Seniors Who Sell Their Homes May
Face a Nasty Tax Surprise May 06 Many seniors who have owned their homes for a long time have substantial unrealized appreciation
thanks to a robust real estate market. This can cause some unpleasant tax surprises when they sell the property however. Married
couples who file jointly may exclude $500,000 of capital gain on the sale of their home (the limit for singles is $250,000)
provided some other tests are met. For example, a taxpayer can claim the full exclusion only if the home has been owned and
used as their primary residence for at least two of the five years before the sale. Increasingly, people are selling their
homes for gains exceeding these limits and are startled to hear about the tax cost which results. The current law replaced a rule allowing home sellers to exclude all home sale gain as long as they purchased
a new home costing as much as the proceeds received on the sale of the old one. Also, the current law eliminated the once-in-a-lifetime
exclusion of $125,000 for sellers who were 55 or older. If a taxpayer has a gain exceeding
the statutory limits, they may have to pay as much as 15% on the capital gain. Also, there can be a loss of deductions, exemptions
and credits, and income tax on Social Security benefits. Capital gain generally equals the sales
proceeds minus the property’s "tax basis." Tax basis is widely misunderstood even by some tax professionals. When no
taxable gain is reportable, an accurate calculation of tax basis is not particularly important. But when the gain may be taxable,
properly determining tax basis can be vital. Ordinarily, the starting point in determining a taxpayer’s basis in property
is the original purchase price. If the property was acquired by a gift, the taxpayer’s basis is the same as the basis
of the property when it was owned by the donor. And, in the case of property acquired by inheritance, the basis is normally
the value of the property at the date of the decedent’s death. This last point can be vitally important, and easily
overlooked in the case of a home owned by a surviving joint owner, such as a widowed spouse. The basis in the property in
the hands of the survivor is increased based on the value of the property at the time of the deceased spouse’s death.
For example, if a couple bought a home for $40,000 in 1965 which is worth $500,000 when the husband dies in 2005, the wife
has a basis of equal to her half of the original purchase price or $20,000 plus the value of the deceased spouse’s half
at the time of his death of $250,000 for a total basis of $270,000. Basis is also increased by the value of home improvements,
but not repairs, so keeping accurate records is also important. For more information, see IRS Publication 523 or consult an
attorney or accountant qualified to advise you on tax matters. Is a Will Really Necessary? April 06 "Everything I own is in joint name with my wife (or husband).
Why should I bother having a will?" Here are a few important, but often overlooked,
reasons why a will is important even if all of your property is owned jointly: - Simultaneous death situations. Occasionally,
family members die in the same disasters or accidents. If this happens, unintended, negative results can occur. A will can
address these situations as well as those cases where one joint owner survives the other by only a very short amount of time.
- Naming a personal representative. A typical will names an executor
who handles the orderly settlement of the decedent’s affairs. For example, an inheritance tax return is required even
if all of a person’s property is held jointly, and an executor is generally the person responsible for filing this form.
- Disposing of probate assets. Even where people think they may have
placed everything they own into joint ownership, sometimes a property interest has been overlooked. For example, if the decedent
has life insurance payable to his or her estate, the proceeds will be considered probate property. Also, if the decedent owned
a life insurance policy on the life of another person that policy is considered a probate asset. If the decedent has a lawsuit
started at the time of his or her death, an executor or administrator may continue the case and any recovery or settlement
will be considered probate property. Also, if the decedent dies as the result of someone’s negligence, the "wrongful
death" suit is considered to be a probate asset.
These are just a few of the complications
that can occur with even a simple estate. Consult with a qualified attorney to insure that things go smoothly for your loved
ones. New Rules Mean New Ways to Protect Assets for the Elderly March
06 The Deficit Reduction Act passed in February severely limited asset protection for
elderly people needing nursing home care. Fortunately, some beneficial provisions still remain in the law. One of the surviving techniques is known as "the caregiver child exception." This allows the elderly person to
transfer his or her home to a son or daughter and not incur any Medicaid transfer penalties. Some background can make it easier
to understand this approach. Medicaid, unlike Medicare, provides benefits only after
an applicant has virtually run out of money. If someone gives away their money and/or property to family members or loved
ones in order to qualify for Medicaid, penalties will apply. Generally, the penalty is a period of Medicaid ineligibility.
