The Petrosewicz Law Firm Estate Planning Blog

Estate Planning When a Family Member Is Disabled

This kind of mistake can wreak havoc on many lives, which is why it is so important to work with an experienced estate planning attorney who is knowledgeable about special needs planning. The article, “Crafting an estate plan to include disabled family members” from The Ledger explains what is involved in special needs planning.

Supplemental Security Income (SSI) is a federal program that pays monthly benefits to disabled or blind adults and children. To qualify, an individual must have fewer than $2,000 of countable assets and very limited income. Medicaid is a Federal and State health insurance program that helps people with limited assets and income pay for their medical costs.

While it is common for people to name their spouse or children as beneficiaries in their estate plan, if your spouse or child is disabled and receiving government benefits, an inheritance will result in their loss of benefits, unless special planning is done.

A Special Needs Trust (SNT) is designed for disabled beneficiaries so that cash, real property, or any other assets are available for the person’s benefit, while still allowing the disabled person to receive their means-based government benefits.

There are several different ways to accomplish this, depending on your family’s situation. One way is to have a testamentary Special Needs Trust created within a will or trust that goes into effect, when the creator of the trust or the will dies. A SNT can also be created while you are living and can be funded, instead of waiting for it to go into effect at your death.

A third-party SNT can be named as the beneficiary of life insurance policies and retirement accounts, investment accounts or real property. The third-party SNT assets that are not used for the disabled beneficiary during their lifetime, can pass to non-disabled beneficiaries upon the death of the disabled beneficiary.

These assets will be free from Medicaid recovery efforts, since the property used to set up the third party SNT did not originally belong to the disabled beneficiary.

A first party SNT is set up and funded with assets that do belong to a disabled person, and no other funds can be contributed to this type of trust by any other donors. These are often used when a large settlement following an injury is awarded. In Texas and in other states, first-party SNTs are subject to Medicaid payback to reimburse the state.

Special needs trusts are complicated trusts and require the knowledge of an experienced attorney who devotes most, if not all, of their practice to SNTs and trust and estate planning.

The Petrosewicz Law Firm can assist you with special needs planning.  Contact us today at (281) 344-9455 or [email protected]. 

Reference: The Ledger (May 2, 2019) “Crafting an estate plan to include disabled family members”

Worried about a Spouse Needing Nursing Home Care?

The cost of nursing home care is worrisome for those who are married when a spouse has to go to a nursing home. In the example above, Tom has had some major health issues in the past year and Louise is no longer able to care for him at home.

In this case, the couple lives in Texas where the average cost of nursing home care statewide is $63,017.25 a year ($172.65 per day). The state has a Medicaid program that is a joint state-federal program that will pay for nursing facility care, if a person meets both the medical and financial criteria.

Tom has met one of the major Medicaid threshold requirements because he meets the “medical necessity” criteria.  This means that a doctor has certified that due to illness, injury or disability, Tom requires the level of care and services that can only be provided in a nursing home.

What will happen to their assets?

In 1988, Congress passed the Medicare Catastrophic Coverage Act, which created a process of allocating income and resources between a spouse who needs to live in an institutional setting and the spouse who can continue to remain in a community setting.

Tom and Louise’s resources are divided into two buckets: one that is exempt and the second that is non-exempt.

The family home, car, and household goods and personal effects are exempt or non-countable assets.

Almost everything else, whether they own it together or individually, is considered non-exempt. In Texas, IRAs are the exception if the owner of the IRA is over 70½ years old. However, that is not the same in every state.

Louise is entitled to keep one half of what they own, up to a maximum of $126,420, as of January 1, 2019. This is her “spousal protected resource allowance.”  However, that allowance may be expanded above $126,420 when the couple’s combined income is below a certain threshold.

Anything else they own is used to pay for Tom’s nursing facility care or to purchase a very select group of “exempt” assets, like a replacement car or the cost of a prepaid burial.

If they have given money away in an attempt to preserve some of their assets within the last 5 years, a penalty is imposed, unless an exception applies. They would have needed to give away their resources at least five years preceding an application for Medicaid for there to be no transfer of assets penalty.

Louise needs income to live on so that she is not impoverished. She is entitled to a minimum monthly maintenance needs allowance of $3,160.50. These numbers are federally adjusted yearly and are based on inflation.

