Two overriding questions govern your choices in an elder law estate plan. First, what will happen to your assets when you pass away? Second, what will happen to your assets if you need long-term care? A comprehensive plan covers both issues. You must protect assets from going to long-term care costs so that the assets may transfer to your beneficiaries instead.
Plan A, and the best protection from long-term care costs, is long-term care insurance. Factors to consider include the daily benefit amount and an inflation rider that keeps pace with the increasing cost of nursing homes. Long-term care insurance also pays for home health aides, which allows you to “age in place,” rather than go to a facility.
If you don’t have, or cannot get, long-term care insurance, Plan B is the Medicaid Asset Protection Trust (MAPT). Assets that have been in the MAPT for a minimum of five years are protected from nursing home costs and, under upcoming laws, two and a half years for home care.
Consider the use of trusts, as opposed to wills, to avoid probate, a court proceeding that occurs when you die with assets in your name alone. It is also much easier to contest a will than a trust. If you are disinheriting a child, it makes sense to use a trust to avoid potential litigation. Generally, trusts save time and money in settling your estate.
You may want to leave your assets to your children in their own Inheritance Protection Trusts, rather than as outright distributions. These trusts protect the inheritance from your children’s divorces, and, when the child passes away, the inheritance goes to your grandchildren, not to your son-in-law or daughter-in-law.
To sum up, an elder law estate plan (1) protects assets from the costs of long-term care, (2) passes assets to your heirs, with the least amount of taxes and legal fees possible, and (3) keeps assets in the bloodline for your grandchildren and protects the inheritance from your children’s divorces.