5 Estate Planning Nightmares from Around the Country

With the proper estate planning, the following situations could have been avoided. The truth is, many fail to adequately plan their estate, which can potentially lead to outcomes such as these worst-case scenarios.

1.  Mom had been in the nursing home on private pay for over 7 years.  After paying over $700,000 to the nursing home, the family consulted an attorney for estate planning.  The family had sold Mom’s house, spent all the proceeds on her care and were down to $40,000.  The attorney was able to preserve the $40,000, but all the other money and her home were lost.

2.  A skilled nursing facility told resident’s adult children there was no need for an attorney to assist with the Medicaid application for the parent, and that the skilled nursing facility would help with the application when the parent’s modest assets were at the appropriate level to apply.  All of this time, the parent was paying $8,000 per month to the facility.  Skilled nursing facility botched the application (parent had three vehicles and, though none were very new or valuable, all were worth more than the resource limit).  When the application was rejected, the skilled nursing facility began badgering kids for payment of about $30K in outstanding bills and threatened to evict the parent.

The most common scenario is one where the skilled nursing facility has a similar conversation with the family, does not botch the application and parent goes on Medicaid, but only after spending down all the assets by private-paying the skilled nursing facility.  The horror in that story is simply the amount of assets that are lost, that could have been preserved with proper advice and guidance.

3.  Parent private paid for nursing home until their assets were depleted.  With nothing left except the parent’s meager income, which included very small income streams from 3 immediate annuities, the family prepared the Medicaid application.  One annuity company added Medicaid as first beneficiary and all was okay.  Other two annuities were identical policies issued by another company when mom was 88 years old.  Those two annuities did not have beneficiaries, as they were joint guaranteed income for life annuities with income to the parent for life and then to a daughter for daughter’s life.  Daughter was willing to do a pseudo beneficiary designation to Medicaid by assigning the income payment to Medicaid, but the annuity company said no assigning, no beneficiary designation, no cashing out, no changing owner, etc.  Medicaid held the application open for eight months and worked with family and annuity company explaining what needed to be done, why, etc.  The annuity company refused to budge saying, “nothing can be done.”  In the end, the Medicaid application was denied, as the purchase of the annuities ($100,000) was deemed a gift because the annuities were not Medicaid compliant.  A penalty period was assigned and the family was in arrears to facility for 8 months with the penalty period running.

4.  Attorney did a Medicaid Asset protection analysis for a mentally incompetent woman in a nursing home.  The attorney was hired by her son, who was her attorney-in-fact.  The attorney discovered that the son was stealing from his mother by doing things such as living in her house rent free, paying himself $900 per week for visiting her once or twice a month and wiring money to unknown out-of-state recipients in amounts in the tens of thousands of dollars. The attorney confronted the son and advised him that unless all monies were returned within one week to mom’s account, the attorney would withdraw as attorney.  At the same time, the attorney advised the son of the criminal and civil penalties and other causes of action for breach of fiduciary duty and tortuous interference with an inheritance that he likely faced.  He was unrepentant and did not return money.  The attorney resigned and an anonymous phone call was made to Adult Protective Services.  The son was removed as attorney-in-fact, and replaced by an independent third party as guardian and the son is being pursued civilly.  It appeared to the attorney that the son had taken well over $150,000 out of a $300,000 estate.

5.  Elder with limited means and no estate planning in place had a bad stroke and wound up in a skilled nursing facility on private pay.  The skilled nursing facility said there was no need to get a lawyer and that they would assist the elder’s children with the Medicaid application, which they did.  The children lived in another state and knew nothing about Medicaid laws.  When the Medicaid application was months later rejected because of excess resources (a life insurance policy with cash surrender value of a few thousand dollars), and the elder had run through all other assets paying the skilled nursing facility, the skilled nursing facility said to children, “pay up the entire deferred private pay bill or come get your parent.”

With proper estate planning, the above nightmares could have been avoided. While these are extreme cases, many fail to properly estate plan, leaving themselves and their loved ones at risk of adverse consequences. If you are thinking about estate planning and want to provide security for your future care and the financial stability of your loved ones, consulting an estate planning attorney may be an important step. Contact the experienced estate planning attorneys at Fields and Dennis, and let us know how we can help you.