Wed, 27 August 2008
A number of years ago, I received a call from a potential client who had the following tale to tell. The woman’s husband had died leaving a will and some assets, one of which was a 401k. The marriage was a second for her husband, who had 2 sons from his first marriage. While he was single he had changed the beneficiaries of his life insurance and 401k plan to his sons and had redone his will.
After his second marriage, the husband and his new wife bought a new home together. They asked their real estate attorney, who handled the purchase for them, to draft new wills as well. The husband listed for his attorney the assets he wanted to pass to his sons and which to his new wife. The 401k he wanted to go to his wife. Unfortunately, the attorney didn’t understand the difference between probate and non-probate assets. So when he wrote a will that specifically left the 401k to the wife, he didn’t know that the will would have no effect on this asset because the beneficiary designations on file with the custodian of the 401k plan still listed the sons from the first marriage.
When the husband died, the wife received a big shock when she was told that she had no interest in the $500,000 account. That’s because a will doesn’t automatically control the distribution of all your assets. Contract property such as life insurance, annuities and retirement accounts pass in accordance with whom you have designated on the beneficiary forms completed and filed with the life insurance and annuity companies or retirement account custodians. Other types of property pass by operation of law such as joint accounts with right of survivorship or real estate that is owned by husband and wife. When one owner dies the property automatically passes to the surviving owner. It does not matter what the will says.
That is what happened in our story. The 401k is contract property so it passed according to the beneficiary designation form on file, not by the will. The wife tried unsuccessfully to get a court order directing the funds be paid to her. She did recover about half of the account balance, filing a malpractice action against the attorney who drafted her husband’s will, for failing to recognize that listing the 401k account in the will was meaningless.
The moral of the story is that although many people think drafting a will is simple and often undertake to do it themselves or ask the attorney who did other work for them to handle this task as well, they may miss important steps that must be taken that can save a lot of heartache and money.
Category:Probate -- posted at: 12:00pm EST
Wed, 6 August 2008
In show number 8 of his podcast, Elder Law Today, practicing elder law attorney, Yale Hauptman, discusses some real life case studies to illustrate how the Medicaid laws can trip people up and cause much stress and financial loss for the unprepared and unwary.
Yale first discusses the case of the granddaughter caring for her grandmother full time, with Grandmom providing the funds to support both of them. Things go wrong when Grandmom’s condition deteriorates to the point where nursing home care is necessary and the money has run out. Learn the mistakes that this family made and why it has become much harder to fix them under the new Medicaid laws.
Next, Yale discusses a call he received from a son in Mississippi who took in his parents to his own home, moving them from New Jersey. The parents transferred their home to Son, who then put it up for sale. The plan fell apart when Dad took ill and needed nursing home care much sooner than anticipated. He applied for Medicaid and was denied because of the home transfer. The Medicaid caseworker told the family they would need to transfer the home back and spend down the sale proceeds before Dad could then qualify. Learn why their course of action was the wrong one for more than one reason and what they could do fix it and immediately qualify Dad and preserve the funds for Mom.
Yale then discusses the call he received from the frantic daughter who was sued by the nursing home when, after 8 years, Mom lost her Medicaid eligibility. The nursing home sought $80,000, the private pay cost of care for Mom. Why did it happen and what do you need to do to prevent it from happening to your family? Tune in.
The final case study concerns a couple who was unprepared when suddenly Husband took ill, needing nursing home care. They were told that he would qualify for Medicaid but that some amount of money would have to be spent down first. Unfortunately, Wife did not fully understand the urgency and did not spend down to the necessary levels for 6 months. The nursing home presented them with a bill for $70,000, the private pay amount for that period of time, for which Medicaid will not cover. Yale talks about why this outcome didn’t have to happen and what could have been done to avoid it.
Yale also takes time to answer some more listener emails. Learn what to do when a bank resists honoring a power of attorney that is presented to it. This 8th installment is sure to answer many of the questions you have about common elder law issues.
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