Elder Law Articles

Proving the hardship exception to the Medicaid penalty period

If you transfer assets within five years of applying for Medicaid, you will likely be subject to a period of ineligibility. There is an exception, however, if enforcing the penalty period would cause the applicant an “undue hardship.” This exception is difficult to prove and rarely granted, but it may be available in certain circumstances.

Under federal Medicaid law, the state Medicaid agency must determine whether an applicant transferred any assets for less than fair market value within the past five years. If there are any transfers, the state imposes a penalty period, which is a period of time in which the applicant will be ineligible for Medicaid benefits. The length of the penalty period is calculated by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in the state.

A Medicaid applicant can fight the penalty period by arguing that enforcing it will cause an undue hardship. Federal law provides that an undue hardship exists if the penalty period would deprive the applicant of: (1) medical care necessary to maintain the applicant’s health or life; or (2) food, clothing, shelter, or necessities of life. The burden is on the applicant to prove that hardship exists. A nursing home can pursue a hardship waiver on behalf of a resident. [Read more…]

Family dispute illustrates need for long-term care plan

A recent New Jersey court case demonstrates how important it is for families to come up with a long-term care plan before an emergency strikes.

The case involved two brothers who got into a fight over whether to place their mother in a nursing home. R.G. was the primary caregiver for his parents, as well as their agent under powers of attorney. After R.G.’s mother fell ill, R.G. wanted to place her in a nursing home. R.G.’s brother objected, but R.G. went ahead and had his mother admitted to a nursing home without his brother’s consent. R.G.’s brother sent angry and threatening texts and emails to R.G. as well as emails expressing his desire to find a way to care for their parents in their home. Eventually the men got into a physical altercation in which R.G.’s brother shoved R.G.

R.G. went to court to get a restraining order against his brother under New Jersey’s Prevention of Domestic Violence Act. A trial judge ruled that R.G. had been harassed and assaulted and issued the order. But a New Jersey appeals court reversed the trial court, ruling that R.G.’s brother’s actions did not amount to domestic violence. According to the court, there was insufficient evidence that R.G.’s brother purposely acted to harass R.G. [Read more…]

Use your will to dictate how to pay your debts

The main purpose of a will is to direct where your assets will go after you die, but it can also be used to instruct your heirs on how to pay your debts. While generally heirs cannot inherit debt, an estate’s debt can reduce what they receive. Spelling out how debt should be paid can help your heirs.

If someone dies with outstanding debt, the executor is responsible for making sure those debts are paid. This may require selling assets that you would have preferred to leave to specific heirs. There are two types of debts you might leave behind:

  • Secured debt is debt that is attached to a piece of property or an asset, such as a car loan or a mortgage.
  • Unsecured debt is any debt that isn’t backed by an underlying asset, such as credit card debt or medical bills.

[Read more…]

How Medicare and employer coverage coordinate

Medicare benefits start at age 65, but many people continue working past that age. That makes it important to understand how Medicare and employer coverage fit together.

Depending on your circumstances, Medicare is either the primary or the secondary insurer. The primary insurer pays any medical bills first, up to the limits of its coverage. The secondary insurer covers costs the primary insurer doesn’t cover (although it may not cover all costs). Knowing whether Medicare is primary or secondary to your current coverage is crucial because it determines whether you need to sign up for Medicare Part B when you first become eligible. If Medicare is the primary insurer and you fail to sign up for Part B, your eventual Medicare Part B premium could start going up 10 percent for each 12-month period that you could have had Medicare Part B but did not take it.

Here are the rules governing whether Medicare coverage will be primary or secondary: [Read more…]

Four provisions people forget to include in their estate plan

Even if you’ve created an estate plan, are you sure you have included everything you need to? There are certain provisions that people frequently forget to put in in a will or estate plan that can have a big impact on their heirs.

  1. Alternate beneficiaries

One of the most important things an estate plan should include is at least one alternative beneficiary in case the named beneficiary does not outlive you or is unable to claim under the will. If a will names a beneficiary who isn’t able to take possession of the property, your assets may pass as though you didn’t have a will at all. This means that state law will determine who gets your property, not you. By providing an alternate beneficiary, you can make sure that the property goes where you want it to go.

  1. Personal possessions and family heirlooms

Not all heirlooms are worth a lot of money, but they may have sentimental value. It is a good idea to be clear about which family members should get which items. You can write a list directly into your will, but this makes it difficult if you want to add or remove items. A personal property memorandum is a separate document that details which friends and family members get which personal property. In some states, if the document is referenced in the will it is legally binding. Even if the document is not legally binding, it is helpful to leave instructions for your heirs to avoid confusion and bickering. [Read more…]

IRS now allows private debt collectors to dun taxpayers

In a move that could be confusing to seniors who are vulnerable to scams, the IRS is using private debt collection agencies to collect past-due taxes. The new program began in April 2017.

