Your Rights in a Nursing Home

Last week, I described the different long-term care facilities.  There are three primary long-term care facilities:  assisted living residences, nursing facilities, and continuing care retirement communities (or CCRC).

This week, I wanted to write a little about the practical aspects of entering these facilities.  Your rights can vary quite a bit in these different facilities, and those rights can have a practical aspect on you.

Nursing facilities are governed by the Nursing Home Reform Act, a law that has existed since 1987.  There are various rights guaranteed to every nursing facility resident.  The right to privacy, the right to confidentiality, the right to be free of restraints, the right of free choice are just a few of the rights guaranteed to every nursing facility resident in the United States.

A nursing facility also cannot obtain a guarantee of private payment from a third-party and it cannot require a prospective resident to guarantee private payment for any length of time or to refrain from applying for Medicaid benefits. Nursing facilities also cannot treat residents who are eligible for Medicaid benefits differently than those residents who are ineligible for Medicaid benefits.

For those residents who are eligible for Medicaid benefits, nursing facilities must accept Medicaid as payment in full. For instance, a nursing facility cannot ask the resident’s family to supplement the resident’s stay in the nursing facility if the resident is eligible for Medicaid benefits.

Almost every nursing facility in the state of New Jersey accepts Medicaid benefits. If the facility accepts Medicaid benefits, then it must agree to accept a minimum amount of its residents as Medicaid beneficiaries.  For instance, a facility must agree to accept at a minimum 45% of its residents as Medicaid beneficiaries.

In almost every nursing facility, every bed in the facility is dual certified for both a Medicare and Medicaid patient, meaning that in those beds, the facility must accept a resident who is eligible for Medicare or Medicaid. This can be very important because most people enter a nursing facility after being discharged from a hospital.  The resident enters the nursing facility to receive rehabilitative services, frequently as a Medicare beneficiary.

The family may decide that the resident needs to remain in the facility after his rehab is over. The resident will then switch to being either a privately paying resident or a Medicaid beneficiary.

The nursing facility might tell the family that they don’t have any Medicaid beds, but as stated above, in most facilities, every bed is dual certified for Medicare and Medicaid patients. Chance are quite high that the resident already is in a Medicaid bed—the same bed from which he was receiving rehabilitative services covered by the Medicare program.

Since the nursing facility cannot require a resident to refrain from applying for Medicaid benefits pursuant to the Nursing Home Reform Act, the facility cannot prevent the resident from applying for Medicaid benefits to cover the cost of the Medicaid certified bed in which he currently lies his head. The facility also must refrain from requiring the family (a third-party) from guaranteeing private payment for the resident’s stay.

Knowing that they cannot discharge you simply because you are converting from a short-term Medicare beneficiary to a long-term Medicaid beneficiary, many nursing facilities pressure the resident or his family to remove the resident from the facility. “We don’t have any Medicaid beds.”  “We don’t take a person Medicaid pending.”  “You will have to take the resident home and care for him in your home.”  These are common statements that nursing facility staff make to family members.  These statements are almost always incorrect.

Next week, I will write about your rights in an assisted living residence and a CCRC. Hint:  Those rights are substantially less than your rights in a nursing facility.

What Are My Rights

There are several common facts that people should know about long term care facilities.  Long term care facilities come in different varieties.  There are assisted living residences, a nursing facilities (commonly known as a nursing homes), and a continuing care retirement communities or CCRC.  Each type of facility is governed by different laws and each has a different type of license.

From a layperson’s point of view—which to a large extent includes me because I am not qualified or overly knowledgeable about the licensing standards for each of these facilities—an assisted living residence is similar to a hotel in appearance.  Compared to a nursing facility, an assisted living residence typically will have fewer professional staff members (for instance, nurses) than a nursing facility.

The residents often live in a room by themselves and share common areas for eating and socializing. The residents of assisted living residences are typically more active than residents of nursing facilities.  The residents will frequently go on day trips organized by the facility.

Nursing facilities when compared with assisted living residences are more hospital-like in nature. There are a number of nurses on duty at any given time and the residents are frequently visited by a staff physician.

