Frequently Asked Questions
What Are the Biggest Threats to My Retirement Savings?
Again, the biggest threat to your retirement savings is the cost of long term care, and that’s something most people don’t know. They think, okay, I’ve got money in an IRA, it’s protected. It is not. Not in the state of Illinois; there are some states that will protect IRA money, if it is in payout status. In other words you’re taking distributions. But in Illinois, your IRA money is not protected. It counts as both an asset, in determining if you qualify. It also counts as an income stream, which means more income that has to go to the nursing home that you don’t get the benefit of.
The best way to protect your retirement assets is through the Pension Protection Act which I’ve mentioned in another question, or answered to another question as well. The Pension Protection Act allows us to use some of those retirement savings at no tax cost to you in such a way as to provide long term care payments, but also to provide tax for your life insurance for your beneficiaries and heirs if you don’t need long term care during your lifetime. We all have the goal of living as long as we want, doing the things we want, and then dying quietly in our sleep. Unfortunately, many of us are never going to make that goal. We’re going to have an illness, we’re going to suffer from a disease process, we’re going to have problems that don’t allow us to enjoy our lives to the fullest, and yet we’re still here.
And so that’s where new laws, new planning procedures such as the Pension Protection Act provides is the way to go to protect your retirement savings and make sure that you never run out of money, make sure that what you don’t need and don’t use during your lifetime is not going to a nursing home, does not go to Medicaid, but instead go to your loved ones.
What Sets Facer Law Office Apart From Other Law Firms?
Our difference is simply because all we do is Elder Law. We do not, as so many attorneys tend to do, handle a divorce on one day, a traffic ticket another day, perhaps a real estate transaction or a corporate transaction. We devote, myself and my staff, 100% of our time to help you people face the challenges and problems that they encounter as they grow older, and so, all of our energies are focused on that one topic. That’s what makes us different and better than other law firms.
What is the First Step I Should Consider in My Elder Law Planning?
The first thing to do is to get in touch with an elder law attorney, such as myself, and then we will have a several part process. Our first part is to have one of our staff call you and begin to gather some preliminary information over the phone. That process takes approximately 20 minutes; we do not ask anything confidential that you should be worried about sharing over the phone, but we do want some preliminary information so that I have it to review before you come in, because the second part of the process is to meet with me personally.
There, we’re going to do what I refer to as elder law check-up. I’m going to go through your current estate planning documents, your wills if you have them, your powers of attorney, a trust if you have one of those, and I’m going to find out exactly what those are doing for you, and I will point out if there are weaknesses or things that need to be improved. The second part of the elder law check-up will be to talk about your family, and whether there’s special planning considerations we need to do there, and then the third part of the elder law check-up is to make sure I thoroughly understand your finances. I’m not a financial adviser, I’m not seeking to be in charge of your investments, but I do need to understand how each investment is titled, exactly what it is, what it is worth so that I can best advise you. Then at the end of this elder law check-up, I will be in position because I now understand your situation, to advise you as to what’s the best plan that can be put in place for your particular situation.
Should I Get My Family Involved in My Elder Law Planning?
The ultimate answer to that is a personal one. If you trust your family then by all means, in fact we encourage people, we think its great you bring family members to your appointment and if they are out of town and they can’t be here, we will conference call them in during your meeting with us. We will also email them documents and other things if necessary or at your request. So it’s a personal choice to you, but I’ve always felt that the more family that is involved the better.
Certainly as folks get older sometimes they start to feel overwhelmed by the everyday activities of handling their finances and other items like that. Having an extra set of eyes and ears when you come in to meet with me is usually helpful because it one, helps you better understand, two it puts your family minds at ease as far as what is being done for you and three it helps them understand your situation so at some point in time when perhaps they take over because of your incapacity or your death, they will have a better understanding of what to do, how to do it, and be able to get the best possible results. We encourage families to be involved but ultimately that is your choice.
Does Everybody Need a Trust?
There is no one set answer to that question, because not everybody is the same, the situation is not the same. We find using trust in our planning to be something we do on a regular basis, probably an excess to 75% of the people we help involves using a trust. But the key is to go through and make sure that we understand your situation, because only then can we properly evaluate your need for a trust, and exactly which trust will work best for you. If you listen to my answer on the question about how to start planning, I referred to an elder law check-up, and that’s the process whereby we make sure that we understand your situation. At the end of that elder law check-up, I will know exactly what you need and be able to make my recommendations to you. That might involve a trust, that might involve any one of a different number of trusts, but you’ll understand why I’m making that recommendation at that time.
