The Bill Kumpe Law Firm

            First, federal and state law does not allow you to go down to the pharmacy and self-prescribe your own medications for obvious reasons.  A layman is not qualified to diagnose his own illness and prescribe his own medication.  Physicians go to school half of their lives to acquire those skills and then work very hard for the rest of their lives to stay current.  Every medication has side effects and unanticipated consequences that have to be taken into account.  It works the same way in the legal profession.  Granted, anyone with average intelligence can fill in the blanks and complete a simple will or for that matter an incorporation or LLC formation.  But, is that person capable of determining the future legal and tax consequences of their actions?  I doubt it very seriously. 

            Second, the prices at many of these so-called self-help legal stores aren’t really that good.  In many cases, the prices charged by law firms for the same service is not that much more than the price of the self-help “kit.”  A few decades ago before word processing programs and document assembly software, making or changing even a simple legal document was a very labor intensive and expensive proposition.  But, these days the vast majority of the time involved in preparing these documents is not spent in document preparation but rather in what could be called the “diagnostic” stage where the attorney interviews the client and researches their situation to determine what documents and actions are necessary to achieve their goals.  This is a service the self-help legal stores cannot provide by law since that would be unauthorized practice of law.

            In many parts of the Third World, the public can walk in to a pharmacy and buy whatever they want without a prescription.  The resurgence of drug resistant strains of many diseases such as tuberculosis can be blamed in large part on this situation.  Here in the United States, attorneys are beginning to see the same thing in the legal profession.   Self-help wills and trusts are increasingly creating probate nightmares that could have been avoided by consulting an attorney.  Self-help business entity formation promises to produce a bonanza of work for attorneys straightening out the messes created by the unintended consequences of a poorly thought out entity formation.

            Wills and trusts, business entity formations and business transactions are some of the most important actions a person will perform in their lifetime.  Does it really make sense to take those actions without the advice of an attorney? 

Living Trusts and Medicaid

            A lot of people are under the impression that moving their assets into a “living trust” (aka revocable inter vivos trust) will allow them to qualify for Medicaid benefits, particularly nursing home care.  Unfortunately, this is not the truth.  Medicare does not provide for extended nursing home benefits and Medicaid regulations require that the recipient be virtually indigent.

            For a short period a few years ago, a loophole in Medicaid regulations allowed otherwise qualified individuals who had moved their assets into a properly drafted revocable trust to qualify for Medicaid benefits.  This loophole was quickly closed however and occasionally a client (or more likely a client’s family) approaches me with one of these so-called “Medicaid trusts” only to discover that their assets are unprotected and they will have pay for their elderly family member’s nursing home care from the estate or out of their pockets.

            There are three ways to protect your estate from nursing home costs.  One, you can spend the assets down before you need nursing home care.  This strategy requires careful tax planning and must be undertaken several years before nursing home care is needed to avoid the “look back” provisions in Medicaid regulations governing asset transfers. 

            Second, you can move your assets in an irrevocable trust that does not benefit you in any form or fashion.  For the trust to withstand scrutiny under Medicaid regulations, you must derive no tangible benefit from the trust corpus or income and the transfer must be made sufficiently in advance to avoid the “look back” period for the transaction.

            The third and best option is to purchase long term care insurance if you can afford it.  This too requires long term planning and should be done while the client is still healthy, ideally while they are still in their fifties where premium rates are much more attractive.

            Unfortunately, there are lot of old “living trusts” out there that people are relying upon to provide benefits that they can no longer provide.   It’s a good idea to have your estate plan reviewed every two or three years and every time there is major change in elder law.

 To see the Oklahoma Bar Association Brochure on Medicaid Planning click:  HERE.

Legal Wit