Residents are often less cognizant of their surroundings than residents of assisted living residences. The residents rarely, if ever, go on day trips.  Unless there is a medical reason for a resident to have his own room, residents share rooms with one or more other residents of the facility.

A continuing care retirement community has various living arrangements at one facility. Most residents live in independent living areas, essentially apartments, but with common areas for eating and socialization.  If a resident’s care needs increase, the resident can move to the assisted living section of the CCRC, and if the resident’s care needs increase significantly, the resident can move to the nursing facility section of the CCRC.

The benefit of a CCRC is that the resident never has to leave the facility—or so they are told—if their care needs increase; the resident simply moves to a different area of the same CCRC. CCRC’s cost more than standalone assisted living residences and nursing facilities.  A CCRC will frequently require a large, upfront entrance fee—ranging anywhere from $100,000 to $500,000.  The entrance fee may be partially or wholly refundable when the resident vacates the CCRC, though the resident does not earn interest on the money given for the entrance fee.

Each of these facilities is governed by its own set of rules. For instance, residents of nursing facilities have significant rights that have been codified since 1987 in the Nursing Home Reform Act.  The right to privacy, the right to visit with friends and family, and the right to be free from restraints are just a few of the legal rights that have been established by the law for every nursing facility resident in this country for the past thirty years.  A resident of the nursing facility section of a CCRC would also be protected by the rights codified in the Nursing Home Reform Act.

On the other hand, a resident of an assisted living resident has far fewer legal rights than a nursing facility resident. I know of no codified system of rights that protects an assisted living resident.

The differences in the rights granted to the residents of these different facilities can make practical differences in the lives of the residents. Next week, I will write about how the rights of residents can have a practical application to the residents’ lives and the lives of their family members.

Beware of Your Own Generosity

Few issues prompt more questions to me than the concept of gifting.  In my experience, when it comes to gifts, people tend to focus on the unimportant and ignore, or are ignorant of, the important issues associated with gifting.

A gift occurs anytime a person gives something away and does not receive something of equal value in exchange for the thing given.  Clearly, if Mrs. Smith gives her son $10,000 and her son gives her nothing in return, a gift has occurred; however, gifts occur all the time without people knowing that a gift has occurred.

For instance, if Mrs. Smith gives her son her car, Mrs. Smith has gifted her car to her son.  Whatever the value of the car was at the time of the gift is the value of the gift.  Similarly, if Mrs. Smith “sells” her car to her son for $500 and the car is worth $5,000, then a partial gift has occurred.  If the son removes Mrs. Smith’s name from a bank account that held Mrs. Smith’s money and adds his name to the new account, then a gift of the bank account has occurred.  If Mrs. Smith adds her son’s name to the deed for her house, then a partial gift of Mrs. Smith’s house to her son has occurred.

Most people think they can only gift $15,000 a year without paying gift tax.  The fact of the matter is, a person can gift $11,200,000 during her lifetime without paying gift tax.  If a person gifts more than $15,000 in any given year to one person, then a gift tax return must be filed and the amount of the gift above $15,000 reduces the lifetime credit dollar-for-dollar.

Assume that Mrs. Smith gifts $20,000 to her son. Mrs. Smith must file a gift tax return, an IRS form 709.  No gift tax will be owed, but Mrs. Smith lifetime credit against gift tax will be reduced from $11,200,000 to $11,195,000.  Since most people have nowhere near $11,200,000, most people should have no concern about ever paying gift tax, and since a gift tax return is a simple tax form that most anyone can complete, there is little hassle associated with making a large gift.

What is a concern for gifting is the potential impact of the gift on the person’s eligibility for Medicaid benefits. If Mrs. Smith gives her son $20,000 or a partial interest in her house or her car, then those gifts could come back to haunt Mrs. Smith’s eligibility for Medicaid benefits if Mrs. Smith requires long-term care and applies for Medicaid benefits within five years of making the gift.

This is what the Medicaid five-year lookback is all about. When a person gifts any asset within five years of filing an application for Medicaid benefits, those gifts can come back to haunt the person’s application for Medicaid.