Pursuant to a law Congress passed in December 2015, the IRS may now contract with private debt collectors to collect certain debts. The private collection agencies can work on accounts where the taxpayer owes money but the IRS is no longer actively working on the account, perhaps because it is older or because the IRS does not have the resources to continue pursuing it.

Historically, scammers have posed as the IRS to target seniors and other vulnerable adults to retrieve identifying information or payment. Up until now, tax professionals have been able to reassure clients that the IRS would never harass consumers over the phone. However, under this new rule private debt collectors may contact taxpayers by phone, which may make it more difficult to determine whether a scammer is targeting the taxpayer.  [Read more…]

Five things to know to reduce your tax on capital gains

Although it is often said that nothing is certain except death and taxes, the one tax you may be able to avoid or minimize the most through planning is the tax on capital gains. Here’s what you need to know to do such planning:

What is capital gain? Capital gain is the difference between the “basis” in property (usually real estate or stocks, but also including artwork and collectibles) and its selling price. The basis is usually the purchase price of the property. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 – $250,000 = $200,000). [Read more…]

Using a prepaid funeral contract to spend down assets for Medicaid

No one wants to think about his or her death, but a little preparation in the form of a prepaid funeral contract can be useful. In addition to helping your family after your passing, a prepaid funeral contract can be a good way to spend down assets in order to qualify for Medicaid.

A prepaid or pre-need contract allows you to purchase funeral goods and services before you die. The contract can be entered into with a funeral home or cemetery. Prepaid funeral contracts can include payments for embalming and restoration; a room for the funeral service; a casket, vault or grave liner; cremation; transportation; permits; a headstone; a death certificate; and an obituary, among other things.

One benefit of a prepaid funeral contract is that you are paying now for a service that may increase in price — possibly saving your family money. You are also saving your family from having to make arrangements after you die, which can be difficult and time-consuming. [Read more…]

Estate planning for a single person

If you are single, you may not think you need to plan your estate.  But single people have as much reason to plan as anyone else. Estate planning not only involves determining where your assets will go when you die, it also helps you plan for what will happen should you become incapacitated, perhaps as the result of a stroke, dementia, or injury. If you don’t make a plan, you will have no say in what happens to you or your assets.

Without a properly executed will in place when you die, your estate will be distributed according to state law. If you are single, most states provide that your estate will go to your children, parents, or other living relatives. If you have absolutely no living relatives, then your estate will go to the state. This may not be what you want to have happen to your assets. You may have charities, close friends, or particular relatives that you want to provide for after your death.

If you become incapacitated without any planning, a court will have to determine who will have the authority to handle your finances and make health care decisions for you. The court may not choose the person you would have chosen. In addition, going to court to set up a guardianship is time-consuming and expensive. [Read more…]

Medicaid Irrevocable Trusts – Do They Protect Assets?

The New Hampshire Bar Association recently published an article written by Attorney David M. Beliveau discussing the use of Medicaid irrevocable trusts as a legal tool to protect assets (typically, a residence) in the case one has to be admitted to a nursing home and apply to receive Medicaid to cover the respective cost. The question is, do such trusts work? Read the entire article below.

Elder, Estate Planning & Probate Law: Medicaid Irrevocable Trusts: A Tale of Two Cities?

By: David M. Beliveau | New Hampshire Bar Article

With the increasing cost of nursing home care, some elders are using Medicaid irrevocable trusts to try to protect their assets (typically, their residences) in case they have to be admitted to a nursing home and apply to receive Medicaid to cover the respective cost. The question is, do such trusts work? Last year, both the New Hampshire Supreme Court in In re Petition of Braiterman and a Massachusetts appellate court in Heyn vs. Director of the Office of Medicaid answered the question.

