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Law Offices of Ronald W. Rutz
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August 8, 2002: Estate Documents for Special Situations

Q: I wish that you would repeat for the Senior Voice readers some advice that you gave several years ago to an Alzheimer's group about the basic estate documents needed. My very good friend got some advice that seems very complicated and extremely pricey.

A: The following will apply not only to the Alzheimer's situation, but also to anyone needing protection, such as nursing home residents, adult children, etc.

For a married couple, the normal plan includes Wills (distribute assets to each other directly), durable powers of attorney naming each other as an agent, and possibly a living will (the document that instructs to shut off the machines). Additionally, all assets should be held in joint tenancy with each other, or the spouse should be the designated beneficiary or payable on death recipient.

For a single person, the documents are the same - a Will, durable powers of attorney, and a living will. But it is best not to have any other name on an asset in joint tenancy, or name a beneficiary, or have payable on death in place. (I have written other columns on the pluses and minuses of multiple ownership so I will just make this very general statement for this column with the understanding that each situation should be analyzed on its individual basis.)

However, if a beneficiary, whether a spouse, a child, or another, may need special consideration and help, then the basic package needs to be adjusted. Instead of the Will leaving the estate directly to the beneficiary, the Will should instead direct the estate into a trust that was provided for in the Will with the protected person as the beneficiary. But the trust should have the "medicaid language" making it "bulletproof" if social services, doctors, assisted living facilities, or any other kind of creditor tries to punch through and grab the trust asset. If this precaution is taken, the assets are still available for the protected person. The protected person's Will probably does not need to be changed.

The durable powers of attorney should be adjusted for the person not needing protection by removing the protected person as an agent, since he or she probably would be ineffective in that position. Consideration should be given to adjust the protected person's documents to try to make the "revocable" power into one "coupled with an interest," thereby making it harder for the protected person to revoke the Powers.

For a married couple, joint tenancy ownership of assets should at least be severed and title placed in tenants in common. That way, if the non-protected person happens to die first, then half of the property will be directed into the trust in the Will, instead of everything ending up in the hands of the protected person. An attorney should be consulted about actual transfers of property away from the protected person's control.

In like manner, the protected person should be removed as a beneficiary or the recipient of the payable on death designations with no one named as replacement. Thus, the proceeds can be part of the estate and be shifted into the trust.

If Medicaid may be needed, then additional steps would be necessary but the basic documents just discussed would be in place and probably would not need to be adjusted.

Finally, a much more aggressive approach should be taken to determine what resources are available to help with the anticipated extra costs, especially nursing home expenses. Take time to understand the Medicare "100 day" rule. If the person is former military or government employee, learn what benefits are available. This would also include union and employment benefits. Thus, everything can be in place and action taken quickly.

The cost to do all of the basic documents for a couple (standard will, testamentary trust will with the "Medicaid" language, two sets of durable powers of attorney, two sets of living wills) should not be much more than $500, at least in Colorado.

I have reached my space allocation for this month, but I hope that this helped. Remember that basic planning does not have to be complicated and expensive to be effective.

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