Pursuant to the five-year lookback, all gifts made within five years of applying for Medicaid benefits are aggregated. The aggregate value is then divided by a number, which is based upon the statewide average cost of a nursing home room.  That number is currently around $10,500.  So, for every $10,500 of aggregate gifts that Mrs. Smith made during the lookback period, she will be ineligible for Medicaid benefits for one month.

Since Mrs. Smith has no money—she is, after all, applying for Medicaid—she is subject to being discharged from the nursing home in which she resides if Medicaid assesses a penalty period against her for making gifts during the lookback period. If her son doesn’t want her discharged from the nursing home, her son may have to pay for the cost of her care.  Since a nursing home can cost upwards of $14,000 a month, the cost of Mrs. Smith’s care might exceed the value of the gifts that Mrs. Smith made to her son.


My Mom

This past week, my mother passed away.  She was 93 years old—three weeks shy of 94.  For the last six years of her life, my mother resided in a nursing home.

Like most children, I believe that my mother was a great person.  Without question, she was someone who loved being a parent and tried her hardest to be the best parent she could be.  All my mother wanted to be in life was a mother, so measured from that perspective, her very long life was an absolute success.

Years ago, I was able to qualify my mother for Medicaid benefits.  The fact that I qualified her for those benefits saved my father, aged 90, from financial ruin.  My dad still lives at home and has been able to reside at home because my mom qualified for Medicaid benefits.

There are several things that I gathered from my personal experiences that resonate with me every day.  People seek my advice about their parents and their parents’ need for long-term care.  After meeting with thousands of people and measuring their experiences against my own, I can tell you that while we all believe we are unique people with a unique set of facts, the reality is, on whole, we are mostly very much the same.

My mother never wanted to live in a nursing home.  I hear similar statements from clients all the time.  But when I say my mother never wanted to live in a nursing home, I mean she never wanted to live in a nursing home and would have rather just died on the spot if she thought she would ever live in such a place.

Before my mother became a full-time resident of a nursing home, she was in nursing homes on two occasions for rehabilitation.  When I would visit her during those short stays, she was practically hyperventilating from her agitation.  No matter how many times I would tell her that she was only there for rehabilitation and would be going home soon, she wanted to go home right then and there.  And she was adamant and angry.

After suffering several strokes, my mother suffered from vascular dementia.  Due to her strokes, her care needs simply reached a level where it wasn’t feasible for her to remain at home, so we placed her in a nursing facility where she received excellent care for six years.

Because of the effects of dementia, my mother never realized that she was living in a nursing facility, so she was actually comfortable and peaceful in the nursing home.  For the first four years of her stay, she was somewhat conversational and always appeared relaxed and relatively happy.  Eventually, the dementia took over her mind to an extent where she wasn’t conversational, but she always appeared relaxed and comfortable.

So many people come to see me and tell me that they will never live in a nursing home. When they tell me this, I remember my mother.  Sometimes a person’s care reaches a level where family members cannot provide the care.  It would be unsafe for the person who needs the care to remain at home and for the caregiver to provide that care.  Many caregivers—spouses or adult children—suffer mental and physical harm attempting to provide care to an elderly person at home.

So, the point I take away is, never say never, because if my mother spent six years in a nursing home, anyone can end up spending a significant amount of time in a nursing facility.

Another point I bear in mind with respect to my mother’s care is the way people view a particular nursing facility. Many people ask me for a referral of a “good” nursing home.  I always tell people to visit, which is a government site that ranks nursing facilities on various criteria, and to visit the actual nursing home to get a sense of the care that is being provided.  I also suggest that people chose a nursing home near their house, because it makes it much easier to visit the family member.

I thought the facility in which my mother resided is the best nursing facility. I thought the care she received was outstanding.  The facts of her case bear my opinion out.  She resided in that facility for six years, which is longer than any other client of mine has ever resided in a nursing facility and a lot of my clients have resided in nursing facilities.  But I have had clients tell me they don’t like the nursing home where my mother lived.  That’s fine, and that’s why I try not to recommend facilities.  It’s a personal opinion.

Guardian ad Litem

A recent appellate division case makes clear the role of a guardian ad litem.  When a person cannot handle his financial or medical affairs due to physical or mental disability, a guardian might be appointed for him.

