We are into our eighties and perhaps we are too late to do any estate planning. Is there a certain age you should say “why bother” and live with the wills you’ve had for the past forty years or so? We are both in poor health and it”s probably too late to plan to protect our assets from Medicaid and long-term care costs if we need care.
Are we Too Old?
Dear Too Old:
I like to see clients when they are in their late forties or fifties and their children are old enough to have either become part of the farm operation or not and we can plan accordingly. It’s so much easier to grow into a plan over time and have the time to change things as they need to change.
When you”re in your eighties, however, it’s not too late – maybe. If you end up needing care in the next few months, then yes, you’re probably too late. Your farm and assets could be eaten up by these care costs.
However, only one deity knows whether that will be true or not and he says “God helps those who help themselves!”
If you decide to do something, you can still do a transfer of your assets either to an irrevocable trust where someone else runs things for you – a trustee – or you can set up a life estate and put the deed into the names of your heirs.
Whatever you do, when you register this with your county is when the five-year clock starts running. Now what happens during this five-year window is based on how well you planned for everything.
First and foremost, if you use a life estate, you need to have a Power of Attorney granted to someone you trust will follow the plan. This person must be brought in at the very beginning of the process so they know what they have to do and when they have to do things. All of these same things would be true for a trustee – if you use an irrevocable trust. The only people who likely should use an irrevocable trust are people who are incapable of handling their affairs today. Naming someone else to do everything might be a necessary thing.
In either case, this person must know that if you should need care, how you would want your assets used to provide for your care. Most people would state they’d like to use any and all other assets than farmland – savings, retirement funds, etc. – before they’d have to sell land in order to pay for their care.
Remember, however, you only have to worry about five-year’s time from the time of the transfer. If you go for three years and then have an issue, your Power of Attorney or trustee needs to calculate what the costs will be for the remaining two years. If you have some savings, machinery, etc. to get you through for a while, use those first.
But let’s say it’s come down to the land. Now your trustee or Power of Attorney has two choices – one of them they seldom consider but should.
First would be to sell the land and put these sale proceeds towards your cost of care. But do you have to sell every acre? I wouldn’t. I would sell barely whatever it would take to get through the next ninety days or six months depending on your health. If you’re not in great health and the land is sold and you then die, your family will never get that land back again. What a shame that would be!
Second, and the alternative few consider, is to take a loan against the land to pay for your costs of care. When you die, it’ll be up to your heirs to determine if they want the land rents or income from the land to repay that loan over time and retain all of the land or if they want to sell enough to cover the loan costs. Sure, you’re adding interest to the equation, but I’d rather borrow two or three hundred thousand against a million dollars of land than to lose the land forever.
That’s why it’s important to have our trustee or Power of Attorney on hand when you do your planning. You can tell them how you want things handled – whether it be to sell or to borrow. If they’re on board from the get-go, you know you have a team working to keep your land as you want it. It just might work and you might make it past those five years – no matter how old you are now.