concerned about the well-being of their loved ones. No matter what your level of wealth happens to be, there are decisions that will have to be made if you become incapacitated or when you pass on.  If you don’t leave detailed instructions for the type of medical care you want or what to do with your things, you will be putting those you love most in the position of being a mind-reader. They will have to do their best to figure out what you would have wanted and then deal with the consequences such as unhappy family members who disagree with them. Do you really want to cause this type of stress for them at a time when they are already upset and mourning?  I doubt it.

I realize thinking about these things is not easy or fun, but approaching it in an organized manner may help. Here’s a list of things to consider when planning your estate:

1. Talk to close family members and let them know how you would like to handle the dispersal of your assets and sentimental items. Also, talk to them about the type of medical care you would like to receive should you become incapacitated. Chances are, if everyone knows your plans ahead of time, there will be fewer arguments and a lot less stress.
2. Prepare a list of all of your assets including your home, your financial accounts, insurance policies and any personal possessions.
3. Make a list of everyone that you would like to be a beneficiary of your estate. You may also want to include organizations that are meaningful to you, such as charities, churches, schools or universities or civic organizations.
4. Plan for how you would like your pets cared for if something should happen to you.
5. Make a list of passwords, PIN numbers and other codes that someone might need and store them in a secure place (be sure someone know how to access).
6. Think about who you would like to put in charge of your medical care and who you would like to oversee the dispersal of your assets. You can appoint different people for these critical jobs.
7. Consult with an experienced estate planning attorney who can offer advice about how to arrange your estate so that the person you put in charge of your financial and medical decisions will have the fewest complications.

These steps alone will go a long way in reducing the stress that your loved ones will experience. Isn’t their well-being enough reason to do an estate plan?

If you answered “yes,” then be sure to give our office a call at (919)443-3035 and ask to schedule a Peace of Mind Planning Session.

Individuals engaged in estate planning often get panicky when they hear the word “probate.”  When the term hasn’t been fully explained by a probate lawyer (and sometimes even when it has), it conjures visions of long waits, loss of inheritance, and many other hassles for heirs of an estate.

To calm these fears (and to avoid working with an attorney), many people consider the idea of adding one or more of their children to their bank accounts.  Generally speaking, each “joint tenant” of an account has complete access to the money, but when one dies, the entire amount becomes the property of the other joint tenant(s).

This may seem like a logical way to directly transfer money to heirs without going through the probate process, but a skilled probate attorney in Cary needs to keep clients informed of potential pitfalls of this approach:

• As it has already been mentioned, all joint tenants have access to the funds in the account.  This means that either party can withdraw money at any time.  If the child added to the account is not entirely trustworthy, this can be a devastating reality when the money is used inappropriately.
• Any money received by the child may be considered a gift, which means that it is subject to a variety of gift tax laws.  A Cary estate gift tax attorney will be able to keep you up-to-date on current laws and regulations in our area.
• Creditors for both parties can have access to this account.  That means that if one joint tenant dies (even the one who is not in debt), the other’s creditors can go after the money they jointly held.  Keep in mind that this means that if the child has had credit problems, those creditors may have access to the parent’s money.  This could include not just creditors, but lawsuits and divorce as well.
• Money left in the event of the parent’s death will only be accessible to the other joint tenant(s).  If one child has been responsible for the majority of a parent’s elder care and therefore is on the account, he or she will likely have no legal responsibility to share those funds with other siblings.  Again, trustworthiness is an important issue.  And even if the child wishes to share the funds with his or her siblings, there may be gift tax consequences to doing so.

If you are considering adding a loved one to a bank account as a means to avoid probate, it’s important to at least talk to a Cary probate attorney about your options. You may find that simply giving your loved one power of attorney over the account or holding your assets in trust may be more preferable based on your circumstances.

The following article originally appeared in an issue of Planning Partners Press, a free newsletter provided courtesy of Carolina Family Estate Planning to Triangle-area financial professionals.  If you are a financial professional that would like to learn more, please click here to request a subscription.

What if Santa and Mrs. Claus decided to do an estate plan? Although they would doubtless be great clients, the actual plan could be challenging.

What is the size of the Claus estate? It is extremely hard to calculate, even for Mr. and Mrs. Claus. Their accountant merely shrugs when asked. Unless estate taxes are totally repealed forever, Santa has a tax problem. Santa’s toy making business is prospering. He has enough inventory to supply every child on earth with at least one toy each year. There are now over 6 billion people on earth, and if just half of those are children, and if Santa spends just $20 on each child, he is spending 60 billion dollars per year on Christmas gifts alone. Apparently this formal gifting program is not reducing the size of his estate nor his tax liabilities sufficiently since he’s continued to do this since the 4th century.

Another consideration for Santa’s estate plan will be caring for the hundreds of elves that work in his shops and are apparently totally dependent on his largess for survival. There are no known relatives to serve as guardians in the event of Santa and Mrs. Claus’s joint demise. And even if relatives can be tracked down, it is doubtful that they will have the wherewithal to care for so many dependents. We might want to consider starting a charitable organization that establishes homes, jobs, and caretakers for these magical little people.

Santa has also invested a lot of time, money, and love in his wild animal preserve. Besides the normal elk, caribou, and polar bears, Santa has successfully bred a unique species of flying reindeer and at least one with a light-emitting snout. It’s likely that several world zoos will be clamoring to add these animals to their collection, but it would be advisable for Santa and Mrs. Claus to make some of these decisions ahead of time, and use these charitable opportunities for further estate tax planning.