Both Braiterman and Heyn turned on each court’s interpretation of the “any circumstance” test. Under 42 USC Section 1396p(d)(3)(B), if there are any circumstances under which payment from the trust could be made to or for the benefit of the Medicaid applicant, then the Medicaid irrevocable trust is deemed countable for the purpose of determining the Medicaid applicant’s eligibility for Medicaid. In Braiterman, the New Hampshire court appears to have interpreted the “any circumstance” test broadly and, consequently, found the Medicaid irrevocable trust at issue problematic. In contrast, in Heyn, the Massachusetts court appears to have interpreted the “any circumstance” test narrowly and, consequently, found the Medicaid irrevocable trust at issue not problematic. [Read more…]

Long-term care benefits for veterans and surviving spouses

Long-term care costs can add up quickly. But for veterans and the surviving spouses of veterans who need in-home care or are in a nursing home, help may be available. The Veterans Administration (VA) has an underused pension benefit called Aid and Attendance that provides money to those who need assistance performing everyday tasks. Even veterans whose income is above the legal limit for a VA pension may qualify for the Aid and Attendance benefit if they have large medical expenses for which they do not receive reimbursement.

Aid and Attendance is a pension benefit, which means it is available to veterans who served at least 90 days, with at least one day during wartime. The veteran does not have to have service-related disabilities to qualify. Veterans or surviving spouses are eligible if they require the aid of another person to perform an everyday activity, such as bathing, feeding, dressing or going to the bathroom. This includes individuals who are bedridden, blind or residing in a nursing home.

To qualify the veteran or spouse must have less than $80,000 in assets, excluding a home and vehicle. In addition, the veteran’s income must be less than the Maximum Annual Pension Rate (MAPR). Following are the MAPRs for 2017: [Read more…]

Hospitals now must provide notice about observation status

All hospitals must now give Medicare recipients notice when they are in the hospital under “observation.”  The notice requirement is part of a law enacted in 2015 that just took effect.

Signed by President Barack Obama in August 2015, the law was intended to prevent surprises after a Medicare beneficiary spends days in a hospital under “observation” and is then admitted to a nursing home. This is important because Medicare covers nursing home stays entirely for the first 20 days, but only if the patient was first admitted to a hospital as an inpatient for at least three days.  Many beneficiaries are being transferred to nursing homes only to find that because they were only under observation and were therefore hospital outpatients all along, they must pick up the tab for the subsequent nursing home stay — Medicare will pay none of it.

The law, the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act, does not eliminate the practice of placing patients under observation for extended periods, but it does require hospitals to notify patients under observation for more than 24 hours of their outpatient status within 36 hours, or upon discharge if that occurs sooner. The Act required hospitals to begin giving patients this notice as of March 8, 2017.  Some states, including California and New York, already require such notice. [Read more…]

Short-term care insurance: An alternative to the long-term care variety

A little-known insurance option can be an answer for some people who might need care but are unable to buy long-term care insurance. Short-term care insurance provides coverage for nursing home or home care for one year or less.

As long-term care premiums rise, short-term care insurance is gaining in popularity. This type of insurance is generally cheaper than its long-term care counterpart because it covers less time. Purchasers can choose the length of coverage they want, up to one year. According to the American Association for Long-Term Care Insurance, a typical premium for a 65-year-old is $105 a month.

People who can’t qualify for long-term care insurance because of health reasons may be able to qualify for short-term care coverage. This kind of insurance doesn’t usually require a medical exam and sometimes only has a few medical questions on the application. Another benefit of short-term care insurance is that there usually is not a deductible. The policies begin paying immediately, without the waiting period usually found in long-term care policies. [Read more…]

New protections for nursing home residents

Obama-era rules designed to give nursing home residents more control of their care are gradually going into effect. The rules give residents more options regarding meals and visitation as well as making changes to discharge and grievance procedures.

The federal Centers for Medicare and Medicaid finalized the rules, which are the first comprehensive update to nursing home regulations since 1991, in November 2016. The first group of new rules took effect in November. The rest will be phased in over the next two years.

Here are some of the rules newly in effect: [Read more…]

Four legal steps to take right after an Alzheimer’s diagnosis

If you or a loved one has been diagnosed with Alzheimer’s disease, it is important to start planning immediately. There are several essential documents to help you once you become incapacitated, but if you don’t already have them in place you need to act quickly after a diagnosis.

Having dementia does not mean that an individual is not mentally competent to make planning decisions. The person signing documents must have “testamentary capacity,” which means he or she must understand the implications of what is being signed. Simply having a form of mental illness or disease does not mean that you automatically lack the required mental capacity. As long as you have periods of lucidity, you may still be competent to sign planning documents.

Here are some essential documents for a person diagnosed with dementia: [Read more…]

Reverse mortgages increasingly available for high-value homes

Seniors with pricier homes now have an increased ability to get a bigger reverse mortgage in order to raise cash for retirement. As the housing market has improved, so-called jumbo reverse mortgages are becoming more popular even though they carry some risk.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house or permanently moves out. Homeowners can use money from a reverse mortgage to pay for improvements to their home, to allow them to delay taking Social Security or to pay for home health care, among other things.