In order to appoint a guardian for a person, a court action is required.  The court action must be supported by the reports of two physicians who have examined the incapacitated person and opined that he can no longer handle his financial or medical (or both) affairs due to mental or physical infirmity.

For instance, if Mr. Smith suffers a massive stroke, he may be unable to handle his affairs. If Mr. Smith failed to sign a power of attorney and an advanced healthcare directive, then no other person could make decisions for him.

Mr. Smith’s children will want to help him, but legally, they can’t because they don’t have the authority to make decisions for him or access his financial accounts (bank accounts, annuities, IRAs, etc.). One of his children will have to initiate a guardianship action.

Once the child files the guardianship action, the court will appoint an attorney for Mr. Smith. In a guardianship action, the court is being asked to declare that Mr. Smith  can no longer handle his affairs and that someone else (his child) has the authority to make decisions for him.  If the court decides this is the proper course of action, then the court is depriving Mr. Smith of fundamental rights—Mr. Smith can no longer make decisions for himself.

Since it is alleged that Mr. Smith can no longer make decisions for himself, the court must appoint an attorney for him to ensure that his fundamental rights are not inappropriately being taken away from him. That lawyer must advocate for Mr. Smith.  If Mr. Smith tells the attorney that he does not want a guardian, then the attorney must advocate for what Mr. Smith wants, unless what Mr. Smith wants is plainly harmful to Mr. Smith.

A guardian ad litem does not have the same role as the court appointed attorney. A guardian ad litem is appointed in some (not all) guardianship actions to opine as to what is in the best interests of the proposed ward, that is, Mr. Smith in my example.  Mr. Smith’s court appointed counsel might believe that Mr. Smith needs a guardian, but Mr. Smith might tell his attorney that he doesn’t want a guardian.  In such a case, the court could appoint a guardian ad litem to opine as to Mr. Smith’s need for a guardian.

Once the court declares that Mr. Smith is mentally incapacitated, the court could leave the guardian ad litem in place in order to accomplish some goal. The guardian ad litem could have a special skill from which the court believes Mr. Smith would benefit.  For instance, if Mr. Smith were being sued for an automobile accident in which he was involved, the court could appoint a guardian ad litem who is an attorney with extensive experience in litigation involving automobile accidents.

The court could empower the guardian ad litem to negotiate and enter an agreement disposing of the lawsuit against Mr. Smith. With such authority, the guardian ad litem could negotiate a settlement of the lawsuit against Mr. Smith and enter a settlement agreement disposing of the lawsuit.

A guardian ad litem is not appointed in most guardianship actions, but in some cases, the appointment of a guardian ad litem can be very beneficial. If a guardian ad litem is appointed, it is important to remember the differences between the court appointed counsel and the guardian ad litem, because even attorneys get their roles confused.

What Is a Trust?

Many clients ask me if they should have a trust.  The client has heard of some person who has a trust, and they believe that a trust would be appropriate for them.

A trust is a fiduciary relationship in which one person, called the trustee, is holding assets (cash, stocks, bonds, mutual funds, real estate) for another person, called the beneficiary.  A fiduciary relationship is one in which the fiduciary has the utmost duty of care to handle the assets of another person.  So, with a trust, the trustee is the fiduciary, holding the assets of the beneficiary with the utmost duty of care.

The person who establishes the trust is called the grantor.  The grantor places his assets into the trust.  The trustee holds and invests the assets of the trust.  And the beneficiary derives the benefits of the trust.

With many trusts, the grantor establishes the trust for the benefit of himself with some other person, such as his children, as remainder beneficiaries after his death.  In such cases, the grantor also serves as the initial trustee of the trust, with one of the children serving in the role of successor trustee after the grantor’s death.

Because a trust is really just one person holding assets for another person, the trustee can invest the assets of the trust any way a person can invest assets.  A trust could have its assets invested in multiple types of investments, just as a person could.  For instance, you are probably “invested” in real estate in that you own your home.  A trustee can invest in real estate by owning a home in the name of the trust for the benefit of the trust’s beneficiary.

You probably have a checking account.  A trustee could have a checking account in the name of the trust.  You could invest in CDs, stocks, mutual funds, and annuities.  A trustee could invest in CDs, stocks, mutual funds, and annuities.

