When asking clients what their plan is for affording long-term care, often times they respond by saying the will give everything to their children before they need care. This blog discusses the top five reasons why giving your children everything before you need care is not the answer, and offers a solution to “leave” everything to your heirs without the risks.
1. Giving Everything to Your Children Can Actually Prevent Your Ability to Qualify for Long Term Care Assistance
What happens if you meet with an Elder Law attorney who tells you the planning options you have, and the hindrances gifting away all of your assets to your children can have. Time to ask for that money back! Your children could willingly give the money back to best plan for the protection and preservation of those assets and funds, or they could say, “I don’t think so.” Whether for your children’s benefit, or because they think gifting it back would be a mistake, your children absolutely have the right to say no to your request. Depending on the amount of the assets gifted, you could have just accidentally prevented yourself from receiving state long-term care benefits for five years – the opposite of your intended goal.
2. You Can’t Spend Your Own Money!
Say your stock portfolio has a great year and you want to celebrate that great year by going on a vacation with your family. The first problem is, if you’ve given everything away to your children, you can’t spend that money! It is not your decision on how to spend your dividends or wise investments, and your children might not want to celebrate the same way you will. On another note, the portfolio you gifted your heirs likely had a hefty tax consequence to them and any income subsequently produced after the transfer is being taxed to your children, not to you. This only increases the likelihood that your children will have a lot to say about how your former investment funds are spent.
3. You Can’t Change Your Mind about Your Assets
Let’s continue the idea of a change in circumstances creating a change in perspective. Think about what would happen if you transferred the title of your home into the name of your child, but you later decide that you want to downsize or move to a warmer state. Although you still possess your home, you gifted the legal title to your children. You have to get their permission and involvement to move to Florida or into a smaller home.
4. You Can’t Manage Your Investments, Your Business, or Your Property
Many individuals have a family business, income producing property or investments. If you give your children the family farm, for example, you no longer have any right to manage the property or business. You may provide input, but the management rights have been given to your children.
5. Just Because You’ve Given Everything to Your Children, Does Not Mean Everything Will Stay with Your Children
We’ve discussed the practical consequences that occur after you give property to your children, but what about the unknown consequences? Are your children married? Do your children have high-risk jobs such as doctors or lawyers? Do your children have credit cards or mortgages? If you answered yes to any of these questions, there are risks to giving your children your property. If you give property to your children that consist of your hard earned assets, investments, and accounts and they get divorced or sued in their capacity of their employment or by creditors for unpaid bills, that gifted property is now available to those creditors and former spouse. In an ideal world, we would not have to worry about divorces or lawsuits, but until our crystal ball starts working, there are no guarantees. We need to mitigate these risks.
So What Do You Do?
Different kinds of trusts can be used for many different purposes. A Family Trust is an ideal option for people who not only want to give their assets to their children but also want to avoid the five reasons above.
Instead of giving property directly to your heirs, you give the assets to a specially tailored Family Trust. The trust will avoid all of the pitfalls, yet still allow the assets to be protected to help you later legally qualify for Medicaid or Veterans benefits and allow those assets to have preferential tax treatment.
The drafting and utilization of this trust is extremely important to ensuring its intended consequences. An experienced elder law/long term care planning attorney can help you utilize a Family Trust and other unique planning tools specific to your situation and assets.
You’re Invited to Call Today!
If you have questions about estate planning, elder law, or long-term care planning, please don’t hesitate to call DelCotto Law Group at (859) 231-5800 or email attorney Sara Johnston at firstname.lastname@example.org