Advisor Newsletter
Next in Line
A weekly newsletter for advisors, covering the practical yet consequential interaction between estate planning and family dynamics.
Most recent issues:
When your child needs more than an inheritance
For most parents, estate planning is an exercise in optimism: name your children, choose who will care for them, decide who gets what, and move on. For families with children who have special circumstances, it can feel very different.
Consider Jen and Tom. Their daughter Emma has a developmental disability and will likely need help managing money and important decisions for the rest of her life. Their son Jack has struggled with addiction, with periods of sobriety followed by relapses.
Jen and Tom face very different questions:
For Emma: How can they leave her an inheritance without jeopardizing benefits or placing financial responsibilities on her that she cannot manage?
For Jack: How can they provide for him without putting a large sum of money immediately within reach if he relapses—or allowing others to take advantage of him?
The parents have delayed updating their estate plan. But avoiding the question does not eliminate the problem. It simply leaves the decision to circumstances—and potentially to a court—when the family has the least ability to influence the outcome.
Critical Questions for Children with Special Circumstances
For a child with a disability who receives or may receive means-tested government benefits, a special needs trust (SNT) can be an essential planning tool. Rather than leaving assets directly to the child, the inheritance remains in trust and is managed for the child's benefit.
Properly structured, a special needs trust can provide supplemental resources without necessarily disqualifying the child from benefits for which they otherwise qualify. Trust assets can generally be used for things such as:
Housing and transportation
Education and recreation
Technology and personal expenses
Medical and dental expenses
Other quality-of-life needs
The rules vary depending on the type of trust and benefit program, making careful drafting important.
Meanwhile, addiction presents a different problem, but it often calls for the same fundamental principle: don't assume an outright inheritance is the right answer.
There is no single "addiction trust." Instead, parents can structure an inheritance so that assets remain in trust with a trustee on board to control distributions.
Possible approaches include:
Lifetime discretionary trust: The trustee decides when and how much to distribute, rather than giving the child immediate access to the entire inheritance.
Direct payments: The trustee can pay expenses directly instead of distributing cash.
Holdback provisions: Assets can be retained for a specified period or distributed in stages rather than all at once.
Independent trustee: A professional or other independent trustee may be useful where family members would otherwise be caught between protecting the child and preserving the relationship.
These provisions should preserve flexibility. Rigid conditions designed to control every aspect of an adult child's life can become impractical or counterproductive.
The objective is not punishment, but instead, a recognition that inheritances can be handled differently, depending on the circumstances and everyone’s best interests.
Planning for the Child You Have
Parents naturally want to treat their children equally. But equal does not always mean identical. Two children can receive the same economic benefit through completely different structures because their circumstances require different forms of protection.
The hardest part is often psychological. Parents may:
Fear that a trust sends a message that they don't trust their child.
Hope a child will recover or become independent.
Feel that planning for a bad outcome somehow makes it more likely.
Simply want to avoid having the conversation.
Planning does not mean giving up hope. A parent can believe completely in a child's recovery and still decide that a lifetime trust is the prudent way to structure an inheritance, for example.
For one child, estate planning may mean preserving an inheritance without disrupting public benefits. For another, it may mean protecting assets while still making them available when appropriate.
In either case, the important thing is to have the conversation, making sure there is a plan in place for the future—a plan designed for everyone’s actual life and circumstances.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
Estate Planning Field Report - July 2026
Once a month, we sub out family dynamics and sub in our estate planning field report. As we spend more and more time with advisors and their clients, certain patterns emerge. This post highlights confusion around a popular topic: life insurance.
When we consider the confusion surrounding life insurance from an estate planning perspective, there are three aspects we see arise:
Most people don’t understand the role of life insurance in general.
They certainly don’t understand the ownership question.
There is confusion over ongoing responsibilities, especially for insurance trusts.
#1: People often don’t understand the role of life insurance
Life insurance is so common, but it’s poorly understood. Ask someone why they have a policy, and you'll usually hear a version of the same answer: "To take care of my family."
Sure, that's true… but it's also incomplete.
That misunderstanding extends well beyond the purpose of the insurance itself. Most people have little idea how the policy fits into their broader estate plan.
They don't know who technically owns it, whether ownership matters, or why an attorney recommended changing that ownership years ago.
They remember signing documents and updating beneficiary forms, but the rationale fades quickly.
Unlike an investment portfolio or a home, life insurance often sits quietly in the background for decades. If the premiums are being paid, most people assume everything else is taking care of itself.
It's an interesting disconnect. Insurance receives enormous attention in the estate planning world, but much of that attention focuses on sophisticated planning for extraordinarily wealthy families—premium financing, split-dollar arrangements, dynasty trusts and other advanced techniques. Those strategies deserve attention, but they represent a tiny fraction of what most advisors actually encounter.
Far more common is the family with a $2 million policy, maybe a trust somewhere in the background, and only a vague recollection of why everything was structured that way to begin with.
#2: There is a lack of understanding regarding ownership of an insurance policy
Depending on the family’s circumstances, life insurance may replace many years of lost income, create liquidity to pay estate taxes, fund a business succession plan, equalize inheritances among children, or ensure that illiquid assets don't have to be sold after a death. The role of insurance changes dramatically based on the family's objectives, yet many policyholders don’t appreciate those nuances. They simply know someone recommended buying a policy.
For many families, a common surprise is that how the policy is owned, and who can have the power to make changes to the policy, can have very consequential effects.
If a client has an irrevocable life insurance trust (ILIT), the client often remembers being told that “a trust is better for taxes.” They signed the documents, transferred the policy, and assumed the planning was complete.
But the dots are never connected. They have no idea why it matters. (Ultimately, it’s fair to ask: does it matter? But that’s a separate conversation…)
Trust ownership can remove insurance proceeds from a taxable estate, protect beneficiaries, preserve assets for future generations, or ensure children from a prior marriage ultimately receive an inheritance. Those benefits are significant and, for many families, well worth pursuing. And we have had many conversations of late regarding the importance of ILITs and our ability to prepare them for our insurance partners.
