A living trust only saves taxes for couples, not single people and only if the trust is established before the death of the first spouse. The trust establishes a holding tank where at first death, the money of the deceased spouse goes into the holding tank and the money is available to the surviving spouse for their health, education, maintenance and support.
Often people believe assets are protected when they are not. Just because a property may be exempt from a nursing home spend down, that doesn’t mean its protected. Estate Recovery is the states way of coming back after peoples properties or assets, after a public benefit recipient has passed away. Estate Recovery can come back for the amount of whatever the state paid including at home benefits, passport and Hospice.
1) You can loose control of the home. If a child predeceases you, the home may go to their spouse and the home could be sold out without your permission.
2) Liabilities. If theres a divorce or lawsuit
3)Taxes.
What can you do? An Asset Protection Trust where your home is protected and you get all the favorable tax advantages and if something happens to the kids, nothing can happen to the house.
Over the past several months our office has been receiving an increasing number of clients calling with question about various financial and insurance products. Most of these questions have been related to how certain products work and especially as to how these products may or may not fit into the clients overall plan to avoid taxes, reduce probate cost and protect their assets from being lost to the cost of aging, including the cost of a nursing home stay, assisted living or home health care.
Listed below are a couple examples of questions received and answers that hopefully will help clear up certain misunderstandings. ……
Question: Is an annuity product protected from being lost to the cost of a nursing home stay if the annuity has waiver of surrender charges?
Answer: No. The waiver of surrender charges in the event of a nursing home stay is just that, a waiver of the surrender charges should you need to cash in your annuity to help pay for the cost of your nursing home stay.
Please note: The only annuities that are protected against being lost to a “nursing home spend down” are those being used in conjunction with other legal documents, such as a trust. If anyone tells you that they have a stand alone financial product, such as an annuity, that will gives you nursing home protection it is not true. If you have any specific questions in this regard, please call Sandy Workman at our office for a more detailed explanation.
Question: I was recently approached about a single premium whole life insurance policy and was told the death benefits would not be taxable when I die. Is his correct?
Answer: Most life insurance death proceeds are not subject to income tax or Ohio death tax if paid to a named beneficiary. However, if you are the owner of the life insurance policy, the death proceeds are included in your gross estate for federal estate taxes. These death proceeds may or may not be taxable depending on the size of your estate or when you die. With larger estates, these taxes can usually be avoided by using a certain type of trusts.
Our plan is to continue to provide answers to frequently asked questions as part of the blog postings. Should you have any questions at all, please contact us at 1-800-798-5297.
One of the most unusual memories I have about meeting with Thom’s clients after a death in the family makes me thinks of some things to do – and not do – when you’re planning where your “stuff” will go when you’re gone. It stared with a phone call from the daughter who I will call Sally, who scheduled a meeting for herself and her brother, Bill, to talk about Mom’s death. Mom died with assets that had to go through probate because they had no beneficiary. Further, Sally and Bill could not meet on their own without coming to blows.
When Sally and Bill arrived for the meeting, they sat across from each other, each staring at the floor. We reviewed the estate to determine what needed to be done. Neither had much to say, but it was obvious there was some tension about who got what. Mom had not been specific and each felt entitled to the diamond ring, the box of family pictures and the chess set. At the end of the meeting, Sally opened a bag and pulled out a small box and a coffee can. She handed Bill the coffee can and asked if he was ready to split the ashes!
What did I learn from this? Here are some pointers for helping your children after you are gone, particularly if they don’t have the most perfect relationship:
This question is one that frightens many of our clients. They worry that if they go to a nursing home that they will lose their savings. Although there are a few exceptions, largely your savings and investments are available for spend down. Let me explain.
A single person must spend all of their savings and investments, including IRA’s and life insurance down to $1500, before they get help. A married couple has a somewhat different requirement. The couples savings and investments are divided between them using the following formula to determine the amount the healthy spouse can keep.
The nursing home bound spouse must spend their share before the government will provide any help with the nursing home payment.
Many clients want to know if they can just change the name on their accounts and remove the ailing spouses name or put their accounts into their revocable living trusts. Unfortunately, none of these ideas will help prevent the loss of money to the nursing home.
However, there are still a few things that you can do to prevent the loss of your savings to a nursing home. In addition, often it is still possible to protect some of your savings even after you are in the nursing home. Planning ahead is usually the best and we encourage clients to plan ahead.
If you have questions about how to protect your savings and investments, please call and ask for me personally. I would be happy to help you and answer your questions.
You must begin to do two things:
You can accomplish both goals.
