Many individuals are overwhelmed by the small print.  If that is the case, have the document reviewed by one of your adult children who is capable of understanding these types of contacts or have it reviewed by your attorney.  I recently had a case where the wife signed the agreement without reading all the fine print and ultimately had agreed to allow the nursing home to put a lien on her home for any unpaid portion of her husband’s nursing home bill.  In many situations, a spouse is admitted to a nursing home on a fairly rushed basis or in the midst of crisis planning.  Regardless of the circumstances, it is important that you take the time to review the contract in detail and make sure it is what you are willing to ultimately agree to and that you are signing it in the right capacity.

However, with the implementation of the Medicaid Recovery Act, which the State of Michigan avoided for over 10 years, there are new reasons to have a Living Trust.  Although, a Trust may not allow you to protect the cash or investment assets, as in many cases they need to be spent on nursing home care, a Living Trust can ultimately protect your home and your personal property.  Under the Estate Recovery Act, the only assets that the State of Michigan can go after are assets that pass through probate.  If you have set up a Living Trust and have done some legal, but creative planning, your home can pass through the Trust, avoid probate and ultimately avoid repayment of Medicaid expenses.

The parents responded, “yeah, we scribbled something on a napkin and divided everything equally.  The bank will take the house and you kids take the rest.”

Obviously, this is not the best type of estate planning, but for many, it is the only planning they have.  I read a recent article about whether a suicide note would serve as a valid Will.  Apparently, prior to the mother’s suicide, she hand wrote on the outside of an envelope that the envelope was not to be opened until she died.  Inside the envelope she wrote on a separate piece of paper, “please make sure the kids get my money” and signed the letter.  A lawsuit in probate court followed between the children and the wife’s newly married spouse as to the validity of the suicide note as a Will.  Following excessive litigation, the court found that the hand written note did in fact satisfy the holographic Will requirements.  Unfortunately, this decision followed extensive litigation.  Obviously, hand written notes or writing notes on a cocktail napkin are not the best way to complete your estate plan.  There are several things to consider when setting up a Will such as who will serve as the executor, who will serve as the guardian of any minor children and if you are newly married, it may be important to specifically exclude your spouse.

It is important because when it comes to co-habitating with someone that you are not married to, some of the traditional rights in the estate planning world do not apply.  For example, if you are married and your spouse dies without a Will or a Trust, under the probate laws you will be entitled to inherit most, if not all of that spouses assets.  If you are co-habitating with another individual and they die, you are entitled to none of their assets if there is nothing prepared such as a Will or Trust.  If you are living with another person and you are not married to them and that person faces medical issues, you may have no authority to make medical decisions, get medical information or even pick up a prescription for that individual.  Additionally, there are issues about commingling of assets, personal property and bank accounts and if the two unmarried partners have children from a previous relationship, there are issues as to whether your children will inherit your “stuff” or whether it will pass to your partner.  It is said that about two-fifth’s of children are expected to live in a co-habitating household at some point.  It is as a parent that estate planning will become even more important in these situations.

Setting up an estate plan is not as difficult as many would think, but it is a very important New Year’s resolution to keep.

Many of the clients we talk to think that Medicaid is an easy solution for their long term care costs.  Unfortunately, if the client has retirement accounts or other investments, the government is going to take these into consideration before Medicaid is awarded.  Just remember that interest rates have fallen, longevity has improved and care costs have increased faster than general inflation and for these reasons alone, long term care insurance is something you should consider.

Remember,  not only are these funds necessary to protect your family members care, but this may also be your inheritance that is being put at risk.