But there are important things for people to remember. Here are a few:
If someone names their revocable trust as the beneficiary of their insurance policy, that is not the right trust from a tax savings perspective. Having a revocable trust be the beneficiary of a policy does not remove it from the decedent’s estate — it must be an ILIT (most importantly, irrevocable).
Just because an ILIT is created, it doesn’t mean the ownership question was solved. The tax rules are nuanced with important issues regarding “incidents of ownership.” A foot-fault in an ILIT can disrupt the whole plan.
So even if a client (or advisor) knows what should be done, careful steps are required to make sure these get effectuated correctly.
#3: There’s an ongoing responsibility?
The conversation often ends with why a trust exists and rarely spends enough time on what comes next. Clients often assume the hard part was signing the documents. In truth, the documents are usually the easy part. Maintaining the planning over the next twenty or thirty years is the real work, and frankly – the annoying part.
Premiums have to be coordinated correctly.
Trustees have ongoing responsibilities.
Gifts to the trust require annual beneficiary notices (“Crummey notices”) during a very specific window of time.
Trust records have to be maintained, bank accounts have to be kept active, and documentation has to be preserved.
None of those tasks is particularly difficult, but together they create an administrative process that lasts for as long as the policy does.
One pattern we've noticed is that responsibility often becomes diluted over time.
The attorney assumes the advisor is discussing the insurance during annual reviews.
The advisor assumes the trustee is handling the trust administration.
The trustee assumes someone will reach out if action is required.
Years pass without obvious problems, yet nobody feels entirely certain that everything is being maintained exactly as intended.
It's simply the consequence of an estate plan quietly fading into the background while life continues moving forward.
Perhaps that's why life insurance remains one of estate planning's most misunderstood areas. The public conversation tends to swing between sophisticated tax strategies for the ultra-wealthy and the assumption that insurance is simply a beneficiary designation and a premium payment.
Most families live somewhere in between. They don't need billion-dollar planning techniques, but they do need to understand that life insurance isn't just a financial product, but rather, an integral part of a larger estate plan.
Check out our prior field reports:
June 2026: There's a lot of planning gaps we're seeing over and over again.
April 2026: What we’re seeing and what’s unique or surprising about it.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
The long-term plan no one wants to plan for
Robert and Linda spent forty years building exactly the retirement they envisioned. They paid off their home, accumulated a comfortable investment portfolio, updated their estate plan and worked closely with a trusted financial advisor. They had done everything right.
Then Robert fell.
What began as a fractured hip became months of rehabilitation, repeated hospitalizations, and eventually a difficult realization: he would never again be able to live independently. The family shifted overnight from discussing recovery to evaluating nursing facilities, and with that came an even more uncomfortable conversation—how they were going to pay for it.
The facility they preferred cost nearly $18,000 per month. Like many families, they assumed Medicare would cover the expense. Instead, they learned that Medicare generally pays only for limited periods of skilled nursing care after a qualifying hospitalization; it does not cover the ongoing custodial care that many older Americans ultimately need.
Someone mentioned Medicaid. Linda was stunned. "We've spent our entire lives saving so we'd never need Medicaid."
Ultimately, Linda learned that Medicaid is not simply a program for people who have always had limited means. It has become the primary payer of long-term nursing home care in the United States, and many middle-class families eventually find themselves confronting its eligibility rules after years of responsible financial planning.
Planning Before Crisis
Long-term care is one of the largest uninsured risks facing retirees. A prolonged nursing home stay can consume hundreds of thousands of dollars, fundamentally altering decades of thoughtful financial planning.
Long-Term Care Insurance
Fortunately, long-term care insurance has begun making a comeback.
Traditional policies fell out of favor because of premium increases and shrinking carrier participation, but newer hybrid products combining life insurance or annuities with long-term care benefits have renewed interest among both advisors and clients.
For many families, insurance remains the cleanest and most effective way to protect retirement assets from catastrophic care costs.
Unfortunately, many clients wait too long. By the time they begin asking about coverage, they may be uninsurable because of age or health, or the premiums simply no longer make economic sense. That is often when Medicaid planning enters the conversation.
Medicaid Asset Protection Trusts
One of the primary tools is a Medicaid Asset Protection Trust, commonly referred to as a Medicaid trust.
In simple terms, it is an irrevocable trust designed to remove certain assets from the grantor's estate for Medicaid eligibility purposes, assuming numerous legal requirements are satisfied.
The strategy works because clients voluntarily give up ownership and control of those assets years before they expect to need benefits.
Timing is everything, though. Federal law generally imposes a five-year look-back period for transfers, meaning planning usually must occur well before anyone anticipates entering a nursing facility. Once care becomes imminent, many planning opportunities disappear.
Complexities and Local Specificities
Medicaid is administered at the state level, and every state has its own eligibility rules, procedures and administrative nuances.
In many jurisdictions, even county offices develop their own practices, and different caseworkers may request different documentation or interpret rules differently.
Successfully obtaining benefits often requires navigating years of financial records, responding to repeated requests for information, and coordinating closely with experienced counsel.
Clients also need to appreciate the practical tradeoff.
Qualifying for Medicaid generally requires spending down most remaining countable assets, while assets transferred to the trust are intentionally placed beyond the client's direct control.
For families who spent decades accumulating wealth, surrendering access to much of it can be emotionally difficult.
Trusts require periodic review, and the eventual application process often demands continued involvement from attorneys, advisors, trustees and family members.
For the right client, however, the benefits can be extraordinary. Proper planning can preserve a family home, protect assets for a surviving spouse or future generations, and provide meaningful financial stability during an otherwise overwhelming period.
Bring up long-term care now
Very few clients ask about Medicaid trusts because very few know they exist. Even fewer understand the distinction between Medicare and Medicaid or appreciate how dramatically long-term care can reshape a retirement plan.
