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Living trusts, wills, and full timing


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#1 Johnontheroad

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Posted 03 May 2012 - 05:43 AM

We have been fulltiming for 4 years, and are Texas residents courtesy of Escapees. So we finally reviewed our retirement plans and learned some important issues related to Texas residents. This post is not meant as legal advise, just an alert to others. Check with your own lawyer for more details.

Before we went full time we lived in North Carolina. At retirement, I had a Financial Planner set up all of our retirement plans. One of these was setting up a Living Trust (LT). In short, a LT is a legal entity that can own assets. You - and others you designate -- in turn own the LT. Now what you do is transfer all your assets into the LT. So now you own nothing, the LT does (but you own the LT).

If you have a will and you die, your assets go into Probate Court, where a judge (and lawyers) assist in divvying up your assets. This can be time consuming and expensive. But if you have a LT, and that does NOT die when you do, probate and legal expenses are mostly avoided. Sounds good so far, right? But things are different in Texas.

The simplified Texas probate system requires the executor of a will to have just one court hearing, file a list of assets called an inventory and file a notice to creditors without any further court oversight. This much simplified system -- unique in the US -- makes having a LT in Texas mostly unnecessary. Exceptions include having out of state property, know your will be contested, or expect to be infirm through Alzheimer's or similar.

Based on what I learned, I will be dissolving my LT and having my lawyers draft up a proper Texas Will. If you have an LT, and are a TX resident, you may want to check with your legal advisers. But remember there are a bunch of scams involved with selling LTs to elderly people, so make sure you see a proper lawyer, not just a "Financial Planner" who sells LTs.

== John
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#2 Jack Mayer

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Posted 03 May 2012 - 06:01 AM

Filing a list of assets can be a daunting task. In some states it must be a complete and detailed list. This can literally take months to prepare, and is far less desirable than a living trust is. Do you have some indication of what detail is required in TX? I could not find anything definitive online.

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#3 Johnontheroad

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Posted 03 May 2012 - 06:25 AM

Filing a list of assets can be a daunting task. In some states it must be a complete and detailed list. This can literally take months to prepare, and is far less desirable than a living trust is. Do you have some indication of what detail is required in TX? I could not find anything definitive online.


That is true, but Texas claims to have eliminated much of the detail that other states do. The whole thrust of the changed Probate laws was to make the process simpler and more available to the average person. Again, you should check with your own lawyers.

The flipside of this is that all your assets need to be held by the LT. This requires the Vehicle Title, for example, to be held by the LT. And if you need a loan to buy the LT that too has to be in the name of the LT. Many banks will not easily allow you to re-title bank accounts in the LT name. Finally, as was our case, four years of forgetting about it meant that many of my assets were in my name. And even though I have a pour over will that still requires any assets in your name to go through probate court, so now you have to deal with BOTH the LT and the probate court.

The whole purpose of this post was to alert TX residents about the allegedly "easy" probate laws in Texas. And I'll state again -- check with your own legal adviser.

Check this publication by the Tx Attorney General: click

This also gives a lot more detail on LTs: click

John

Edited by Johnontheroad, 03 May 2012 - 06:34 AM.

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#4 JM

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Posted 03 May 2012 - 07:21 AM

Thank you for the links.

#5 mcbockalds

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Posted 03 May 2012 - 08:44 AM

This much simplified system -- unique in the US -- makes having a LT in Texas mostly unnecessary. Exceptions include having out of state property, know your will be contested, or expect to be infirm through Alzheimer's or similar.

Based on what I learned, I will be dissolving my LT and having my lawyers draft up a proper Texas Will.


Given the exceptions you list, I am not sure why you would dissolve the LT, rather than keep it and have the new TX will drawn up.
Cheers John
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#6 Johnontheroad

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Posted 03 May 2012 - 10:22 AM

The LT requires a special "pour over" will that recognizes the LT. This will takes any assets that you still own in your own name roll them over into the LT. You don't want to have a "pour over" will and a regular will because only one will be valid (the last one) and then the legal problems begin. Also, a competent attorney can include tax planning in your will giving your will the same tax advantages that the LT would have.

Again, talk to an attorney specializing in these matters so you get the best plan possible for your situation.

== John
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#7 Kirk

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Posted 03 May 2012 - 10:29 AM

Let me offer a comment on the LT versus a will in Texas. I have twice helped a friend through the process of settling an estate in Texas which was covered under a properly executed Texas will. In one case it was a widow, and the will was the typical "mom & pop" will where everything was to go the the surviving spouse. The execution of that will took less than two hours in a judge's chambers in Hood Co., TX. The other case was where my friend was the surviving son and named executor of the will. I was not present for the hearing part of that one but he told me that it also took a very short time in the office first to find out what to do, and second a return trip with the requested documentation for less than an hour. I do not remember exactly all that he had to take with him, but I do know that it was not that detailed a list of possessions but did include the car title, a deed to a home(neither had a lien), an original copy of the will, a statement from the deceased's bank, a certificate of death, and I think that was about it.