The caregiver child exception is an exception to the penalty in that it allows an elderly person to give away his or her home
without any ineligibility. The caregiver child exception allows an individual to transfer his or
her home to a son or daughter who has resided in the home for at least two years before the individual became institutionalized
and who provided care which permitted the individual to reside at home rather than in an institution. Best practice will require
a detailed letter from a doctor documenting the care provided by the child. This exception does not apply to grandchildren,
siblings, friends or other caregivers. However, they may qualify for a hardship waiver under Pennsylvania’s Estate Recovery
Program to prevent the estate from losing the home to a Medicaid lien after the death of the elderly person. Be sure to consult
with a qualified elder law attorney to find out exactly how these rules might affect your situation well before the date of
the planned gift of the home. Even Simple Estates Need Careful Planning
By Michael J. Repak, J.D., LL.M.,
CPA Feb 06 Some middle-class people decide they can just download
a will from the Internet or purchase a form from an office supply store and avoid the expense of paying a competent lawyer
to write one. With some luck this strategy might work out fine, but professional advice produces more certainty and less risk
at a reasonable cost. A professional advisor counsels and educates the client,
in addition to preparing the necessary documents. The simple will created by a lawyer in 8 out of every 10 cases will not
look much different than the form sold on the Internet or in the local store. Even if you can use a simple will, your estate
planning process should analyze at least two other considerations: (1) what situations are not addressed by your will, and
(2) what property changes hands on account of your death that is not covered by your will. A
Will Won’t Address Your Lifetime Needs A will is only
effective after the death of the maker. The appropriate will is going to work fine for someone who dies quickly or after a
short illness. However, people dying after an extended illness requiring nursing home care may have their estates depleted
to pay for their care. The odds that long-term care will be required sometime in an individual’s life are increasing
thanks to modern medicine’s miraculous ability to prolong life. Although the desirability of extending a life which
must be spent in a nursing home may be questionable, the cost of such care is already substantial and likely to rise. Addressing
the risk that long-term may be needed is an integral part of professional estate planning. Sometimes we recommend purchasing
long-term care insurance if it is available and affordable. But virtually every client will benefit by having a well-drafted
Durable Power of Attorney (DPOA). A DPOA can allow the client’s agent to carry out the client’s estate planning
objectives after the client has lost his or her decision making ability. Frequently, this means transferring a client’s
property to heirs (as permitted by law) before it has to be spent on the client’s care. A Will May Not Cover All of Your Property Many
people are surprised to discover that any of their property is outside the coverage of their will. Three types of property
which many "simple estates" include which pass outside of the will are jointly-owned real estate (e.g., the marital home),
life insurance and retirement plan assets such as an IRA or 401(k) account. These assets need to be reviewed carefully to
make certain that the correct person receives them, and especially in the case of retirement assets, that they pass with the
lowest possible income tax load. Also, the state inheritance tax impact needs to be reviewed to make certain that this tax
is apportioned fairly. You would seek a licensed physician to do even your simple surgery. You
should obtain professional legal advice in planning your simple estate. Even if you won’t do it for yourself, do it
for your heirs. What is Elder Law?People often ask me how Elder Law
differs from more traditional Will preparation or Estate Planning. While those are among the services that I and many
other Elder Law attorneys offer, the focus on Elder Law is on the older person themselves rather than simply on their property
and money. Documents are frequently prepared, but the value of an Elder Law attorney’s services depends much more
on the counseling provided. Generally, I start by ensuring that each of my clients has an appropriate
Will, General Durable Power of Attorney, and a Health Care Power of Attorney with an Advance Declaration of Health Care (“Living
Will”). Then, in planning an estate I will review a client’s assets and help plan for their distribution
either during life or after the client’s death. Ordinarily, I will spend as much time as needed to counsel a client
on how to live out his or her remaining years within their financial means and with dignity. Together, the client and
I will develop a plan for the client to achieve his or her lifetime goals either by spending for long-term care and/or gifting
to family members. Although my work may have the effect of benefiting a client’s heirs much as a Trusts and Estates
attorney, my primary thrust is to make certain that the elderly person’s lifetime needs are met. I
am especially skilled in developing plans to protect a family’s assets from nursing home claims. If one member
of a couple needs to enter a nursing home, I make sure that the spouse who remains behind gets to keep as much of the couple’s
money as possible. Where the care of a handicapped or disabled child must be considered, I can develop plans to ensure
that the child’s governmental benefits are not jeopardized by their inheritance. Medicaid Planning
& ApplicationsFor my planning clients, I will prepare a comprehensive evaluation of the client’s
unique family and financial situation and provide recommendations designed to preserve the client’s estate for his/her
surviving spouse and heirs to the maximum extent possible. The rules of Medicaid eligibility change almost daily; as they
become increasingly complex there are pitfalls for the unwary, but there are also opportunities for the early planner. I help
guide clients through this maze. I can also compile the necessary documentation to successfully apply for Medicaid benefits.