My Spouse is in a Nursing Home and I Need Help Paying for Care. What Will I Have to Live on if My Spouse Gets Medicaid?
A couple of different answers apply to that question. Number one, just because your spouse is already in a nursing home, it is not too late to still do planning that will allow you to protect more of your assets than the law allows. So that’s one answer and of course, the ultimate answer there is individual to your circumstances what planning techniques make sense to you.
The second answer is, if in fact you already applied for Medicaid, or there’s no planning that can be done, then the law exempts certain assets on behalf of the spouse who’s not in the nursing home. That person is called the community spouse. Generally speaking, the community spouse gets to keep the house, one vehicle, normal and regular household goods, and $109,560 of other assets. Those assets can be IRAs, checking, savings accounts, CDs; whatever you choose, it’s just $109,560 worth of value. You also are allowed to have a prepaid funeral and burial plan, and up to $1500 of cash value life insurance. Your spouse in the nursing home is allowed to have $2000 worth of assets. So in terms of assets, that’s about what you get to keep if Medicaid is helping pay for your spouse’s nursing home care; obviously, depending upon the value of the house, that can be hundreds of thousands of dollars.
In terms of income, you basically get to keep all of your income, if it’s over the statutory minimum, which is $2,739 and your spouse gets to keep $30 of income. If you have less than the $2,739 figure, then other rules apply which allows you to keep more of your spouse’s income and all of your own. The bottom line is, is that every situation is different. The rules I have cited apply to the state of Illinois; other states have different rules and in fact, all 50 states have their own set of rules, so there are 50 different rules out there. So the answers I’ve given are specific to Illinois.
The key though again is to have us do an elder law check up. Let us find out how we can help you, because so often we can save so much more than the bare statutory minimum that I had mentioned.
Why Should I Consider Long Term Care Planning When I’m Doing My Estate Planning?
It’s so important to consider long term care planning because the greatest threat to your financial well-being is the cost of long term care. That can be in the home, in assisted living, or in the nursing home. But nothing has the potential to drain your finances quicker than paying for long term care, or as the name implies, a long period of time. Because of that, it’s not enough to do estate planning, because estate planning essentially answers the question “what happens to your stuff after you die?” That’s an important question to answer, and we need to answer that, too.
But there’s a more important question, which is, “what happens if you don’t die but instead become ill?”We’re living so much longer in this country. In 1900, the average life expectancy was 47 years, now it’s 78 years and over 80 for women, for example. Because of that, and the fact that the numbers of seniors is increasing, we also have the situation where we’re living longer but oftentimes with a disability.
I mentioned it before, but my father was an example. He lived to be 88, but he had Alzheimer’s the rest of his life. If our medical system wasn’t so good, he never would have made it that far because he had some cancer, he had to beat some other issues. So bottom line is we have to answer the question, what happens if you don’t die but instead become ill; that’s long term care planning rather than just estate planning which answers the question that what happens after you die. So it’s vital that we answer all of the questions and not just one or two of them.
Please Address the Common Objection: “Long Term Care Insurance is too Expensive. My Friend Had a Long Term Care Insurance Policy and They Skyrocketed the Premiums on it.”
I hear that objection a lot, and it’s a valid one. The other objection I also hear is, I paid this sky rocket high premiums for years, and then never needed the policy, so all that money was down the drain. So those are the two objections I hear on the traditional long term care insurance.
Happily, now, because of the new law called the Pension Protection Act, there are lot of very attractive alternatives available to long term care insurance that will actually provide more benefits, but also, if you don’t use the benefits, you won’t lose them but instead they would go to your heirs and beneficiaries.
In addition, most of the benefits under the Pension Protection Act have a single premium that you pay one time, you pay it upfront, and the premiums can never go up because you’re done paying premiums. And so that works out very well to solve both of those objections. You never will have a premium increase and if you don’t use the long term care insurance during your lifetime, it will pay out as regular tax for your life insurance to your heirs and beneficiaries after you’re gone. So again, that’s the Pension Protection Act and it provides a very nice alternative to long term care insurance.
What Does Assisted Living and Nursing Home Care Cost?
In Illinois there’s a wide range of cost for assisted living and nursing home due to Chicago, being a large city, on to down state Illinois where it is not as expensive. In central Illinois though the nursing home cost has an average of $6,500 a month plus incidentals. Assisted living costs anywhere from about $3,500 on up to $7,000 a month.
Am I Protected if My Assets Are in a trust?