As John has stated, you would be wise to get advice of a Texas attorney but my observation was that it is very simple and requires little time in the typical, simple estate with all assets in Texas. The second will did list specific things to go to specific people and ended with an statement that all other property was to go to the son/executor. It was not complicated and I am sure that a more complex will would likely require more effort, but most of us just don't have that complicated an estate to worry about.

We do each have a Texas will and also plan to get ours reviewed by a Texas attorney soon, as ours has not been examined closely in nearly 15 years. For me it was a timely subject, to remind me that I still need to get that done! ;)

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#8 mcbockalds

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Posted 03 May 2012 - 10:41 AM

Actually I have a specific situation in mind and maybe neither the LT or simple will would do the job. It involves protecting the house from Medicaid after both spouses have died and they received Medicaid/nursing home benefits before they died. I realize that this falls under your advice "see a lawyer." :)

Cheers John
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#9 Mike

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Posted 03 May 2012 - 10:54 AM

Most states have simplified probate levels based on the value of the estate. I think I would also agree with the above post as to looking into keeping the living trust and updating your will to reflect Texas laws if needed. Otherwise you will need to transfer all the Living Trust assets back into your own name to close the trust and then when you die, your executor/administrator, much like the follow on Trustee of your Living Trust, will need to transfer ownership to the hands of the post death beneficiary of the trust if the trust is to terminate.

Obviously checking with a Texas lawyer makes a whole lot of sense and there are a number of issues as well related to other aspects of estate planning that may or may not apply to your situation. I suspect you have a will now and if you are a Texas resident, it should be probated in Texas regardless of where it was drawn up. It would seem and the procedures would be the same as if it was written in Texas originally. If you have out of state property, that too can sometimes complicate the issue and not allow the use of simple estate procedures. The use of "transfer on death" and joint tenancy type ownership structures can also help stay under the threshold for probate, if that makes sense given the individuals total estate picture.

This should not be considered legal advise, but the suggestion to seek legal advise.

Edited by Mike, 03 May 2012 - 10:55 AM.

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#10 JM

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Posted 03 May 2012 - 05:21 PM

Actually I have a specific situation in mind and maybe neither the LT or simple will would do the job. It involves protecting the house from Medicaid after both spouses have died and they received Medicaid/nursing home benefits before they died. I realize that this falls under your advice "see a lawyer." :)

Cheers John


Protecting Your House After You Move Into a Nursing Home
While you generally do not have to sell your home in order to qualify for Medicaid coverage of nursing home care, it is possible the state can file a claim against your house after you die. If you get help from Medicaid to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called "estate recovery," and given the rules for Medicaid eligibility, the only property of substantial value that a Medicaid recipient is likely to own at death is his or her home. If possible, you should consult with an attorney before entering a nursing home, or as soon as possible afterwards, in order to discuss ways to protect your home. Click here for the complete article

#11 Mike

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Posted 03 May 2012 - 05:47 PM

Protecting Your House After You Move Into a Nursing Home
While you generally do not have to sell your home in order to qualify for Medicaid coverage of nursing home care, it is possible the state can file a claim against your house after you die. If you get help from Medicaid to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called "estate recovery," and given the rules for Medicaid eligibility, the only property of substantial value that a Medicaid recipient is likely to own at death is his or her home. If possible, you should consult with an attorney before entering a nursing home, or as soon as possible afterwards, in order to discuss ways to protect your home. Click here for the complete article


And I would add that the area of Medicaid recovery is a very detailed and technical area that has some unique state law angles and this is not a subject that a general practitioner will likely know in depth. It really is a specialty area, along with some other "elder law" areas.
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#12 Kirk

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Posted 03 May 2012 - 08:10 PM

Unless it has changed in recent years, or possibly varies by state (Medicaid is a state administered program with federal funding and supervision) any gifts must have been given at least 3 years prior to the recipient beginning to receive aid from Medicaid.Even then, there are cases that they can go back farther if the recipient was not competent to do their own business in the past three years.

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#13 moonlightrunner

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Posted 03 May 2012 - 08:13 PM

A short cut for those who don't have the time or patience to wade thru a website....


To Will or Not to Will

"To Will Or Not To Will" has been prepared to inform the public of what happens legally to the property of a person when he or she dies with a will or without a will. The Texas Young Lawyers Association seeks to make Texas residents aware of how the law (the Texas Probate Code) affects them and their families. This handbook is not a substitute for the advice of a lawyer, but instead is designed to assist Texans in learning about their legal rights.



