Dawn L Richards
Law Offices

Be Aware of the Dangers of Joint Accounts

Last Updated: 3/24/2009 - (www.elderlawanswers.com)

Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones, and such accounts are sometimes referred to as "the common person's estate plan." But while joint accounts can be useful in certain circumstances, they can have dire consequences if not used properly. Adding a loved one to a bank account can affect Medicaid planning as well as expose your account to the loved one's creditors.

When a person applies for Medicaid long-term care coverage, the state looks at the applicant's assets to see if the applicant qualifies for assistance. While a joint account may have two names on it, most states assume the applicant owns the entire amount in the account regardless of who contributed money to the account. If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to it.

In addition, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets for Medicaid purposes. This means that either one of you could be ineligible for Medicaid for a period of time, depending on the amount of money in the account. The same thing happens if a joint owner is removed from a bank account. For example, if your spouse enters a nursing home and you remove her name from the joint bank account, it will be considered an improper transfer of assets.

Another problem with joint accounts is that the account is vulnerable to all the account owner's creditors. For example, suppose you add your daughter to your bank account. If she falls behind on credit card debt and gets sued, the credit card company can use the money in the joint account to pay off your daughter's debt.

Finally, you need to be sure you can trust the joint account holder because he or she will have full access to the account. Either account owner can take money out of the account regardless of who contributed to the account.

There are better ways to conduct estate planning and plan for disability. A power of attorney will ensure family members have access to your finances in the case of your disability. If you are seeking to transfer assets and avoid probate, a trust may make better sense. To learn more, talk to an elder law attorney.

10 Reasons to Create an Estate Plan Now

Last Updated: 7/21/2008 - (www.elderlawanswers.com)

Many people think that estate plans are for someone else, not them. They may rationalize that they are too young or don't have enough money to reap the tax benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth. (For more information on estate planning, see our Estate Planning section.)

1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).

2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.

3. Dying without a will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state's laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without benefit of your direction or of trust protection. With a plan, you decide who gets your assets, and when and how they receive them.

4. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage or marriages.

5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.

6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child's spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.

7. Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.

8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.

9. Business ownership. Do you own a business? Without a plan, you don't name a successor, thus risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.

10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.

It's Official: Draconian New Medicaid Transfer Rules Enacted

(www.elderlawanswers.com)

President Bush today (February 8, 2006) signed into law the Deficit Reduction Act of 2005, which among other provisions places severe new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care.

The law extends Medicaid's "lookback" period for all asset transfers from three to five years and changes the start of the penalty period for transferred assets from the date of transfer to the date when the individual transferring the assets enters a nursing home and would otherwise be eligible for Medicaid coverage. In other words, the penalty period does not begin until the nursing home resident is out of funds, meaning she cannot afford to pay the nursing home.

The law also makes any individual with home equity above $500,000 ineligible for Medicaid nursing home care, although states may raise this threshold as high as $750,000.

The new federal law applies to all transfers made on or after the date of enactment, February 8, 2006. However, the law gives states that must pass legislation to meet the new requirements more time to come into compliance. This gives many people in most states a little time to plan. The deadline for states to enact their own laws varies from state to state, but generally it is the first day of the first calendar quarter beginning after the end of the next full legislative session.

Any transfer made before February 8 falls under the old transfer rules. But what about someone who transfers assets after that date but before his state comes into compliance with it? In all probability, this will depend on the date of the application for Medicaid. If the application is filed before enactment of the state law, it will probably come under the old transfer rules. If it is filed after the enactment of the state law, it will come under the new transfer rules.

The bottom line: if you have considered protecting some assets for your loved ones in case you later require long-term care, you should contact a qualified elder law attorney now. (To find an ElderLawAnswers member attorney in your area, click here).

The new law also:

Establishes new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.

Allows Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.

Sets forth rules under which an individual's CCRC entrance fee is considered an available resource.

Requires all states to apply the so-called “income-first” rule to community spouses who appeal for an increased resource allowance based on their need for more funds invested to meet their minimum income requirements.

Extends long-term care partnership programs to any state.

Authorizes states to include home and community-based services as an optional Medicaid benefit. (Previously, states had to obtain a waiver to provide such services.)

In addition, the law incorporates provisions in the original budget bill passed by the Senate closing certain asset transfer "loopholes," among them:

The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.

Funds to purchase a promissory note, loan or mortgage will be included among assets unless the repayment terms are actuarially sound, provide for equal payments and prohibit the cancellation of the balance upon the death of the lender.

States will be barred from "rounding down" fractional periods of ineligibility when determining ineligibility periods resulting from asset transfers.

States will be permitted to treat multiple transfers of assets as a single transfer and begin any penalty period on the earliest date that would apply to such transfers.