The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. The national limit on the amount a homeowner can borrow is $625,000.  [Read more…]

Don’t wait until it’s too late to execute a power of attorney

A durable power of attorney is an extremely important estate planning tool, often more important than a will.  If you become incapacitated due to dementia or some other reason, this crucial document allows a person you appoint (your “attorney-in-fact” or “agent”) to act in place of you (the “principal” ) for financial purposes.  The agent under the power of attorney can quickly step in and take care of your affairs.

But in order to execute a power of attorney and name an agent to stand in your shoes, you need to have capacity.  Regrettably, many people delay completing this vital estate planning step until it’s too late and they no longer are legally capable of doing it.

What happens then? Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time and costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship the representative may have to seek court permission to take planning steps that he or she could have implemented immediately under a simple durable power of attorney. [Read more…]

Life insurance can play role as part of estate plan

For young families, life insurance can be a great help in replacing lost income.  But as people get older it can also serve as part of an estate plan.

Historically, one main reason to buy life insurance as part of an estate plan was to have cash available to pay estate taxes. Now that the estate tax exemption is so big (in 2016, estates could exempt $5.45 million per individual from taxation), most estates don’t pay federal estate taxes, and President Donald Trump and his Republican allies would like to eliminate the estate tax entirely. However, life insurance can still be helpful in a number of other ways:

  • Providing immediate cash. Life insurance provides cash to use for the payment of debt, burial or estate administration fees. In addition, life insurance can be used to pay state estate taxes, if applicable. [Read more…]

The life estate: a useful tool in the right circumstances

The term “life estate” often comes up in discussions of estate and Medicaid planning. Life estates can be used to avoid probate and to give a house to children without relinquishing the ability to live in it.  They also can play an important role in Medicaid planning.  But what, exactly, does the term mean and how are life estates used?

A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner.  Two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the “remainderman” — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant’s ownership passes automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property. [Read more…]

Are you covered by Medicare while traveling within the U.S.?

Those who have reached age 65, the typical age of Medicare eligibility, often have more time to spend traveling.  Although Medicare coverage is generally not available when beneficiaries are overseas, the news may be better for those exploring destinations closer to home.

If you have the original Medicare, the answer is simple: You can travel anywhere in the U.S. or its territories and receive health services from any doctor or hospital that accepts Medicare.  (“Territories” includes Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.) The amount you will pay depends on whether the provider “accepts assignment.”  Providers that take assignment agree to accept the approved Medicare amount as payment in full, although in the case of outpatient visits you or your Medigap insurer may be left with a 20 percent coinsurance, as would be the case for care at home.

Providers that don’t accept assignment may charge you up to 15 percent above the Medicare-approved amount, although this percentage may be lower in some states. In the case of providers that don’t accept Medicare at all, you will have to pay the entire cost of care. [Read more…]

Steer clear of non-lawyers offering Medicaid planning services

As the U.S. population ages, more non-lawyers are starting businesses that offer Medicaid planning services to seniors. While using one of these services may be cheaper than hiring a lawyer, the ultimate costs may be far greater.

If you use a non-lawyer to do Medicaid planning, they may not have any legal knowledge or training. Bad advice can lead seniors to purchase products or take actions that won’t help them qualify for Medicaid and may actually make it more difficult. The consequences of taking bad advice can include the denial of benefits, a Medicaid penalty period or a tax liability.

As a result of problems that have arisen from non-lawyers offering Medicaid planning services, a few states (Florida, Ohio, New Jersey and Tennessee) have issued regulations or guidelines providing that Medicaid planning by non-lawyers will be considered the unauthorized practice of law. [Read more…]

Rule requiring retirement advisers to put their client’s interests ahead of their own is delayed

President Donald Trump has signed an executive order calling for a review of the so-called fiduciary rule, which was intended to prevent financial advisers from steering their clients to bad retirement investments by requiring these advisers to act in the best interests of their clients. The order delays the rule, which was scheduled to go into effect in April 2017, and the rule may ultimately be repealed.

Prompted by concern that many financial advisers have a sales incentive to recommend retirement investments with high fees and low returns to their clients because the advisers get higher commissions or other incentives, the Department of Labor drew up rules in April 2016 that would require advisers to act like fiduciaries.