In addition to planning for the possibility of long-term illness, I advise clients and their families
after such illness occurs. Many people have no idea that planning opportunities still exist even after someone has entered
the nursing home. So where a client has inherited some money after they have been in the nursing home and even if they
are already on Medicaid, it may be possible to preserve some of this wealth for the client and his/her family
Guardianships and Disability Planning
I represent family members seeking to petition the court
for the establishment of a guardianship of incapacitated adults and developmentally disabled individuals who can no longer
take care of their own affairs. Sometimes we can accomplish even more effective caretaking by relying on a General Durable
Power of Attorney. Where that is the case, I normally recommend that approach, but sometimes guardianships are necessary or
more desirable.
I assist clients with disabilities with legal planning for their long-term needs.
I also advise the parents and other family members of disabled persons on how they can effectively provide for them, with
careful regard for preserving eligibility for Medicaid and other public entitlements. I have drafted supplemental needs trusts
and other documents as appropriate, and helped select professional trustees for trusts for the benefit of disabled persons.
Estate Planning & Administration
I assist individuals and families
in planning their estates. This involves not only reducing estate taxes, but also protecting the estate during life. I prepare
wills designed to reduce or eliminate federal estate taxes, powers of attorney drafted to permit the effective management
of assets and personal affairs, and advance medical directives (living wills) giving instructions to health care providers
in the event of incapacity. Various kinds of revocable and irrevocable trusts are also prepared, if appropriate. I also represent
the Executor or Trustee in the process of administering a decedent’s estate, including: Preparing Tax Returns, PostMortem
Tax Planning and Asset Distribution.
Medicaid Spend DownMedicaid law is
complex and there is a great deal of confusion over the “division of assets” and the “Medicaid spend-down.”
Everyone’s situation is different. But the good news is that clients are frequently surprised at how much of their
assets they can retain and still qualify for Medicaid. Each state is different and the law in this area is constantly
changing which makes it critical to get qualified legal advice. In some instances, the differences among state laws
may even influence in which state an elderly person should reside. For example, the difference between Pennsylvania
and New Jersey regarding how these states treat IRAs and assets in qualified retirement plans can be a major consideration
for elderly couples who are considering housing alternatives on either side of the Delaware River.
The time that one member of a couple has to enter a nursing home can be stressful and confusing enough without considering
the financial and legal aspects of this life event. Normally, the state will total all of the assets owned on the day
of the nursing home admission (the “snapshot date”). The state will then divide their assets in half (“division
of assets”) and the institutionalized spouse will qualify for Medicaid once his or her one-half of the assets are spent
down to the legal limit. Although, many couples are pleased to discover that their home and one car are “exempt”
for Medicaid purposes, they frequently have no idea what other planning opportunities are available for them during this spend
down phase. Occasionally, a kind social worker at a nursing home may recommend that the family contact an elder law
attorney for assistance, but they are not obligated to do that. Perhaps the most common misconception I see among my
new clients is the idea that the institutionalized spouse’s half of the marital property has to be spent on their care.
That certainly is not the case and many times we develop plans which involve using the institutionalized spouse’s portion
of the marital property to improve the home and life of the spouse who remains behind. These elderly people are always
relieved to see that the assets they have accumulated over a lifetime of hard work can be used to make their lives better.
And I must admit that seeing that look of relief come over the face of someone who was so worried when we first sat down is
one of the great satisfactions of my professional life. This level of planning is both is fact specific and may be vastly
different depending upon the clients’ state of residence. It should only be done by someone who is fully qualified
to provide this sort of advice and is committed to remaining current in this area of law. It certainly cannot be accomplished
at the case worker level as they are not able to give you the legal advice that you will need. Before you start spending
down, before the money you worked so hard to earn is gone, you must seek advice from someone who knows Medicaid law, what
it allows and how to use it to your advantage.
