Sandra Reed: Life care planning for your 70s

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your life planning questions.

Those ads for cruises with all the dancing gray-haired, mature-looking couples are true. Many in the seventh decade are enjoying themselves to the fullest. They are traveling, taking in art exhibits, going to the symphony, the theatre and trying out the latest restaurants. They are working out weekly or even daily at the gym, hiking the trails, biking the roadways and paddling the rivers. The hours previously devoted to the toil of a daily job can now be expended in leisure activities of their own choosing.

Ads featuring people of a certain age touting the virtues of certain pain relievers and medical equipment, extolling one or another assisted living or long-term care facility and singing the praises of financial rescue through reverse mortgages also exist.  Many in their 70s face major life changes requiring them to move from homes they have cherished for decades and adjust to limited activity and economic resources.

Discussed below are a couple of illustrative examples of major life changes that call for specific life care planning actions.

Property Located in State Other than the State of Domicile at Death

John and Mary have lived in Texas all their married lives and now, in their 70s, are living in their dream home.  In addition to the residence, they had acquired a lovely vacation place on the Brazos River when they were in their late 50s. Each of their four grown-up kids, along with their families, takes a turn coming from out-of-state to spend a couple of weeks at the cabin in the summers. The entire family gathers there at Thanksgiving and again at Christmas.

Since all the children live in the Washington, D.C. area, John and Mary decide to move to Virginia to spend more time with their grandchildren. They sell their home but retain the river property. Their new domicile is Virginia. The husband and wife have wills that dispose of all their property, including the property in Texas.

John and Mary represent a certain percentage of folks who retain real estate interests in one state while moving to another. These folks should review their wills to make certain that provision has been made to meet the requirements for probating that property. “Ancillary administration,” as it is often called, is required when a person owns property located in a state other than the state in which he or she dies. This out-of-state property is subject to the law of the state where the property itself sits. John and Mary’s property located in Texas will require ancillary administration.

Ancillary administration in Texas is governed by the Texas Estates Code. Assuming John dies while domiciled in Virginia (or in any state other than Texas), his will is a considered by Texas as a “foreign will.”  Ditto if Mary dies outside of Texas. Texas Estates Code §501.001 provides that a foreign will can be admitted for probate in Texas if the will deals with property located in Texas and proof is presented that the will is probated or determined valid in another state.

Managing Assets When the Need for Long-Term Care Looms

As Ed and Edna enter their 70s, they face the fact that Ed’s Parkinson’s is becoming increasingly debilitating. They know it is inevitable that Ed will need long-term care in the next few years. In the meantime, their oldest daughter is after them to sell the family home and move in with her. The plan would be that when dad has to go into the nursing home, mom can continue to live with the daughter.

Sounds like a good plan. On the other hand, there may be more prudent options.

Ed and Edna should be aware that selling their residence converts an asset – the home – from a non-countable resource for purposes of qualifying for Medicaid (as long as their equity in the home is not greater than $543,000) into a countable resource under the Medicare guidelines.

The State of Texas estimates that the 2014 average cost of nursing home care is $4,739 a month, or $156.34 a day. If the equity in Ed and Edna’s house is $250,000, that amount would be exhausted by payments for long-term care in less than four-and-a-half years.

However, if Ed qualifies for Medicaid, Edna can retain the home during her lifetime and the equity is preserved for their heirs afterward. Medicaid in Texas limits the recovery for amounts paid out to Medicaid recipients to estate assets. Ed and Edna’s home can be protected from being subject to recovery through the execution of a “Lady Bird” deed that takes the property out of his estate.

If Ed goes into the nursing home, Edna can stay in the home and retain all the income in her name.  If her income is less than $2,931, she can keep Ed’s income up to that amount. If their combined income is less than that amount, she can keep more resources. If their income exceeds the qualifying income level, a so-called “Miller trust” must be created. The income from this trust will, in general, go to the care-giving facility, leaving Ed about $60 a month for incidentals.

Edna can also keep a car and a life insurance policy of no more than $1,500. If the couple has other assets that total $23,444 or less, then Edna can keep all of that and Ed is eligible for Medicaid immediately. If their countable assets stand between $23,448 and $44,896, the couple will have to spend down to $23,448. If their countable assets are between $46,896 and $234,480, they must spend down half of that. If their countable assets are over $234,480, they must spend down to $117,240.

In the end, the benefits Ed and Edna would be foregoing if they sell their home and move in with their daughter could make that decision a costly one.

Sandra W. Reed is an attorney practicing in Glen Rose, of counsel with the Fort Worth elder law firm of Katten & Benson. Phone: 254-797-0211; email:  swreed2@yahoo.com

 

 

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