The rule required all financial professionals who offer advice related to retirement savings to provide recommendations that are in a client’s best interest. Currently, financial advisers only have to recommend suitable investments, which means they can push products that may benefit them more than their clients. The rule would require advisers to not accept compensation or payments that would create a conflict unless they have an enforceable contract agreeing to put the client’s interest first. Advisers also would have to disclose any conflicts and charge reasonable compensation. [Read more…]

What is undue influence, and how can it be avoided?

Saying that there has been “undue influence” is often used as a reason to contest a will or estate plan, but what does the term mean?

Undue influence occurs when someone exerts pressure on an individual, causing that individual to act contrary to his or her wishes to the benefit of the influencer or the influencer’s friends. The pressure can take the form of deception, harassment, threats or isolation. Often the influencer separates the individual from loved ones in order to coerce him or her. The elderly and infirm are usually more susceptible to undue influence.

To prove a loved one was subject to undue influence in drafting an estate plan, you have to show that the loved one disposed of his or her property in a way that was unexpected under the circumstances, that he or she is susceptible to undue influence (because of illness, age, frailty or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so. Generally, the burden of proving undue influence is on the person asserting that it took place. However, if the alleged influencer had a “fiduciary relationship” with the loved one (meaning that the loved one placed a high degree of trust in the influencer to handle his or her affairs), the burden may be on the influencer to prove that there was no undue influence. People who have a fiduciary relationship can include a child, a spouse or an agent under a power of attorney. [Read more…]

Understanding the tax consequences of inheriting a Roth IRA

Passing down a Roth IRA can seem like a good idea, but it doesn’t always make the most sense. Before converting a traditional IRA into a Roth IRA to benefit your heirs, you should consider the tax consequences.

Earnings in a traditional IRA generally are not taxed until they are distributed to you. At age 70 1/2 you have to start taking distributions from a traditional IRA. By contrast, contributions to a Roth IRA are taxed, but the distributions are tax-free. You also do not have to take distributions from a Roth IRA.

Leaving your heirs a tax-free Roth IRA can be used as part of an estate plan. However, in figuring out the best type of IRA to leave to your beneficiaries, you need to consider whether your beneficiary’s tax rate will be higher or lower than your tax rate when you fund the IRA. In general, if your beneficiary’s tax rate is higher than your tax rate, then you should leave your beneficiary a Roth IRA. Because the funds in a Roth IRA are taxed before they are put into the IRA, it makes sense to fund it when your tax rate is lower. On the other hand, if your beneficiary’s tax rate is lower than your tax rate, a traditional IRA might make more sense. That way, you won’t pay the taxes at your higher rate. Instead, your beneficiary will pay at the lower tax rate. [Read more…]

Medicaid’s benefits for assisted living facility residents

Assisted living facilities are a housing option for people who can still live independently but who need some help.  Costs for these facilities can range from $2,000 to more than $6,000 a month, depending on location.  Medicare won’t pay for this type of care, but Medicaid might.  Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

Unlike with nursing home stays, there is no requirement that Medicaid pay for assisted living, and no state Medicaid program can pay directly for a Medicaid recipient’s room and board in an assisted living facility. But with assisted living costs roughly half those of a semi-private nursing home room, state officials understand that they can save money by offering financial assistance to elderly individuals who are trying to stay out of nursing homes. [Read more…]

How to pass your home to your children tax-free

Giving your house to your child or children can have tax consequences, but there are ways to accomplish this tax-free. The best method to use will depend on your individual circumstances and needs.

Leave the house in your will

The simplest way to give your house to your children is to leave it to them in your will. In 2017, as long as the total amount of your estate is under $5.49 million it will not pay estate taxes. In addition, when your children inherit property it reduces the amount of capital gains taxes they will have to pay if they sell the property. Capital gains taxes are paid on the difference between the “basis” in property and its selling price. If children inherit property, the property’s tax basis is “stepped up,” which means the basis would be the value of the property at the time of death, not the original cost of the property.

There are some downsides to this approach. Some states have smaller estate tax exemptions than the federal exemption, meaning that leaving the property in your estate may cause it to owe state taxes. Also, if you were to need Medicaid at any time before you died, a lien might be put on the property and it might need to be sold after your death to repay Medicaid. [Read more…]

Should you buy an annuity doubler for long-term care?

“Annuity doublers” are being touted as a new alternative to long-term care insurance. But are they a good idea?

Long-term care plans have become much more expensive lately, pricing many older people out of the market. As an alternative, some companies are offering annuities that have a “nursing home doubler.” With this option, the amount of monthly annuity income you would normally receive is doubled during any period you’re in a nursing home, which will help pay for care.

