Removing your House from your Trust

There are ways to remove your house from your trust, but work with an estate planning attorney to do so while preserving the trust benefits!

Occasionally clients ask for assistance in removing their house from their trust.  They do so to facilitate refinancing the house, the client wants to add a relative to the title, to ensure the home is considered a residence for Medicaid purposes or some other similar issue.  There are a number of issues to consider before doing so as the recent nj.com article entitled “I want to revoke a trust on my house. What do I do?”  points out.  Whether it is a good idea to remove your home from your trust and actually doing so will require the assistance of an experienced estate planning attorney.

The answer to a question about how to get a house out of your trust is going to be in the trust terms themselves. However, if the terms of the trust are silent, the answer may be found in the trust laws in the state statutes.  If answering the question in general terms, the primary concern is whether the trust is revocable or irrevocable.

The first step is to determine whether the trust is revocable.   Most clients use revocable trusts, so assuming it is a revocable trust, the trustor (person who set up the trust) has the right to remove the house from the trust.  The trustee (probably the same person) can execute a deed conveying the property from the trust to the trustor.  That takes the property out of the trust.

In the majority of cases, this will solve the problem.  Also, if the property was removed to refinance, you can safely convey it back to the trust once the refinance is done.  Similarly, if a client wants to add someone to title to change where the property goes at death, it is often better to just change the trust terms to leave the residence to the beneficiary.  This is often better for taxes as well.

If the trust is irrevocable, it means that the house can’t be removed from the trust unless the terms of the trust permit it.  There are exceptions, such as asking a Court’s permission to revoke the trust or remove the property, or in some cases, terminating the trust with agreement of the trustee and beneficiaries, but these are more difficult options and not guaranteed.

Next, let’s look at the reason why the home was initially put in a trust.  It is important to keep these ideas in mind as removing the property from the trust may negate important benefits.   See here for the benefits https://www.galliganmanning.com/category/trusts/page/6/      There may be alternatives which accomplish the same goals as well.

If the purpose was to lower estate taxes, it may make sense to remove the house from the trust. This is especially the case if the property is in a state that doesn’t have state estate taxes.  Very few states still do.  An estate rarely meets the threshold for federal estate taxes, so clients actually save taxes by removing the property from trust.

If the property is owned by an irrevocable trust for asset protection in long-term care planning, it might make sense to keep the property in the trust.  However, if you are using a revocable trust and want to consider asset protection in long-term care planning, it is often better to keep the property in your name. This is because Medicaid may exempt your residence if you own it personally.  In our office, we prepare “Lady Bird deeds” for Texas residences which allow a client to own the residence personally, and transfer it to the trust automatically when they pass away.  This works with both asset protection planning and probate planning.

If the trust owned the property for probate avoidance, the property often will be put back into the trust or conveyed at death to the trust such as with the Lady Bird deed.

In sum, there are some reasons to remove property from a trust, but doing so should always involve an experienced estate planning to preserve the benefits of the trust and to ensure your goals are met.

Reference: nj.com (Feb. 4, 2020) “I want to revoke a trust on my house. What do I do?”

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When Should I Consider Long Term Care Insurance?

Many people haven’t adequately planned for long term care costs. Consider long term care insurance early as a way to cover those costs.

You can bet that you won’t need long term care in your lifetime, but you’ll probably lose that bet: about 70% of seniors 65 and older require long term care at some point. That could be just a few months with a home health aide or it could mean a year (or more) of nursing home care. You can’t know for sure. However, without long term care insurance, you run the risk that you’ll be forced to cover a very large expense on your own.

The Motley Fool’s recent article, “75% of Older Americans Risk This Major Expense in the Future,” says many older workers are going into retirement without long term care coverage in place. In a recent Nationwide survey, 75% of future retirees aged 50 and over said they that don’t have long term care insurance. If that’s you, you should begin considering it, because the older you get, the more difficult it becomes to qualify, and the more expensive it becomes.

