Living Trust Basics

The living trust, also known as the intervivos trust or revocable trust, is a useful and popular estate planning tool in Florida, and rightly so. In this post I tell you about key advantages of this versatile legal instrument. I'll also tell you about some common misconceptions.

The Advantages

Advantage: Avoid probate

In Florida, probate can be a long, drawn-out process, incurring both legal fees and court fees. If your personal representative (executor) is not local, it becomes an even bigger hassle. Some probates can take months, but others can literally take years. A living trust can streamline the process, allowing your heirs to receive their distributions more quickly.

Advantage: Avoid 2nd probate for out-of-state property

If you own real estate in another state, titling that property in the name of your living trust will eliminate the need for a secondary probate in that state.

Advantage: Privacy 

If you pass away and have a will, the will must be filed with the probate court. If you have left no valid death instrument - no will or no trust - a probate will still have to be opened up for your estate. As soon as your estate is in probate, it becomes public record, meaning anyone can examine the details of your estate plan. And that makes it easier for anyone unhappy with your plan -  a disgruntled, estranged child, for example - to launch a legal challenge. Fighting that challenge will cost your estate, leaving less money for your heirs.

Advantage: Greater control over distributions

You may not want certain heirs to get their inheritances in one lump sum. With a living trust, you can place certain controls and conditions on your heirs' inheritance. For example, you may want a younger beneficiary to get his/her distribution upon attaining a certain age, or a spendthrift beneficiary to receive only a limited amount of money in staggered distributions. Another way to exert this control is to have your estate pass under your will, go through probate, and leave the inheritance in a trust known as a testamentary trust under your last will and testament. Obviously, using a living trust is a more straightforward method to accomplish your goal. 

Advantage: Financial institutions more likely to honor your trust than your power of attorney

Your durable power of attorney authorizes someone to manage your financial affairs. In Florida, there is no one statutory power of attorney form. The document is only required to meet certain basic legal requirements, and financial institutions can be extremely picky about the document. It is not uncommon for an attorney-in-fact trying to do business for an incapacitated loved one to be turned away by a bank or brokerage because the power of attorney doesn't meet that institution's specific, unique requirements. If you have a living trust, the equation changes. Financial institutions are unlikely to reject the successor trustee your trust authorizes to handle your finances. 

Advantage: Retain full control until incapacity

In Florida, you may not create a "springing" power of attorney. That means that the person you designate as your agent under your power of attorney has immediate authority to act on your behalf, even if you are not incapacitated. This does not prevent you from acting, but it gives your agent legal authority equal to yours. 

Usually, with a married couple, that is not a problem. But many people are uncomfortable giving someone other than the spouse the authority to handle their affairs while they are still competent. With a living trust, you can be the sole trustee, and your successor trustee can take over for you only after documenting your incapacity. (Spouses usually designate one another as co-trustees, so both have equal authority to act. A third party, usually a child, is designated to take over when neither husband or wife can handle the finances.) 

The Misconceptions

Misconception: Creditor protection

As noted above, a living trust has many virtues. However, putting assets into your living trust does not protect them from creditors. 

Misconception: Living trust assets are not considered when applying for Medicaid benefits for long-term care

An asset in your living trust is available to you, and therefore is considered a countable asset if you apply for Medicaid for long-term care. Only an irrevocable trust can remove assets from consideration by Medicaid.

Misconception: Trustees have to be paid 

Successor trustees can be paid a fee, but if you are like most people, you will probably name a family member to serve as your successor trustee. Most family members decline to receive fees. If you do name a professional, third-party to serve as successor trustee, naturally there will be a fee for services. If you have a good reason to want a third-party successor trustee - for example, you have children who can't get along - those fees are money well spent for your peace of mind.

Misconception: You lose control over your assets

No! You can buy assets, sell assets, and do anything you would normally do.

Misconception: It's costly to set up and a hassle to maintain

You will have to re-title your assets in the name of your trust, but for most people this is not a big deal. (Note: some assets, such as IRAs, should not be placed in your trust. Your estate planning attorney will advise you about this.) You don't have to get any special tax numbers; you will file your taxes as you always have. And although the initial cost to set up a living trust exceeds the cost of setting up a will, it saves money at the back end in legal and administrative fees.

Misconception: Any lawyer can set up a living trust

Wrong. This is a complex instrument, and the devil is in the details. Since your trust will speak for you after you are gone, there can be no ambiguity. Every "t" must be crossed and "i" dotted! Beware trust mills, non-lawyers doing estate planning, online or preprinted forms, and attorneys not experienced in estate planning. Relying on an experienced estate planning attorney can give you the assurance that you and your family will get the protections you seek.