The term “doubler” can be misleading. Some policies only pay 50% extra – although others pay triple. In most cases the extra income lasts for up to five years, or until the annuity’s cash value is exhausted. [Read more…]

How to protect against elder financial abuse

Seniors who are dependent on others due to illness, disability or cognitive impairments may be susceptible to financial abuse and fraud. The culprits may be outside predators, hired caregivers, or in some cases even relatives.

If you or a family member is increasingly dependent, there are some simple but important steps you can take to reduce the chance of abuse.

The most important step is to have a trusted family member or friend be involved in the finances – visiting often, reviewing statements, and generally exercising oversight. The best defense against financial exploitation is having someone else around who can notice large checks, unusual ATM withdrawals, missing valuables, and so on. [Read more…]

Many older estate plans have an unnecessary trust

An estate planning technique that was very popular some years ago is still present in many people’s wills, especially if they haven’t reviewed their estate plan in a while. But this technique – called a “bypass trust” – might now actually increase taxes rather than decrease them for many people, as a result of changes in the law in the last few years. If you haven’t reviewed your estate plan recently, now is a good time.

Not long ago, the federal estate tax affected even relatively small estates, and it was a big problem. One solution was to provide that, when the first spouse died, many assets would go into a trust. The trust would take care of the surviving spouse, and when he or she died, the assets would go to the children. The assets in the trust would escape, or “bypass,” the estate tax.

Now, however, the federal estate tax only affects estates worth well over $5 million (and, if handled properly, couples worth more than $10 million). So in the vast majority of cases, these bypass trusts are no longer necessary. [Read more…]

Residents of care facilities can still vote – here’s how

Voting is the foundation of any democratic system, but it isn’t easy if you’re in a long-term care facility. Residents of nursing, assisted living and other facilities face a number of challenges in voting, from registering to actually casting a ballot.

When you move into a nursing home or assisted living residence, your address changes, which means you’ll probably need to re-register to vote based on your new address. You can register in person, by mail, or, in many cases, online.

You can often register in person at your local elections office or your local motor vehicle department office. For more information on where to register, go to: http://tinyurl.com/lw-where-to-register. [Read more…]

Avoid this new Medicare ‘trap’

When Judy Hanttula came home from the hospital after surgery last November, her doctor’s office called with bad news: Records showed that even though Judy had signed up for Original Medicare, she was nevertheless enrolled in a Medicare Advantage plan.

Original Medicare wouldn’t pay for the surgery because she now had an Advantage plan, and the Advantage plan wouldn’t pay for it because her doctor and hospital weren’t in its network. So Judy was on the hook for more than $16,500.

After more than five hours of making phone calls, Judy discovered what had happened. Because she had individual coverage through Blue Cross Blue Shield before she became eligible for Medicare, the company had automatically signed her up for its own Medicare Advantage plan. Blue Cross had apparently notified Judy of this in a letter. But because Judy had already signed up for Original Medicare, and because she was being deluged with letters from health plans at the time, she ignored it, not realizing it was important. [Read more…]

How Medicaid’s look-back period works

Medicaid’s look-back period can be confusing, but it’s important because it can have a very significant effect on your ability to pay for long-term care.

Unlike Medicare, Medicaid is a system that’s available only to people who have very few assets. As a result, the government is concerned that people will “game the system” by giving away all their assets to family members and then applying for Medicaid shortly afterward. That’s obviously not fair to the taxpayers who support the system.

So Medicaid imposes a penalty on people who transfer assets without receiving fair value in return. [Read more…]

Guardianship abuse leads to calls for reform

The growing problem of adult guardianship abuse is giving rise to calls for reform, as vulnerable elderly people caught up in this system sometimes end up being harmed and exploited by the very process that’s supposed to protect them.

A guardian is someone appointed by a court to make decisions on behalf of an incapacitated person, known as a “ward.” The process usually starts when a family member or social worker notifies the court that someone can no longer take care of himself or herself. If the court decides that the person is incapacitated, it often appoints a family member as guardian. However, if the family can’t agree on a guardian, or there’s no family member to serve, the court may appoint a public guardian. Public guardians are supposed to be neutral individuals hired to act in the ward’s best interest. [Read more…]

Has Medicare dropped coverage of your drugs?

Medicare prescription drug plans can change which drugs they cover, possibly leaving you without coverage for a drug you need. Or you might switch plans, and find that your new plan doesn’t cover your medication at all. In these circumstances, it’s good to know that Medicare drug plans are required to offer you a 30-day transition supply of the drug you’re taking.

