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    10 Estate Planning Myths


    Actually, just the opposite is true. A Will is given effect through the Probate Court. This means that your property will be distributed according to your wishes, as expressed in your Will, but the process will be administrered through the Probate Court. In most cases, Wills are used as part of an overall estate plan but not as the main estate planning vehicle because most people prefer to avoid probate if possible and a Will alone does not accomplish that.


    Again, actually the reverse is true. Property held in a Revocable Living Trust is considered as your individual property and treated as if the Trust did not exist. While assets held in a Revocable Living Trust avoid probate, a Revocable Living Trust does not provide creditor protection because you have complete control to amend or revoke the trust at any time. Creditor protection is available for your assets using advanced estate planning techniques such as irrevocable trusts but that means you have to give up some control over those assets. For Medi-Cal (California's Medicaid program) eligibility purposes your home is exempt. However, if you individually or through your Revocable Living Trust hold title to your residence and you die, the residence is no longer exempt and Medi-Cal can file an estate recovery claim. While Revocable Living Trusts can be an excellent estate planning tool, they are not designed for asset protection. 


    You can never tell when something bad will happen. People of all ages have unexpected accidents or illnesses that can leave them incapacitated or dead. While many people think that Estate Planning is just for the wealthy or the elderly, consider the case of Terri Schiavo. She was a young woman, yet the whole country got involved in her healthcare because she hadn’t done the necessary planning for her end of life care. And end of life care is not the only thing. Her husband had to go to Probate Court to be appointed her Guardian so he could handle her legal and financial matters, as well as make medical decisions for his wife. All of that could have been avoided with proper planning. She could have done an Advance Health Care Directive to specify who would make medical decisions and what kind of medical treatment and life sustaining treatment she wanted. She could have done a Durable Power of Attorney to allow her husband, or someone else, to manage her financial affairs. And what about her children (if any)? With proper advance planning she could have provided for them, even named someone other than her husband to handle their money and see that it was preserved for college. Yes, the elderly and infirm need to do proper planning, but so does everyone else.


    This isn’t exactly true. While your spouse may have access to some joint property, such as bank accounts or investments, it doesn’t cover everything. If you own land jointly, you still have to sign legal documents to transfer it or to mortgage it. You need to sign legal documents, various insurance forms, and lots of other things. And just because someone is your spouse doesn’t mean they can make medical decisions for you. You need to have documents in place to give those powers. That is why everyone, single or married, once they reach 18, should consider an Advance Health Care Directive and a Durable Power of Attorney.


    Many parents of disabled or special needs children, who receive various types of government benefits, think that if they leave any money or property to that child the child will lose benefits. They are correct if the child received money outright, the child would lose benefits. However, money can be left in a Supplemental Needs Trust for the child without jeopardizing benefits. Money in such a trust can be used to provide all types of things to improve the child’s quality of life, from housing to travel to additional medical procedures and equipment. A SNT can be a very powerful planning tool to provide for a disabled or special needs child while preserving the child's access to government benefits.


    Sure, there is a lot of information available about Estate Planning and Medi-Cal (California's program for Medicaid). There are websites and computer programs and free forms that will allow you to create Wills, Advance Health Care Directives, Powers of Attorney and other documents all by yourself. But know that each state has its own requirements for each of the various legal documents. If you create your own legal documents and they don’t meet California's requirements, your documents may not be effective. If you are dead or disabled when that is discovered, it's simply too late. Similarly, Medicaid is very state specific. California administers the Medicaid program through Medi-Cal.  The rules for Medi-Cal are different than the rules for Medicaid in other states. What you read about online or in magazines may work somewhere, but may not work for your particular situation. Even ‘simple’ estate and Medicaid planning isn’t simple. There are numerous legal requirements to meet, contingencies to plan for, and gift tax, estate tax, capital gains tax and income tax issues to consider, even in small estates. Money spent to consult an attorney who can guide and advise you and draft proper documents for you is money well spent. It is easy to be ‘penny wise and pound foolish’, when saving a few hundred dollars by doing it yourself and then costing thousands in unnecssary taxes, probate costs, additional nursing home expenses, or potential litigation costs.


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