I would like to tell you about a typical family situation that is common among my clients. The adult children call for an appointment after Dad has suffered a stroke. He is in the hospital and not doing well. The hospital wants to discharge him to a skilled nursing facility with a monthly private pay bill well over $5,000 per month. The adult children need information and guidance regarding their Dad’s future.
In reviewing their father’s legal documents, I recognize that Dad signed a poorly written living trust six years ago and a one-page power of attorney document. These documents have been prepared by a company who advertised a free estate-planning seminar. The trust language was so vague, that a court petition would be required to request clarification and instructions for the trustee on how to proceed. In addition, the power of attorney was worthless and invalid as it expired upon Dad’s incapacity. The adult children are shocked. They had no idea how critical properly drafted documents were for the day-to-day care of their father and for administration of his assets. They thought, like so many others, that a trust and power of attorney are magic, if you have them, you are protected from such catastrophic situations. Unfortunately, this mistaken belief is usually discovered too late, when the documents are needed the most.
The adult children are frantic since Dad’s discharge to the skilled nursing facility is imminent. Based on the asset information provided by the children, Dad has too much life insurance, too many vehicles and too many assets to qualify for Medi-Cal. Basically, without the properly drafted power of attorney documents to assist with the eligibility requirements, the children are unable to protect his assets and qualify him for long-term Medi-Cal benefits for skilled nursing care. Dad’s current documents could not have been worse for his situation. In addition, the free estate-planning seminar organization that prepared these documents also sold Dad an annuity. He cannot withdraw his money without incurring a hefty penalty. Dad had no idea the good deal he had paid for six years ago would cause such a strain and impact today on his medical care, his finances and his family.
Although Dad’s home is titled properly in the trust, his bank accounts and brokerage accounts are in his name alone. Further, his life insurance policies and 401(k) plans do not name a beneficiary. If Dad died today, a probate proceeding would be necessary since his assets were not properly funded into his trust.
It is crucial that all of us know what is in our legal documents, what those documents mean and how they can be used in the future. Our families should inherit fond memories, not problems and unnecessary legal fees.
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