The Potential Cost of Wedded Bliss

When people marry for the second, third, or fourth (or more) time, losing assets to pay for their new spouse’s serious illness is probably the last thing on their minds when they say “I do.” But that could very well happen.

Current costs for long-term care facilities can run between $70,000 – $150,000 annually. Studies show that 70% of Americans will need that kind of care, perhaps for three years or longer, in their life.

If one spouse in a marriage becomes ill, the assets of both spouses are, by and large, required to be spent on the ill spouse’s care before Medicaid benefits become available. This could be a big problem, especially if money that the well spouse had saved for her children’s’ inheritances goes to pay for the ill new spouse’s care instead.

With careful planning, this can be avoided. Financial arrangements can be made to protect the estate of the well spouse and to ensure that the spouse who needs care will be responsible to pay his or her own way.

The benefits rules do provide that the spouse who does not need care yet may keep an allowance of a certain sum for that spouse’s benefit. This is known as the “Community Spouse Resource Allowance” (CSRA). But many find that the CSRA is too small to permit the well spouse to maintain their standard of living, pay for retirement, and still leave enough for the children to inherit.

Any planning or shifting of assets must be done very carefully and only after consulting with experienced professionals knowledgeable about Medicaid asset protection strategies.

The Medicaid rules heavily penalize transfers of assets made without receiving value in return. Gifts, in other words. Assets can be protected, though, by a number of strategies that are permitted by the Medicaid rules. Some or all of the well spouse’s assets could buy a Medicaid-compliant annuity. This would provide an income stream for the well spouse, without the assets being otherwise deemed available to pay for the ill spouse’s care.

In turn, the assets of the spouse needing care could be transferred to people whom that person especially trusts: a trustee, or an agent for financial affairs, or a family member or beneficiary. That kind of transfer would be subject to penalty, but planned-for, using the strategies permitted under the Medicaid rules. Some relief from penalties can be achieved using existing Medicaid rules.  

There are also insurance products available to provide for long-term care coverage, which any newly married couple—or everybody, really—ought to consider. Find advice on various insurance options here.

The best strategy of all, is to consult an experienced elder law attorney . The sooner the consult, the more options available and the more money that can be saved.

When we embark on the adventure of marriage, nobody can tell what the future has in store. But with thoughtful planning, assisted by qualified elder law attorneys, you can relax and let the nuptial celebrations begin.

If you would like to schedule a consultation to learn more and begin implementing planning to protect your assets and family, contact us at 718-979-7477.

How to Steer Clear of Probate Court

Many people have been told that it is important for people to “avoid probate.” However, just because people may have heard that term, doesn’t mean they know exactly what probate means, why it can be a problem or how to avoid it successfully.

What is Probate?

The term probate most literally means “to prove” a will. Today it covers the entire legal process necessary to settle a person’s estate after they die. The appointed representative (usually a family member) opens the probate case in court. With the court’s help, they will work through all of the financial business that the decedent left behind. For example, probate includes disposing of personal property, money, real property or anything else that the deceased owned at the time of their death. Probate also deals with any debts that were in existence at the time of death.

Why is Probate Such a Negative Thing?

Probate is not inherently evil. It is simply a system that was created to oversee the process of identifying and inventorying the deceased person's property and settlement of the estate. Here’s why you should avoid probate, if possible:

Lack of Privacy

Probate cases are filed in the court and are in the public record. If for any reason a person wants to maintain a sense of privacy after they die, it could be a good idea to avoid probating the estate in court. Famous people or other potentially controversial people usually don’t want their financial and family affairs dragged out into the open.

Probate Can Create Family Disagreements

One reason that wills and estates probate takes place in court is to allow interested persons the chance to represent their claim on the estate by challenging or contesting a will that does not favor them. For people with complicated family dynamics, unpopular second marriages or estranged loved ones, avoiding probate should be a top priority. When an estate is executed through non-probate channels, it becomes much less likely that the will is successfully challenged.