To determine how much of Tom’s income Louise can keep, Medicaid looks at Louise’s Social Security benefits, Tom’s Social Security benefits, any pension either of the two may have and any other income sources. She can keep her income.  However, if the couple’s combined income is more than $3,160.50, Tom may have an applied income or co-payment to the nursing home.

Sounds scary? It is. This is why it is so important to do advance planning and have an ongoing working relationship with an attorney with experience in estate planning and elder law. There are changes over time to address the changing circumstances that life and aging presents.  Even if you have an immediate need for long term care and don’t have the luxury of planning in advance, you should still consult with an attorney with experience in estate planning and elder law.

The Petrosewicz Law Firm can assist you with your elder law needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Pittsburgh Post-Gazette (April 29, 2019) “Married and concerned about one of you going to a nursing home?”

Should My Estate Plan Include a Trust?

There are as many types of trusts, as there are reasons to have trusts. They all have benefits and drawbacks. What type of trust is best for you? The answer is best discussed in person with an estate planning attorney. However, an article from U.S. News & World Report titled “8 Things to Know About Trusts,” gives a good overview.

Revocable or Irrevocable? Revocable trusts are usually established for a person (the grantor) during their lifetime, and then pass assets to the named beneficiaries, when the grantor dies. The revocable trust allows for a fair amount of flexibility during the grantor’s lifetime. An irrevocable trust is harder to change, and in some cases cannot be changed or amended. Some states do allow the option of “decanting” trusts, that is, pouring over assets from one trust to another. You’ll want to work with an experienced estate planning attorney to be sure trusts are set up correctly and achieve the goals you want.

Trusts can protect assets. Irrevocable trusts are often used, when a grantor must go into a nursing home and the goal is to protect assets. However, this means that the grantor no longer has access to the money and has fundamentally given it away to the trust. Putting assets into an irrevocable trust is commonly done to preserve assets, when a person needs to become eligible for Medicaid.  The trust must be created and funded five years before applying for benefits. Irrevocable trusts can also be used to obtain veteran’s benefits, if they are asset-based. VA benefits have a three-year look-back period, as compared to Medicaid’s five-year look-back period.

Trusts can’t own retirement accounts. Trusts can own non-retirement bank accounts, life insurance policies, property and securities. However, retirement accounts become taxable immediately, if they are owned by a trust.

Trusts help avoid probate after the grantor’s death. Most people think of trusts for this purpose. Assets in a trust do not pass through probate, which is the process of settling an estate through the courts. Having someone named as a trustee, a trusted family member, friend or a financial institution, means that the assets can be managed for the beneficiaries, if they are not deemed able to manage the assets. Another good part about trusts: you can direct how and when the funds are to be distributed.

Trusts offer privacy. When a will is filed in the courthouse, it becomes part of the public record. Trusts are not, and that keeps assets and distribution plans private. A grantor could put real estate and other personal property into a trust and title of ownership would remain private.

Tax savings. Before the federal estate tax exemptions became so high, people would put assets into trusts to avoid taxation. However, state taxes may still be avoided, if the assets don’t reach state tax levels. You can also transfer funds into an irrevocable trust to transfer it to others, without making it become part of a taxable estate. This is something to discuss in detail with an estate planning attorney.

Irrevocable Trusts can be expensive. If you are considering an irrevocable trust as a means of controlling the cost of an estate, this is not the solution you are looking for. Trusts require careful administration, annual tax filings and other fees. You may also lose the advantage of long-term capital gains by putting assets into trusts, since they are taxed upon withdrawal, and usually based upon current market value. The marginal rates for trust income of all kinds apply at much lower levels, so that the highest marginal taxes will be paid on very low levels of income.

Work with an experienced trusts and estates lawyer. Trusts and their administration can be complex. Seek the help of a trusts and estates attorney, who will be able to factor in tax liability and the impact of the trusts on the rest of your estate plan. Remember that every state has its own laws about trusts. Finally, an estate plan needs to be updated every few years. For example, trusts that were set up for a far lower federal estate tax exemption several years ago are now out of date, and may not work to achieve their intended goal. The laws changes, and the role of trusts also changes.

The Petrosewicz Law Firm can assist you with your estate planning and trust needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: U.S. News & World Report (March 29, 2019) “8 Things to Know About Trusts”

Moving to a Care Community? Check the Fine Print

Reading the fine print when purchasing a home in a retirement community or a care community is intimidating. The typeface is tiny, you’ve got boxes to pack and movers to schedule and, well, you know the rest. What most people do, is hope for the best and sign. However, that can lead to trouble, advises Delco Times in the article “Planning Ahead: Moving to a care community? Read the agreement.”