The majority of people who come into my office have what we call a living trust or a revocable living trust. These trusts are great for their intended purpose which is to avoid probate, but they do not offer protection in any way, shape, or form. So most likely, unless you have some type of asset protection trust, you are not protected just because your assets are in a trust. Again, your trust will work for its intended purpose but that intended purpose was never to protect assets, it’s to avoid probate only.
Why is it Important to Plan Ahead for Long-Term Care?
I am often called to a nursing home, and I stand at the foot of the bed and of course I’m looking at somebody’s loved one in the bed, typically a spouse or adult children are around the sides of the bed and they all look at me and say how can we pay for this? And while I can provide some answers, the truth is it is impossible to plan backwards. What we need to do is have people come see us before the crisis hits, and in my world a crisis is somebody needs a nursing home right now, or they’re in a nursing home right now. We don’t want to wait for the crisis, now if we have to, we do and we can still help you. It’s almost never too late, but planning ahead allows us to protect so many more assets, allows us to insure the right people have the right authority to make sure you’re taken care of, your loved one is taken care of, and it just allows us to do so much more than if we’re trying to plan backwards.
Is it too Late to Do Anything if My Loved One is Already in a Nursing Home?
It is not too late, but that’s a common misconception that you will hear from friends, neighbors, even social helpers at the nursing home. It is only too late to do planning if one of two things has happened – first, the person in the nursing home is already broke, if there’s nothing left to protect there’s nothing we can do obviously. The second time it’s too late is after a Medicaid application has been filed with state. Up until you file a Medicaid application you have many options, or your loved one has many options to protect their assets. After their Medicaid application is filed, all the options are off the table and all you can do is pay the nursing home bill or hospital bills with your assets. So it’s not too late, but timing is critical.
When Should I Start Estate Planning?
Let me illustrate a couple examples. In the past couple of years I’ve had a gentleman, actually his adult daughter came to see me because her father had fallen in the home, he had been living independently in the home, he had fallen and now he had to go live in a nursing home permanently. We were able to help him, we were able to protect approximately 60% of his assets even though he was already in the nursing home.
But I had another couple come see me while they were relatively in good health, not perfect health, but reasonable health, they came to see me and in their situation they had over a million dollars of farm land. Because they came to see me before the crisis occurred, we were able to protect all the million dollars plus their farm land, their house, farm equipment, and all sorts of other assets, again, because they came before the crisis occurred. The earlier, the better.
How Does the Medicaid Spend Down Work for a Single Person?
The Medicaid spend down is basically a concept that says Medicaid will not start to pay for your nursing home care or your long-term care until you have spent down your assets to a predetermined amount. That predetermined amount in Illinois is $2,000. A single person, unless they’ve done proper planning, will have to spend their assets down until there’s only $2,000 remaining before Medicaid will start paying for their long-term care.
Will I Lose My House if I Need Medicaid?
The house, as some of you may know, is an exempt asset. By that I mean it is exempt for purposes of qualifying for Medicaid. You can own a nice home, actually a large home or an expensive home and Medicaid will disregard that home as part of the application process. The problem though comes after you pass away because at that point Medicaid will put a lien on the home and recover every penny they paid out in benefits on your behalf. You don’t lose your home, but your home is going to be subject to what is called the state recovery lien and you will lose the equivalent value in your home to whatever Medicaid paid on your behalf. I consider the home to always be at risk and it is one of the largest assets that we take immediate steps to protect.
I Was Told By My CPA That I Could Give Away $10,000 (or $14,000) Each Year to My Kids. Is This True? How Does it Work?
That question illustrates the problem or the difficulty in understanding Medicaid. Currently, under federal gift tax laws, you can gift $14,000 per calendar year to any individual you choose. And that money is gifted tax free to them. You do not pay any tax on the money either, and that’s federal gift tax law. However, what federal gift tax law says is okay, Medicaid rule says is not okay. And if you gift $14,000 a year to somebody under gift tax law, you will be penalized for approximately 2 1/5 months for having done so. And when I say penalized, I mean, for about 2 1/5 months for a $14,000 gift, Medicaid will not pay for your nursing home. What one law in this country allows you to do, another law says you cannot do, which is why Medicaid is such a tricky area.
I Did Not Give My Home Away, But Instead I Sold it to My Kids for $1. Am I Protected?
