2015-08-21 Elder Law and Estate Planning Q&A with Attorney John G. Watts


Welcome to our Q&A on elder law and estate planning issues. The entire video is above, and the transcript is below.

I hope you enjoy!

John Watts ==============

Hello, my name is John Watts. I’m a lawyer in Alabama.

Today is August 21st, 2015. Like we do pretty much every Friday around this time, we’ll be answering some elder law and also some estate planning questions that have been submitted to us. Typically, the way people get questions to us is you can leave a comment below a video. We try to monitor those comments. You can go to our main Elder Law Estate Planning website called Alabama Elder Lawyer. If you’re in Alabama or if this concerns somebody in Alabama, maybe an aged parent that you are trying to figure out a long-term care issues for, things like that, you can always give us a call: 205-879-2447.

Today, it’s going to become a shorter webinar. This week, we only received three questions. If you have questions, definitely get those into us and we’ll be happy to answer those.

The first question is: How does a will affect joint assets?

I think what is meant by this is, let’s say, that I own a piece of property with my wife. It’s in both of our names. My will says that, just imagine this is the case, everything goes to my daughter. What would happen with the house? Some people say, “Aha! See? The will says everything goes to his daughter, so that ends it.” The problem with that is a will only has power, only controls over things that are in my name only.

A joint checking account with a child, with my brother, with a friend down the street, my will has nothing to do we have that. A piece of property that I own jointly with somebody, my will has no control over there. If we’re talking about typical joint ownership where when one person dies, the other person gets it. Keep that critical concept of mine because we get calls all the time. people come up to me at church or other places and say, “Hey, you know, what’s gonna happen here because the will says it goes to all four kids but, uh, one of the kids is a joint owner on all the financial accounts.” Technically, that kid gets everything because a will only controls things that are my name only.

It certainly is appropriate and fine to do joint ownership, it’s maybe not the best way to do estate planning. There can be a lot of problems with that. Typically, it’s better to have a will, at least a revocable living trust so that you can clearly identify: I want this to go over here and this to go over there. Just remember, a will, only things in my name, and whenever we’re talking about a trust, a will, it doesn’t matter. The ownership is going to trump any type of estate planning.

I might assure this, I don’t know if I did this in a video or maybe just in some live seminars in front of groups of folks, but there was, I’m going to say it’s like maybe 85 years old. This is a year or two ago. He got remarried late in life but he told his kids, “Hey, don’t worry. Everything is going you.” I think he had maybe a $400,000 IRA and he dies like 2 months after he gets married. The kids go, “Okay. Hey, it’s ours, all right?” The will says, “It goes to the four kids,” and the now new widow says, “Wait a minute. His assets are mine.” There is a $400,000 IRA.

Just assume that’s all that there way. What he had written on the IRA as far as beneficiary as he said, “Per my will.” That’s meaningless. If it doesn’t say who is going to go to, then the default rule is it goes to your spouse. You have all the wills, all the trust in the world, but if you don’t have things properly titled as far as legal ownership, then the best will, the best trust, may end up doing you no good. I hope that that answers this question of: how does a will affect joint assets? Really it doesn’t. Again, assuming we’re talking about the typical joint thing like a house with your spouse. It says, “We both own it. If I die, then my wife gets that.” There are some types of joint ownership where, literally, it’s divided up but that’s not very typical for us.

Our next question is: How does the VA pension help pay for an assisted living facility?

I think the context of this is if you are talking about putting a spouse or a parent into an assisted living facility, it’s pretty expensive.

It could be $3,000, $4,000, $5,000 a month, even more than that. How do you pay for that? You may have heard about something called the VA pension. It’s also called VA Aid and Attendance. The same thing. That is a benefit for certain types of veterans or widows of veterans. For a married veteran, it’s about $25,000 a year tax free. It’s a pretty remarkable benefit because you’re thinking, “Okay. That’s two grand a month. That can really help me pay for an assisted living.” A window is about $1,000 a month and a single veteran, you’re talking around $20,000 a year.

Let’s say that it’s $5,000 a month and we have income of $3,000 a month. We’re short. We got $5,000, we got income of 3, we still are short $2000 a month. Let’s say it’s a widow, if we can get the VA Aid and Attendance, that’s an extra $1,000. Now, we’re only going in the hole $1,000 a month. This can really be vital when you think about a married veteran and maybe, let’s say, they’ve got $30,000. That’s all the money they have. They make $2,000 a month and the assisted living is 4, so were $2,000 in the hole. We only stayed there 15 months. That $30,000 is just going to be gone a little over a year. If we could get the VA Aid and Attendance, there’s that $2,000. How long can we stay there? I understand prices go up and things of that nature but using the numbers that I’ve used, you could say, they’re indefinitely.

It’s really vital if you are in an assisted living, you have a loved one was thinking about going to an assisted living, check out the VA pension. We have lots of videos on this. We have one that, I think, it’s about a 40-minute interview that a friend of mine, Davis Nelson, did of me. You can find that on my YouTube channel.

