Harry's Gang: With a will, there's a way to be OK at end of life
November 19, 2021
One of the questions I get most from clients is, “How do I avoid probate?” I can understand why they are so concerned — probate is an expensive process, but with careful planning, it can usually be avoided altogether.
The other big concern is, “I don’t want the government to take my house if I have to go into the nursing home.”
The facts are, most people don’t end up in a nursing home, and when they do, it’s most often for a short period of time (three to five weeks, to recover from an ailment). And while it’s true that the average stay in a nursing home is almost 9 years, since most people don’t ever go to a nursing home, giving away all your belongings just to avoid paying for nursing home care is a bit silly.
It’s like quitting your job because you don’t like paying taxes.
Still, it makes sense to plan carefully for the future, and you should at least consider the possibility that you may need nursing home care.
Minnesota is a great state to live in for this. We take care of people in Minnesota, and if you need to move to a nursing home, we’ll find one for you. If you can’t afford to pay for it, we’ll pay for you. And if you have assets, like a house, we’ll cover the cost, and just ask that you pay us back later, when you or your heirs do sell your house. The state never seizes a house to pay for nursing home care.
When I explain it to clients that way, they are often relieved. There’s some misconception that Medical Assistance is kicking people out of their homes to collect nursing home bills, or that they won’t let you into a nursing home if you don’t have the money upfront to pay for it. Take a drive down Cloquet Avenue someday. See all the old, infirmed folks standing around on the street corners because they can’t afford a nursing home? NO? That’s because they’re not there — they are in nursing homes. We take care of people in Minnesota.
Not to say that nursing homes are free; they’re not. Quite the opposite — nursing homes are expensive — between $8000 and $12,000 a month, on average. And if you have some income, we do expect you to apply most of that to the nursing home bill. You do get to keep some money for incidentals, like toothpaste, gifts, and entertainment expenses. And you are allowed to keep a car, if you need one; and to save enough money to prepay for a funeral, and things like that. The rest is applied to your nursing home expenses, as it should be.
For most people, their home is their biggest asset, followed by retirement plans and life insurance. It’s pretty easy to set up financial accounts with a beneficiary, so the funds go where you want them to when you are gone. But be careful about adding a signer to your bank accounts — many people will add a daughter or son to their accounts, so the child can help pay bills, etc. If that child becomes a joint owner of your accounts, all the money left in that account will become theirs when you pass away. That may be what you wanted. But if you are expecting that child to spread that money around to all your heirs, you better make sure you’ve specified that in your will. The law is pretty clear about that.
You can do the same sort of thing with your house. It’s called a Transfer on Death Deed that you file at the courthouse, and it is used to transfer ownership of your house to your heirs when you pass away. The beauty of a TODD is that it doesn’t affect ownership of the house until you die. So, you can sell the house, or mortgage it, or do anything you want — a TODD just says that if you still own this property when you pass, it becomes your heirs’. It’s also cheap — drafting the TODD and filing it is at a very reasonable cost, and your heirs file a simple affidavit after you are gone. It’s a great tool to avoid probate.
Still, I do suggest you have a will. If you have done everything correctly, you may never need to use it. But if you left something out or made a mistake, you’re safe if you have a will. Remember, you can’t fix it after you’re gone.