Obviously, death isn’t the only concern for the Clauses. If Santa were to be disabled by a collision with an aircraft, a fall from his sleigh on a fast take-off, or a gunshot wound from someone who mistakes him as a burglar, the business could be in trouble. Mrs. Claus has had her hands full taking care of the elves, and hasn’t had a lot of direct involvement with the toy making. It might be wise to pick some key elf employees from executive management who can be trained to take over. Perhaps an ESOP is appropriate, or a pre-negotiated buy-sell agreement. Due to his advanced age (approximately 1600), and the fact that he is overweight and smokes, life insurance is also unlikely – but should not be ruled out because of his overall good health and vitality.

One other issue to be considered is citizenship. Although we think of Santa as an American icon, he was actually born as Nicholas of Myra in Anatolia – which is now southwestern Turkey. Rumor has it that he met Mrs. Claus while watching the annual tree lighting at Rockefeller Center in New York. If Mrs. Claus is a U.S. Citizen, proper tax planning will require her to at least prepare a Qualified Domestic Trust.

Obviously, planning for Santa and Mrs. Claus will be a daunting task requiring our best efforts. Like Santa, our firm wishes you a “Merry Christmas to All”, Happy Holidays, and a Happy and Prosperous New Year.

This article was original featured in our newsletter last year. Don’t receive our newsletter?  If you’re a Triangle area resident, sign up here.

At Carolina Family Estate Planning, we just love creating Priceless Conversations™. During the holidays, you can create your own special memories by asking friends and family the interview style questions below and then recording them on CD.

1. As a child, what were your three favorite holidays or seasons of the year?  What made them special?
2. Describe how your family celebrated Thanksgiving, Christmas, Hanukah or other similar holidays.  What were your family’s traditions?
3. What special foods were part of your family gatherings?  Who prepared those foods?  Do you still prepare them today?
4. What family traditions would you like to carry or see carried forward?
5. Was there an unique or unusual event or tradition that your family celebrated? How did that celebration get started?
6. If you celebrate birthdays, what was the most memorable birthday you can recall and what made it special?

If you have lost a loved one and are now attempting to close out their estate, we are sorry for your loss and we understand how frustrating the process can be.

The steps to take after the loss a loved one can be overwhelming, but requesting a death certificate is a great place to get started.  You will need a death certificate to complete many of the administrative tasks that you will face in the weeks to come, so it only makes sense to order a copy of this as soon as possible.

While the exact process to order a death certificate can vary from county to county, there are basic guidelines that you can follow to make the request for a death certificate as quick and easy as possible.

Let’s take a look at these guidelines:

I typically recommend ordering 8-10 copies of your loved one’s death certificate. As mentioned above you will need them for many tasks over the next few weeks, so it’s best to have them on hand. The easiest way is to order them through the funeral home, as there is generally a lag time when you order straight from the county recorder’s office.

Make sure to have the following information readily available when filling out the request:

• Full name of the deceased
• The date of death
• The place of death
• The deceased’s date of birth
• The purpose of your request
• Your driver’s license number
• Provide a self-addressed stamped envelope along with your request
• Typing or printing the information is helpful

If you are still not sure how to properly obtain a death certificate for your loved one, or you need to know whether or not you should obtain one based on your responsibilities, contact our Wake County attorney at the Carolina Family Estate Planning  by calling 919-443-3035.

The death of a loved one, particularly if the deceased is a spouse or parent, is one of the most difficult periods in a person’s life.

At a time when the survivor is already struggling with loss and grief, the administration of the deceased’s trust can be an overwhelming and daunting task. That is why many beneficiary/trustees choose to “leave things the way they are” and ultimately take no action regarding the administration of their loved one’s estate. This is especially true if the trustee is the same person as the beneficiary.

Again, sheer overwhelm is one reason for this, but beneficiaries/trustees also hesitate to administer their loved one’s estate out of fear they will encounter expensive legal costs, endless probate, or tax situations they may not be equipped to handle. Whatever the reason, people have been known to delay for months, or even years. Unfortunately, most of these beneficiary/trustees are unaware of the legal and fiduciary responsibilities of their position.

As a trust administration lawyer in Cary, part of my job is making sure my client is thoroughly informed about what to realistically expect from the trust. Most clients appreciate that assets held in trust are much easier to administer and distribute after death than through the probate process, but they also need to know that the successor trustee is required by law to do many things before the distribution of assets can occur.

As the requirements and obligations for trust administration can vary from state to state, it is important to be conscious of the role and the responsibilities for the beneficiary/trustee in Cary.  Duties include, but are not limited to the following:

• Notifying beneficiaries
• Valuation and Liquidation of Assets
• Paying Debts and Taxes of the Trust
• Filing Tax Returns
• Distribution of Remainder of the Assets to Beneficiaries

Additionally, it is compulsory for the trustee to follow the accounting and reporting requirements of the state and courts, and to be responsible for defending the trust against all claims of creditors or excluded heirs. Although the trustee may be unacquainted with all of these duties, an experienced trust lawyer knows exactly what is involved and can prepare forms and guide the administrator through the process.

That’s why for many people, having a lawyer who handles trust administration on their side makes this difficult time go more smoothly and eases the administrative burden of having to close out a loved one’s estate.   If you are now in this position and would like further information about how our firm can help you, please feel free to give our office a call at 919-443-3035 and ask to schedule a complimentary consultation.