Probate is Slow

Like most things that end up in court, probate can be time-consuming. In more complex estates, the entire process can last months or years. Moreover, while the family waits for this time to pass, the decedent’s assets or property may be slowly losing value or be lost completely.

Probate is Costly

Probating an estate requires the help of a competent probate lawyer to facilitate the matter. Since the process requires court appearances and extensive paperwork, the legal fees can mount up quickly. You can avoid much or all of this cost with proper pre-planning.

How Can Families Prevent the Need for Probate?

Creating a smart estate plan is the best way to avoid probate. You and your attorney can work together to draft the proper legal documents and carefully time asset transfers. 

Trust Planning

A trust is an instrument which dictates the management or distribution of property. The property is transferred in title to the trust during the owner’s lifetime. The property owner also chooses someone to act as trustee, an appointed fiduciary who will manage the trust property and any distributions after the death of the trust’s creator.

With a trust in place, there is no need to involve the court in any way. There is nothing to file, and it does not require the probate court.

Joint Title

Another way to avoid probate hassles is by placing your assets into joint ownership with your future beneficiaries. This way, when you pass away, the ownership interest will automatically transfer to the joint owner.

Payable-On-Death and Transfer-On-Death

Payments on death accounts (POD) have a designation which names a person who will receive the assets in the account when the original account owner dies. At the same time, transfer on death (TOD) is a designation on the title or deed to a piece of real estate or a car which will automatically change ownership once the owner dies.

Don’t Be Tempted to Give Away Your Assets

Some people assume that the easiest way to avoid probate is to give everything away before you die. However, doing this could cause problems for seniors when they may need to qualify for assistance for long-term care.

Hopefully, these tips will help you and your family plan responsibly for the future.

Our firm specializes in trust planning and helping you avoid probate. Contact our office to learn more or to schedule your consultation.

The Senior Safe Act: Financial Protection for Elders

The Senior Safe Act, signed into law by President Trump in 2018, is designed to protect our elders from financial abuse from either within a family or support system, or by scam artists preying upon them. Tens of billions of dollars each year are illegally taken from US seniors and these numbers only reflect the crimes being reported.

Issue and Percentage of Cases Reported

  • Third-party abuse/exploitation: 27%

  • Account distributions: 26%

  • Family member, trustee or power of attorney taking advantage: 23%

  • Diminished capacity: 12%

  • Combined diminished capacity and third-party abuse: 12%

  • Fraud: 6.30%

  • Elder exploitation: 5.70%

  • Friend, housekeeper or caretaker taking advantage: <1%

  • Excessive withdrawals: <1%

SOURCE: North American Securities Administrators Association

Often a senior does not report financial abuse or identity theft because they are unaware, embarrassed, or worse, they think that someone will deem them mentally unfit and they might be “put away” as a consequence of having been exploited.  While these are real issues and fears experienced by elderly people, the scale of financial exploitation is so great it has to be addressed.  This is why the enacted Senior Safe Act, coupled with the Elder Abuse Prevention and Prosecution Act (signed into law October 2017), as well as two Financial Industry Regulatory Authority (FINRA) rule changes (which have already taken effect), will provide the legal protections and financial industry framework our senior population need and deserve. One of the most important aspects of the new FINRA rules is the ability for member firms to place a temporary hold on disbursement of funds or securities when there is a reasonable belief that a senior is experiencing financial exploitation, thus protecting assets before they are taken from the senior. This new rule, in conjunction with the Senior Safe Act, can help keep seniors’ assets from vanishing.

The Senior Safe Act, which was originally initiated by Rep. Bruce Poliquin of Maine, is based on the already existing program in that state with the same name. Similar to the Maine program, the federal legislation allows insurance and financial advisors to report incidence of suspected cases of financial fraud involving their senior clients to financial institutions, who in turn could pass the suspicions on to the proper authorities.  