No, you’re not. We get this question all the time, and we also get the question of can I just deed the home to one of my adult children? And the answer is a sale for $1 or just giving it your children is what is called as impermissible transfer. An impermissible transfer is anything for which you do not get fair market value. If you sold your home in the open market, let’s say it was sold for $100,000 and that’s what it’s worth so there’s no penalty for doing that. But if you sell your home for $1, or if you give your home away you will be penalized for having done so because that is an impermissible transfer. And Medicaid says if you make impermissible transfers we will penalize you. Selling it for $1, selling it for $10 whatever is not going to work.
How Do You Advise Someone Who Says, “I’m Never Going Into a Nursing Home!” or “I’m Never Going to Need Long-Term Care”?
That’s one of my favorites. I was actually asked a few years ago to speak to the hemlock society, that actually exists, these are people who are determined they would commit suicide before they go into a nursing home or suffer from a terminal illness. The problem with that thinking is we do not always control our fate. My father was as independent and as strong of a man as I’ve ever known, but in his later years he developed Alzheimer’s. There was no way to keep him out of an Alzheimer’s memory care unit. No matter what we wanted to do, no matter what his desires were we cannot keep him from the memory care unit, and I will add they took very good care of him. The same thing applies if you have a stroke, or perhaps a catastrophic accident of some sort, you don’t always have that choice. We refer to it as the feet first choice. I’m never going into a nursing home, I’m going out of my home feet first, meaning dead. You don’t always have that option, because your health or lack of it might overtake your desires and then you will end up in a nursing home and you need the plan in case that happens.
Why Do I Need to Plan Ahead?
As I mentioned in other answers you cannot plan backwards. It’s impossible. We can’t protect what has already been spent, or we can’t protect after somebody has already applied for Medicaid, or we can’t protect because it’s just simply too late. You plan ahead for long-term care expenses just the same way you buy car insurance. You do not buy car insurance, you can’t buy car insurance, let’s say you’re in a car accident and you didn’t have insurance. You can’t buy car insurance and have it cover that accident, it can only cover future accidents. Planning is the same way, we can’t cover what has already happened, we can only cover future events. If you want to have maximum protection, you have to plan in advance so that everything is covered, that way you don’t have to worry, it’s just piece of mind.
What is Probate? Does My Will Avoid Probate?
A Will is a ticket to probate court. People hear all the time, and this is why we really ask that you don’t rely on your hairdresser or the internet or your neighbor for solid legal information. It will take you into probate court. Now, exactly what happens with probate depends on a state by state basis. In Illinois, probate is triggered if one of two things happen – one, if you own land, a house, a vacant lot, a commercial building, farm land, it doesn’t matter, doesn’t matter the value of the land and any buildings on it. If you own a land in Illinois, your estate will has to go through probate.
The second trigger for probate in Illinois is that you have assets over $100,000. Now adding to the problem is that not all assets are affected by your will. Life insurance for example, that’s a contract between you and the life insurance company. You have designated a beneficiary and so when you die, the life insurance company knows what to do with the life insurance proceeds, therefore your Will has no effect on the life insurance policy. The same as true of IRAs, 401Ks, those types of retirement plans, and also annuities they are not affected by your Will. What your Will does affect is any asset that’s in your name only. In its simplest terms, they go and check your account owned by yourself with nobody else’s name on it. When you die the bank is going to freeze the money in that checking account until they receive instructions. Who from? From a probate court. A probate court is going to give instructions about whom they can release the money to. In essence that’s the probate process and that’s why your Will will lead you directly into probate.
What’s the Difference Between Medicare and Medicaid? Will Medicare Pay for a Nursing Home?
Another great question. I wish when these programs were devised somebody would have given them different names because inevitably there’s a lot of confusion. To answer the second question first, Medicare will not pay for the nursing home. And let me explain why there’s confusion over that. Medicare started under President Johnson back in the 1960s, at that time, if for example, you needed a hip replaced or something like that, you enter the hospital, you have the surgery, you recover in the hospital for a couple of days and then you remained in the hospital and received physical therapy instructions about how to use a walker, how to sit down without twerking your hip and so on. Then somewhere, I think in the 80s, somebody got the idea that you know what we can provide that therapy at a much cheaper cost if we discharge people to a nursing home. And so now, after you recover from a hip replacement, you recover for a few days and then you go to the nursing home where you might receive a 20 or 30 days therapy and rehab. Because of that, and because Medicare pays for that nursing home bill, a lot of people are under the misconception that Medicare is going to pay for all of the nursing home.
