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NEWTON COUPLE DISCOVERS SECRET TO PROTECT THEIR HOME & LIFE SAVINGS WHILE AVOIDING PAYMENT OF UNNECESSARY TAXES

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Sep 11, 2012 4:48:00 PM

A financial advisor initially referred the Lowell family to us.  They were concerned about estate planning, taxes, and did not want to loose their life savings to a nursing home.  When they came to our office, they had been told at a cocktail party, barbershop, or beauty parlor, they couldn’t remember which, that they should deed their home to their two children if they wanted to protect it.  When I asked if it made sense for their children to be saddled with $150,000 capital gains tax, they replied, “No, of course not”.  They thought it made a lot more sense to protect their home in a manner that would permit them to sell their home, which they eventually did, completely free of any capital gains tax, up to $500,000.  The Lowells were even happier when they learned they could start the five-year look back period required to protect assets from being spent down on a nursing home if either got sick. 

Unique Educational & Counseling Process

Massachusetts Veterans Benefits, Aid & Attendance, Estate TaxAs part of our unique process, we asked the Lowells about their top planning goals.  They talked to one and other and reported back to us that they wanted, above all else, to protect their life savings and home for each other in the event either got sick or went to a nursing home, so they could protect things for each other and leave a greater legacy for their two children.  With their objective clear, we then helped create and put in place the planning necessary to help the Lowells accomplish their objectives.  The sense of relief as a result of finally taking care of their estate and asset protection planning was visible on Lowells’ faces.  

Planning Early Saves Thousands Later

A number of years later, our office was contacted by an attorney trying to help sell the Lowells’ home.  The attorney happened to be married to the real estate broker who was in the process of helping sell the home.  Upon speaking with the attorney for the bank, we were told said the bank preferred working with the trustee of the trust, and after the home had been deeded to it.  We were able to get the deed recorded and fortunately for the Lowells, that property was deeded to their trust, so the proceeds of the sale were fully protected from the nursing home.  Additionally, the gain on the sale of the home was entirely tax free to their Protective Trust, just like they planned.  As a result of carefull planning, the Lowells were able to sell and close on the property, protect the proceeds from the sale, and avoid paying capital gains tax.

Failing to Review Your Planning: Common, Critical Mistake

Time passed and we did not hear from the Lowells for a few years. We tried to contact the Lowells’ son John, who had moved to California, to discuss the need to review planning in order to make sure that all of their life savings were coordinated with their Trust and protected from the cost of nursing homes, which cost $12,000 to $15,000 per month.  They never did get together to review things, and as time went on, John eventually contacted our office saying, “Dad isn’t doing too well, and he’s going to be moving to a nursing home.  The plan would be for mom is to stay in the house.”  At this point, we hadn’t reviewed things in a several years, though we had developed the “Lifetime Protection Program”, a membership program designed to make sure that the members’ planning is up to date, protects all of their assets and is going to work the way it was supposed to when executed.  Because of changes in the law, especially the new health care law and the coming estate tax changes, as well as changes in financial and personal circumstances planning needs to be monitored and maintained to make sure that clients are getting the best protection.  This is possible with the “Lifetime Protection Program” even as laws, families, finances, and personal circumstances change.  We reminded John again of the fact that reviewing planning crucial aspect of assuring that goals and objectives are accomplished.

Well, John said he’d get back to us, and a year and a half later we still hadn’t heard from him.  By this time, the Lowells had sold the home, Mom was in assisted living in the same complex where Dad was getting nursing home care.  The total cost was in excess of $16,000 per month.  The problem however, was that it turned out there was $550,000 that had not been put in their Trust, as we recommended, so it was not protected!  We contacted John and discussed a strategy to protect the $550,000.  It was difficult since John lived in California, and his sister had moved to Europe.  Because of the significance of the planning we were able to help.

Click Here to Download the Senior & Boomers Guide to Health Care Reform & Avoiding  Nursing Home Poverty

Crisis Planning to Protect Assets

It turned out that out of the $550,000 that had not been coordinated to the Asset Protection Trust, and if it was transferred now the five-year look back period would start all over again on the unprotected $550,000.  We learned shortly thereafter Dad had taken a turn for the worse, and was probably not going to be with us too much longer.  Learning about this, we introduced a special concept to the family, whereby the funds which normally avoid probate are coordinated with a testamentary trust.  Only then the funds are allowed to avoid the five-year look back period.  We quickly arranged to create a testamentary trust, which would protect the funds for Mrs. Lowell after Mr. Lowell died and eliminate the five-year look back period.