If you don’t want to read the fine print or can’t make head or tails of what you are reading, one option is to ask your estate planning attorney to do so. Without someone reading through and understanding the contract, you and your family may be in for some unpleasant surprises. Here are some things to consider.

What kind of a community are you moving into? If you are moving to a Continuing Care or Life Care Community, your documents will probably have provisions regarding health insurance, entry fees, deposits, a schedule of costs, if you need additional services, fees for moving to a higher level of care and provisions for refunds and estate planning.

When you enter an Assisted Living facility, you may find yourself signing documents regarding everything from laundry policies, pharmacy choices, financial disclosures and statements of your rights as a resident. Not every document you sign will be critical, but you should understand everything you sign.

If moving into a nursing home that accepts Medicaid, you and your family need to know that nursing homes that accept Medicaid are not permitted to demand payment on admission from either an adult child or a power of attorney from their own funds. However, Texas does not yet have support provisions regarding children paying a parent’s medical expenses, called “filial responsibility.” However, you should speak with an elder law attorney if you are applying for Medicaid for a loved one, to make sure you have completed the Medicaid application correctly and are in full compliance with all of the requirements.

If your adult children ask you to sign documents and say “don’t worry” about what the documents are, you may want to sit down with an attorney to review the documents. When someone is not trained to review these documents, they won’t know what red flags to look for.

If someone signs the document who is not the applicant/future resident, that person may become responsible for the costs, depending upon what role you have when you sign: are you a guarantor or indemnitor? That person typically agrees to pay after the applicant/resident’s funds are exhausted. The payments may have to come from their own funds. Sometimes the “responsible party” is simply the person who handles business matters on the applicant’s behalf. You’ll want to be sure that the person signing the papers understands what they are agreeing to.

Almost all agreements will say that the applicant, or the person receiving services, is responsible for payment from their own assets. However, if someone signing the documents is power of attorney, they need to be mindful of what they are signing up for.

If possible, the person who will receive services should be the one who signs any paperwork, but only after a thorough review from an experienced attorney.

The Petrosewicz Law Firm can assist you with your Medicaid needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Delco Times (Feb. 5, 20-19) “Planning Ahead: Moving to a care community? Read the agreement”

How to Cope When the Diagnosis Is Dementia

A diagnosis of early onset Alzheimer’s is life changing. The story of a busy workaholic sales executive, as detailed in the article “Leading an Active Life with a Diagnosis of Dementia” from The New York Times, has no happy ending. However, it does point to a way forward.

The number of people with Alzheimer’s disease who are 65 and older is expected to soar to 7.1 million in 2025 and 13.8 million in 2050. That’s an increase from today, when 5.5 million suffer from the disease, according to the Alzheimer’s Association. Add to that 200,000 people younger than 65 who are estimated to have the disease, and that is not counting those with dementia from vascular disease, Lewy body, and other kinds of dementia.

There is the possibility, however, that people in the early stages of the disease can still pursue fulfilling lives. They must, however, make plans immediately for future care.

The first step is to create a team of professionals, including an estate planning attorney, the physician, a geriatric care manager and a financial planner. Trusted family members should be in on all planning to coordinate and oversee their work.

The challenging legal question is if a person with a diagnosis of dementia sign legal documents? These necessary documents include financial and health care powers of attorney, as well as a will. The person’s attorney may need to seek a clinical evaluation to determine whether the client still has the decision-making skills to permit them to sign documents.

It is necessary to act quickly, because most types of dementia progress over time. Having the person evaluated, won’t preclude anyone from challenging the documents but it is a strong step in their defense.

An advance health care directive must also be prepared. This typically provides guidance on end-of-life treatment. A person with dementia is capable of living a very long time with their condition. It would be wise to have them involved with the preparation of this document, as well as the decision-making process, while they are still cogent. Instructions can include details, like what they think they would want in terms of care setting or caregivers.

Planning to pay for long-term care is an important part of planning for a long life with dementia. For some people in the early stages, it makes sense to protect assets from long-term care costs. Medicaid, financed by state and federal governments, pays only for people with limited assets while state laws vary. This is an area where you need the help of an elder law attorney. Planning must also be done soon after diagnosis, since there is a five-year look-back and other penalties, if planning is not done on a timely basis.

