Q & A

What is Probate?            
Probate is the process of presenting a last will and testament to the court.  The court will satisfy itself as to the will’s validity and then issue Letters Testamentary to the person named as executor so that he/she may act on behalf of the estate. An executor may not act without the court's approval.

Can I avoid estate taxes without setting up trusts?            

Many times the answer is yes.  

How do Medicare & Medicaid differ?            
Medicare is a federal program available to those over 65 or disabled regardless of financial circumstances.  It provides medical, hospital and short term rehabilitative care.  The benefits for nursing home care are only provided immediately following a hospital stay and are for a maximum of 100 days and only for rehabilitative purposes.  This benefit is not available for custodial care. Medicaid is a joint federal, state and local program available to the financially needy.  It covers medical, hospital and nursing home care and home health aides.  Under this program nursing home and home care attendants are available for an unlimited period of time and for custodial care.

What are the rules for Medicaid home care?
Medicaid home care provides services for people who are able to safely live in their homes, but may need assistance.  Eligibility for home care is based on the income and assets available at the time of application without consideration to any prior transfers.  Although the income limit is low, excess income can be paid into a pooled trust, thereby preserving it for use by the applicant for living expenses.

What are the rules for Medicaid chronic  care?
Medicaid chronic care provides for long term nursing home stays.  Eligibility is determined by reviewing all income, assets and transfers over the prior five years.  This five year look back period is the reason that planning should be done long before a need arises.

What is the five year look back period?            
Medicaid chronic care eligibility is determined by reviewing all transfers of assets during the five years prior to application.  Any transfer where the applicant did not receive a full benefit is considered a gift and subjects the applicant to a period of ineligibility based on the value of the transfer.

What is a Trustee?            
The trustee is the person who administers a trust.  That person has no ownership interest in the trust and just acts in a fiduciary capacity to manage the trust.

What is a Living Trust?            
Most lay people are referring to a revocable trust when they discuss living trusts.  A revocable trust is a trust that can be undone at any time.  Generally the person creating the trust is also the trustee.  A living trust avoids probate and is valuable if the creator has assets in multiple states; if a will contest is anticipated or if the creator has only distant relatives. This is a popular tool in states such as Florida where probating an estate is difficult.  The creator of the trust transfers ownership of his assets from his individual name to the trust.  This type of trust does not avoid estate taxes, creditors rights or create eligibility for Medicaid.

What is a Medicaid Irrevocable Trust?            
The person creating the trust transfers ownership of their assets to the trust.  Someone other than the creator of the trust is the trustee.  The transfer is irrevocable meaning that in most circumstances it cannot be undone.   Five years after transferring assets to this trust they are not counted for Medicaid eligibility.   The creator of this trust does retain the right to change the trustee or a beneficiary of the trust.