All Medicare Part D plans must offer these transition refills, including Medicare Advantage plans with prescription drug coverage. Plans must provide a 30-day supply of an ongoing medication (unless a lesser amount is prescribed) within the first 90 days of plan membership or within the first 90 days of the new contract year. [Read more…]

What you need to know about required distributions from your IRA or 401(k)

The oldest of America’s 75 million baby boomers are turning 70 this year. That means the IRS will soon be requiring them to start cashing out their tax-deferred retirement savings accounts. How you handle these withdrawals can have a profound effect on your own retirement and on what you leave to your heirs.

As a general rule, if you don’t need the money in these accounts to live on, it can be wise to keep as much as possible in them, rather than withdrawing it. This can reduce your income taxes, plus there can be significant tax advantages in leaving money to your heirs in a tax-sheltered account rather than giving it to them outright.

Here’s a look at the rules: Once you turn age 70½, the IRS requires you to take “required minimum distributions,” or RMDs, from your IRA and 401(k) accounts. You’ll also have to pay income tax on these withdrawals. [Read more…]

Be careful if different people handle your finances and health care

It’s not uncommon for seniors to name one person in their power of attorney document to handle their finances if they become incapacitated, and to name someone else to make decisions for them in their health care proxy.

For instance, a senior might live with one child or be very close to him or her, and trust that child to make medical decisions – because the child is familiar with the senior’s day-to-day health issues. On the other hand, that child might be bad with finances, or another child might simply have a much more helpful financial background or a greater willingness to handle bills, taxes and investments.

That’s fine – as long as the two get along and agree on everything. A problem can arise, though, if the two ever disagree. That’s because a child making health care decisions might not be able to put them into effect unless the other child agrees to pay for them. [Read more…]

Social Security can be seized to pay debts – sometimes

If you don’t pay your debts, creditors can generally obtain a court order to garnish your wages. But what if your income comes from Social Security? In that case, the answer is a bit more complicated.

For most types of debts (including credit cards, medical bills, and personal loans), Social Security benefits cannot legally be garnished to pay them off. But how this actually works in practice can be tricky.

Suppose you receive $1,500 a month in Social Security, and have it directly deposited in your bank account. If a creditor tries to freeze your account, the bank must allow you access to any Social Security funds deposited within the last two months. So the bank would have to allow you access to $3,000 in your account. [Read more…]

Long-term care premiums dip for men, rise for women

On average, long-term care premiums are decreasing for men and increasing for women, according to a study by the American Association for Long-Term Care Insurance, an industry trade group.

For instance, a healthy 55-year-old man can expect to pay an average of $1,015 annually for a new policy offering $164,000 in long-term care benefits, which is down 4.2 percent from last year, according to the group.

But for a woman in the same situation, the average premium would be $1,490 – an increase of 7.2 percent over last year.   [Read more…]

Medicare now covers conversations about end-of-life care

Did you know that 40 percent of people over age 65 haven’t written down their wishes regarding life support and other end-of-life treatment? One reason for this may be that people haven’t had a conversation with their doctor about the options that are available.

In the past, Medicare didn’t cover these doctor-patient conversations – except during the patient’s initial “Welcome to Medicare” visit, a time when the topic might not seem very relevant.

Under new regulations, however, Medicare will cover these conversations at any time. [Read more…]

What you need to know if you’re an agent under a power of attorney

If someone has named you as an agent under a durable power of attorney, you’ll be allowed to handle that person’s finances. (The person who signs the power of attorney is known as the “principal”; you’ll be known as the agent or “attorney-in-fact.”) Here are answers to some questions you might have:

What are my duties?

You’re responsible for handling the principal’s financial affairs. Generally, you can step into his or her shoes and take whatever investment and spending measures the principal would ordinarily take. This may include opening bank accounts, withdrawing funds, trading stocks, paying bills, and cashing checks. Read the power of attorney document carefully; it might give you other powers (such as making gifts), or place certain limits on your powers. Note that any financial steps you take must be consistent with your role as a “fiduciary.” [Read more…]

Retiring abroad? Check your long-term care policy

If you’re thinking of retiring abroad, and you want to purchase (or have already purchased) long-term care insurance, be sure to read the fine print on your policy.

Not all policies cover care in other countries, and even if they do, the benefits are often reduced. For example, one large insurer pays only 50 percent of the nursing home benefit if your care is received outside the U.S. [Read more…]

Long-term care insurance deductions increased for 2016

The amount you can deduct on your taxes as a result of buying long-term care insurance has been increased by the IRS for 2016.