Many Alzheimer’s Association chapters offer support groups and socialization for patients and caregivers. This is not a journey you want to take on your own and you don’t have to.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The New York Times (October 5, 2018) “Leading an Active Life with a Diagnosis of Dementia”

Getting Ready to Fly South? Estate Planning and Snowbirds

This is the time of year when people ,who can’t stand cold northern winters, start making their plans to head south to enjoy warmer climates. However, according to TBR Newsmedia’s article “Estate planning tips for snowbirds,” there are some legal matters that need to be addressed before heading south.

You’ll need to determine if you should see an attorney in your home state or in your winter residence, if you want to create estate planning documents and plan for care in the future.

In what state are you a legal resident? Some factors used to determine residency, include the amount of time spent in each state, your mailing address, what state issues your driver’s license, where your car is registered, where you vote and what address you use to file your income taxes.

Once you determine your state of residence, there are other considerations. Where do you plan on living in the future and where do you think you’ll receive healthcare? If you move south upon retirement but plan on heading back north when you are faced with health issues and need the support of family members, you need to consider those things when making your estate plan.

The laws governing Medicaid vary from state to state. You should have your documents reviewed by attorneys in both your northern and southern residences, to be sure that they comply with the law in both places.

There are also differences in the law for powers of attorney and advance directives, including health care proxies and living will documents. These are important documents and you’ll want to be sure they will work in both states.

For instance, in New York State, the person who is named to make medical decisions is called your agent, while that same role is called a surrogate in Florida. The term used under the law to name a default agent is proxy in Florida.  Although it seems simple, it could lead to confusion and a delay in decision-making at a time when minutes count.

The language listed in your power of attorney will differ state by state as well. If your agent is helping you with long-term care planning, this becomes especially important. You need to make sure that your power of attorney includes all possible powers your agent may need, regardless of whether you are paying privately or applying for Medicaid to cover costs.

Talk with an estate planning attorney about your travel plans and make sure that your documents are all in order, before taking off for a warm winter.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: TBR Newsmedia (Sep. 3, 2018) “Estate planning tips for snowbirds”

How Many Different Retirement Systems are There?

Most of us understand that after years of work we have paid into a system designed to help us when we retire, according to an article in newsok.com “The ABCs (And D’s) of Medicare and other retirement questions answered.”  However, the details of what you’re supposed to do and when can be a little overwhelming.

Both Social Security and Medicare are not programs that kick in automatically. They require recipients to take action. These systems may have started out simple. However, now they are complex and not so easy to navigate.

Medicare, Part A, also called original Medicare, is managed by Medicare and provides Medicare benefits and coverage for inpatient hospital care, inpatient stays in most skilled nursing facilities and hospice and home care services.

Part B is managed by Medicare and provides Medicare benefits for doctors and clinical lab services, outpatient and preventive care, home health care, screenings, surgical fees and supplies and physical and occupational therapy.

Medicare Part C, also known as Medicare Advantage, is a different way of receiving Medicare Part A and Part B coverage. Medicare Advantage Plans combine Part A and B together in one plan. They can also be combined with Part D prescription drug coverage, which is then considered a Medicare Advantage Prescription Drug (MA-PD) plan.

Those plans are offered as a stand-alone plan known as Medicare Part D Prescription Drug Plan (PDP) or can be combined with a Medicare Advantage Plan, also called a Medicare Advantage Prescription Drug (MA-PD) Plan. Part D plans help cover the cost of prescriptions, helping to lower some prescription costs and protecting against higher costs in the future.

That’s just for starters. There are also deadlines that must be met, or certain costs become higher.

Getting up to speed on all these systems before you have to make decisions, is the best way to prepare yourself. You’ll want the coverage that works best for your situation. Bear in mind that if you go the cheaper route in some of your choices, you may end up paying more over the long run. Be open to getting help from good sources and be wary of sales pitches.

The Petrosewicz Law Firm can assist you with your Medicaid needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: newsok.com (Sep. 3, 2018) “The ABCs (And D’s) of Medicare and other retirement questions answered”

Self-Directed Home Care? Could It Work for You?

There are programs that cater to seniors who would prefer to stay at home, says Next Avenue in the article “Does Self-Directed Long-Term Home Care Make Sense for You? Many retired Americans with disabilities don’t know that they have options and their adult children don’t know either.

When one woman sought long-term care for her 83-year-old father, she knew the options because she was a long-term care researcher for AARP’s Public Policy Institute. She’s been examining how older Americans can “self-direct” their own care, choosing from several options they can receive in their own homes.