Check out my website for more on living trusts.

Florida Medicaid Myths

In Florida, the average annual cost of a private room at a long-term nursing facility now hovers upwards of $90,000 annually, with a semi-private room around $83,000. With the oldest Baby Boomers turning 70 and the escalating incidence of chronic and extraordinarily expensive diseases such as Alzheimer's, more and more families face financial disaster when a loved one needs long-term care. It is fair to say that this is a national crisis, but one our political leadership is not yet seriously addressing. For the foreseeable future, America's families are on their own.

If a family lacks the extensive financial resources necessary to cover long-term care costs, or if a person needing care has failed to obtain, or has not been able to qualify for or afford long-term care insurance, Medicaid is often a viable option. Securing Medicaid benefits for long-term care in a nursing home can preserve a good portion of a family's assets before virtually everything is lost to nursing home costs. Obviously, preserving assets is especially critical when the person needing care is married, so that there are sufficient funds left for the spouse to live on. 

With this in mind, below I address some of the most common myths about Florida Medicaid benefits for long-term care. The list is by no means exhaustive, but is a good starting point if you are concerned about how to pay for your own or a loved one's long-term care, whether you're planning in advance or facing an immediate crisis. 


MediCARE covers long-term nursing care. 
False! Medicare covers only skilled nursing care, and even then, only for a limited period of time following a three-day hospital stay. In contrast, long-term care is custodial care. It is not intended to make a person "better." Its goal is to help a person with activities of daily living such as bathing, eating, toileting. Medicare does not cover long-term care. If you or your loved ones are relying on Medicare to cover long-term care expenses, think again. 

Once you are in a long-term care facility, it is too late to take any steps to preserve assets and obtain Florida Medicaid. 
False! While it is always better to plan in advance, that is not how things generally unfold in the real world. Most often, we assist families with crisis planning, i.e., when a loved one is already in, or about to enter, a nursing home. Even at that point, a variety of techniques can help preserve assets.

You must spend down and become totally impoverished before applying for, let alone becoming eligible for Medicaid. 
False! Spending down is just one method of becoming Medicaid eligible. Numerous other methods may be available that do not involved dissipating one's assets. In fact, many times we are able to assist families who have been privately paying a nursing home for months or longer because they did not realize there was an alternative to spending down. 

Any transfers made within five years of applying will make you ineligible for Medicaid for five years. 
False! This myth is based on an incomplete and incorrect understanding of Florida's Medicaid rules. Any uncompensated or below-market-value transfers will be considered by the Medicaid office when it examines the application. These transfers will be used to determine a waiting period during which Medicaid benefits will not be available and the applicant will have to pay privately. But that does not mean you have to wait five years to apply. More importantly, some transfers are exempt and will cause no delay in obtaining Medicaid. 

Florida's Medicaid rules are the same as the rules in other states. 
False! Medicaid is a federal program, but because each state also participates financially in Medicaid funding, there are many areas in which the rules vary from state to state. A friend's experience in another state does not necessarily apply to Florida. And even in Florida, you can't assume a rule that applied last year is true this year, because the rules change from time to time. 

Long-term care facility residents on Medicaid receive inferior care compared to private pay residents. 
False! Federal law prohibits nursing facilities from discriminating against a patient based on source of payment. In all my years working with clients who have loved ones residing in nursing homes, I have never come across a situation where this has occurred. In fact, many of my clients' families have been able to provide a greater quality of care for their loved one by using preserved assets to pay for part-time private duty care to supplement regular nursing home care, as well as other "extras." 

Medicaid rules let me give away $14,000 a year without impacting eligibility. 
False! This common misconception arises when Medicaid rules are confused with federal estate and gift tax rules. Under federal law, you can give away $14,000 per year to as many people as you like without it affecting your lifetime unified estate and gift tax exemption. However, this rule is completely unrelated to Medicaid rules. As far as Medicaid is concerned, any transfer for less than fair market value is examined when the application is submitted, and may be used to compute a penalty period during which the applicant will be ineligible for benefits. 

My spouse's assets and income won't matter if I apply for Medicaid. 
False! The assets and income of both spouses are considered. However,  there are steps that may be taken to protect the assets of the well spouse. In Florida there is currently "spousal refusal" whereby a spouse has the right to refuse to pay for a spouse's long -term care costs. My law firm has assisted numerous families with this strategy. 