That creates an opportunity for advisors—not necessarily to recommend a particular legal strategy, but to raise the conversation before a crisis forces decisions. Some clients will determine that long-term care insurance is the right answer. Others may ultimately benefit from Medicaid planning. Some will choose neither.
The important point is that they make those decisions while they still have options. Whether through insurance, a Medicaid trust or another strategy, clients who plan early preserve flexibility, reduce stress on their families and avoid making irreversible financial decisions during one of life's most difficult moments.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
The retirement account that undid the estate plan
When Sarah remarried, she did everything right. She met with an estate planning attorney, created new wills and trusts, signed powers of attorney, and left with an estate plan that reflected exactly how she wanted her assets distributed. She assumed everything was finally in order.
A few years later, Sarah died unexpectedly.
Her husband, David, soon discovered that her largest asset—a seven-figure IRA—wasn't controlled by any of those documents.
Years earlier, Sarah had named her former husband, Mark, as the beneficiary. She never updated the form.
Neither Sarah nor David had any idea that the beneficiary form would override her updated estate plan. But it did, and the IRA passed directly to her ex-husband.
The trust was flawless. The will named all the right people. Yet, retirement accounts generally pass according to the beneficiary designation — outside the will and trust — even when it conflicts with the rest of the estate plan.
This is one of the most common—and costly—pitfalls in estate planning. Clients spend hours discussing trusts, guardians and taxes, while the beneficiary form they completed years ago quietly determines where hundreds of thousands or millions of dollars ultimately go. And too often, it goes forgotten.
Failing Plans, One Account at a Time
A strange peculiarity of the American legal system is that probate has a limited function — it only controls what is not controlled by a beneficiary designation or a joint account with survivorship rights.
Retirement and brokerage accounts (as well as insurance policies) generally transfer by contract rather than through a will or revocable trust. That means the beneficiary designation is often the controlling document.
The financial institutions will honor the name written in the form. It’s immensely challenging and unlikely for a financial institution to do anything other than what the form on file says—even if it conflicts with the rest of the individual’s estate planning documents.
Sometimes the mistake is obvious: an ex-spouse is still listed years after a divorce. In other cases, parents remain beneficiaries because the account was opened right after college. Twenty years later, the client has a spouse and children but never revisited the paperwork. Nevertheless, the financial institutions honor the form.
Trusts create another common issue. A family spends time creating a trust for young children or a second marriage, but the retirement account still names individuals directly. The trust is perfectly drafted—it's simply never connected to one of the family's largest assets. The beneficiary needed to be the trust.
I can speak from first-hand experience: I’ve seen several lawsuits that stemmed from beneficiary designation forms that hadn’t been updated properly. The family says “this couldn’t be right,” but the financial institution is bound. Ultimately, it lands in litigation or gets settled out of court.
The Easiest Yet Most Important Review
Some of the highest-value planning conversations begin with a remarkably simple question:
Can we review your beneficiary designations?
For advisors, that five-minute exercise can uncover ex-spouses, deceased beneficiaries, outdated percentages or retirement accounts that were never coordinated with the client's estate plan.
For attorneys, it's a reminder that signing documents isn't the finish line. Every estate plan should include a review of retirement accounts, life insurance policies and other beneficiary-designated assets.
But that’s only the first part. The next step is to actually update the designations. Most of these financial institutions allow you to do it online very easily, though some do still make you come in person or fill out a paper form with a wet ink signature.
Ultimately, the most important estate planning document often is the one-page beneficiary form everyone forgot existed, not the twenty-page trust. Make sure you find the forms and align them with the plan.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms in order to make estate planning modern, efficient and cost-effective. Herbie services clients nationally through its own law firm, provides consulting, lead generation and value-added services to professional advisors, and offers free self-guided estate planning tools to the public. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
When your child needs more than an inheritance
For most parents, estate planning is an exercise in optimism: name your children, choose who will care for them, decide who gets what, and move on. For families with children who have special circumstances, it can feel very different.
Consider Jen and Tom. Their daughter Emma has a developmental disability and will likely need help managing money and important decisions for the rest of her life. Their son Jack has struggled with addiction, with periods of sobriety followed by relapses.
Jen and Tom face very different questions:
For Emma: How can they leave her an inheritance without jeopardizing benefits or placing financial responsibilities on her that she cannot manage?
For Jack: How can they provide for him without putting a large sum of money immediately within reach if he relapses—or allowing others to take advantage of him?
The parents have delayed updating their estate plan. But avoiding the question does not eliminate the problem. It simply leaves the decision to circumstances—and potentially to a court—when the family has the least ability to influence the outcome.
Critical Questions for Children with Special Circumstances
For a child with a disability who receives or may receive means-tested government benefits, a special needs trust (SNT) can be an essential planning tool. Rather than leaving assets directly to the child, the inheritance remains in trust and is managed for the child's benefit.
Properly structured, a special needs trust can provide supplemental resources without necessarily disqualifying the child from benefits for which they otherwise qualify. Trust assets can generally be used for things such as:
Housing and transportation
Education and recreation
Technology and personal expenses
Medical and dental expenses
Other quality-of-life needs
The rules vary depending on the type of trust and benefit program, making careful drafting important.
Meanwhile, addiction presents a different problem, but it often calls for the same fundamental principle: don't assume an outright inheritance is the right answer.
There is no single "addiction trust." Instead, parents can structure an inheritance so that assets remain in trust with a trustee on board to control distributions.
Possible approaches include:
Lifetime discretionary trust: The trustee decides when and how much to distribute, rather than giving the child immediate access to the entire inheritance.
Direct payments: The trustee can pay expenses directly instead of distributing cash.
Holdback provisions: Assets can be retained for a specified period or distributed in stages rather than all at once.
Independent trustee: A professional or other independent trustee may be useful where family members would otherwise be caught between protecting the child and preserving the relationship.
These provisions should preserve flexibility. Rigid conditions designed to control every aspect of an adult child's life can become impractical or counterproductive.
The objective is not punishment, but instead, a recognition that inheritances can be handled differently, depending on the circumstances and everyone’s best interests.