If Joseph Smith were invested in stocks, the stocks would simply be titled “Joseph Smith.”  If Joseph Smith were the trustee of a trust for the benefit of his nephew, Mark Jones, then the stocks would be titled “Joseph Smith, Trustee, of the Mark Jones Trust.”  Titling the stock in this manner would show that Joseph Smith is holding the stocks for the benefit of Mark Jones in a trust.

If Joseph Smith wanted to invest the assets of the trust in real estate, mutual funds, annuities, bonds, etc., all of the accounts or assets in which the trusts was invested would be titled “Joseph Smith, Trustee, of the Mark Jones Trust.”  The trust could invest in one asset or twenty assets, just as you could invest in one asset or twenty assets.

The only limitation to the manner in which the assets are invested is that the trustee must always bear in mind his duty of care to the beneficiary.  When it comes to investing, the trustee must be guided by the Prudent Investor Rule.  The Prudent Investor Rule requires the trustee to invest the assets of the trust in a prudent—careful—manner.

Whether a client needs a trust or would benefit from a trust is always a question of fact given the client’s particular set of circumstances.  A trust is not the right choice for every client.

Many trusts are revocable, meaning that the grantor of the trust can amend or completely revoke the trust any time the grantor chooses.  Revocable trusts often come in handy for estate planning purposes when a client owns real estate in another state, for instance, in Florida.

An irrevocable trust is a trust that cannot be amended or revoked by the grantor.  The grantor could designated another person, such as the trustee or someone else, who could modify or terminate the trust, but in order to be irrevocable, the grantor cannot retain the power to modify or terminate the trust.  Irrevocable trusts are often used to remove assets from the name of the grantor and gift those assets to other persons.

Off to College: Did You Forget Something?

A financial power of attorney and an advanced healthcare directive can be two of the most important documents that you ever sign.  A financial power of attorney permits someone else, called the “agent” or “attorney-in-fact,” to make decisions for the person who signs the power of attorney, called the “principal.”

A power of attorney is only effective when the principal is alive.  Once the principal dies, the agent’s power of attorney authority ends.  Moreover, a principal is always free to revoke any power of attorney authority that he has granted to his agent.

Once a person attains the age of eighteen, no one can make decisions for him unless that person is his power of attorney or court-appointed guardian.  As silly as it may seem, the age of eighteen is the age of majority, and once a person attains that age, he is an adult.

Some people think a spouse can make decisions for you simply because of his/her status as a spouse. This is not the case.  For instance, if Mr. Smith owns an IRA and he is mentally incapacitated, Mrs. Smith would not be able to access that IRA unless Mr. Smith executed (signed) a power of attorney in her favor or she is the guardian of her husband.

When clients come to see me, I always tell them that a Will is important, but a financial power of attorney is even more important.  A Will is for other people.  A Will is only effective after you die, so a Will is not really for you; it’s for those you love.

A power of attorney is for you.  The power of attorney permits someone else to take care of you if you cannot take care of yourself.

An advanced healthcare directive is essentially a financial power of attorney but for healthcare decisions.  The directive grants authority to someone else (called the “agent” or “proxy”) to make decisions for you.  Through an advanced healthcare directive, you can grant someone the authority to access your medical information, which is important given privacy laws.

Over the years, I have had a few clients who I would consider to be good planners contact me about planning for a child of theirs who was going away to college.  The child was about eighteen years of age and the parent realized that if something happened to the child when the child was away at college, the parent would not be able to make decisions for the child.

These parents have contacted me and asked that I draft a financial power of attorney for the child.  This is a smart move.  Now that the parent has a power of attorney, he can continue to make financial decisions for the child.

The parent can still handle the child’s banking, even if the child is perfectly healthy, and if something were to happen to the child—for instance, if the child were to get into an accident—the parent can handle the child’s financial affairs.  Furthermore, the parent could make healthcare decisions for the child and access the child’s healthcare information.

As much as none of us would ever want to think about something happening to one of our children, what would make the situation many times worse is being told that you don’t have authority to make important financial or healthcare decisions for the child who now desperately needs your help.  Eighteen is what the law considers an adult, so your authority over your child legally ends once he attains the age of eighteen.


