Elder Law -- Is Avoiding Probate Enough?
I had a new client come to my office recently. She was looking for Medicaid planning advice for her husband's parents. (This is a very frequent occurrence.) Her mother-in-law was suffering from dementia but was still able to live at home. Her father-in-law was 85 years old but in good health and led a fairly active life.
She told me that about 7 years ago, her in-laws had wills, a living will, and a revocable living trust drafted. She said her parents' total assets were worth about five hundred thousand dollars, and the revocable trust was drafted solely to avoid probate. I was dumfounded that the attorney who drafted the plan did not draft a durable financial power of attorney nor discuss Medicaid planning with the couple. After all, the husband was already 78 years old!
I explained that Medicaid had a five-year look-back period on transfers of assets for less than fair market value. I suggested that her in-laws might want to have a new irrevocable trust drafted. We also discussed the possibility of an irrevocable grantor trust, a special type of irrevocable trust that causes income to the trust to be taxed to the individual's personal return, rather than taxed at the higher trust rates.
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