The distinction is simple, Medicare pays for the therapy that you receive in a nursing home setting, it does not pay for long-term care in the nursing home. Medicaid on the other hand is what does pay for that long-term care in the nursing home. An easy distinction which I admit is over simplified, but an easy distinction is, think of Medicare as health care insurance. Part A pays for the hospital, part B pays for the doctor, part D pays for prescriptions. Medicare is like healthcare insurance, Medicaid is like nursing home insurance or long-term care insurance. That’s one way to keep them straight on your own line.
What is The Difference Between an Estate Planning Attorney and a Family Protection Attorney?
An estate planning attorney, which are very fine ones, focuses on what happens after you die. They’re going to have discussions with you about what happens to your assets. Who’s going to get the house, the bank accounts, how do you divide it among your children, or whomever your beneficiaries might be? That’s an important question to answer but there’s so much more to it and that so much more is what a family protection attorney does and that is how do we plan not only for what happens after we die but what happens if we don’t die but instead become ill.
My father is a primary example, wonderful man, lived until he was 88 years old, but he lived the last several years of his life with a disability namely Alzheimer’s. In his case, we were so much worried about what happens after he dies, we were worried about how are we going to take care of dad. How are we going to give him the care necessary? How are we going to make sure his needs are met? That’s what a family protection attorney focuses on, they answer the question, what happens to your stuff after you die because they ask and you answer. But ultimately it answers the question what happens if I don’t die but still become ill. And there’s good examples for that, there’s a lot of life to be lived even if we are ill or have disability. My father never would have wished to have Alzheimer’s, my brothers and I certainly did not wish for him to have it either, but there were still some enjoyments of life there. It wasn’t the quality of life that he wanted but there was a quality of life. For example, dad loved to get out to eat and we would take him out several times a week to eat. And the man could eat me under the table. He loved to eat, he loved to watch people. Yeah, he didn’t talk much towards the end, he kind of withdrew from the conversations, but there was enjoyment there, there was a quality of life that if we have not planned for it, and we did family protection planning for my parents, if we had not planned for that quality of life, my dad would never have been able to enjoy it. Family protection planning attorney is what you need to make sure that we answer all the important questions.
My spouse has Alzheimer’s and is living at home. What do we need to do now to plan ahead?
This is one of the most difficult situations I see. I had a lady in my office this morning who is in exactly that situation. Her spouse was just diagnosed with dementia with the behavioral disorder component, which means that her husband is argumentative, he is sometimes abusive, and always aggressive.
The first thing you have to do in this situation, and this is perhaps the hardest because it’s not a legal point, it’s an emotional one, and that is simply, when a loved one gets a diagnosis of Alzheimer’s, you have to accept that that’s like getting a ticket to enter the nursing home. Your loved one, unless you have the resources of Oprah Winfrey or some multi-millionaire to keep them at home, your loved one is going to end up in a nursing home. And emotionally, you need to accept that fact because when you do, now you will realize, yes I need to get started with my planning.
At that point, we need to put a complete family protection plan in place. One of the problems, I mean Alzheimer’s is heartbreaking, but one of the real problems with Alzheimer’s is that, on average, people live about 8 years in a nursing home when they have a diagnosis of Alzheimer’s. That doesn’t include the two or three years they probably were able to remain at home before their needs for care got to the point where they had to have round the clock nursing home care. That’s a long time. If you do the math and the nursing home costs 70, 80, or $90,000 a year, and you multiply that by 8, we’re talking about a lot of money. The time to plan is immediately. The time to plan is now before your loved one needs the nursing home. But you will only plan if you can accept the fact that your loved one is going to need the nursing home, and that he or she is going to have to go there at some point. We accept that emotional and difficult to accept fact, now we can do the planning for you that will allow us, and you, to protect your assets. And remember, we’re protecting them for several reasons.
Number one, we want to make sure that your loved one never runs out of money. You could be the one who dies first. It’s not common, it’s not expected, but you could be the one who passes away first, leaving your loved one in a nursing home for years. We want to make sure they’re protected.
Second, we want to protect you because more than likely you will outlive your spouse. Now we want to make sure that if you ever need a nursing home in the future you have everything you need.
And third, we’re protecting your family. Your children, your grandchildren, your nieces, your nephews, whomever you wish to benefit, we want to make sure that inheritance can go to those people that you want to benefit, the people you love.
So, we’ve got to get started right away. Again, the diagnosis of Alzheimer’s, and I should add Parkinson’s and other long-term diseases like that, but that diagnosis is a ticket to enter the nursing home. The sooner you accept that, the sooner you’ll come in to plan, the more we can protect.