Calculating a Just Penalty

Medicaid is a health payment plan for needy individuals.  What this means is, if a person qualifies for Medicaid, the Medicaid program will pay for many of the person’s health care needs.

In order to qualify for Medicaid, the person’s assets must be below a certain level, typically $2,000.  His income must be insufficient to pay for his care; for instance, if he is living in a nursing home costing $12,000 a month, then his income (Social Security, pension) must be less than $12,000 a month.  Finally, he must meet certain clinical criteria.  He must require hands-on assistance with three of the basic activities of daily living, such as clothing, bathing, toileting, eating.

If the person meets all three of those criteria, then he can qualify for Medicaid.  If he is residing in a nursing facility, the Medicaid program will pay for most of the costs associated with his care at the nursing home.  Medicaid will also help pay for care in an assisted living residence and at home.

When a person applies for Medicaid, the Medicaid Office requests financial documents for the past five years.  Essentially, the Medicaid Office is performing a forensic accounting of the applicant’s finances for the past five years.  The Medicaid Office is looking to verify that the applicant has less than $2,000 in assets currently and that the applicant has not given away any assets in the past five years.

If the applicant has given assets away in the past five years, then he will be rendered ineligible for Medicaid for a period of time.  The more the applicant gave away in the past five years, the longer the period of ineligibility.  The period of ineligibility is called a “penalty period.”  During a penalty period, the applicant must pay for his care privately; Medicaid will not pay for his care during the penalty period.

A penalty period is calculated by taking the aggregate assets that the applicant gave away during the five years immediately preceding the date of his application, called the “lookback period,” and dividing that figure by a penalty divisor figure that the State publishes every year.

The divisor is supposed to be based upon the average cost of a semi-private nursing home room in the state in which the applicant lives.  So, for instance, if the average cost of a nursing home is $400 in New Jersey, then the penalty divisor is $400.  If the applicant gave away $12,000 during the lookback period, then the applicant will be ineligible for Medicaid benefits for one month, because a $400 daily penalty divisor is equal to $12,000 a month ($400 * 30 = $12,000).    If the applicant gave away $24,000 during the lookback period, then he would be ineligible for two months.

Last year, in 2017, the state published a divisor figure that was $423 per day.  This year, the state is attempting to publish a daily divisor figure that is only $343 per say, or approximately $80 lower than last year’s divisor number.  This would result in longer penalty periods for people applying for Medicaid benefits because the divisor figure is lower.

This is odd because the cost of nursing homes in New Jersey keeps increasing every year.  The cost of a nursing home certainly did not decrease by 19% from 2017 to 2018 ($80/$423 = 19%).

There are several hundred nursing homes in New Jersey, and the divisor figure is supposed to reflect the average cost of care at all of them. From my perspective in Monmouth County, I can say that the cost of a nursing home ranges from $350 per day to $450 per day.  I think the state may need to look at the figures it is using again to ensure the accuracy of the divisor.

My Will, My Way

A person’s last will and testament is called his “Will” because the document is supposed to reflect the will (or intention) of the person signing the document.  A person making a Will is called the “testator.”  Another way of saying this is, the document called a Will reflects the intention of the person making the document with respect to how his property will pass after his death and who will handle his affairs, typically called the executor.

Wills are to be read in a manner that effectuates the intention of the testator as expressed in the Will document, as closely as possible.  It is said that a Will is to be interpreted in a manner that effectuates the probable intent of the testator.  We do not read Wills as a typical legal document looking for mistakes that might make the Will fail; instead, we read a Will in a manner that effectuates the intentions expressed in the Will as best as those intentions can be accomplished.

Through a Will, a person can effectuate any purpose he wants with his assets subject to a few, very limited exceptions.  A Will cannot be used to accomplish a desire that is contrary to public policy.  For instance, a testator could not say, “I give my entire estate to my daughter on the condition that she divorces her Irish husband.  I don’t like people who are Irish, so my daughter must divorce her Irish husband in order to receive my estate.  If she doesn’t divorce her husband, then my estate shall pass to the dogs.”  Such a devise (which is the name given to an inheritance under our laws) is against public policy.

