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Top 3 Long Term Life Planning Mistakes

Top 3 Long Term Life Planning Mistakes

Everyone, regardless of their assets, can benefit from a through long term life planning process. Not everyone sees the value of consulting with a professional when making what seem to be simple decisions to protect assets. However, there are many potential situations that you can avoid by checking the facts and working with an estate planning or elder law professional. Here are the top three avoidable situations that “self-planners” often encounter when making decisions on the fly.

One of the most common mistakes made during long term life planning is transferring homestead property, or adding a child to the deed to protect the home. Clients are concerned that the state will “take their home” or force them to sell the home to pay for care. During your lifetime, even if you apply for public benefits, your home is a protected asset And, while all other states place some type of lien on the home at death, Florida has unique homestead protection, in that creditors, (included the state of Florida) cannot place a lien on your home if you pass it to your heirs at law. The only creditors that can attach your home are financial institutions that hold a mortgage or line of credit, or a contractor who performed work on your home and was not paid. In addition, adding a child to the deed will be considered a transfer of assets if you want to qualify for public benefits (Medicaid) within 5 years of the transfer. This addition of an owner can also cause an increase in taxes under a reassessment of value when the deed is recorded.

Gifting money to qualify for Medicaid is another big mistake as any transfer of assets creates a penalty if the gift occurs within the 5 years prior to applying for benefits. This includes cash gifts that are allowable under IRS rules and require no reporting, and transfers to an irrevocable trust. However, the transfer penalty does not apply if the transfers of assets are between spouses.

Finally, trying to hide assets, or hide assets that have been transferred, is a big mistake that can have serious consequences. These days it is virtually impossible to hide assets, or cover up a transfer of assets, as every transaction leave an electronic trail that will point back to you. The state of Florida and the IRS have privy to that information when you sign a release allowing access at the time of application. While it may take time, if transfers are discovered, and it is shown that there was in intent to commit fraud, a payback of benefits and stiff penalties could apply.

If you are concerned about the possibility of long term care and protecting your assets, you should consult an elder law attorney before making a costly mistake. An elder law attorney will take you through a thoughtful process of long term life planning. Knowing the facts and how they apply to your situation can save you money and avoid added stress during a time that is already stressful. Most clients are surprised that the rules regarding eligibility for Medicaid are not as onerous as expected and that they can get the care needed, allow their spouse to live comfortably, and pass some hard earned assets, like the home to their children at death.

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  • "In October 2009, my fiancé (and future wife) and I wanted to have estate documents prepared. Upon the recommendation of friends, we contacted an elder law firm in Sarasota, FL. We were assigned to Teresa K. Bowman, an estate planning and elder law attorney. Over the course of several months, she helped us to develop and refine our documents to our exact specifications and requirements, with our complete satisfaction. During the next few years, various modifications to our documents were required, and she helped us to implement these changes, always with absolute professionalism and precision, and with a warm, friendly manner. Incidentally, Teresa Bowman, serving in the role of Justice of the Peace, presided over our wedding ceremony in May, 2010. It was the first wedding ceremony she had ever performed, so we trust that it is just as memorable an event for her as it was for us. In 2014, when Teresa Bowman established her own Estate Planning and Elder Law practice, we, of course, transferred our accounts to her new firm. She has since implemented additional modifications to our estate documents, with the same high level of service that we have come to expect and appreciate. We would have absolutely no reservations in recommending Teresa Bowman and her firm to anyone who has need of the services she renders." - Robert G. and Judith L. Hores

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