If you itemize your deductions, you can generally claim a deduction if your premiums, together with your other unreimbursed medical expenses, amount to more than 10% of your adjusted gross income (or 7.5% if you’re 65 or older). [Read more…]

Veterans face new limits on long-term care help

The U.S. Department of Veterans Affairs offers a pension benefit to low-income veterans (and their spouses) who are in a nursing home or who need help at home with everyday tasks such as dressing or bathing. The program is called “Aid and Attendance.”

Unfortunately for many veterans, the government recently proposed new regulations that will tighten the qualification rules and impose a look-back period and transfer penalties similar to those under Medicaid. As a result of these changes, anyone who might be eligible for Aid and Attendance should probably talk to a lawyer about how to proceed.

In the past, veterans or surviving spouses applying for Aid and Attendance had to meet certain asset limits. Different offices used different limits, but $80,000 worth of assets was a common ceiling above which benefits could be denied. However, a veteran or spouse could give away assets to family members in order to qualify, without penalty. [Read more…]

New technique to qualify for Medicaid more quickly

A recent court decision may make it easier for seniors to use short-term, immediate annuities to qualify for Medicaid more quickly.

In general, people who go to a nursing home must spend down their resources before becoming eligible for Medicaid. If you transfer your assets rather than spending them down (such as by making gifts to family members), that triggers a penalty period during which you’re ineligible for Medicaid benefits, even if you would otherwise qualify.

If one spouse goes into a nursing home, the other spouse is generally allowed to keep a certain amount of assets to live on. However, if a couple owns more than this “asset allowance,” they must spend down any additional assets before applying. [Read more…]

Major changes to Social Security may require taking action now

Two Social Security strategies that many married couples have been using to maximize their benefits are being eliminated, as a result of the federal budget deal that President Obama signed into law in November.

In the past, these strategies could be worth tens of thousands of dollars over a lifetime for some couples. The fact that they are being phased out means that many seniors should take action now, before the changes take effect, to reduce the impact. Other seniors may need to reconsider their long-term retirement plans.

The strategies that are being eliminated are: [Read more…]

Your IRA can affect your Medicaid eligibility

When you’re planning for Medicaid coverage of nursing home care, it’s important to take any IRAs you own into account.

Medicaid applicants can retain only a small amount of assets ($2,000 in most states) in order to be eligible for benefits. Certain assets may be exempt from this rule. Whether your IRA is exempt often depends on whether it is in “payout status.”

You can put your IRA into payout status starting at age 59½ if you elect to take regular, periodic distributions based on life expectancy tables. At age 70½, you’re required to put your IRA into payout status. [Read more…]

Medicaid helps children who live with aging parents

In most states, if you give your house to your children (or to someone else) and then apply for Medicaid coverage of nursing home care, you can be disqualified for a long period of time. That’s because you’re supposed to spend down your assets on your own care before applying for Medicaid, not give them away.

But there is an important exception that allows you to give your home to your children in certain circumstances. [Read more…]

New law warns seniors of Medicare nursing home loophole

A new federal law will help many seniors with a costly Medicare loophole that often results in their not being covered for a stay in a nursing home. It won’t make the stay covered, but it will at least put seniors on notice if a stay isn’t covered, so they can plan accordingly and won’t be hit with a nasty surprise.

Here’s the problem: Medicare covers nursing home stays for the first 20 days, so long as the patient was first admitted to a hospital as an inpatient for at least three days. But a lot of people who spend three days in a hospital later discover that they were never actually “admitted.” Rather, they were merely kept in the hospital “under observation.” As a result, the nursing home stay afterward isn’t covered. [Read more…]

Make sure your loved ones can get your medical info

If you’re in the hospital, you probably want certain family members and trusted friends to be able to get information about your condition or prognosis. But to make sure this happens, you may need to plan ahead.

A federal law called HIPAA (the Health Insurance Portability and Accountability Act) is designed to protect your health care privacy, and says that medical personnel can’t disclose your health care information to unauthorized people. Only a small number of people are authorized under HIPAA … so if you want other people to know about your condition, you have to authorize them in advance. [Read more…]

What to do if you have an Obamacare plan and become eligible for Medicare

If you or someone you know has a marketplace health care plan under the Affordable Care Act (an “Obamacare” plan), and you’ve reached the age of 65 or are close to it, it’s important to look carefully at your options. Not making the right decision could be costly.

In the vast majority of cases, the smart approach is to terminate the Obamacare plan and sign up for Medicare.

But many people are unaware of this fact, because there’s no warning given to such consumers that they have an important decision to make.  [Read more…]