What is “half a loaf”? And why not keep the “whole loaf”?
First off, “half a loaf” is a nursing home Medicaid spend down strategy where approximately half a person’s money can be saved. The basic idea is that half of the applicant’s money is “divested” or given away. The other half purchases a “Medicaid annuity” to provide payment to the nursing home while Medicaid will not. For example let’s say Mrs. Smith has sold her home and has $150,000 in the bank. She is in a long term care nursing home. If she does nothing she will spend all $150,000 on nursing home bills. If she gives half of it to her children and purchases a Medicaid annuity with the other half, she will have saved half of her money.
Now let’s be clear, this post is not all about the moving parts of the “half a loaf” strategy. There are many. This post is about raising the question “Can I do better than the “half a loaf”? The short answer is “Yes, much better.”
It puzzles me why so many “elder law” attorneys use the strategy as their main approach to Medicaid eligibility. Under their strategy the nursing home will be paid by the applicant for months and sometimes years!
The problem I have with that is that my clients are hard-working folk who saved instead of squandering the money they earned. They paid taxes on it too. At age 90 many have been taxpayers for more than 70 years! They have a right to say what are the provisions in the Medicaid program that will allow me to have the taxes I paid all these years pay the nursing home? We all know President Trump brags about paying little or no taxes because he has “smart lawyers.” Why shouldn’t you have a “smart lawyer?”
Here’s my point. In the Mrs. Smith example above we could help her save the “whole loaf” (minus modest attorney fees).
So if you know anybody who has seen an “elder law attorney” who recommends a “half a loaf” strategy, give us a call for a consultation to see if you cannot do much, much better.
It may surprise some, but many post-death probate court battles between children begin with the parent. Perhaps the most common reason for disputes is unequal distribution of property including complete disinheritance. This may or may not be intended by the parent.
A common reason for unintended inequality is trusting a child to share with the others. For example a child may be joint on a bank account with Mom and after she dies the child decides to keep the entire account. Many people are surprised to learn that even though a Will calls for equal distribution of property, a child may keep a joint account. The law allows a survivor of joint property to be the sole owner of the property free to do whatever he or she wishes with the property including keeping all of it. This result happens because a parent failed to make clear his or her intentions when the joint ownership was set up.
But let’s look at intended inequality of gifts.
There are many good reasons why a parent may decide to give one child more than others. One child may be very successful in life and another is plagued by poor health. Sometimes a child had an unsuccessful marriage and is left with little money and no career. In the field of elder law, a caregiver often gives years of support to a parent while other children give little. In these cases the parent’s reason is understandable, but that does not mean there will be no court contest. Any Will, trust or deed can be contested on grounds of fraud, mistake, coercion or undue influence.
The best advice – no surprise – is to have a lawyer carefully setup your distribution plan. If the client is elderly or has serious medical issues that may question the person’s decision making ability, the lawyer will take steps to ensure that a plan is not the result of fraud etc. Sometimes the lawyer recommends a medical exam to verify that the client is competent to understand the results of the distribution plan.
But, here is one more item to consider.
It is absolutely true that a parent may give property to anybody he or she pleases and does not have to ask permission. But, consider this tip: is it not wiser to tell the kids your thinking yourself? Don’t let your Personal Representative or Successor Trustee be the bearer of bad news. Every lawyer who has been consulted about a Will with unequal distribution has heard a child say “Mom would never do that! My sibling must have forced her.”
So, why not tell them yourself? “I have decided to give your sister a bigger share because she has been so helpful to me for years. Without her I would not have been able to stay in our home. I may have had to go to a nursing home.” Or, “I am so proud of what you accomplished in life. But I have considered how poorly life has gone for your brother. I feel it is my parental duty to help him, just as when you were children I had to help some of you more than the others.”
If any children think your decision is the result of fraud or coercion etc. then the time to raise that concern is now. If there is fraud, coercion, mistake or whatever, it can be fixed now instead of waiting for the damage to be done both financially and to your family. Once children engage in battles in court, they are enemies forever.