As long as the insurance and financial institutions elevate concerns in good faith and their employees have received the proper training, the law will protect the institution and its workers from liability in a civil or administrative proceeding where information had been presented to authorities in the hopes of protecting a senior client from financial abuses or identity theft. The training includes a collaborative effort between state and federal regulators, financial firms and legal organizations, credit unions, broker-dealers, insurance companies and agencies, and investment advisers to educate employees on how to spot and report suspected elder financial abuse.

Seniors who are most active in communicating with a trusted professional third party about their finances are the least likely to fall victim to financial fraud. Counter-intuitively, most financial fraud happens to seniors who do not display signs of cognitive impairment. Senior participation with professional and properly trained employees of financial institutions is the back-story of this bill. All of the legal protections of the Senior Safe Act will achieve nothing if there is no participation by seniors.

It is advisable to find a trusted professional adviser to help protect against financial abuse and identity theft. The Senior Safe Act should make it much easier for seniors to find a properly trained individual who will monitor their financial accounts and be able to report signs of potential trouble to authorities. That trusted individual will be able to identify the warning signs of common scams and educate seniors as to how best to protect themselves; such as how often to check credit ratings for signs of identity theft, reviewing financial statements, identifying common phone and online scams, and more. The laws are in place to help seniors stay protected. Get protected by becoming more involved in your own personal financial world.

Contact our office to schedule an appointment to discuss how we can help you with your planning.

Happy 2019!

Holiday Wishes & Office Hours

We wish you and yours a happy and healthy holiday season, and we look forward to serving you in the New Year!

As the holidays are approaching, we wanted to reach out to let you know about our office closure. We will be closed December 21 through January 1 for the Christmas and New Year’s holidays to allow our team to spend time with family and loved ones.

Common Mistakes When Planning for a Disabled Family Member

There are 58 million Americans five years of age or older that are identified as special needs making them the largest single minority in this country. The majority of federal and state benefits available to help persons with disabilities are needs based, meaning income and assets are strictly limited and can often by misinterpreted, resulting in costly mistakes.

One of the most common mistakes a parent or loved one makes is disinheriting their family member with special needs. The reason is often because the family believes other siblings will step in and take care of the disabled family member. However, this can lead to numerous problems, especially if the non-disabled sibling gets sued, divorced, or otherwise loses the money left to them.

Another common mistake is failing to create a properly drafted trust to qualify the disabled family member for government benefits than can help pay for costly medical and/or living expenses. Qualifications for government benefits like Supplemental Security Income (SSI) or Medicaid dictate that the disabled individual has no more than $2,000 in assets. If your disabled loved one has assets above this threshold, they will have to be "spent down" to qualify for government assistance or otherwise protected in a properly drafted trust.

Well-meaning friends and extended family may not understand the complexity of disability benefits and give a disabled loved one money or assets that would disqualify them for state and federal benefits. It is especially difficult if the disabled person already has benefits and becomes disqualified because the "needs based" review discovered additional funding putting them over the $2,000 asset limit. It is best to avoid this situation as it is a big hassle to re-qualify your dependent for government assistance.

Be wary of crowdfunding sites like GoFundMe to benefit your loved one with special needs. In the absence of qualified legal planning, these donations can disqualify SSI, Medicaid, food stamps and section 8 housing. A well-meaning fund campaign could cut the benefits of a disabled person and make their living circumstances worse than before. 

What to do? Plan ahead! There are several ways to provide for your special needs dependent and stay within government guidelines for additional benefits. One of the best ways is to establish a special needs trust that has the specific purpose of supplementing federal and state assistance programs. By doing so, a disabled loved one can benefit from government programs, and have additional money to supplement what those programs provide.

There are strict rules when it comes to creating special needs trusts for a disabled family member. There are also restrictions on what the money can be used for. We can help you determine what type of trust is best based on you and your loved one’s particular circumstances. Give us a call at your convenience to set up a time to discuss your situation further.