Transferring Property Upon Your Death
There are essentially five ways an individual can transfer property to their loved ones upon their death.
Depending on the age of the persons who will be receiving property or the dynamics among family members who are receiving
the property, it is important to choose your method of transfer very carefully.
Leave Property
Titled Solely in Your Name (i.e. do nothing to plan for property after your death) - If you do absolutely nothing to pre-plan
for the transfer of your assets and your property is titled solely in your name at the time of your death, your property will
need to be “probated.” This means that a court will order your property to be divided equally among your surviving
relatives according to the intestacy laws of your state. Basically, the courts, via state statutes, provide who your property
will pass to upon your death. It usually takes at least a few months (or sometimes longer) before all of your assets are distributed
(obviously the length of the proceedings varies greatly depending on the circumstances).
Establish
a Last Will and Testament - Establishing a Last Will and Testament allows you to provide written instructions on how your
property is to be divided upon your death. In your Will, you designate an “executor” of your estate, who opens
a probate estate. With the close supervision of the court, your executor will distribute your property as you have outlined
in your Will. The process of probating your Will usually takes at least a few months (again, the length of probate proceedings
varies greatly). A Will can be advantageous as a court becomes involved in the distribution of your assets to ensure family
dynamics do not affect your testamentary wishes.
Add a Joint Owner with Right of Survivorship
to Your Property - Adding a joint owner with the right of survivorship to your property (a joint tenant) will pass
100% of that property to the joint owner upon your death. There is no probate necessary. This is often the way spouses choose
to title their property. Joint tenancy can, however, be a problem. For instance, if a child is added to an account and that
child is later sued (divorce, car accident, etc.), 100% of that account may be subject to the lawsuit and the parent may be
left with no recourse. Joint tenancy “overrides” any Last Will and Testament you may have executed.
Add Beneficiary Designations to Your Property - Adding a beneficiary designation (pay-on-death or transfer-
on-death) to your real or personal property is another way to avoid probate. Again, 100% of your property passes to the person(s)
you have designated as beneficiary. Unlike a joint owner, however, the beneficiary has no access to your property until you
have passed away, thus avoiding any attachments of your assets by the beneficiary’s creditors. Like joint
tenancy, however, the beneficiary designations “override” any Last Will and Testament you have executed.
Establish a Revocable Living Trust - A Revocable Living Trust is an estate planning
document which allows an individual to direct another person (the Trustee) to distribute property upon their death, according
to specific wishes. Unlike a Will, however, a Revocable Living Trust is not probated. Although a Revocable Living Trust can
avoid the time and expense of probate, they are generally quite a bit more expensive to establish than preparing a Will.
So, in the end the Revocable Living Trust may not produce any savings. On the other hand, a Revocable Living Trust can
help ensure your financial affairs remain private (as court records are open to the public). They allow an individual
to retain control over their property while they are alive and they can incorporate planning for if you become incapacitated.
Also, a Revocable Living Trust can be a good way to avoid having to probate assets in states other than your own (“ancillary
probate”). Because of differences among state probate laws, the usefulness of Revocable Living Trusts can
vary greatly from state to state. This technique is quite popular among practitioners in New York, California, Florida
and Delaware for example, but is less commonly used in New Jersey and Pennsylvania.
Before adding
anyone to your accounts or drafting any estate planning documents, you should contact an experienced elder law attorney who
can advise you on the advantages and the pitfalls of the various methods of transferring your property at death (including
your state’s Medicaid Estate Recovery practices).
Simple Wills . . . Or, NotMany
times I get calls or clients visit and say “All I need is a simple will.” Some people seem to think that
I have documents available for sale. Sometimes I feel that it would make my life a lot easier if that’s what I
did, too. Unfortunately, it doesn’t work that way for me. Often, I tell people that a
“simple will” is going to be all you need if you can absolutely guarantee that you will die quickly. That
often gets a chuckle. Frequently, someone will tell me that they are never going to go into a nursing home. Then,
I point out that I have never had a client ask me to help them get into the nursing home, and still the nursing homes are
filled. So, how did that happen? In short, I try to underscore the point that none of can predict the future,
but we can all prepare for various future outcomes. The will, of course, deals with only one outcome, although it is
the certainty; we are all going to die eventually. And, while any will can take care of things after you die, what needs
to be done to take care of things while you’re still living? Many of the people shopping for
“simple wills” are also looking for the cheapest price. While it’s only human nature to want to get
something for the lowest cost, these same people would never dream of shopping for the lowest priced surgeon if they or a
loved one needed an operation; they’d want thebest doctor they could find. Similarly,
no one would tell the doctor to only take half of the appendix out because that’s all they feel like paying for.