If you do not purchase long term are insurance, but need to pay for long term care, there are other options, such as government benefits like Medicaid.  I’ll focus on insurance in this article, but see here for more information about long term care and how to pay for it.  https://www.galliganmanning.com/long-term-care-whats-it-all-about/

Long term care insurance can be costly, which is why many people don’t buy it. However, the odds are that your policy won’t be anywhere near as expensive as the actual price for the care you could end up needing. That’s why it’s important to look at your options for long term care insurance. The ideal time to apply is in your mid-50s. At that age, you’re more likely to be approved along with some discounts on your premiums. If you wait too long, you’ll risk being denied or seeing premiums that are prohibitively expensive.

Note that not all policies are the same. Therefore, you should look at what items are outside of your premium costs. This may include things such as the maximum daily benefit the policy permits or the maximum time frame covered by your policy. It should really be two years at a minimum. There are policies written that have a waiting period for having your benefits kick in and others that either don’t have one or have shorter time frames. Compare your options and see what makes the most sense.

You don’t necessarily need the most expensive long term care policy available. If you’ve saved a good amount for retirement, you’ll have the option of tapping your IRA or 401(k) to cover the cost of your care. The same is true if you own a home worth a lot of money, because you can sell it or borrow against it.

It’s important to remember to explore your options for long term care insurance, before that window of opportunity shuts because of age or health problems. Failing to secure a policy could leave you to cover what could be a devastatingly expensive bill.

Reference: Motley Fool (September 23, 2019) “75% of Older Americans Risk This Major Expense in the Future”

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Why an Attorney Should Help with a Medicaid Application

Seniors should consider medicaid asset protection planning as part of their estate plan.
Hiring an attorney to prepare a Medicaid application may save money in the long run and get your loved one the care they need.

Elder law attorneys can be very helpful when it is time to complete a Medicaid application, and they can save money in the long run, ensuring that you (or a loved one) get the best care. Instead of waiting to see how wrong the process can get, says The Middletown Press, it’s best to “Use a lawyer for Medicaid planning” right from the start. Here’s why.

Conflict of interests. When a nursing home refers a family to people for preparing the Medicaid application or offers to complete it themselves, very often the person has dual loyalties: to the nursing home who refers them the work (or signs their checks), and to the family who will pay them a fee for help with applying for benefits. Whose interests comes first?

Everyone wants the Medicaid application to be successful, but let’s be realistic. It’s in the nursing home’s best interest that the resident pays privately for as long as possible, before going on Medicaid. It’s in the resident or family member’s best interest to protect the family’s assets for care for the resident’s spouse or family.

An attorney has a duty of loyalty only to his client. He also has an ethical and professional responsibility to put her client’s needs ahead of her own.

Saving money is possible. Nursing homes in some areas cost as much as $15,000 a month, in Texas they tend to be cheaper, but still in the several thousands.  While every market and every law practice is different, it would be unusual for legal fees to cost more than a month in the facility. With an experienced attorney’s help, you might save more than her fee in long-term care and related costs.

Further, attorneys can find ways to complete a Medicaid application and successfully obtain benefits without simply spending all of your assets before applying.  Many times nursing home staff will offer to do the Medicaid application after the assets are nearly entirely spent.  A quality elder law attorney will find ways to complete and file a successful Medicaid application while protecting your legacy.

The benefit of experience. It’s all well and good to read through pages of online information (Google, Esq.), but nothing beats the years of experience that an attorney who practices in this area can bring provide.  Any professional in any field develops knowledge of the ins and outs of an area and applying for Medicaid is no different. Without experience, it’s hard to know how it all works.  See Mary’s blog for more detail about how an attorney helps with this process.  https://www.galliganmanning.com/when-you-need-an-elder-law-attorney/

Peace of mind from a reliable, reputable source. Consulting with an experienced attorney about a Medicaid application will help you avoid years of wondering, if there was more you could have done to help yourself or your loved one.

There are multiple opportunities for nursing home residents to preserve assets for themselves and spouses, children and grandchildren, particularly when a family member has long term care needs. However, here’s a key fact: if you wait for the last minute, there will be far less options than if you begin planning long before there’s a need for a Medicaid application.

Reference: The Middletown Press (July 29, 2019) “Use a lawyer for Medicaid planning”

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