If I am incapacitated, my agent under my Durable Power of Attorney can do Medicaid planning for me in order to preserve assets. 
Not necessarily!  Your Durable Power of Attorney (DPOA) would have to give the agent certain powers, including the power to make gifts. If a DPOA does not confer these powers or is not executed properly and does not meet all Florida legal standards, your agent will not be able to perform these actions. You would have to create and execute a new DPOA - which obviously would not be possible if, at that point, you lacked the requisite mental capacity. That is why it is always advisable to have a Florida Bar Certified Elder Law Attorney review your DPOA while you are competent, so that you can change it if necessary.

Assets in a living trust are protected from nursing home costs. 
False! However, there are certain kinds of trusts - for example, a Medicaid Asset Protection Trust which, if done in advance and properly structured, may preserve assets. 

I can just "hide" assets so Medicaid doesn't know they exist.  
False! This is a crime. You could be charged with fraud. Any "advisor" who suggests hiding assets is giving you bad advice. There are many perfectly legal ways to restructure and move assets that can hasten Medicaid eligibility and preserve a good portion of assets. No other approaches should be taken. 

I will lose my house if I get Medicaid benefits.  
False! Under Florida law, your homestead is a protected asset if the equity is under $552,000. It cannot be taken away during your lifetime. Nor is it subject to Medicaid recovery upon your passing, if it is left to your constitutional heirs at law. 

I don't need an attorney to help with Medicaid planning. 
False! Florida Medicaid law is complicated. Any mistakes you make with regard to transfers and assets can be costly ones. Rely on a Florida Bar Certified Elder Law Attorney such as myself to guide you through the process.

Beyond the Power of Attorney and Health Care Surrogate: Protecting yourself from yourself with a pre-need guardian

"Gloria" came to my office, convinced her 82-year-old mother was "losing it" after visiting her the previous week. Her mother had always been a fastidious homemaker, but now dirty dishes were piled up and enough trash was on the floor to constitute a fire hazard. Unpaid utility bills were stuffed in a drawer. There was little food in the refrigerator and cupboards, and her mother had lost a dramatic amount of weight. Another red flag: Gloria's mother was gushing praise for her new friend, a neighbor who was now keeping her company a few nights a week, and who had also offered to handle her mother's checkbook and take care of the bills.


As her mother's agent under her Durable Power of Attorney and her health care surrogate, Gloria tried to talk with her mother about the situation, but could make no headway. Her mother insisted she was fine. She was particularly incensed by Gloria's suspicions about the new friend, accusing her of jealousy and noting that the new friend visited more often than Gloria did. When Gloria offered to go to the bank to straighten out her mother's account and pay the bills, her mother said she was going to do it herself soon and didn't need help. She rejected Gloria's suggestion that she see a physician about the weight loss. 


Gloria, distraught, asked me what she should do. Clearly she could not force her mother into a car and into a physician's office, nor tear the house apart looking for the checkbook. I informed her that as her mother's attorney-in-fact and health care decision-maker, she was only authorized to act on her mother's behalf - but she could not overrule her mother's powers. So long as her mother was deemed competent, she could make her own decisions. I advised Gloria to contact others who might be able to get through to her mother - perhaps a clergy person, a longtime friend, a relative. If that approach did not work, Gloria's only option was to commence a guardianship proceeding over her mother. If the court determined that her mother was not competent to manage her own affairs, it would appoint a guardian for her. That could be Gloria, but not necessarily.


I relate this story because it has implications for your own planning. You probably cannot envision behaving like Gloria's mother. But it does happen. There are are no guarantees on anyone's cognitive health, and as our lifespans increase, so do our chances of become mentally incapacitated. In anticipation of a situation like Gloria's mother's, many of my clients choose to name a pre-need guardian, in addition to executing a Durable Power of Attorney and Health Care Surrogate.  A pre-need guardian is the person you would like to serve as your guardian in the event that, like Gloria's mother, the courts decide that you are not competent to manage your own affairs. The courts are not bound to name the person you've requested, but generally do so unless there are circumstances that make your choice unsuitable. By naming a pre-need guardian, you give yourself at least a modicum of control over your own fate. 


In order to protect themselves, their loved ones and their assets, some clients - often those with a family history of cognitive impairment - take steps even beyond naming a pre-need guardian. They amend their trusts, resign as trustee, and appoint one or more of their children as trustee(s), irrevocably.  Usually the client retains control over an operational checking account, and sometimes a money market as well. With these arrangements in place, my clients are confident that if they ever become impaired and disposed to making poor financial decisions or vulnerable to financial predators, the bulk of their assets are protected and their families are spared unnecessary grief.


It would be easy to equate these plans with giving up control of your life. But in reality, the reverse is true: They are a way to ensure that your family's well-being and your assets are protected if you can no longer protect them yourself.