They would want the job performed thoroughly and completely by someone who had the right professional training and competence
to create the best chance of the best possible outcome. Sometimes “simple wills” look
a lot like a commodity service that lawyers provide. Even lawyers that do no other elder law or estate planning generally
will prepare wills for couples in which one spouse leaves everything to the other and vice versa. Some lawyers use this
service as a loss leader, advertising it at a very attractive price to meet new clients whom they can then sell additional
services to. I suppose that as long as the clients receive all of the services that they need that this is a reasonable
approach for a lawyer to use to build new client relationships. My point of view is that it is not wise to simply prepare
a will for a client without at least visiting the other issues that should be addressed in planning for infirmity and mortality.
Most reputable lawyers would rather use a more thorough approach. My feeling is that everyone is better
served when I more directly explain my services. I tell the people shopping for “simple wills” that I sell
counseling, not just documents. Although I certainly prepare wills that leave everything to one spouse or the other,
that’s not the real value that my services bring. In fact, in many cases that’s not even the most valuable
document that I wind up preparing for these clients. Many people have no idea how important a well-drafted General Durable
Power of Attorney can be. In many crisis situations, that document can make all the difference with respect to what
can be done to save someone’s money when long-term care is needed. I also work with my clients to develop a plan
for various future possibilities. We identify different risks and discuss appropriate steps to control these risks.
Sometimes this involves sending my clients to a reputable insurance agent to purchase an insurance product. But always it
involves educating people about their options and empowering them to understand the control they will have under different
future events. And with this power comes the peace of mind of knowing that a they have a real plan in place. Adult Day Care -An Alternative to Nursing Home PlacementIsolation is often a great danger to elders
living independently and, as an alternative to moving into a nursing facility or assisted living facility, many elders have
been able to remain living at home with the assistance of adult day care programs. Adult day care programs are community-based
and provide a safe, supervised alternative to seniors who are unable to live on their own, but do not yet require 24-hour
skilled nursing. They are an important step for individuals between living independently in their own home and round- the-clock
care in a care facility. Not only are adult day care programs therapeutic for the senior, often postponing or even eliminating
the need for nursing home care, but they also provide much-needed respite to family members caring for their loved ones.
Adult day care centers provide a variety of recreational and social activities, allow seniors to enjoy the support of their
peers, provide personal care/assistance with Activities of Daily Living (ADL) and they provide nutritional, health and social
services. Some programs provide more intensive health and therapeutic services for seniors with severe medical problems and
may even provide physical or occupational therapy. Transportation, counseling, caregiver support groups and education are
other options that are often available depending on the program. It is important when choosing a center that you talk with
the staff with other participants and with other family members to ensure the particular program is able to meet your needs,
or the needs of your loved one. If you are unable to stay alone during the day, or if you are currently caring for someone
and struggling to balance your caregiving responsibilities with your employment outside the home, adult day care could be
the solution. Most adult day care centers operate Monday through Friday during normal business hours. Some programs,
however, offer services in the evening and on weekends.
Enhancing the Quality of Life for People
with Alzheimer’s
and Their Families
Learning how to communicate with loved ones who have Alzheimer’s disease is often a difficult
task for families. It can be heartbreaking and confusing to witness a loved one exhibit behavior that is far from their usual
temperament. In order to sustain relationships and enhance coping abilities, family members and caregivers must learn how
to communicate with their loved ones in ways that can enhance the quality of life for the individual.
Techniques
for Communication
Learning how to successfully communicate with your loved one can help to keep undesired behaviors
like agitation and wandering to a minimum as well as improve their quality of life. There are a few basic techniques caregivers
and family members should keep in mind when communicating with their loved one.
First, approaching a person from the
front can be helpful in reducing the potential of surprise. The element of surprise can be fear-producing and disorienting
for someone with Alzheimer’s. Second, face the person as you talk with them, and avoid spending time in a setting with
a lot of sensory stimulation. Too much surrounding noise or movement can be confusing and affect your loved one’s ability
to communicate. Third, if a situation looks like it might get out of hand, distraction can be helpful to diffuse the situation.