This plan was successful!  After Mr. Lowell passed away, a testamentary supplemental needs trust was established with the $550,000, which will be available for the lifetime of Mrs. Lowell, and would not be subject to claims of the nursing home.  Again, the family was grateful for what had been accomplished for Mrs. Lowell and the family. 

As time went on, Mrs. Lowell remained in the assisted living for a number of years after Mr. Lowell had passed away and both the proceeds from the sale of the house protected originally and the additional $550,000 were protected. 

Additional Resources Available for Massachusetts Seniors

Since our involvement with the Lowells, we have learned of even more special resources that may be available through Mass Community Health and other programs, which will allow seniors to continue to live in their home and community rather than a nursing home. One such program is for all-inclusive elder needs.  Others include PACE, SCO and the Frail Elder Program.  These new programs are available because nursing homes have become so costly and as a result of the fact that most people don’t need or want to go to a nursing home.  Increasingly we have been able to help families who prefer to stay in their home, or retire in a community or assisted living, rather than going to a nursing home with health assessments and guidance on finding the right care specialty or facility. 

Life Care Planning: What & How?

We’ve introduced a new service called life care planning for all of our clients that looks for the years ahead as to senior running into mobility and memories issues, both simply concerns as we all age.  Life care planning is a process that puts a long-term lens on the required planning that needs to become well ahead of time, in particular because the five-year look back, which most likely will be extended to eight or 10 years down the road.  If you know of a family member in need of assistance finding the right facility, getting the right care, or the like, it is important to be educated and informed about the importance of this planning and what could be accomplished with proactive, forward looking protection to protect spouses, homes, life savings.  For the long-term, there’s quite a bit that can be accomplished for families and their legacies. 

The purpose of Life Care Planning is to put people in control of their health care and living accommodations rather than be forced into a nursing home prematurely, just because that seems to be the only option.  People are much happier having options and control over their financial decisions, their health care, and their living situations. 

Are You Qualified for Additional Benefits Over $2,000/month?

In addition to the Mass Community Health programs there are a number of opportunities for Veterans.   Married Veterans may be eligible to receive over $24,000 a year.  Single Veterans may be eligible for $1,749 a month and widows of veterans approximately $1,100 per month.  If you think you may be eligible, it is important to act quickly, as there has been a bill introduced that would create a three-year look back period for veteran’s benefits. This is a big set back to veterans in need of assistance.

Massachusetts, VA Benefit, Aid & Attendance

Do Not Become a Statistic: Review & Update Your Planning

There exists a wealth of opportunity for those that are informed and proactive about their planning.  We’ve developed a unique 19-Point Trust Estate, Asset Protection Review Program to help people learn about opportunities to improve and enhance their planning so they don’t end up with on of the 86% of trusts that simply DO NOT WORK to accomplish the planner’s current goals and objectives. This failure rate is mainly attributable to the fact that plans are not reviewed, maintained, and adjusted as situations change.   Unaccounted for changes in the law, in personal health or financial circumstances, and even changes in families can cause a once effective plan to fall into the 86% that fail.  Don’t let that happen to you.  Call our office at 781-237-2815 to discuss the above situation or any of the following topics:

  • Life Care Planning

  • Save Investing for Seniors

  • 19 Point Trust, Estate, & Asset Protection Review and Guide

  • Complimentary DVD that explains why your living trust by itself will not protect you

About Our Team

At The Estate Planning and Asset Protection Law Center of Dennis Sullivan & Associates we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide our clients with a unique educational and counseling process so they understand where problems exist as well as where opportunities exist for significant improvement now as they implement plans for a protected future.  We even provide a Lifetime Protection Program to ensure plans continue to meet client & family objectives in the future, even with all of the changes in taxes, healthcare, personal and family situations.

Trust, Estate and Asset Protection Workshops

Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Come to a complimentary workshop to learn how protect you, your spouse, your family, your home, life savings and legacy. Register by calling 800-964-4295 (24/7) or visit us online at our website, www.DSullivan.com.

Tags: asset protection, Estate Planning, Elder Law, GST tax, gift tax, estate tax, estate tax savings, family, health Care act, Massacusetts Estate Tax