If a person’s Will contained a devise such as this, the offending language would be stricken from the Will.  In this case, the daughter would receive the inheritance without the requirement that she divorce her Irish husband.

In a Will, a person can leave his property to whomever he wants, with one exception.  If the testator is married, his spouse may be able to receive one-third of his estate even if he disinherits his spouse.  In other words, if Mr. Smith disinherits his spouse and leaves his entire estate to his children, Mrs. Smith might be able to claim one-third of Mr. Smith’s estate.  This is called an “elective share.”  Whether Mrs. Smith can obtain any of Mr. Smith’s estate depends on the amount of money Mrs. Smith has in her name.  The more assets she has in her name, the less she will receive from Mr. Smith’s estate.

Other than a spouse’s right to claim against a deceased spouse’s estate and public policy concerns, the testator is free to leave his estate any way he chooses.  If a person has four children, he is free to leave his entire estate to three of them and disinherit one of them.  He doesn’t have to leave the disinherited child $1 or $5 or any other arbitrary sum.  Mr. Smith is free to simply disinherit the child.

A Will is a document that is designed to reflect your intentions.  Through it, you can leave your property how you want, to whom you want.  It’s your money, so as long as you don’t offend common decency, you can do with your property what you want.

Is a Will Important?

A last will and testament can be a very powerful legal document.  It has the potential of disposing of all of your property after your death.  A Will could control tens of thousands dollars or even millions of dollars of assets, depending upon the worth of the deceased person.  On the other hand, a Will might control nothing.  It depends on what assets the decedent owned and how those assets were titled.

A Will is only an effective document after the person who made the Will dies.  During his life, his Will has no effect at all.  A person can always change his Will until the day he dies.  This is why we call it the “last will and testament.”  The only important Will is the last will that the person made before he died.  All prior Wills are meaningless.

If a person dies without any assets, then his Will won’t control any assets.  Sometimes, a client of mine will be a recipient of Medicaid benefits and his family will say something such as “Dad doesn’t have a Will.  Does he need one?”  If dad is receiving Medicaid benefits, then he would have to own less than $2,000 in assets.  So, he might need a Will, but his Will isn’t going to control many assets.

There are non-financial aspects of a decedent’s affairs that can be controlled through his Will.  For years, I have nominated a funeral agent in my clients’ Wills.  This is a person with authority to direct the funeral arrangements for the deceased person.  This could be very important if there is a dispute as to how the deceased would like his remains handled.  Funeral directors like it if there is a nominated funeral agent, so I have nominated a funeral agent in my clients’ Wills to handle this situation.

A Will may or may not control the decedent’s assets.  It depends on how the decedent titled his assets.  When a person dies, his assets pass in one of three ways—by operation of law, by contract, and by probate.  If all of person’s assets pass by operation of law or by contract after his death, then his Will won’t control how any of his assets pass.

An example of property passing by law is when a husband and wife own their home jointly.  When a husband and wife own a home jointly, they own it as joint tenants with right of survivorship.  This means that when one spouse dies, the other spouse becomes the absolute owner of the entire property.  Nothing needs to be done to effectuate the vesting of absolute ownership in the surviving spouse.  The property passes to the surviving spouse by operation of law.

An example of property passing by contract is a life insurance policy that names a beneficiary.  When the insured dies, the insurance policy pays out to the named beneficiary.  The contract, the life insurance policy, controls who will receive the proceeds of the insurance when the insured dies.

A person might die with nothing but property that passes by operation of law or by contract.  Typically, when the first spouse dies, his Will doesn’t have to be probated because everything passes to the surviving spouse in one of these two ways.

On the other hand, a Will might control some of the decedent’s property or all of the decedent’s property.  For this reason, a Will can be very important.  In fact, in my opinion, it is wise to ensure that some of your property passes under your Will because you need to leave your executor with some assets with which to pay your final debts—funeral expenses, medical expenses, credit card bills, and utilities for your house.  Without any assets, your executor can be left in the unseemly positon of having to beg or to sue the individual who received your assets by operation of law or by contract in order to pay your debts.