For example, introducing another activity such as a walk or drive can help to redirect their attention. Lastly, speaking slowly
in a low-pitch and remembering to ask only one question at a time can help your loved one understand and minimize confusion.
Sometimes
prescription medications are appropriate for those with Alzheimer’s to alleviate psychotic symptoms or enhance memory
and cognitive functions. However, there are other interventions that caregivers and family members can take in order enhance
their relationships and quality of life for the individual.
Family members can help to preserve their loved one’s
skills and strengths by identifying areas of satisfaction and pleasure. Enabling your loved one to participate in activities
which they have enjoyed their whole life can help to reduce agitation, improve their ability to cope with the disease, and
increase their sense of dignity, For example, if your loved one used to enjoy painting or gardening, set time aside to participate
in these activities in away that is safe and manageable. Activities that are as simple as being around pets, going for walks,
and listening to music can help to positively structure time and enhance quality of life.
Lastly,
watching video biographies area great way to spend time with your loved one. Video biographies are old photographs that are
videotaped and narrated by family members. These videos can often help to reduce agitation during a visit and possibly help
to spark the memory of the person suffering from Alzheimer’s disease. There is a lot of room for creativity in constructing
video biographies as well as the opportunity to include multiple generations of family members in the process.
Caregiver
ContractsMillions of Americans are currently caring for an elderly family member or friend at home, without receiving
regular compensation. Depending on the circumstances, however, it may actually be beneficial for both parties to enter into
a care contract wherein the caregiver accepts payment for the care they are providing their loved one and also formally assumes
responsibility for that care.
For example, if the loved one you are caring for reaches a point where nursing home placement
is the only option, all of their money will be considered available to pay for their care at the nursing home and they will
not be eligible for Medicaid assistance until all of their assets have been depleted. Certainly the care they were provided
by you, while they remained in the community, is just as valuable to them and worthy of payment as that they will be provided
in the nursing home. With a care contract in place, they can pay their caregiver, and every penny spent will count towards
their “Medicaid spend down” should they apply for benefits.
Having a care contract in place also ensures
Medicaid will not impose penalties on the money received by the caregiver. Sometimes an elderly person will randomly give
sums of money to their caregiver as payment for the care they provide. Without a contract in place, Medicaid will assume the
money transferred is a “gift” or a “transfer of assets” and will impose penalties resulting in ineligibility
for Medicaid benefits.
From a caregiver’s perspective, although they are willing to provide services for
free, it is often difficult for them when, at the time of their loved one’s passing, the caregiver who has provided
several years of care receives the same inheritance as the other heirs, many of whom have not been involved in caring for
the loved one. On the flip side, if a caregiver is receiving payment and there is no contract in place which defines the care
they have been working hard at providing, other heirs may be upset by the additional monies the caregiver received. The bottom
line: if you are caring for a loved one or receiving care from a loved one, a care contract is a good idea for both parties
involved, for multiple reasons. Before entering into such a contract, be sure to consult someone experienced in drafting such
contracts and knowledgeable with respect to their effect on Medicaid qualification.
Also, if you are a child who
has been caring for your parent for over two years, there is another Medicaid planning technique that may be available which
would allow your parent to transfer their home to you, without incurring Medicaid transfer penalties This is not true in all
cases, but if you and your parent meet certain criteria, the exemption known as the “Caretaker Child Exemption”
could be a great way to ensure your parent’s home stays in the family. This information is for general informational
purposes only and does not constitute legal advice. For specific questions, you should consult a qualified elder law attorney.
Press ReleasesThe Hardest
Part of the Holidays December 7, 2004 The holidays
are, for most people, a combination of tradition, nostalgia, stress and joy. We work hard preparing for our celebrations,
from finding just the right gift for a child to squeezing card sending and traditional baking in between open houses and business
obligations. It’s also the time of year for last-minute tax planning. The end of the year
rivals April 15 as an important deadline. Baby boomers set up retirement plans. Those grappling with the issue
of estate taxes have the December 31 deadline to take advantage of the annual exclusion gift of $11,000 (per recipient and
per giver). Seniors with IRAs and 401(k)s must make sure that they have taken enough out of each plan by December 31,
to avoid penalties. But the hardest part of the holidays will confront tens of thousands of baby boomers
as they travel to family get-togethers and realize that their parents’ ability to maintain their households and finances
has eroded. It may be due to physical frailty, to a decline in cognition, or both. Here are some tips for baby
boomers who are afraid their parents are “slipping”: Red flags parents finances
need intervention: Visible unpaid bills – members of the “Greatest
Generation” usually don’t let bills hang around – they pay them promptly and file them away. Mail
of any type piled up – this may indicate that a senior is overwhelmed, depressed, or otherwise not up to daily
tasks.