Several states now provide innovative strategies to provide long-term care at home. They involve “person-centered” choices to Medicaid patients. Each state has these programs, although they vary in quality and scope.

One Texas woman had relied on home health care agencies. However, she found them inflexible and unreliable. She switched to her state’s self-directed program and found that by scheduling and paying her home-care providers as she wished, the services were provided to her liking.

A study by Matematica Policy Research found that people who were able to take charge of their care were more satisfied and experienced equally good or better outcomes. The idea of choosing your own mode of long-term care is an evolving trend. There are now more than one million people in more than 200 self-directed Medicaid and Veteran directed programs nationwide. Enrollment in these services has increased by more than 40% since 2011.

Self-directed programs are not for everyone, because they require the ability to manage the care and vet caregivers. Someone who is too ill or suffering from mental incapacity may not be able to handle this.

You’ll need to know what services are available locally before making a choice. For example, when is adult day care an option? How do you find a home care specialist who can do anything from basic homemaking to providing in-home nursing care?

The other drawback is that self-directed services are typically offered only through veterans and state Medicaid programs for low-income participants.

Most Americans who need long-term services must still pay for it themselves. You’ll need a family member with the tenacity and time or you can hire a geriatric care manager who will be able to determine needs and set up a care management plan. That person can help select the right professionals and coordinate services.

It may take some extra work, but the comfort of being at home is, for many, priceless.

Reference: Next Avenue (Aug. 13, 2018) “Does Self-Directed Long-Term Home Care Make Sense for You?”

The Ethics of Medicaid Planning

Medicaid often does not get a lot of attention, despite its importance. However, with some in Congress looking to make cuts to it as a way to reduce spending and taxes, Medicaid is back in the news on a regular basis.

One of the things the program does is pay for long-term care in nursing homes for those elderly people who cannot afford their own care.

That part of the program is under fire because some people essentially hide their assets to make it look like they cannot afford their own nursing home bills, so that Medicaid will pick up the tab.

Recently, The New York Times looked at the debate over the ethics of doing that in "The Ethics of Adjusting Your Assets to Qualify for Medicaid."

On one side of the debate are people who point out that those who can plan for Medicaid are wealthy enough to hire attorneys.  Therefore, they should not hide assets to take advantage of a program designed to help the poor.

On the other side, people point out that nursing home care is extremely expensive.  They believe that it is not fair for people to have to exhaust all of their assets, leaving nothing for their children to inherit, in order to have some of that care paid for by a program they fund with their taxes.

Whichever side you are on, it is important to know that if you do want to plan for Medicaid, then you need to see an elder law attorney about doing so and you need to do that long before you will ever need nursing home care.

The Petrosewicz Law Firm can assist you with your elder law needs.  Contact us today at (281) 344-9455 or [email protected].

Reference: New York Times (July 21, 2017) "The Ethics of Adjusting Your Assets to Qualify for Medicaid."

Does the Senate Bill Cut Medicaid?

Very little in government is ever straightforward.  One example is the Senate Republican plan to repeal and replace the Affordable Care Act.

A vote on the bill has been delayed.  However, it is likely to still come at some point in the future.  Therefore, what the bill proposes to do with Medicaid funding, is important for elderly people who rely on the program for their nursing home care.

On one side of the debate over the bill are Democrats, who claim that it will slash Medicaid spending. On the other side, are Republicans who claim that the bill will increase Medicaid funding, as Fox News reports in "Fact Check: Dem claims that Senate bill guts Medicaid ignore billions in new funding."

Which side is right depends entirely on how you look at the issue. If the Senate bill passes and eventually becomes law, then Medicaid funding would increase by $71 billion by 2026. However, if the Senate bill does not become law and the current law remains in place, then Medicaid funding would increase by $231 billion during the same time period.

Under either scenario, Medicaid funding increases.

The argument is over how much it should increase and whether any increases are enough to meet future costs.

In the current highly partisan climate, it can be difficult to understand what is going on, as politicians and the media discuss policy changes. For that reason, it is important to look carefully at the facts to determine what the real question is.

For Medicaid that question is this: are politicians making sure the program can continue to do what it was designed to do without the country going broke?

The Petrosewicz Law Firm can assist you with your Medicaid needs.  Contact us today at (281) 344-9455 or [email protected]. 

Reference: Fox News (June 27, 2017) "Fact Check: Dem claims that Senate bill guts Medicaid ignore billions in new funding."