Planning for the Child You Have
Parents naturally want to treat their children equally. But equal does not always mean identical. Two children can receive the same economic benefit through completely different structures because their circumstances require different forms of protection.
The hardest part is often psychological. Parents may:
Fear that a trust sends a message that they don't trust their child.
Hope a child will recover or become independent.
Feel that planning for a bad outcome somehow makes it more likely.
Simply want to avoid having the conversation.
Planning does not mean giving up hope. A parent can believe completely in a child's recovery and still decide that a lifetime trust is the prudent way to structure an inheritance, for example.
For one child, estate planning may mean preserving an inheritance without disrupting public benefits. For another, it may mean protecting assets while still making them available when appropriate.
In either case, the important thing is to have the conversation, making sure there is a plan in place for the future—a plan designed for everyone’s actual life and circumstances.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
The long-term plan no one wants to plan for
Robert and Linda spent forty years building exactly the retirement they envisioned. They paid off their home, accumulated a comfortable investment portfolio, updated their estate plan and worked closely with a trusted financial advisor. They had done everything right.
Then Robert fell.
What began as a fractured hip became months of rehabilitation, repeated hospitalizations, and eventually a difficult realization: he would never again be able to live independently. The family shifted overnight from discussing recovery to evaluating nursing facilities, and with that came an even more uncomfortable conversation—how they were going to pay for it.
The facility they preferred cost nearly $18,000 per month. Like many families, they assumed Medicare would cover the expense. Instead, they learned that Medicare generally pays only for limited periods of skilled nursing care after a qualifying hospitalization; it does not cover the ongoing custodial care that many older Americans ultimately need.
Someone mentioned Medicaid. Linda was stunned. "We've spent our entire lives saving so we'd never need Medicaid."
Ultimately, Linda learned that Medicaid is not simply a program for people who have always had limited means. It has become the primary payer of long-term nursing home care in the United States, and many middle-class families eventually find themselves confronting its eligibility rules after years of responsible financial planning.
Planning Before Crisis
Long-term care is one of the largest uninsured risks facing retirees. A prolonged nursing home stay can consume hundreds of thousands of dollars, fundamentally altering decades of thoughtful financial planning.
Long-Term Care Insurance
Fortunately, long-term care insurance has begun making a comeback.
Traditional policies fell out of favor because of premium increases and shrinking carrier participation, but newer hybrid products combining life insurance or annuities with long-term care benefits have renewed interest among both advisors and clients.
For many families, insurance remains the cleanest and most effective way to protect retirement assets from catastrophic care costs.
Unfortunately, many clients wait too long. By the time they begin asking about coverage, they may be uninsurable because of age or health, or the premiums simply no longer make economic sense. That is often when Medicaid planning enters the conversation.
Medicaid Asset Protection Trusts
One of the primary tools is a Medicaid Asset Protection Trust, commonly referred to as a Medicaid trust.
In simple terms, it is an irrevocable trust designed to remove certain assets from the grantor's estate for Medicaid eligibility purposes, assuming numerous legal requirements are satisfied.
The strategy works because clients voluntarily give up ownership and control of those assets years before they expect to need benefits.
Timing is everything, though. Federal law generally imposes a five-year look-back period for transfers, meaning planning usually must occur well before anyone anticipates entering a nursing facility. Once care becomes imminent, many planning opportunities disappear.
Complexities and Local Specificities
Medicaid is administered at the state level, and every state has its own eligibility rules, procedures and administrative nuances.
In many jurisdictions, even county offices develop their own practices, and different caseworkers may request different documentation or interpret rules differently.
Successfully obtaining benefits often requires navigating years of financial records, responding to repeated requests for information, and coordinating closely with experienced counsel.
Clients also need to appreciate the practical tradeoff.
Qualifying for Medicaid generally requires spending down most remaining countable assets, while assets transferred to the trust are intentionally placed beyond the client's direct control.
For families who spent decades accumulating wealth, surrendering access to much of it can be emotionally difficult.
Trusts require periodic review, and the eventual application process often demands continued involvement from attorneys, advisors, trustees and family members.
For the right client, however, the benefits can be extraordinary. Proper planning can preserve a family home, protect assets for a surviving spouse or future generations, and provide meaningful financial stability during an otherwise overwhelming period.
Bring up long-term care now
Very few clients ask about Medicaid trusts because very few know they exist. Even fewer understand the distinction between Medicare and Medicaid or appreciate how dramatically long-term care can reshape a retirement plan.
That creates an opportunity for advisors—not necessarily to recommend a particular legal strategy, but to raise the conversation before a crisis forces decisions. Some clients will determine that long-term care insurance is the right answer. Others may ultimately benefit from Medicaid planning. Some will choose neither.
The important point is that they make those decisions while they still have options. Whether through insurance, a Medicaid trust or another strategy, clients who plan early preserve flexibility, reduce stress on their families and avoid making irreversible financial decisions during one of life's most difficult moments.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
Estate Planning Field Report - July 2026
Once a month, we sub out family dynamics and sub in our estate planning field report. As we spend more and more time with advisors and their clients, certain patterns emerge. This post highlights confusion around a popular topic: life insurance.
When we consider the confusion surrounding life insurance from an estate planning perspective, there are three aspects we see arise:
Most people don’t understand the role of life insurance in general.
They certainly don’t understand the ownership question.
There is confusion over ongoing responsibilities, especially for insurance trusts.
#1: People often don’t understand the role of life insurance
Life insurance is so common, but it’s poorly understood. Ask someone why they have a policy, and you'll usually hear a version of the same answer: "To take care of my family."
Sure, that's true… but it's also incomplete.
That misunderstanding extends well beyond the purpose of the insurance itself. Most people have little idea how the policy fits into their broader estate plan.
They don't know who technically owns it, whether ownership matters, or why an attorney recommended changing that ownership years ago.
They remember signing documents and updating beneficiary forms, but the rationale fades quickly.