For many baby boomers, this may be the year to ask parents if they would like help
in bill paying or balancing the checkbook. If they agree, arrange to have duplicate bills/statements sent to you.
Children may be surprised to find out, that, when given the option, parents may prefer to have all bills sent directly to
a trusted child. If a parent is not ready to give up control of monthly bill-paying, the child may
want to ask for permission to monitor their accounts. Establish on-line account access so that the child can periodically
check from his or her computer and make sure everything looks okay. Holidays can also
be a good time for children to be introduced to their parents’ key advisors, whether financial planners, insurance agents
or attorneys. If the parent does not have an estate plan, this is the time to make an appointment for the parent to
meet with an attorney to set one up. In most families, there’s no easy time to discuss
finances or the reality or possibility of a decline in capacity. But a dose of prevention, in the form of a realistic
discussion while parents are still managing on their own, may set the tone when help is needed later, and prevent expensive
legal and financial problems down the road. MEDICAID
AND ALZHEIMER’S DISEASEJuly 1, 2004 President Reagan’s
death has reminded Americans about the devastating disease known as Alzheimer’s. Reagan wrote
a letter to the country dated in 1994, which included these words…“Unfortunately, as Alzheimer’s disease
progresses, the family often bears a heavy burden. I only wish there was some way I could spare Nancy from this painful experience.” Alzheimer’s and other types of cognitive impairments are the leading cause of needing long-term care. The burden on family when someone needs long-term care can be enormous. But when the need for care
is caused by Alzheimer’s, the burden can seem both overwhelming and never ending. The average duration from date
of diagnosis to date of death is over nine years. Patients with Alzheimer’s eventually reach the point where round-the-clock
care is needed. Even with a loving, devoted family, it’s often impossible to keep a loved one home as Alzheimer’s
ravages their ability to be home by themselves safely. That’s why many people with this disease end up in nursing
homes. Nursing homes are uniquely able to provide the comprehensive, round-the-clock care that most families cannot
provide. Few seniors have the ability to afford the cost of a nursing home. In 2000, the average
cost of a nursing home was about $50,000/year according to the Congressional Budget Office (CBO) , and can be as much as twice
this amount in some parts of the country. The CBO also reports that, in 2000, only about seven percent of seniors had
income in excess of $50,000 year. Those who had the foresight to purchase long-term care insurance
are in good shape. But only 7 percent of seniors have such insurance. Others must pay out of
pocket until they qualify for Medicaid, the joint federal and state health care program for the poor. Medicaid now covers
more than half of the cost of nursing home care in this country. Its rules permit the protection of significant assets
for the nursing home resident, for his or her spouse, and for other family members. But the rules are complicated, ever-changing,
and full of traps for the unwary. An elder law attorney is uniquely qualified to guide the senior and his or her family
through the long-term care planning process.
IT’S NEVER TOO LATE TO SLASH NURSING HOME
BILLS
June 7, 2004 When a loved one moves to a nursing home,
family members are often shocked to learn that the bill is not paid by Medicare or health insurance. Few families have
the money to pay the average nursing home bill of $58,000 year (the national average according to a MetLife study) themselves.