#14 Mike

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Posted 03 May 2012 - 08:15 PM

Unless it has changed in recent years, or possibly varies by state (Medicaid is a state administered program with federal funding and supervision) any gifts must have been given at least 3 years prior to the recipient beginning to receive aid from Medicaid.Even then, there are cases that they can go back farther if the recipient was not competent to do their own business in the past three years.


Good point Kirk. I do think it has increased to a 5 year "look back" for the most part now. (you think they would they would chase the folks with real money). But that is not my area. And folks, do your own due diligence, yada yada yada.
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#15 Mike

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Posted 03 May 2012 - 08:18 PM

Here is an interesting "light reading" link on the Medicaid "Spend Down". YMMV of course.

On edit: No knowledge whatsoever about the sponsor of the web page. Caveat Emptor.

Edited by Mike, 03 May 2012 - 08:19 PM.

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#16 JM

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Posted 04 May 2012 - 06:57 AM

Good point Kirk. I do think it has increased to a 5 year "look back" for the most part now. ...


The Crackdown on Medicaid Planning (Click here for complete article)
Tougher restrictions. The government doesn't want to finance long-term care for people who are sheltering assets that could go toward paying their bills. So the new rules, which took effect in February 2006, extend the "look back" period from three years to five. If an individual gives away money or property during the five-year look-back, it triggers a penalty period during which he or she is ineligible for government aid.

The penalty period equals the amount given away divided by the average cost of nursing-home care in your area. So, for example, if you give $60,000 to family members and a nursing home costs $6,000 a month where you live, you can't qualify for Medicaid for ten months.

Under the old rules, the penalty period was less onerous because it began the day you transferred the assets. That meant it often expired before you were admitted to a nursing home, so you could still qualify for government aid when you applied.

Now, however, the penalty period begins the day you apply for Medicaid, which by definition means you have already spent virtually all of your money and need public assistance to pay the bills. (Asset transfers made before February 8, 2006, are grandfathered under the old rules.) That means the family members who receive your gifts may have to pay nursing-home bills during the penalty period until you qualify for Medicaid.


#17 mcbockalds

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Posted 04 May 2012 - 09:31 AM

The Crackdown on Medicaid Planning (Click here for complete article)
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I have been reading a lot about estate planning lately in preparation for a visit with an elder law lawyer, so these articles are good to read too. But what do you make of this quote in the next to last paragraph from the article above, "Once your parent qualifies for Medicaid, he says, you can be as generous as you like with gifts and cash."

Cheers John
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#18 Mike

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Posted 04 May 2012 - 09:55 AM

I have been reading a lot about estate planning lately in preparation for a visit with an elder law lawyer, so these articles are good to read too. But what do you make of this quote in the next to last paragraph from the article above, "Once your parent qualifies for Medicaid, he says, you can be as generous as you like with gifts and cash."

Cheers John


I would think it is apparently a reference to the last sentence in the preceding paragraph which states: "If you intervene too soon, all of your financial gifts will be considered your parent's assets and will go toward paying nursing-home bills."


Keep in mind, the idea is that the person is essentially destitute and needs society's help to pay for the care. Then again, if they are in a nursing home, how much do they really need? Beauty shop, some clothes, dinner out now and then, maybe a bottle of adult beverage. And why would you want to shift assets to the person anyway? The elder lawyer should be able to help here not only with the law, but the practicalities of the needs of the individual as well when they are in a nursing home. If nothing else, I would follow the maxim I first heard from my tax law professor: "Pigs get fat, Hogs get slaughtered".


Edited by Mike, 04 May 2012 - 09:56 AM.

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#19 richfaa

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Posted 04 May 2012 - 04:07 PM

We did that years ago in our home state of Ohio.Our trusted attorney set it up for us. Our parents also did that as they aged in the State of PA. It worked out well for them and their care in their last years.
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#20 LG61820

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Posted 05 May 2012 - 10:02 PM

" It involves protecting the house from Medicaid after both spouses have died and they received Medicaid/nursing home benefits before they died".

I have been a Nursing Home Administrator, a child of a parent whose nursing home care was paid by Medicaid and am now at an agency that has a lot of interaction with the Medicaid program. I feel competent to speak to this issue. I don't see how "protecting the house" from Medicaid cost recovery is any different than being the welfare queen we've all heard of and decried over the years.

My mother used the allowable amount of her assets to prepay her funeral. She paid from her assets as a private pay paitient until her assets were diminished. When she passed Medicaid got everything left - as was only right as they had provided her nursing home care. My brother and I never considered trying to "protect" her assets in any shady way. Her legacy was the life she lived, not her estate.

I would hope that the OP would rethink this and realize that nothing in this world comes for free, that nursing home care is very costly and that Medicaid dollars do not fall from the sky. LG