Unlike an investment portfolio or a home, life insurance often sits quietly in the background for decades. If the premiums are being paid, most people assume everything else is taking care of itself.
It's an interesting disconnect. Insurance receives enormous attention in the estate planning world, but much of that attention focuses on sophisticated planning for extraordinarily wealthy families—premium financing, split-dollar arrangements, dynasty trusts and other advanced techniques. Those strategies deserve attention, but they represent a tiny fraction of what most advisors actually encounter.
Far more common is the family with a $2 million policy, maybe a trust somewhere in the background, and only a vague recollection of why everything was structured that way to begin with.
#2: There is a lack of understanding regarding ownership of an insurance policy
Depending on the family’s circumstances, life insurance may replace many years of lost income, create liquidity to pay estate taxes, fund a business succession plan, equalize inheritances among children, or ensure that illiquid assets don't have to be sold after a death. The role of insurance changes dramatically based on the family's objectives, yet many policyholders don’t appreciate those nuances. They simply know someone recommended buying a policy.
For many families, a common surprise is that how the policy is owned, and who can have the power to make changes to the policy, can have very consequential effects.
If a client has an irrevocable life insurance trust (ILIT), the client often remembers being told that “a trust is better for taxes.” They signed the documents, transferred the policy, and assumed the planning was complete.
But the dots are never connected. They have no idea why it matters. (Ultimately, it’s fair to ask: does it matter? But that’s a separate conversation…)
Trust ownership can remove insurance proceeds from a taxable estate, protect beneficiaries, preserve assets for future generations, or ensure children from a prior marriage ultimately receive an inheritance. Those benefits are significant and, for many families, well worth pursuing. And we have had many conversations of late regarding the importance of ILITs and our ability to prepare them for our insurance partners.
But there are important things for people to remember. Here are a few:
If someone names their revocable trust as the beneficiary of their insurance policy, that is not the right trust from a tax savings perspective. Having a revocable trust be the beneficiary of a policy does not remove it from the decedent’s estate — it must be an ILIT (most importantly, irrevocable).
Just because an ILIT is created, it doesn’t mean the ownership question was solved. The tax rules are nuanced with important issues regarding “incidents of ownership.” A foot-fault in an ILIT can disrupt the whole plan.
So even if a client (or advisor) knows what should be done, careful steps are required to make sure these get effectuated correctly.
#3: There’s an ongoing responsibility?
The conversation often ends with why a trust exists and rarely spends enough time on what comes next. Clients often assume the hard part was signing the documents. In truth, the documents are usually the easy part. Maintaining the planning over the next twenty or thirty years is the real work, and frankly – the annoying part.
Premiums have to be coordinated correctly.
Trustees have ongoing responsibilities.
Gifts to the trust require annual beneficiary notices (“Crummey notices”) during a very specific window of time.
Trust records have to be maintained, bank accounts have to be kept active, and documentation has to be preserved.
None of those tasks is particularly difficult, but together they create an administrative process that lasts for as long as the policy does.
One pattern we've noticed is that responsibility often becomes diluted over time.
The attorney assumes the advisor is discussing the insurance during annual reviews.
The advisor assumes the trustee is handling the trust administration.
The trustee assumes someone will reach out if action is required.
Years pass without obvious problems, yet nobody feels entirely certain that everything is being maintained exactly as intended.
It's simply the consequence of an estate plan quietly fading into the background while life continues moving forward.
Perhaps that's why life insurance remains one of estate planning's most misunderstood areas. The public conversation tends to swing between sophisticated tax strategies for the ultra-wealthy and the assumption that insurance is simply a beneficiary designation and a premium payment.
Most families live somewhere in between. They don't need billion-dollar planning techniques, but they do need to understand that life insurance isn't just a financial product, but rather, an integral part of a larger estate plan.
Check out our prior field reports:
June 2026: There's a lot of planning gaps we're seeing over and over again.
April 2026: What we’re seeing and what’s unique or surprising about it.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
The retirement account that undid the estate plan
When Sarah remarried, she did everything right. She met with an estate planning attorney, created new wills and trusts, signed powers of attorney, and left with an estate plan that reflected exactly how she wanted her assets distributed. She assumed everything was finally in order.
A few years later, Sarah died unexpectedly.
Her husband, David, soon discovered that her largest asset—a seven-figure IRA—wasn't controlled by any of those documents.
Years earlier, Sarah had named her former husband, Mark, as the beneficiary. She never updated the form.
Neither Sarah nor David had any idea that the beneficiary form would override her updated estate plan. But it did, and the IRA passed directly to her ex-husband.
The trust was flawless. The will named all the right people. Yet, retirement accounts generally pass according to the beneficiary designation — outside the will and trust — even when it conflicts with the rest of the estate plan.
This is one of the most common—and costly—pitfalls in estate planning. Clients spend hours discussing trusts, guardians and taxes, while the beneficiary form they completed years ago quietly determines where hundreds of thousands or millions of dollars ultimately go. And too often, it goes forgotten.
Failing Plans, One Account at a Time
A strange peculiarity of the American legal system is that probate has a limited function — it only controls what is not controlled by a beneficiary designation or a joint account with survivorship rights.
Retirement and brokerage accounts (as well as insurance policies) generally transfer by contract rather than through a will or revocable trust. That means the beneficiary designation is often the controlling document.
The financial institutions will honor the name written in the form. It’s immensely challenging and unlikely for a financial institution to do anything other than what the form on file says—even if it conflicts with the rest of the individual’s estate planning documents.
Sometimes the mistake is obvious: an ex-spouse is still listed years after a divorce. In other cases, parents remain beneficiaries because the account was opened right after college. Twenty years later, the client has a spouse and children but never revisited the paperwork. Nevertheless, the financial institutions honor the form.
Trusts create another common issue. A family spends time creating a trust for young children or a second marriage, but the retirement account still names individuals directly. The trust is perfectly drafted—it's simply never connected to one of the family's largest assets. The beneficiary needed to be the trust.
