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Elderlaw: 05/01/2006

Elder Law for May 1, 2006



Dear Len & Rosie,

I was injured on the job ten years ago, so I cannot get any insurance because of my pre-existing injuries and I have never been able to return to work. I own my own home but I am very concerned about losing it if a major illness were to happen to me. I am a 62-year-old women, and I am not really in the best of health. Can you give me some help on protecting my home and any cash in the bank?

Sharon

Dear Sharon,

You have several options. It is possible for you to qualify for Medi-Cal benefits by spending down and sheltering your countable assets, which more or less consists of everything except your home, car, some life insurance policies and retirement accounts, and $2,000. If you collect Medi-Cal benefits, then it becomes important to shelter your home from Medi-Cal estate claims. The best means of doing so is usually to transfer the home into an irrevocable trust.

But it may not be a good idea just yet. You are only 62, and you are probably not yet ready to give up control of your property. If your home were held within an irrevocable trust designed to protect it from Medi-Cal, someone other than you would have to be the trustee. Also, you would not be able to borrow against the trust property under most circumstances, and if the property were sold within your lifetime, you would have to pay more capital gains tax than you would if you keep the home in your name or in an ordinary revocable trust.

There are alternatives to Medi-Cal. You will turn 65 in three years, which will allow you to enroll in Medicare which will take care of most of your medical expenses. You could also get Medicare early, if you qualify for Social Security Disability Insurance (SSDI), but since it takes two years of collecting SSDI benefits to get Medicare, that’s probably not an option for you. What you need is something to cover your medical needs until you turn 65.

The answer may be for you to buy insurance through the Major Risk Medical Insurance Program, which is a state program that provide you with medical insurance with health insurance providers such as Blue Cross, Blue Shield, and Kaiser Permanente. The cost is fairly low regardless of any pre-existing conditions. Perhaps more importantly, after three years you can transition to ordinary health insurance with your major risk provider and they can’t deny you coverage.

You can find additional information about Major Risk Medical Insurance Program on the Internet at www.mrmib.ca.gov, and you can obtain an application by calling (800) 289-6974.

Len & Rosie

Dear Len & Rosie,

My step-grandfather passed away recently without a will. My grandmother is also deceased, and it turns out he has no blood relatives that we know of. The next closest relatives are my father, my sister, and me. The problem is that my father has been living in relative obscurity for the last ten to fifteen years. We have done a great deal of research to find him to no avail. No one in the family has heard from him in several years. What steps should I take at his point? If my father is never located, do my sister and I have a reasonable claim toward the estate?

Pascal

Dear Pascal,

There are companies that specialize in locating missing heirs, and private detectives and the like that you or the administrator of your step-grandfather’s estate can hire to locate your father. It could be a simple matter of running a credit check. If your father can be located, then whatever claim your father has against your step-grandfather’s estate will belong to him.

If your father cannot be located and his death certificate cannot be located after a diligent search, there is a court procedure in which you can obtain a judicial determination of your father’s death that would allow whatever claim your father had against your step-grandfather’s estate to pass to you and your sister.

What remains is the question as to whether or not there is a claim against the estate. Your step-grandfather’s estate will pass by “intestate succession”, the law about who gets what when someone dies without a will. Intestate succession provides a priority list of heirs. Because you are not related to your step-grandfather by blood, you are fairly low on the list.

You will inherit a share of your step-grandfather’s estate if your father is deceased, or judicially determined to be deceased, and there are no living descendents of his own grandparents. That means pulling out the old family tree to see if any of these people are still alive and paying a genealogical research company to located them.

But even if your step-grandfather is survived by legal heirs, you may still have a claim against part of the estate. If your grandmother died without a will of her own less than fifteen years before her husband’s death, your father, or you and your sister, will inherit whatever real property was owned by your grandmother that passed to her husband as a result of her death. Your family could inherit half of your step-grandfather’s house. The same goes for your grandmother’s personal property, but only if she died less than five years before her husband.

There is a good chance that distant cousins your step-grandfather never knew will inherit all or half of his estate. The lesson learned here is that your step-grandfather would have saved his family a lot of difficulty had he bothered to create an estate plan to distribute his assets to his chosen heirs in an orderly manner.

Len & Rosie

Dear Len & Rosie,

My uncle and aunt have an A/B trust. Their only daughter and her children are the beneficiaries. My aunt went into the hospital, and her daughter and grandchildren never called to see how she was doing. My aunt died, and my uncle paid the way for his daughter and grandchildren to fly to the funeral. They never called him when they were in town, and they never thanked him for paying for their plane tickets. They attended the funeral, but never spoke to him.

My uncle is very upset. He wants to change the trust and leave them nothing. At this point he will do whatever he needs to do so that they get nothing. What are his options, if any?

Dennis

Dear Dennis:

Your uncle’s trust is an A/B trust. His wife’s portion of the trust became irrevocable upon her death, so while he can disinherit his daughter and grandchildren from his half of the trust, he can’t remove them from his wife’s half of the trust. He needs to see a trusts and estates attorney. Your uncle can amend the A trust, which consists of his share of the trust property. Then he needs to get creative.

The B trust, if it’s like most B trusts, gives your uncle all of the income it earns. The B trust should also give him the power to invade the principal of the trust if he needs the money for his health, education, maintenance, and support. It may be possible to allocate the assets between the A trust and the B trust so that he’ll have to invade the B trust. For example, if he puts the family residence into the A trust, and the cash and investments in the B trust, it’s almost certain that he’ll have to take some of the B trust principal to pay for his needs.

If he’s lucky, the B trust may even have a “five or five” power, in which he has the right to take for himself $5,000 or 5% of the B trust assets, whichever is greater, every year without having to give a reason at all.

It is important that your uncle retain a trusts and estates attorney to help him with this. His daughter has rights to the B trust that he cannot ignore. If he were to simply take everything out of the trust and make a new trust, his daughter wouldn’t even have to wait until his death to sue the trust to enforce her rights as a beneficiary.

And there’s something even more important. Your uncle should try to find out why his daughter and grandchildren are not talking to him. Despite how poorly they treated him at the funeral, he should not write off any hope of reconciliation. A rule to live by is that family therapy is frequently much less expensive than lawyer fees and lawsuits.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at www.lentillem.com. Len also answers legal questions each Saturday & Sunday, 4-7 p.m. on KGO Radio 810 AM.


Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at lentillem.com. Len also answers legal questions each weekday on The Len Tillem Show, a podcast available via iTunes, Facebook, www.spreaker.com/user/lentillem and lentillem.com.
Email: lentillem@kenwoodpress.com

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