Life savings can be depleted quickly paying these bills. As life savings are depleted, gone too are many seniors’
dreams of leaving an inheritance to their children and grandchildren. Why do so many seniors think
that Medicare will pay their nursing home bill? That’s because Medicare, the health insurance that most seniors
have, does pay some nursing home bills. But that coverage is only for 100 days at most; most seniors are notified that
they are no longer eligible for Medicare to pay their bill after 21 days in the nursing home. That’s when seniors
are on the hook to pay the $4,700 a month bill themselves. What happens when a senior runs out
of money? Medicaid, a joint federal and state-funded program, steps in. Medicaid is the government’s
safety net to pay the nursing homes bills of seniors. In most states, seniors who are not married must deplete all but
$2,000 of their life savings to meet Medicaid’s asset qualifications. Married couples are allowed to keep $94,760
(not counting their house and car). Most every asset above this amount must be sold, in a process that is referred to
as “spending down.” Is “spending down” – going through your life’s
savings – inevitable? No! There are smart financial and legal strategies that allow seniors to shelter assets
while still qualifying for Medicaid benefits. These strategies are often called Medicaid planning, and every senior
should have a working knowledge of how this type of planning may benefit them. There is a lot of misinformation
surrounding the Medicaid program and Medicaid planning. One of the most misunderstood aspects is the belief that once
someone enters a nursing home, it’s too late to do Medicaid planning. That’s simply not true. It’s
never too late to save assets. Whether someone is entering the nursing home tomorrow, already been there one week, or
has been a resident of the nursing home for five years, Medicaid planning to help save their nest egg is still possible. If you or a loved one is living in a nursing home, and you are not yet on Medicaid, you may be able to benefit
from Medicaid planning. Consult with a qualified elder law attorney to see if this type of planning makes sense for
your and your family. Planning a Big Send Off?September
3, 2004 On August 24, 2004, the world lost a remarkable woman. Dr. Elisabeth Kübler-Ross
died at age 78 of natural causes in Scottsdale, AZ surrounded by her family and close friends. Her book On Death and
Dying published in 1969 revolutionized the way most of us think about and talk about death. By “outing”
death, her ground-breaking work fueled the trend toward people planning their own funerals. Now, this
isn’t the kind of errand that’s going to make you rush out on a snowy day, but “pre-need” funeral
planning is generally a very wise idea. The cost of a typical funeral runs between $6,000 and $12,000 placing it among
the largest expenses for most consumers. Yet, people rarely comparison shop or bargain for a good price when purchasing
burial arrangements. My dad often jokes that he plans to save money on a hearse when his time comes by riding in the
front seat with the driver. But even if he succeeds in playing a final practical joke on us, I don’t think there’ll
be much of a cost savings here. Most of the time when survivors have to make decisions after a loved one has died, being
thrifty seems inappropriate and callous. As a result, people are vulnerable to scams and overcharges by unscrupulous
cemeteries, undertakers and burial insurance salespeople. Many seniors have tried to protect
their families and ease their burden by making their own decisions while they are still able. A popular way to do this
is to enter into a contract to pre-arrange a funeral which may involve pre-paying some or all of the funeral expenses.
Many legal services and elder law attorneys advise their clients to purchase prepaid funeral contracts as a way to shelter
assets when determining eligibility for SSI or Medicaid. However, costly mistakes can result if the consumer fails to
educate himself/herself before signing a prepaid funeral contract. For this reason, AARP strongly recommends avoiding
prepaid plans, but suggests that seniors set money aside in a separate bank account to pay for their funerals. And,
if SSI or Medicaid eligibility isn’t important in your case, this may be a good choice to make. After all, the
money is certainly safer in your own bank account, and any interest earned on the money while it’s in the account is
yours rather than the funeral director’s. Making choices can be confusing. But, common
sense is almost always a consumer’s best defense. Any deal that sounds too good to be true should generally be
avoided. And, you should never sign a contract that you don’t understand fully unless your attorney has reviewed
it and explained it to you. Ask questions, demand information and be prepared to go someplace else if you don’t
like what you’re hearing. The vast majority of people in this industry are ethical, caring, hardworking professionals,
so it’s easy to find several suitable providers if you’re shopping around. Although almost
every state plus the Federal government has laws that are designed to protect consumers from unfair funeral industry practices,
several websites offer information to help people avoid becoming victims in the first place. Additional
information can be found at:www.ftc.gov/bcp/conline/pubs/services/funeral.htm
- The Federal Trade Commission offers a Consumer’s Guide with extensive background information and a listing of other
resources. www.aarp.org – The AARP website is searchable
and includes many items of interest to consumers who are planning a funeral. Among the highlights are a worksheet for
funeral planning, information on the itemized costs of typical funeral expenses and a fact sheet on preneed funeral and burial
agreements. www.nfda.org - The website of the National Funeral
Directors Association, an industry trade group includes a Consumers Preneed Bill of Rights which members are expected to follow
and a member locator service
Michael J. Repak, Esq.
The Law Offices
of Michael J. Repak
310 Floral Vale Blvd.
Yardley, PA 19067-5525
Phone: (215) 968-3499
Fax: (267) 373-1603
E-mail: Contact Us
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