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Survival Guide

Keys to Successful Estate Planning

Even if you can’t take it with you, careful estate planning can be a boon to your heirs—even your pets. But lawmakers are changing the rules of the game, and there are unscrupulous insurance agents, as well as uninformed lawyers, in the field scoring against unsuspecting consumers.

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Anna Nicole Smith lived her life dramatically, and the drama continued after her 2007 death—this time over the fate of her reported $700,000 estate. Not thinking ahead to the possibility that she might have another child (which she did) or that her son, Daniel, might die before her (which he did), she left her entire estate to him.

“So, who would be left? Anna’s estranged mother? Probably not who she had in mind,” says Jeffrey S. Greener, a Long Island, N.Y., trusts and estates attorney at the law firm Rivkin Radler.

 If you haven’t yet taken care of your estate, there are things you should know. And if you already addressed your estate planning and think you can rest easy, think again. Recent changes in the law might have potential effects on your estate. But you can’t think about this right now, right? Of course, you also don’t want to put your heirs through any unnecessary hardships, either. Granted, although you likely won’t face anything similar to what happened to Smith, situations change—and so do laws. That means estate plans could be affected in terms of taxes and access by unwanted parties, not to mention family drama—though perhaps without any media spotlight.

OLDIES BUT GOODIES. The primary goal of estate planning, obviously, is to leave the most you can to the people you want to have it, at the least cost. Giving away as much as possible of your assets before you die, which shields them from probate court and estate taxes, is a big part of this. Another part is ensuring adequate care for yourself later in life.

When it comes to charting your future, you have to consider nursing-home care, particularly the costs, which can be tens of thousands of dollars a year and stretch into the six figures in some areas. If you want to avoid spending nearly everything you have on such care, you have a few choices. One is to purchase long-term-care insurance, which can be expensive. Another is to qualify for Medicaid coverage.

“The federal government and most state governments seem to be continually tinkering with the [Medicaid] eligibility requirements and restrictions,” says John McDonald, an estate-planning attorney at Stites and Harbison’s in Nashville, Tenn.

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Changes to Medicaid are important, because Medicare, the federal health-insurance program for people 65 years and older, does not cover nursing-home care beyond an initial 100-day period. This means you must foot the bill afterward—and drain your estate—or give away your money and qualify for Medicaid, the state-federal program that provides health care to the poor (including senior citizens who are technically “poor” from spending down or diverting their assets and who are in need of nursing-home care). All benefit recipients must qualify financially.

Deirdre R. Wheatley-Liss, a certified elder law attorney at Fein, Such, Kahn & Shepard in Parsippany, N.J., calls the changes in elder care and Medicaid in the past few years “huge.” She particularly points to the Deficit Reduction Act of 2005, which was signed into law by President Bush in February 2006. Now, for example, if you gave away a significant amount of money within the past 5 years and you needed long-term nursing-home care, the state won’t pay for it immediately or, potentially, for years, depending on the amount you gave away.

“It truly puts people in a horrible situation,” she says.

The Deficit Reduction Act made two important changes when it comes to giving away money and qualifying for Medicaid. First, the look-back period—the amount of time the government can go back to see whether you gave money as a gift and how much—increased to 5 years from 3. Second, the look-back period begins when you actually need nursing-home care. (The exact amount of wealth that disqualifies a person for Medicaid varies by state, but typically it’s only a few thousand dollars.) Under the old law, the clock began ticking when the gift was made.

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