Is your durable power of attorney powerless?

Just about everyone knows the importance of having a Durable Power of Attorney (DPOA). This key legal document allows you to name someone other than yourself to handle your financial affairs.  If you become incapacitated, having a DPOA can make the difference between having your attorney-in-fact smoothly handle your affairs, or your becoming the subject of a guardianship.

Unfortunately, "smoothly" is not how things always go in the real world, even if your DPOA has been drawn up by a competent estate planning attorney and every "t" has been crossed and "i" dotted.  The reason: Financial institutions subject the document to rigorous scrutiny and are notoriously reluctant to honor them. Astonishing as it may seem, in Florida there is no one, universally accepted, statutory DPOA form. Therefore, banks and other financial institutions can be as picky as they want. They may tell an agent that the DPOA was signed too long ago and is "stale"; that the bank has its own form that also needs to be signed; that the form you are presenting to them lacks certain language, etc.

A recent article in The New York Times, "Finding Out Your Power of Attorney is Powerless," catalogs the frustrations some have experienced when trying to use a power of attorney at their financial institutions. In one instance, college professor Claire Ullman approached a bank in order to manage the accounts of an elderly relative who had named Ullman as her agent three years prior. The bank rejected the DPOA, and requested that a new one be signed - an impossible task because Ullman's relative was no longer mentally competent. "People sign these anticipating incapacity. Once incapacity arrives, it's too late to sign another one," Ullman says.

It is easy to conclude that making an attorney-in-fact jump through all sorts of hoops is madness. But from the banks' point of view, there is a method to the madness, given the widespread incidence of financial elder abuse. Statistics show that it is not uncommon for an older person to be victimized by his attorney-in-fact - the very person who is authorized to handle his finances. Therefore, banks increasingly err on the side of caution, hoping it will protect themselves from liability as well as their customers from fraud.

This is not to say that the durable power of attorney is useless. It is not. It is vital. Everyone needs one. But in this day and age, you have to take some additional steps after the ink is dry, in order to ensure that when the time comes your agent will be able to use the document as you intend:

• Make sure your DPOA is drafted by an experienced and competent Florida elder law/estate planning attorney. Do not rely on generic pre-printed or downloadable forms! Although there is no one statutory form in Florida, the state still requires that certain items be included and certain formalities followed.

• Once you've signed your DPOA, take it to your financial institution(s). Request that the legal department review it and provide you with written assurance that your agent will be allowed to use it in the future. If it is not acceptable to the bank, find out why and check back with your attorney. Your financial institution has the right to not accept it, but it is obligated to tell you why.

• Be cautious about any bank-generated form you are asked to sign. Some of those forms contain arbitration clauses and other language that may not be favorable to you.

• If you are a client of The Karp Law Firm, call us. We can engage with the bank's legal department and often, work it out for you. If the bank insists it will not accept your DPOA, withdraw your funds and take them to a more cooperative institution. In fact, just saying you're going to do this will frequently encourage a balky bank to acquiesce.

Another route many of our clients choose is setting up a living trust. In contrast to your attorney-in-fact whose authority stems from your Durable Power of Attorney, a co-trustee or successor trustee under your trust is far less likely to encounter roadblocks when managing your trust assets.

You can read the original New York Times article on this subject here. 

Alzheimer's Disease: Today's Realities

An online search for "Alzheimer's Disease" yields countless articles: New reports appear daily about recently discovered biomarkers, diagnostic tests, possible treatments, new medications, the latest research into potential cures. We are learning more all the time. But despite research efforts, we have yet to find the holy grail: a way to prevent or cure this increasingly prevalent disease.

How prevalent? If you are over 65 you have a one in nine chance of having the disease, according to The Alzheimer's Association's 2016 Facts and Figures report.  If you are lucky enough to live to age 85, your chances increase to one in three. Alzheimer's is the cause of 60% to 80% of all cases of dementia, and women are significantly more likely to be afflicted. If things keep going as they have, the nationwide incidence will triple by 2050. In Florida alone, the number of residents with Alzheimer's is expected to increase 41% by the year 2025.  

The 2016 report also presents revealing data about the toll the disease takes on caregivers. There are currently 16 million unpaid caregivers in the U.S. who are affected economically, emotionally and physically by a loved one's Alzheimer's Disease. The costs of care, the report concludes, "...can make it more difficult for individuals and families to maintain their own health and financial security." 

While it's widely believed that maintaining a healthy lifestyle has some preventive value, there is no way to guarantee that you will remain untouched by Alzheimer's. There are, however, steps you can take that can ease the toll a diagnosis would take on your family. Assessing how your family can shoulder the staggering cost of long-term care, if it becomes necessary in the future, should always be part of your estate and life planning. An experienced Florida Bar Certified Elder Law Attorney can assist you.