Appropriate Documents For End-of-Life Care Decisions

You may think your living will is in order, including instructions regarding resuscitation commonly referred to as a DNR (do not resuscitate). While your wishes in a living will may be appropriately documented, that does not guarantee the instructions will be carried out as you stated. The frightening truth is that mistakes about your end-of-life instructions are made while you are at your most vulnerable. Dr. Monica Williams-Murphy, medical director of advance-care planning and end-of-life education for Huntsville Hospital Health System in Alabama has said, “Unfortunately, misunderstandings involving documents meant to guide end-of-life decision-making are surprisingly common.”

The underlying problem is that doctors and nurses have little if any training at all in understanding and interpreting living wills, DNR orders, and Physician Orders for Life-Sustaining Treatment (POLST) forms. Couple the medical professionals' lack of training with communication breakdowns in high-stress environments like a hospital emergency ward where life and death decisions are often made within minutes, and you have scenarios that can lead to disastrous consequences.

In some instances, mix-ups in end-of-life document interpretation have seen doctors resuscitate patients that do not wish to be. In other cases, medical personnel may not revive a patient when there is the instruction to do so resulting in their death. Still other cases of "near misses" occur where problems were identified and corrected before there was a chance to cause permanent harm. 

There are some frightening worst-case scenarios, yet you are still better off with legal end-of-life documents than without them. It is imperative to understand the differences between them and at what point in your life you may change your choices based on your age or overall health. To understand all of the options available it’s important to meet with trusted counsel for document preparation and to review your documented decisions often as you age. In particular, have discussions with your physician and your appointed medical decision-maker about your end-of-life documents and reiterate what your expectations are. These discussions bring about an understanding of your choices before you may have an unforeseen adverse health event, and provides you the best advocates while you are unable to speak for yourself.

There are several documents that may be appropriate as part of your overall plan. Each of those are discussed below, and we are available to answer any questions you may have about them.

A living will is a document that allows you to express your wishes about your end-of-life care. For example, you can document whether you want to be given food and hydration to be kept comfortable, or whether you want to be kept alive by artificial means.

A living will is not a binding medical order and thus will allow medical staff to interpret the document based on the situation at hand. Input from your family and your designated living will appointee are also taken into account in your best decision making strategy while you are incapacitated. A living will becomes activated when a person is terminally ill and unconscious or in a permanent vegetative state. Terminal illness is defined as an illness from which a person is not expected to recover even though they are receiving treatment. If your illness can be treated this would be regarded as a critical but not terminal illness and would not activate the terms of your living will.

Do not resuscitate orders (DNRs) are binding medical orders that are signed by a physician. This order has a specific application to cardiopulmonary resuscitation (CPR) and directs medical professionals to either administer chest compression techniques or not in the event you stop breathing or your heart stops beating. While your living will may express a preference regarding CPR it is not the same thing as a DNR order. A DNR order is specifically for a person who has gone into cardiac arrest and has no application to other medical assistance such as mechanical ventilation, defibrillation, intubation, medical testing, intravenous antibiotic or other medical treatments. Unfortunately, many DNR orders are wrongly interpreted by medical professionals to mean not to treat at all.

Physician orders for life-sustaining treatment forms (POLST forms) are specific sets of medical orders for a seriously ill or frail patient who may not survive a year. This form must be signed by a physician, physician assistant or nurse practitioner to be legally binding. The form will vary from state to state and of the three instructive documents the POLST is the most detailed about a patient’s prognosis, goals, and values, as well as the potential benefits and risks various treatment options may bring about.

A power of attorney for health care decision, sometimes referred to as a health care directive, allows you to name an agent to make decisions for you if you are unable to. Unlike a living will which only covers end-of-life decisions, a power of attorney for health care decisions allows the agent to act at any time that you cannot make decisions for yourself.

