Comprehensive Planning. Lifelong Solutions.

Protecting the Family Home

by Andrew H. Hook, Esq.

My Clients frequently wish to remain in their home as they age and leave it to their children at their death. However, 2/3 of people over age 65 will need Long-Term Care services. These services are very expensive, $16 to $20 per hour for in home care, $40,000 to $50,000 per year for assisted living facility care, and $75,000 to $85,000 per year for nursing home care. Since long-term care is so expensive, many of my clients must rely on Medicaid or VA aid & attendance benefits, both of which are means tested, to pay for this care.

Frequently, the equity in their home is a large percentage of their net worth. The median American’s net worth consists almost entirely of home equity. In Virginia, this home equity becomes a resource for determining Medicaid eligibility if the client must seek LTC in a facility. If the client obtains care in his home, the state may seek reimbursement from the equity in the client’s home at his or her death.

I am frequently asked by my clients how to:

  1. protect their home from long-term care expenses,
  2. mismanagement during a period of incapacity, and
  3. probate expenses.

We frequently recommend transferring the home to an irrevocable trust. If properly drafted, the trust will not be a resource for Medicaid eligibility, provide management during incapacity, and avoid probate.

A trust is an agreement between the grantor who funds the trust with his house, and the trustee who will manage the trust for the benefit of the beneficiary(s). While the client cannot revoke nor amend the trust nor retain the right to distributions from the trust, the client can retain control over the house during his or her lifetime.

The client can retain the following powers:

  1. The power to remove and replace the trustee
  2. The right to reside in the home and approve the sale of the home.
  3. The right to direct the distribution of trust assets at the client’s death.

The transfer of the home to the trust will be considered a gift & result in a penalty period for Medicaid eligibility purposes for 5 years after the funding of the trust. However, after 5 years there will be no transfer penalty and the home will not be a resource. Additionally, the home will remain eligible for real estate tax relief, the sale of the home by the trust will qualify for $250,000 income tax exemption and, at the client’s death, the beneficiaries will obtain a step up in basis for income tax purposes and avoid probate.

With effective prior planning, the client can have his cake and eat it too.

Kit KatAsk Kit Kat – 3 New Brazilian Toads

Hook Law Center: Kit Kat, what can you tell us about the 3 new types of toads that have been discovered in a single cloud forest in southern Brazil?

Kit Kat: This is extremely interesting. A team of scientists led by Marcio Pie, an evolutionary biologist from the Federal University of Paraná in Brazil, discovered the toads on a recent expedition. All 3 have red underbellies, and are closely related. They estimate the species are a few thousand years old. They also share a warty exterior and are just over an inch long—in the small range when compared to most toads. Their scientific names are Melanophryniscus biancae, M. milanoi, and M. xanthostomus. They are not sure whether these toads are poisonous, like many of the other Melanophyrniscus toads.

Another feature which distinguishes these new 3 species from other Melanophryniscus toads is where they lay their eggs. Others of their genus lay their eggs in ponds and streams, but the 3 new species “lay their eggs in the water that collects in plants, which is known as phytotelm breeding.” These pools of moisture are so small, that the females lay much fewer eggs than other toads of their genus—less than 50.

The head of the expedition, Marcio Pie, says that the new species’ habitat in a cloud forest is a delicate ecosystem. If it’s too dry or too wet, they won’t be able to survive. The cloud forests, which surround mountaintops, are threatened due to climate change and forest loss, as humans seek out further sources of timber. He and his research team rushed to report their findings which was first done just this month in the journal PLOS ONE. ‘Without a species name, an animal can’t be protected because legally it doesn’t exist.’ (http://news.nationalgeographic.com/2015/12/151203-toads-brazil-new-species-science-discovery.html)

Upcoming Seminars

  • January 20th, 2016 – Andrew Hook and Elizabeth Boehmcke will be speaking on “Protecting Assets from Nursing Homes and Medicaid” at Crowne Plaza Hotel, 4453 Bonney Road, Virginia Beach, VA 23462.
  • January 21st, 2016 – Andrew Hook and Elizabeth Boehmcke will be speaking on “Protecting Assets from Nursing Homes and Medicaid” at Hilton Gardin Inn, 5921 Harbour View Blvd., Suffolk, VA 23435.
  • February 15th, 2016 – Stephan Lipskis will be speaking on “Protecting the Money You Leave to Your Children from Their Divorce” at Crowne Plaza Hotel, 4453 Bonney Road, Virginia Beach, VA 23462.
  • February 18th, 2016 – Stephan Lipskis will be speaking on “Protecting the Money You Leave to Your Children from Their Divorce” at Hilton Gardin Inn, 5921 Harbour View Blvd., Suffolk, VA 23435.
  • March 14th, 2016 – Elizabeth Boehmcke will be speaking on “Protecting Your Children’s Inheritance” at Crowne Plaza Hotel, 4453 Bonney Road, Virginia Beach, VA 23462.
  • March 15th, 2016 – Elizabeth Boehmcke will be speaking on “Protecting Your Children’s Inheritance” at Hilton Gardin Inn, 5921 Harbour View Blvd., Suffolk, VA 23435.

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

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2017-08-02 at 10:00am
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