Estate planning, asset protection planning, creditor protection planning, long-term care planning and Medicaid planning. What do all of these terms mean? Are they interchangeable concerning the same topic, or do they cover different topics? Before you can get help with your particular situation, you need to understand the area you need help and how to identify it.
Generally, asset protection planning and creditor protection planning are the same. They involve structuring your estate so your assets are protected from creditors’ claims. It is not about hiding your assets or giving your assets away. It is about holding your assets in such a way so creditors are unable to access them to pay a judgment against you, or it is very difficult for them to do so.
As most people know, we live in a very litigious society. People who are vulnerable to being sued are those individuals who own assets. In order for a plaintiff to proceed in suing you, he or she must have two ingredients. First, you must be liable. In other words, you did something wrong whether it was intentional or accidental. Second, the plaintiff must be able to recover money from you. If you do not own any assets, or if the plaintiff cannot access any of your assets to pay a judgment against you, there is no reason to sue you. The purpose of any law suit is to collect money, not to just get a paper judgment which says the plaintiff is owed money.
Long-term care planning and Medicaid planning are generally the same as well but very different from asset protection planning or creditor protection planning. Long-term care planning and Medicaid planning do not involve hiding assets or being untruthful to the Medicaid agencies. They are concerned with planning your estate in such a way so you qualify for Medicaid benefits to pay for long-term care costs (either in a nursing facility or at home), medical costs, and prescription medications. At the same time, assets are protected with planning. They are still being held and available to supplement your care or pay for anything you may need or want. Upon your death, they pass to whoever you want to receive them. In the Medicaid application, you disclose all your assets to the Medicaid agency along with any and all planning you performed. Most importantly, you include the authority under which you did your planning which protects you and your assets.
Estate planning usually involves structuring your estate and assets to be administered and distributed as you desire both during lifetime and at your death. It also includes ensuring you have the proper mechanisms to care for you during your lifetime if you are incapacitated.
In this planning, you typically use a will or trust to administer and distribute assets. A will does not have any legal significance until it is probated. It does not mean anything more than the pages of this articles until a court says it does. Probate is the process which recognizes the will, gives it legal significance, and makes it enforceable. Probate is the process of transferring assets from a deceased person to the person’s heirs or other beneficiaries.
The time and expense of probate led to the advent of trusts. When you create a trust, you transfer title into the trust. When you die, the trust does not die but continues to exist. You have already appointed a successor trustee to administer the trust after your death. Since the trust continues in existence with your appointed successor trustee, the trustee can administer and distribute your assets as you have directed without having to probate your estate.
Additionally, this planning encompasses planning for you if you are incapacitated before you die. For instance, who makes decisions regarding the care and management of you individually and your assets? If you are married, your spouse does not have that right simply because you are married. If you have adult children, they do not have that right simply because they are related to you. Your spouse, children or other relatives have two options. They can either have a durable power of attorney and advance directive for health care, or go through a courtsupervised guardianship. In most states, a durable power of attorney address financial matters while an advance directive for health care controls health care matters.
For more information about Medicaid, Medicare, VA benefits, Social Security disability, estate planning and asset planning, visit the website of Senior Resource & Benefits, LLC (“SRB”) at www.srbllc.com call toll-free 1-800-407-9302. All legal services for SRB are provided by the law firm of Riffel, Riffel & Benham, PLLC having a website of www.westoklaw.com and telephone number of 580-234-8447.