Your attorney can also help you put in place legal documents that will smooth the road and make the transition easier for family members in the event of your incapacity. A Durable Power of Attorney for Property will allow someone to handle your financial affairs. A Health Care Surrogate will authorize someone else to make your health-related decisions if you cannot do so. All these plans should be made well in advance. But even if you have already been diagnosed with Alzheimer's Disease, so long as your mental capacity remains, you can execute these important documents. Don't delay too long, though: the progress of the disease is unpredictable and, once incapacity occurs, the only recourse may be a court-ordered guardianship. That's a trying and expensive process you and your family will want to avoid.

Perhaps in the near future, I will no longer need to advise clients about how to deal with the legal and financial ramifications of Alzheimer's Disease, because it will no longer exist. That is my hope. I'm sure it's yours, too.

Newlyweds, tend to these important plans

Across the country, thousands of eager couples, young and perhaps not-so-young, are busy with preparations for a June wedding. Guest lists, flowers and bridesmaids' dresses take center stage right now. But after the honeymoon, newly married couples should attend to something definitely not as glamorous, but definitely important: a basic estate plan. If you and your spouse have already discussed your budget and your finances, that's wonderful - but there's more to be done.

Hopefully your life together will be a healthy, happy, and long one - but let's face it, sometimes life has other ideas for us. For your financial and legal health, and most importantly for your peace of mind, you should address the following issues without delay:

Beneficiary designations

You'd be surprised at how many people fail to update their beneficiary designations when they marry. (This happened in my own family, when a relative found out her deceased husband's ex-wife had not been removed as the beneficiary of his life insurance policy.) Examine your retirement accounts, insurance policies, annuities, bank accounts, brokerage accounts. Also consider naming a contingent beneficiary, in case your spouse predeceases you.  

Titling of assets

Do you already own property with your spouse? There are three legal forms of titling when spouses co-own an asset: tenants in common, joint tenants with rights of survivorship, and tenants by the entirety. Consider ownership as tenants by the entirety, which is available only to married couples and can provide additional credit protection not afforded by the other forms of ownership.

Last Will and Testament

Your marriage has brought a new spouse into your life, and perhaps, new real property or other assets. A will allows you to name who you want to get your assets when you pass away. If you or your spouse do not already have wills, you should create them. If you have existing wills, have them reviewed. The law makes provisions for a "pretermitted spouse," i.e., a spouse who became your spouse after you wrote your will. The pretermitted spouse is legally entitled to 50% of your probatable assets. In addition, regardless of whether you change your will, your spouse has certain legal rights to your homestead property and elective share rights against your estate, including all non-probatable assets, unless you have a pre- or post-nuptial agreement that states otherwise. Bottom line, see a qualified elder law/estate planning attorney to get your ducks in a row.

Durable power of attorney

Do not assume that your spouse automatically has the legal authority to handle your financial affairs if you are incapacitated. Each of you should establish a durable power of attorney that  explicitly names the other (or some other responsible person) to handle your financial affairs if you are not able to do so. Once you have established your durable power of attorney, submit it to each of your financial institutions to be sure the institution will honor it.

Health Care Surrogate

Under Florida law, if you are no longer able to make your own wishes for medical care known, your spouse (after a court-appointed guardian, if there is one), gets priority as your health care decision maker. It is necessary to execute a health care surrogate naming your spouse as your health care agent. That assumes, of course, that you want your spouse to have that authority. If you want someone else to act as your health care agent - for example, a sibling - your health care surrogate must explicitly reflect that desire. Naming a contingent agent is also wise, if your first choice is unable to serve for any reason.

Children from a prior marriage?

If you have a child from a prior marriage, who will be the child's legal guardian if you pass away or are incapacitated, particularly if the child's other parent is no longer in the picture? Who will handle the child's money? These are important issues to be discussed with your attorney without delay.

Changed your name? 

Let your financial institutions know about your name change. Change your name on other documents, such as your passport and drivers license. Discrepancies between your new legal name and existing documents may seem like a minor issue, but can mushroom into a major inconvenience and bureaucratic nightmare. (Try getting through airport security when your drivers license says Mary Smith and your boarding pass says Mary Jones!) 

In summary: Enjoy your honeymoon - then make an appointment to see a certified and experienced elder law or estate planning attorney to get your plans underway. And keep the attorney's number on hand. As your married life evolves - perhaps with children, a new home, new assets - your estate plan will have to keep up. Congratulations!