Making a good estate plan is analogous to building a house. Both the estate plan and the house must be built on a strong foundation. A solid home uses bricks and mortar to build the foundation. There are a variety of building materials used in making a good estate plan.
The Will is the cornerstone of an estate plan. It describes who will receive our assets when we are gone, how the assets will be received (whether outright or in trust), what steps have been taken to minimize estate taxes, and who should administer our estate.
Based on the client’s specific needs, additional estate planning tools may be required. For instance, some clients may benefit from a living trust. Other clients may benefit from a family limited liability company (LLC).
The well designed estate plan ensures that your affairs are properly handled when you are gone. But what type of planning can be done in the event you become incompetent, and can no longer handle your own affairs? How will this change of events affect your estate plan?
The New Jersey Appellate Division recently decided what type of estate planning is permitted to be made on behalf of a person who unfortunately could no longer take care of her own affairs. In the Matter of Keri involves an 88 year old woman who continued to live alone in her home. Because of her impaired physical and cognitive abilities, Mildred Keri no longer could provide for herself. Ms. Keri had two devoted children, Richard and Charles, who took turns making sure that one of them visited their mother every day.
Richard applied to the Court to be named as guardian on behalf of his mother. He sought to have his mother sell her residence and to move into a nursing home. His application to the court also made a request to conduct “Medicaid Planning.” In order to preserve some of his mother’s assets, he asked the Court’s permission to implement a gift giving program which complied with the complicated Medicaid rules. Under the plan, his mother would retain $78,000 to pay her nursing care expenses, and $92,000 would be gifted in equal shares to Ms. Keri’s two sons. If the Court did not approve these gifts, then all of Ms. Keri’s assets would have to be exhausted in order to pay her nursing home expenses.
Even though Mildred’s Will named her sons as sole beneficiaries of her estate, the Court denied Richard’s application to permit Medicaid Planning on behalf of his mother. If Mildred were competent, she would be allowed to transfer assets to her children in order to qualify for Medicaid. However, the Court would not grant her sons the power to make these gifts on behalf of their mother.
With proper planning, Ms. Keri’s sons could have been granted power to make gifts without having to go to court. This could have been accomplished by giving her sons power of attorney to undertake Medicaid Planning.
The Keri case stands as a reminder that you should review your estate plan to make sure you have not overlooked important issues.
Do not assume that your family members will be entitled to protect your assets for Medicaid or Estate Tax purposes if you are not capable of making decisions on your own behalf.
I urge you to call me to ensure your estate planning house is in order.
Kenneth R. Cohen, Esq.