I can speak from first-hand experience: I’ve seen several lawsuits that stemmed from beneficiary designation forms that hadn’t been updated properly. The family says “this couldn’t be right,” but the financial institution is bound. Ultimately, it lands in litigation or gets settled out of court.
The Easiest Yet Most Important Review
Some of the highest-value planning conversations begin with a remarkably simple question:
Can we review your beneficiary designations?
For advisors, that five-minute exercise can uncover ex-spouses, deceased beneficiaries, outdated percentages or retirement accounts that were never coordinated with the client's estate plan.
For attorneys, it's a reminder that signing documents isn't the finish line. Every estate plan should include a review of retirement accounts, life insurance policies and other beneficiary-designated assets.
But that’s only the first part. The next step is to actually update the designations. Most of these financial institutions allow you to do it online very easily, though some do still make you come in person or fill out a paper form with a wet ink signature.
Ultimately, the most important estate planning document often is the one-page beneficiary form everyone forgot existed, not the twenty-page trust. Make sure you find the forms and align them with the plan.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms in order to make estate planning modern, efficient and cost-effective. Herbie services clients nationally through its own law firm, provides consulting, lead generation and value-added services to professional advisors, and offers free self-guided estate planning tools to the public. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
When your child needs more than an inheritance
For most parents, estate planning is an exercise in optimism: name your children, choose who will care for them, decide who gets what, and move on. For families with children who have special circumstances, it can feel very different.
Consider Jen and Tom. Their daughter Emma has a developmental disability and will likely need help managing money and important decisions for the rest of her life. Their son Jack has struggled with addiction, with periods of sobriety followed by relapses.
Jen and Tom face very different questions:
For Emma: How can they leave her an inheritance without jeopardizing benefits or placing financial responsibilities on her that she cannot manage?
For Jack: How can they provide for him without putting a large sum of money immediately within reach if he relapses—or allowing others to take advantage of him?
The parents have delayed updating their estate plan. But avoiding the question does not eliminate the problem. It simply leaves the decision to circumstances—and potentially to a court—when the family has the least ability to influence the outcome.
Critical Questions for Children with Special Circumstances
For a child with a disability who receives or may receive means-tested government benefits, a special needs trust (SNT) can be an essential planning tool. Rather than leaving assets directly to the child, the inheritance remains in trust and is managed for the child's benefit.
Properly structured, a special needs trust can provide supplemental resources without necessarily disqualifying the child from benefits for which they otherwise qualify. Trust assets can generally be used for things such as:
Housing and transportation
Education and recreation
Technology and personal expenses
Medical and dental expenses
Other quality-of-life needs
The rules vary depending on the type of trust and benefit program, making careful drafting important.
Meanwhile, addiction presents a different problem, but it often calls for the same fundamental principle: don't assume an outright inheritance is the right answer.
There is no single "addiction trust." Instead, parents can structure an inheritance so that assets remain in trust with a trustee on board to control distributions.
Possible approaches include:
Lifetime discretionary trust: The trustee decides when and how much to distribute, rather than giving the child immediate access to the entire inheritance.
Direct payments: The trustee can pay expenses directly instead of distributing cash.
Holdback provisions: Assets can be retained for a specified period or distributed in stages rather than all at once.
Independent trustee: A professional or other independent trustee may be useful where family members would otherwise be caught between protecting the child and preserving the relationship.
These provisions should preserve flexibility. Rigid conditions designed to control every aspect of an adult child's life can become impractical or counterproductive.
The objective is not punishment, but instead, a recognition that inheritances can be handled differently, depending on the circumstances and everyone’s best interests.
Planning for the Child You Have
Parents naturally want to treat their children equally. But equal does not always mean identical. Two children can receive the same economic benefit through completely different structures because their circumstances require different forms of protection.
The hardest part is often psychological. Parents may:
Fear that a trust sends a message that they don't trust their child.
Hope a child will recover or become independent.
Feel that planning for a bad outcome somehow makes it more likely.
Simply want to avoid having the conversation.
Planning does not mean giving up hope. A parent can believe completely in a child's recovery and still decide that a lifetime trust is the prudent way to structure an inheritance, for example.
For one child, estate planning may mean preserving an inheritance without disrupting public benefits. For another, it may mean protecting assets while still making them available when appropriate.
In either case, the important thing is to have the conversation, making sure there is a plan in place for the future—a plan designed for everyone’s actual life and circumstances.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
Estate Planning Field Report - July 2026
Once a month, we sub out family dynamics and sub in our estate planning field report. As we spend more and more time with advisors and their clients, certain patterns emerge. This post highlights confusion around a popular topic: life insurance.
When we consider the confusion surrounding life insurance from an estate planning perspective, there are three aspects we see arise:
Most people don’t understand the role of life insurance in general.
They certainly don’t understand the ownership question.
There is confusion over ongoing responsibilities, especially for insurance trusts.
#1: People often don’t understand the role of life insurance
Life insurance is so common, but it’s poorly understood. Ask someone why they have a policy, and you'll usually hear a version of the same answer: "To take care of my family."
Sure, that's true… but it's also incomplete.
That misunderstanding extends well beyond the purpose of the insurance itself. Most people have little idea how the policy fits into their broader estate plan.
They don't know who technically owns it, whether ownership matters, or why an attorney recommended changing that ownership years ago.
They remember signing documents and updating beneficiary forms, but the rationale fades quickly.
Unlike an investment portfolio or a home, life insurance often sits quietly in the background for decades. If the premiums are being paid, most people assume everything else is taking care of itself.
It's an interesting disconnect. Insurance receives enormous attention in the estate planning world, but much of that attention focuses on sophisticated planning for extraordinarily wealthy families—premium financing, split-dollar arrangements, dynasty trusts and other advanced techniques. Those strategies deserve attention, but they represent a tiny fraction of what most advisors actually encounter.
Far more common is the family with a $2 million policy, maybe a trust somewhere in the background, and only a vague recollection of why everything was structured that way to begin with.
