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Help for those BIG long-term care bills is about to get harder

Three weeks ago (on Friday the 13th no less), the Illinois Department of Healthcare and Family Services (HFS) unleashed new Medicaid rules.  The rules came about because of the federal Deficit Reduction Act of 2006 (called “the DRA”).  The name should clue you in to the fact that the proposed rules aren’t designed to improve care, just to reduce spending.

With the increase in life expectancies and rise in disabling conditions like Alzheimer’s disease, extended stays in long-term care facilities are more and more common.  And the result is thousands of seniors and their families facing what are often crippling long-term care bills.  What is so sad is that many families don’t know that help is available from Medicaid.

The Medicaid eligibility rules are tough, but it is not something you should think of as “only for the poor.”  Seniors frequently qualify for Medicaid while protecting thousands of dollars in assets for themselves, their spouses, or their families.  Smart planning makes all the difference because it helps pay for many “extras” that Medicaid and Medicare do not cover.  I am passionate about helping families escape from that feeling of hopelessness every time the long-term care bill comes.

The rules HFS announced are not the final rules.  There is still a period for public comment and changes.  But they do give us an inside look into the direction Illinois is heading with its implementation of the DRA guidelines.

There are a few important things to take away from the proposed rules:

  • Crisis planning to protect assets and qualify for Medicaid will still be possible
  • Advance Medicaid planning will become even more valuable to protect your hard-earned assets (best for people who are completely healthy but looking forward 6-10 years)
  • Medicaid will be giving additional asset protection advantages to people who have long-term care insurance in place, making the insurance doubly useful (but it has to be the right kind of policy, not just any old policy will do!)

As the rules move through the process, I will keep you updated about any developments.  But consider this your “heads up” that changes are on the way!

The good news is that there’s still time to get an application in under the current Medicaid rules.  So if you know anyone who is in a long-term care facility or think may need assistance soon, tell them to call my office.  We may be able to help.

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The beach delivers an estate planning lesson (it’s not all sand and surf!)

If there’s one thing I have learned, it’s that life can teach us a lesson at any time and any place.  One of those teachable moments happened to me recently while I was on a vacation at the beach with my husband (and law partner!), Jeff.

Let me start by saying that I am one of those moms who is very strict about sunscreen.  My kids do not go swimming or play outside for very long without a healthy coat of sunscreen.

But Jeff and I found ourselves on the beach on a very overcast day.  I know that clouds don’t prevent sunburns.  But we were also sitting under our very own tiki hut.  The thought of sunscreen entered my mind, but quickly left because we were “safe” under the tiki hut.

So there we sat — in the “shade” on a cloudy day — and read our legal books for hours and hours.  How did our little beach adventure turn out?

Sunburn.  Lots of it.  Jeff got the worst of it because he is very fair skinned.  But I didn’t escape scot free.

The tiki hut gave us a huge false sense of security.  We felt incredibly safe because we had taken some steps, even though they weren’t enough.  In a sense, the cloudy skies and tiki hut prevented us from taking the truly effective steps that we needed to take to protect ourselves.

I run into the same thing all the time when talking to people about their estate plans.

  • The people who told me they got a Will to avoid probate (but a Will actually guarantees probate)
  • The parents who were very proud that they named guardians in their Will (but had done nothing to address who would care for their kids on short notice or if they were injured but not killed)
  • The adult children who took money from their elderly parent’s accounts to reimburse expenses they had incurred (but they hadn’t kept proper records so their parent’s eligibility for Medicaid long-term care coverage was put in danger)
  • The people who tell me their estates won’t have to pay estate taxes (but they didn’t include the value of their life insurance policies when they added up their estate)
  • And many other stories we hear…

Each of these people felt a false sense of security because they hadn’t been properly educated by their attorney (or had gotten documents without seeing an attorney at all, such as from Legal Zoom).  We are strong believers in education because good decisions are only possible by having the full picture.  That’s why we became National Preparedness Coalition Members.

If Jeff and I had the full picture, we wouldn’t have had to stay inside for three straight days of our “beach vacation” because of a serious sunburn.  But the stakes are much bigger in estate planning.

So, get a head start on National Preparedness Month.  Ask yourself, have you fully investigated what you need to do to protect yourself and your family?  Or are you living under a false sense of security?  If you have any questions about your plan, call me and let’s talk about it.

But don’t just think about your own family.  If you believe someone you know — a friend or family member — has a false sense of security, take the initiative to send them this email.  Tell them to get prepared — and get their plan checked out.

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Avoid probate and protect your home, without a land trust

Picture this.  Your spouse hasn’t been sleeping well and runs into another car during his or her morning commute.  The other driver is injured in the accident and has medical bills and lost wages greatly exceeding your insurance coverage.  The lawyer for the injured driver says it was all your spouse’s fault, and they’re coming after everything you have.  Can they really take your home?

Or your spouse runs a business, and the bank required them to personally guarantee a loan.  Now, the business isn’t doing so well, and the bank is asking about other ways your spouse might come up with the money.  Is your home safe?

Or perhaps your spouse gets into trouble with their credit card spending, and bankruptcy seems like the only option for them.  You’re making enough to pay the monthly bills, including your mortgage.  But can the credit card companies really make you sell your home to cover your spouses charges?

