How to avoid probate and creditor claims upon death
Attorney Tom Olsen: Robert, when we were doing our workshop last week, we were talking to people about avoiding probate. When we do estate planning for people, we're all about helping people to avoid probate. Why? For the purpose of avoiding attorney's fees, court costs, and delays. People want to do that. From the Medicaid planning purposes, there's another reason to avoid probate, an added benefit to avoiding probate.
Attorney Robert Hidock: Absolutely. As most people know, estate planning and Medicaid planning overlap. The Lady Bird deed is the most perfect situation you can have, obviously, like you said, for avoiding probate, but for Medicaid, Medicaid in the state of Florida can come after an estate for reimbursement. We see it here at the office all the time that Medicaid is making a claim against the estate.
By taking the house out of the estate via a Lady Bird deed, you're avoiding probate, but more importantly, for our purposes, you're avoiding any kind of reimbursement from Medicaid. You're also avoiding any kind of creditor claims if the person had racked up, let's say, a bunch of hospital bills or skilled nursing facility bills before they were put on Medicaid. It is the perfect tool.
Attorney Tom Olsen: Robert, we're all about helping people to avoid probate here at the Olsen Law Group in Orlando, but we also do a ton of probates. One of our probate departments, that's all they do all day every day. What we're saying is that when we do probates, we're obligated to give creditors an opportunity to file a claim in the estate. We also give notice to Medicaid. If you were ever on Medicaid while you're alive, they have an opportunity to file a claim in the estate.
As you can imagine, in probate, before the wealth goes to your kids, we got to first pay the valid creditors. By avoiding probate, we avoid the possibility for creditors filing a claim, and by avoiding probate, we avoid the possibility of Medicaid filing a claim.
Attorney Robert Hidock: Absolutely. In that vein with avoiding probate, in your workshop, you always tell everybody, have a beneficiary on the bank account, either transfer on death, payable on death. Same thing with Medicaid planning. A client had called us and they created a burial account because with Medicaid, you're allowed to have a bank account that has $2,500 in it, they're allowable assets.
They set it up perfectly for Medicaid, but they didn't put a beneficiary on the account. Now, they're looking at opening up a probate for $2,500 that's in the account.
Attorney Tom Olsen: Yikes, that's going to hurt.
Attorney Robert Hidock: Now, they can't even use that money for burial.
Attorney Tom Olsen: When we're doing Medicaid planning for people, helping people to protect their life savings from nursing homes, what we're saying is that you can create a $2,500 account, a burial account. Medicaid will allow you to keep that account for the purpose of getting you buried or cremated when you pass away.
We need to go a step further, like all bank accounts, and when you set up that burial account, you need to make it POD, payable on death to one or all of your kids so that when you pass away, it automatically goes to them, no probate required. Then they have easy access to that money to get you buried or cremated. That's just one of the things that we do for people here at the Olsen Law Group.