#2: There is a lack of understanding regarding ownership of an insurance policy
Depending on the family’s circumstances, life insurance may replace many years of lost income, create liquidity to pay estate taxes, fund a business succession plan, equalize inheritances among children, or ensure that illiquid assets don't have to be sold after a death. The role of insurance changes dramatically based on the family's objectives, yet many policyholders don’t appreciate those nuances. They simply know someone recommended buying a policy.
For many families, a common surprise is that how the policy is owned, and who can have the power to make changes to the policy, can have very consequential effects.
If a client has an irrevocable life insurance trust (ILIT), the client often remembers being told that “a trust is better for taxes.” They signed the documents, transferred the policy, and assumed the planning was complete.
But the dots are never connected. They have no idea why it matters. (Ultimately, it’s fair to ask: does it matter? But that’s a separate conversation…)
Trust ownership can remove insurance proceeds from a taxable estate, protect beneficiaries, preserve assets for future generations, or ensure children from a prior marriage ultimately receive an inheritance. Those benefits are significant and, for many families, well worth pursuing. And we have had many conversations of late regarding the importance of ILITs and our ability to prepare them for our insurance partners.
But there are important things for people to remember. Here are a few:
If someone names their revocable trust as the beneficiary of their insurance policy, that is not the right trust from a tax savings perspective. Having a revocable trust be the beneficiary of a policy does not remove it from the decedent’s estate — it must be an ILIT (most importantly, irrevocable).
Just because an ILIT is created, it doesn’t mean the ownership question was solved. The tax rules are nuanced with important issues regarding “incidents of ownership.” A foot-fault in an ILIT can disrupt the whole plan.
So even if a client (or advisor) knows what should be done, careful steps are required to make sure these get effectuated correctly.
#3: There’s an ongoing responsibility?
The conversation often ends with why a trust exists and rarely spends enough time on what comes next. Clients often assume the hard part was signing the documents. In truth, the documents are usually the easy part. Maintaining the planning over the next twenty or thirty years is the real work, and frankly – the annoying part.
Premiums have to be coordinated correctly.
Trustees have ongoing responsibilities.
Gifts to the trust require annual beneficiary notices (“Crummey notices”) during a very specific window of time.
Trust records have to be maintained, bank accounts have to be kept active, and documentation has to be preserved.
None of those tasks is particularly difficult, but together they create an administrative process that lasts for as long as the policy does.
One pattern we've noticed is that responsibility often becomes diluted over time.
The attorney assumes the advisor is discussing the insurance during annual reviews.
The advisor assumes the trustee is handling the trust administration.
The trustee assumes someone will reach out if action is required.
Years pass without obvious problems, yet nobody feels entirely certain that everything is being maintained exactly as intended.
It's simply the consequence of an estate plan quietly fading into the background while life continues moving forward.
Perhaps that's why life insurance remains one of estate planning's most misunderstood areas. The public conversation tends to swing between sophisticated tax strategies for the ultra-wealthy and the assumption that insurance is simply a beneficiary designation and a premium payment.
Most families live somewhere in between. They don't need billion-dollar planning techniques, but they do need to understand that life insurance isn't just a financial product, but rather, an integral part of a larger estate plan.
Check out our prior field reports:
June 2026: There's a lot of planning gaps we're seeing over and over again.
April 2026: What we’re seeing and what’s unique or surprising about it.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
The long-term plan no one wants to plan for
Robert and Linda spent forty years building exactly the retirement they envisioned. They paid off their home, accumulated a comfortable investment portfolio, updated their estate plan and worked closely with a trusted financial advisor. They had done everything right.
Then Robert fell.
What began as a fractured hip became months of rehabilitation, repeated hospitalizations, and eventually a difficult realization: he would never again be able to live independently. The family shifted overnight from discussing recovery to evaluating nursing facilities, and with that came an even more uncomfortable conversation—how they were going to pay for it.
The facility they preferred cost nearly $18,000 per month. Like many families, they assumed Medicare would cover the expense. Instead, they learned that Medicare generally pays only for limited periods of skilled nursing care after a qualifying hospitalization; it does not cover the ongoing custodial care that many older Americans ultimately need.
Someone mentioned Medicaid. Linda was stunned. "We've spent our entire lives saving so we'd never need Medicaid."
Ultimately, Linda learned that Medicaid is not simply a program for people who have always had limited means. It has become the primary payer of long-term nursing home care in the United States, and many middle-class families eventually find themselves confronting its eligibility rules after years of responsible financial planning.
Planning Before Crisis
Long-term care is one of the largest uninsured risks facing retirees. A prolonged nursing home stay can consume hundreds of thousands of dollars, fundamentally altering decades of thoughtful financial planning.
Long-Term Care Insurance
Fortunately, long-term care insurance has begun making a comeback.
Traditional policies fell out of favor because of premium increases and shrinking carrier participation, but newer hybrid products combining life insurance or annuities with long-term care benefits have renewed interest among both advisors and clients.
For many families, insurance remains the cleanest and most effective way to protect retirement assets from catastrophic care costs.
Unfortunately, many clients wait too long. By the time they begin asking about coverage, they may be uninsurable because of age or health, or the premiums simply no longer make economic sense. That is often when Medicaid planning enters the conversation.
Medicaid Asset Protection Trusts
One of the primary tools is a Medicaid Asset Protection Trust, commonly referred to as a Medicaid trust.
In simple terms, it is an irrevocable trust designed to remove certain assets from the grantor's estate for Medicaid eligibility purposes, assuming numerous legal requirements are satisfied.
The strategy works because clients voluntarily give up ownership and control of those assets years before they expect to need benefits.
Timing is everything, though. Federal law generally imposes a five-year look-back period for transfers, meaning planning usually must occur well before anyone anticipates entering a nursing facility. Once care becomes imminent, many planning opportunities disappear.
Complexities and Local Specificities
Medicaid is administered at the state level, and every state has its own eligibility rules, procedures and administrative nuances.