In Illinois, the answer to both questions might be no … if you own your home as “tenants by the entirety.”

Don’t let the complicated name scare you off (and let’s just call it “entirety protection” to keep it simple).  Entirety protection is a really important protection for married couples, and one that is overlooked by many estate planning attorneys.

You don’t get entirety protection automatically.  But a new law signed last week by Governor Quinn makes it much easier to use a living trust and keep entirety protection for your home.

Why is entirety protection so important?  Well, it protects your home from claims made against either you or your spouse (but not from claims made against you both).  Without entirety protection, a creditor of your spouse could place a lien on your home and might even force you to sell your home to pay off the debt or claim.

Until now, there have been only two ways to get entirety protection:

  1. Own your home together with your spouse, where the deed includes the words “tenancy by the entirety” or “tenants by the entireties”
  2. Own your home in a land trust, where you and your spouse are the beneficiaries

But the new law allows for a third way to get entirety protection—using a traditional living trust.

The keys to entirety protection under the new law are a properly structured deed and living trust (or trusts, if you and your spouse each have your own trust).

If you already have a land trust, that’s great!  As long as your land trust states that your home is held in “tenancy by the entirety,” you don’t need to do anything.  The new law doesn’t change anything for you.

But if you’re not sure how your home is owned or whether it has entirety protection, I can tell you by taking a look at your deed and living trust or land trust.  There’s no fee for this service.  It’s my gift to you to make sure you don’t miss out on this invaluable protection for your home.

As always, I am here to help you and educate you — bringing you the latest developments in the law that affect your family.

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An estate planning lesson…from a dancing TV show?

The 10th season of Dancing With The Stars is in full swing now on ABC.  There’s even more excitement than usual around the Kabbe household because our local Olympic hero Evan Lysacek is competing!  And, yes, I do mean the whole household.  Even my husband (and law partner), Jeff, watches!

Saying that Evan is local is an understatement.  He is not only from Naperville, but he is from our neighborhood.  He went to the same elementary school and middle school as our children now attend (and he went to the high school our children will go to, but I am really trying not to think about high school yet).

Last week we began wondering how much the stars got paid to appear on the show.  I had heard rumors that some of the stars (such as this season’s Pamela Anderson) went on the show primarily to make money.  So the obvious question was, “how much?”

Well, it wasn’t even ten minutes later and Jeff had found the answer.  During Season 8, the stars earned $125,000 just for appearing on the show.  The stars could also earn up to $240,000 more by making it to the finals.  And what about winning the whole competition?  The only reward for that appears to be the mirrored ball trophy.

How do we know all of these details?  Usually reality TV shows include a pretty tight non-disclosure agreement forbidding the participants from talking about the show and their contract.  That’s why we don’t hear much about how shows like Survivor and The Bachelor are actually produced.

But Season 8 on Dancing With The Stars was different because Olympic gymnast Shawn Johnson was one of the stars.  What made Shawn different from previous competitors is that she was a minor (she was 17 when she competed, having just turned 18 in January).

Shawn’s contract with Dancing With The Stars had to be approved by a judge because minors don’t have the same ability to enter into contracts as adults.  And the second that contract was filed with the court, it became a public record.

It’s the same deal with probate.  Far from avoiding probate, having a will actually guarantees probate (with the exception of some estates under $100,000).  Your will and a complete accounting of your assets will become part of the public record.

Now, it’s unlikely that reporters from TMZ are going to be digging through your court records after you pass away like they have done with Michael Jackson’s estate.  But you may have your own reasons for wanting to keep your family, friends, and neighbors from learning the details of your assets and what gifts you made.

That’s just one of the reasons why more and more people are turning to living trusts for their estate plans:  trusts are private.

If you have only a will, I encourage you to investigate the benefits offered by a living trust.

In the meantime, don’t forget to vote for Evan on Dancing With The Stars!

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Has your plan kept up with your life?

Spring isn’t just a time for cleaning, it is also a good time to do all of the yearly maintenance tasks around your home.  Proper maintenance can save you money and protect your family.

But more than just your house needs maintenance.  You would be well advised to review your estate plan at the same time.

Many of your assets are controlled by beneficiary forms.  Typically, these will be your retirement accounts (such as IRAs, 401(a), 401(k), and 403(b) accounts), life insurance policies, and any other accounts you have with a transfer on death (TOD) or payable on death (POD) designation.

When your beneficiary forms don’t keep up with changes in your life, it can cost you — and the people you love — lots of money.

Have you, or someone you know, gone through any of these major life changes since you last checked your beneficiary forms:

  • Gotten married
  • Gotten divorced
  • Had a child
  • Lost a husband or wife

Many people automatically think to update their estate plan when they have one of these major life events.  But the beneficiary forms often slip through the cracks.

I have read several stories in the news recently about money from a retirement account or life insurance policy going to the wrong people because beneficiary forms weren’t updated.

  • If you have gotten divorced, is your ex-wife or ex-husband still the beneficiary of your life insurance?
  • If you have gotten married, are your parents or siblings still the beneficiaries on your accounts?

It can be tough to predict what life changes will make you rethink your beneficiary forms.  So put it on your calendar.  Every year, get a copy of all of your beneficiary designations and make sure they reflect the life you now lead.

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