We can help you determine which documents best suit your current needs, and help you clearly state your wishes in those documents. We look forward to hearing from you and helping you with these important planning steps.

Creative Financial Approaches to Long Term Care Services

Long term care insurance was sold aggressively in the 1980s and thereafter to offset the costs of seniors needing to live in a nursing home, assisted living or needing at home health care. Now, however, the business of long term care insurance has dramatically changed. What was once over 100 insurers providing LTC policy for sale has shrunk to a pool of less than twenty insurers who continue to sell the health care product. The big financial problem was that the majority of insurers had badly underestimated the longevity of these long term care policy holders and how many claims would be filed during their lifetime. The model became unsustainable from a business perspective.

As reported by the Wall Street Journal, the industry is now in financial turmoil and has turned to the old adage of privatize the gains and socialize the losses; the translation being that millions of people age sixty-five or older with long term care policies are facing steep rate increases. It is not uncommon for a policy holder to face a fifty percent increase in their premium while some of the worst cases are upwards of ninety percent. Because the industry itself used such poor benchmarks and miscalculated projections, policy holders are seemingly left with two choices: Pay the money or leave your coverage after paying into it for years, and sometimes decades.

What if you want a different choice? Everyone would agree that being priced gouged for premiums as you age is inherently unconscionable but if the policy is discontinued what then will happen to the peace of mind long term care brings? What was once the safety net of senior aging care (without becoming a burden to family members) is rapidly disappearing.

CNBC reported about this very issue and suggests getting financially creative for long term care. There is a surprising source that you can tap in order to maintain protection for yourself but it requires planning, professional help and time. Do not delay.

The financially creative premise is to become asset poor, impoverished, and qualify for Medicaid which pays for nursing home care and services. This does not mean the legacy you built during your lifetime will not go to your selected inheritors. On the contrary the assets you own must move out of your name to qualify for Medicaid. The assets will then shift to your designated beneficiary since to qualify you as an individual cannot have over $2,000 in assets.

To begin you will need to retain the services of a qualified elder law attorney, who may also bring in an accountant and a financial advisor. Ideally, you will be able to wait five years before needing long term care and the help of Medicaid. If there are assets transferred during the “five year lookback” it may be subject to penalties or make the applicant ineligible for some period of time requiring them to pay out of pocket.

Now with time on your side it becomes critical to select the right vehicle for transfer. These can be annuities but more often tend to be irrevocable trusts. The assets in the irrevocable trust are no longer under the control of the older person and can provide protection from certain creditors. The vehicle chosen for transfer of assets is very important not only for the older individual but the recipient as well. In the case of an outright gift of appreciated assets (i.e. stocks or real property) there would be no stepped up cost basis which could lead to crushing capital gains taxes when it is time to sell. An elder law attorney with input from your accountant and financial planner can help you choose the right transfer of wealth plan.

Elder law attorneys are closely watching changes in Medicaid,, as Congress is often proposing legislation to change the program.. Be certain your elder law attorney is up to speed on the current requirements, as the eligibility requirements can change very quickly in each state, and sometimes each county.

Though you may never have thought you would find yourself creatively trying to qualify for Medicaid while protecting assets, the current long term care premium prices preclude a large portion of seniors from being able to pay the cost of the policy. Genworth Financial reports the national median cost of a private nursing home room to be $97,455 a year. It doesn’t take long to be wiped out at that cost without long term care. Medicaid may be your solution and time is of the essence for planning.

Contact our office today and schedule an appointment to discuss how we can help you with your planning.

An Opportunity to Say "Thank You"

As Thanksgiving approaches, we wanted to take a moment to say how thankful we are for our clients and colleagues and the confidence you have shown in letting us serve you and work with you. We hope you have a wonderful Thanksgiving and we look forward to working with you in the future.

As always, please don’t hesitate to reach out if we can be of assistance in any way.

Happy Thanksgiving!