In many jurisdictions, even county offices develop their own practices, and different caseworkers may request different documentation or interpret rules differently.
Successfully obtaining benefits often requires navigating years of financial records, responding to repeated requests for information, and coordinating closely with experienced counsel.
Clients also need to appreciate the practical tradeoff.
Qualifying for Medicaid generally requires spending down most remaining countable assets, while assets transferred to the trust are intentionally placed beyond the client's direct control.
For families who spent decades accumulating wealth, surrendering access to much of it can be emotionally difficult.
Trusts require periodic review, and the eventual application process often demands continued involvement from attorneys, advisors, trustees and family members.
For the right client, however, the benefits can be extraordinary. Proper planning can preserve a family home, protect assets for a surviving spouse or future generations, and provide meaningful financial stability during an otherwise overwhelming period.
Bring up long-term care now
Very few clients ask about Medicaid trusts because very few know they exist. Even fewer understand the distinction between Medicare and Medicaid or appreciate how dramatically long-term care can reshape a retirement plan.
That creates an opportunity for advisors—not necessarily to recommend a particular legal strategy, but to raise the conversation before a crisis forces decisions. Some clients will determine that long-term care insurance is the right answer. Others may ultimately benefit from Medicaid planning. Some will choose neither.
The important point is that they make those decisions while they still have options. Whether through insurance, a Medicaid trust or another strategy, clients who plan early preserve flexibility, reduce stress on their families and avoid making irreversible financial decisions during one of life's most difficult moments.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms that functions as financial professionals’ estate planning legal team. Herbie services clients nationally through its own estate planning law firm, while providing consulting, lead generation and value-added services to professional advisors. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
The retirement account that undid the estate plan
When Sarah remarried, she did everything right. She met with an estate planning attorney, created new wills and trusts, signed powers of attorney, and left with an estate plan that reflected exactly how she wanted her assets distributed. She assumed everything was finally in order.
A few years later, Sarah died unexpectedly.
Her husband, David, soon discovered that her largest asset—a seven-figure IRA—wasn't controlled by any of those documents.
Years earlier, Sarah had named her former husband, Mark, as the beneficiary. She never updated the form.
Neither Sarah nor David had any idea that the beneficiary form would override her updated estate plan. But it did, and the IRA passed directly to her ex-husband.
The trust was flawless. The will named all the right people. Yet, retirement accounts generally pass according to the beneficiary designation — outside the will and trust — even when it conflicts with the rest of the estate plan.
This is one of the most common—and costly—pitfalls in estate planning. Clients spend hours discussing trusts, guardians and taxes, while the beneficiary form they completed years ago quietly determines where hundreds of thousands or millions of dollars ultimately go. And too often, it goes forgotten.
Failing Plans, One Account at a Time
A strange peculiarity of the American legal system is that probate has a limited function — it only controls what is not controlled by a beneficiary designation or a joint account with survivorship rights.
Retirement and brokerage accounts (as well as insurance policies) generally transfer by contract rather than through a will or revocable trust. That means the beneficiary designation is often the controlling document.
The financial institutions will honor the name written in the form. It’s immensely challenging and unlikely for a financial institution to do anything other than what the form on file says—even if it conflicts with the rest of the individual’s estate planning documents.
Sometimes the mistake is obvious: an ex-spouse is still listed years after a divorce. In other cases, parents remain beneficiaries because the account was opened right after college. Twenty years later, the client has a spouse and children but never revisited the paperwork. Nevertheless, the financial institutions honor the form.
Trusts create another common issue. A family spends time creating a trust for young children or a second marriage, but the retirement account still names individuals directly. The trust is perfectly drafted—it's simply never connected to one of the family's largest assets. The beneficiary needed to be the trust.
I can speak from first-hand experience: I’ve seen several lawsuits that stemmed from beneficiary designation forms that hadn’t been updated properly. The family says “this couldn’t be right,” but the financial institution is bound. Ultimately, it lands in litigation or gets settled out of court.
The Easiest Yet Most Important Review
Some of the highest-value planning conversations begin with a remarkably simple question:
Can we review your beneficiary designations?
For advisors, that five-minute exercise can uncover ex-spouses, deceased beneficiaries, outdated percentages or retirement accounts that were never coordinated with the client's estate plan.
For attorneys, it's a reminder that signing documents isn't the finish line. Every estate plan should include a review of retirement accounts, life insurance policies and other beneficiary-designated assets.
But that’s only the first part. The next step is to actually update the designations. Most of these financial institutions allow you to do it online very easily, though some do still make you come in person or fill out a paper form with a wet ink signature.
Ultimately, the most important estate planning document often is the one-page beneficiary form everyone forgot existed, not the twenty-page trust. Make sure you find the forms and align them with the plan.
Forwarded this email?
Interested in partnering with Herbie on estate planning for your clients?
Next in Line is a weekly newsletter for advisors, brought to you by Herbie, covering the practical yet consequential interaction between estate planning and family dynamics.
About Herbie: Herbie is an estate planning platform built by veterans of the nation’s most prestigious law firms in order to make estate planning modern, efficient and cost-effective. Herbie services clients nationally through its own law firm, provides consulting, lead generation and value-added services to professional advisors, and offers free self-guided estate planning tools to the public. Learn more about Herbie at herbieplan.com.
About the Author: Michael Moritz is the co-founder of Herbie. A veteran of some of the nation’s most prestigious law firms (Skadden, McDermott and Paul Weiss), Michael continues to practice as an estate planning attorney through Herbie Legal, Herbie’s dedicated law firm. Michael’s career has included crafting estate plans for billionaires, representing public companies and even a sovereign nation in high-stakes federal lawsuits, and personally arguing and winning a case before New York’s highest court. A seasoned genealogist, Michael has lectured and written extensively about family history research and related familial dynamics. Michael otherwise loves exploring the world (been to 40+ countries), eating at whatever restaurant his wife discovers next, and contemplating whether to make his son a Mets fan or spare him the suffering.
Read the full article
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