Want to know what the WORST part of my job is?
Here’s a hint: it has to do with reviewing documents drafted by lawyers who didn’t know what they were doing.
In my field, there are days when we find out a client has passed away. Those days are the worst, but they go with the territory. As hard as it is to hear that a client has passed on, we take comfort in the fact that we were able to help them. But other than a client’s death, what is the worst part of my day?
It’s pretty simple really. Sometimes I must be the bearer of bad news. The bad news I’m referring to usually has to do with trusts – specifically, trusts used to protect your home from long-term care liens. That bad news often leaves people shocked, saddened, and downright bewildered.
When you come in to see us for a Strategic Planning Session, we prepare for the meeting by reviewing all of your information, as well as reviewing your existing estate documents. That way, your meeting is 100% dedicated to you, and you have our full attention. We don’t waste your meeting time by gathering name/address info – we have you submit all of that ahead of time. We walk into your meeting with a complete focus on you and your situation, and an analysis of any existing documents you might have already.
That means I know I have to be the Bad News Guy before you even walk in the door. I have to sit down and explain to you that your documents don’t do what you thought they’d do.
I often review “Big 3” documents, which include a Last Will, Power of Attorney, and Health Care Proxy. Most of the time, these documents were drafted by general practitioners who either didn’t know any better or just didn’t care. I see documents that are glaringly simple, disastrously so, and I have to tell the client that they aren’t covered in the way they think they are. In today’s world, your Power of Attorney must be on-point and address numerous scenarios to be effective. Sadly, most of the “simple” documents aren’t up to par.
The good news with the Big 3 is that I can usually fix the issue. I can create new documents that do what they are supposed to do. Our packages meet all of today’s standards and cover things like dementia, digital accounts, and life-sustaining measures. Because a Will, Power of Attorney, and Health Care Proxy are revocable, a new document package solves the problem. It’s terrible that a client who has paid for documents from a non-specialist now has to spend more money to get it done right, but the result is that I can solve this problem. Most of the time.
But what if the signer of the Big 3 now has dementia? If the client doesn’t have the required mental understanding of the documents, then they cannot sign them. It’s just another reason not to wait to get your planning done. But even in those cases, I can typically still fix the problem, either through an existing Power of Attorney or even a court-appointed individual who can amend the bad documents.
Because I can fix Big 3 issues, that’s still not the WORST part of my day. So, what is?
It’s when I have to tell someone that the Trust they have for their home doesn’t comply with Medicaid and MassHealth regulations, and therefore doesn’t protect their home. Sadly, this happens pretty frequently.
In some cases, I have to practically beg the client to share their Trust with me for my review. They will tell me that “My house is already in a Trust” and therefore they think it is protected from nursing home liens. They’ve paid a lawyer a lot of money for the Trust, and deep down, they don’t want to be told that it’s wrong. It’s part of my job to insist on seeing the Trust.
Sometimes, it’s good news, and the Trust does what it should. But other times, more frequently than you’d think, the Trust is a simple revocable Trust that provides no long-term care protection whatsoever. That means I must walk into the room, sit down with a client that thinks their home is protected, and I must tell them that the home is not protected at all.
Any old Trust doesn’t protect the house. The proper Trust is technical and lengthy because it has to be. There are numerous specifications that have to be met for compliance with MassHealth regulations, as well as tax considerations, all of which must be done perfectly. This is not a Trust you want to get from a general practitioner.
The biggest issue is that a Trust designed to protect the home takes 5 years to be fully effective. That’s because of the MassHealth Five Year look back.
So here I am, walking into a Strategic Planning Session meeting, and I have to tell the client that their Trust is NOT protecting the house. Even worse, some clients think they are a few years into the 5-year lookback, or even past the 5 years, and I have to break the news that they get no credit for the lookback at all. In fact, the 5-year clock hasn’t even started, because the property is in the wrong kind of Trust, and the lookback clock was never triggered.
This happened just recently to a client who thought her home was fully protected, having put her home into Trust 7 years ago. I reviewed the Trust, and it was trash. So here is this client, she’s in her seventies, and she thinks her home is protected. Further, she paid good money to the wrong lawyer and didn’t get what she thought she was paying for. And I had to be the one to tell her.
Well, she cried. And cried. And cried some more. I felt awful. I was so sad for her because she had been taken advantage of. Here’s this kind-hearted woman who reminds me of my grandmother, trying to do the right thing, and she gets hoodwinked. That’s the worst.
Hope can spring from the worst of things. After she had her cry, I was able to tell her that we can pick up the pieces here and fix things. I could draft a new Trust – the RIGHT Trust – and transfer her home into the new Trust. Because she was healthy and still young (yes, in my business, 70s is still young) we stood a good chance of making the five-year lookback and protecting the home.
What I can’t do, is rewind time.
I cannot get her back the 7 years that she’d lost, while the home sat in a useless Trust. Yes, I can do a new document and get the 5-year clock started, but I can't go back and get her any credit for the 7 years she’d already put in. For this client, the end result was a positive one, and the house will be protected by the new Trust we created. If she had been in her late 80s or 90s, and/or had health problems, then starting the lookback period might have been too late. The home equity could have easily been lost to nursing home liens, all because the original lawyer didn’t know what he was doing.
The moral of the story:
- Make sure you are seeing a specialist if you're trying to protect your home from Long-Term Care.
- Do it right the first time.
- Don’t put it off. Get that 5-year clock running asap.
- Not all Trusts are created equal.
If you want to know what Trusts can WRECK your estate plan, download our free report HERE.
If you are worried you don't have the right Trust, and that your home is not protected, schedule a Strategic Planning Session today by calling the office at 978-657-7437 or book online at www.BookMyPlanningSession.com