Each year of my practice as an attorney, I meet hundreds of people without a will or any estate plan in place. The most common reason they give me is timing. Young people—20’s to 50’s depending on who you talk to—tend to feel that they’re healthy and they have lots of time to plan when they’re retired. Meanwhile some older people (80+) actually fear it’s too late to make a plan because they may not make it through the five year look-back period for Medicaid asset protection. In truth, there’s no wrong time to have a conversation with an estate planning attorney because there’s a myriad of options for people of all ages.
Estate Planning isn’t just about death.
Even if you’re in the contingent of people I meet each year who are certain they’re going to live to 120, it’s important to remember that estate planning covers a lot more than where your assets will go when you die. Millions of Americans become disabled in the later years of their lives, as faculties and abilities decline. A Power of Attorney and Healthcare Proxy are critical estate planning components that govern who would handle essential legal, financial, and medical decisions for you in the event of your reduced or diminished capacity. No one knows if and when they might get sick. Waiting until you’re elderly or even hospitalized to make these documents can put you in a position of making snap decisions that aren’t carefully thought out and considered. Moreover, if you never get around to completing these documents, your family may have to petition the court for a legal guardianship. This can be time consuming, expensive, and unpredictable. Making a disability plan eliminates stress and confusion for your family in your hour of need.
There are different types of estate plans for different stages of life.
The basic plan for a young person is a will, power of attorney, and healthcare proxy. Younger people typically have one critical priority in mind when it comes to estate planning—providing for their children. This is more than just financial. A last will and testament can name a legal guardian for minor children who would care for them until they come of age. The guardian does not have to be the person who manages the money. Some people decide to split these tasks and create a system of checks and balances. Also, the children do not have to receive all of their inheritance when they turn 18 years old. While this might have been reasonable for previous generations, today’s 18-year-olds are not typically in a position of financial maturity and responsibility. Some young parents, mindful of the fact that in the event of their tragic passing at a young age, their estate would include a substantial amount of term life insurance, choose to include testamentary provisions about how money is to be distributed over a longer period of time.
Estate planning for older folks can be more complex because they are very seriously contemplating the realities of death and disability. We often look at trusts, more complex powers of attorney, and Medicaid planning techniques to protect assets from long-term care and nursing home costs. The children are usually grown up at this point, so clients’ concerns shift to how they can maximize and enjoy their assets during their retirement, while still protecting the nest egg for the children in the most responsible way.
It can’t be “too late.”
When assets are transferred for Medicaid protection purposes, there is a five-year look-back period. In other words, clients need to stay out of a skilled nursing facility and off of Medicaid for five years after they move their assets to a trust, execute a life estate deed, or use similar transferring strategies. Some clients in their 80’s and onward lament that they have not done the planning in the past and fear that they will not stay healthy enough to make it through the look-back period. While it’s always good to start Medicaid planning in your 60’s or 70’s while you’re healthy and well, I’ve seen a great many significantly older clients embark on this process and successfully make it through the five-year look-back period. Here’s why it’s not too late to start Medicaid planning:
- Community Medicaid: If someone can receive care in the home, then they can apply for benefits that do not necessitate a five year look-back period, and the clock on their trust or other asset transfer continues to run.
- “Prorating:” If someone makes it less than five years after transferring their assets, a qualified elder law attorney can often save a proportionate amount of the money.
- Flexibility: Certain types of asset transfers—including irrevocable trusts—can be undone. So if the worst happens and you get sick and require care just months after getting sick, then you can go back to square one, and be in no worse a position from where you started. Furthermore, elder law attorneys can save about half of the assets “on the nursing home doorstep.” In other words, even under the worst case scenario, with no time at all for advance planning, it’s still possible to protect and shield some of your assets.