Real quick summary, three requirements for the VA pension. There’s a military requirement so you have to be a war time veteran. That’s active duty, just one day, World War 2, Korea, Vietnam, the Gulf War, which the Gulf War has been continuous since 1990, and then an honorable discharge. That’s the military requirement. Second requirement, we look at health or disability.

Do we need help?

Now, if we’re going into a true assisted living as opposed to independent living, because when we go for an assisted living it’s because we need help. We need help bathing, we need help getting dressed, we need help getting up and down, out of a chair, maybe we’re a fall-risk. There’s something we need help with because, otherwise, we would go into independent living, which is it may still be in a facility but we live there independently.

That’s one level, assisted living is another, and then nursing home is the highest level. Definitely, check this out, military requirement, disability requirement, and then financial. We look at income and we look at assets. That can get a little bit complicated. If nothing else, I want to put this in your mind and know that, “Hey, this is something I wanna think about if I have a loved one already in an assisted living or I can foresee that they will be going to an assisted living.”

Our last question and we haven’t had one in a while on special needs trust but it says, “Does money in a special needs trust get paid back to the government?”

It’s a great question.

Let’s define some terms.

A trust is just like a container or a box. I usually have a little treasure chest here but I’m actually in my home office right now. If you can picture it like a little box here and we put stuff in it. What do we put in? We might put in money, we might put in a house, stocks, investment, whatever it may be. What do we mean by special needs. It’s also called supplemental needs.

Here’s the basic idea. If I am getting government [inaudible 00:10:26] benefits. [It’s maybe 00:10:28] I’m on Medicaid, maybe I’m on SSI. We’re not talking about SSDI, the Social Security Disability Insurance, that’s because I’ve worked and I paid into the system and now I’m disabled. We’re not talking about that. Maybe I’ve never worked. Maybe I was born with a disability and so I don’t have any income that I’ve paid into the government. Then I can get this thing called SSI, Supplemental Security Income. That is means-tested, which just means they look at my assets and they look at my income also.

When we’re talking about a special needs, supplemental needs trust, we mean we’re putting money into this box, into this trust, to benefit me but I don’t want to lose my government benefits. I’m not getting into all the details but let’s just say that
the test is if I had more than $2,000 in assets but I want to put $100,000 into this trust, how does that work? The government says, “Okay. We’ll let you put it into this trust as long as that money is going to the person that needs help in a certain way, so it’s not to replace your Medicaid or other government benefits. It’s to supplement them.”

What happens, I’m getting all this money from Medicaid or from SSI. Do I have to pay that back? It depends. When we look at that trust that we’ve created and money goes into it, we say, “All right. That money that went into? Where did that come from? If it was my money, I was entitled to it and I put my own money in there, then yes, it’s gonna have to be paid back, which makes sense because that was my money and I would have been disqualified if it was sitting in my wallet or my bank account.” The government says, “Okay. Look, John. You can put that into a trust and we won’t count that against you but you know what? When you die, we’re going to have our hand out saying, ‘We want to be paid back.'” That’s fair.

We got the trust, we got money in it, what if that money came from a parent or somebody else? In other words, not from me. That was their money, so it makes sense when that goes into the special needs trust, again assuming we’re following all the rules and there are exceptions and all of that types of but just a general big picture, somebody else’s money goes into the trust. When I die, that money does not have to go back to the government because it was never my money in the first place. It wasn’t a lawsuit that I filed that I’m getting the money or it wasn’t just I happen to have $200,000 in the bank and I become disabled and I get on government benefits.

That’s money.

If I’m going to shield that money by putting it in a special needs trust to supplement my needs, then the government gets it back. If it was never my money and I’ve got some, maybe it’s a family member, whoever it is who’s putting money into this trust, then the government doesn’t get that money back. Again, assuming I follow all the rules. It can get a little complicated with special needs trust and sometimes you’ll hear him call first party trust or a third party. Typically, what people mean by that is first party is me, so it’s my money.

The most common scenario is, it’s very sad when this happens, but maybe there’s a young person that’s involved, just a horrible wreck and they’re in a nursing home afterwards or they’ll never work again. They’re getting government benefits but then it comes a time to settle that lawsuit against the trucking company or whoever injured them, and its $1 million. That’s going to kick them off the government benefits. Sometimes we’re okay with that. We say, “You know what? That’s better to do it that way.” If we don’t want to lose those government benefits, then we need to make sure that that’s going into the right type of trust to protect it.

I hope that these have been helpful. Again, just a reminder, we just covered as many as special needs trust get paid back to the government? It depends on what kind of trust it is. How does a will affect joint assets? It really doesn’t because remember a will is only things in my name. How does a VA pension help pay for assisted living? It’s really designed to cover that gap. Here’s the cost. Here’s our income. We’re short, money, that’s when that VA pension can really be helpful. I hope that this video has been helpful to you. Feel free to leave us a comment or ask any questions that you have. Again, you can do that below this video, you can do it on our website Alabama Elder Lawyer, or you can give us a call, 205-879-2447. Definitely, send us more questions and we will see you next week.

Have a good day!


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