All Posts By

Matt Leonard

FRAUD: The “F” Word of Estate Planning

By Uncategorized

Fraud is a label to run from – not walk from

As an attorney that practices in areas of law that have both local and national scope – reading and reviewing scholarly writings and recent case decisions is critical to staying current. From these readings, we come to learn and respect the work done by other attorneys and how they are best representing their clients and their interest.

One such article came across my desk entitled “Medicaid Planning Technique Didn’t Work Exactly as Intended” a link to the full article can be found HERE.

The article examines what could be best described as a case study of one attorneys recommendations to a client who was retained to assist the family with Medicaid planning and qualification. As the title infers, the plan did not work out as explained and the clients goals and objectives were not carried out with the suggested plan proposed and enacted by the attorney. Fraud ruins any thought of a clever estate plan – and once that genie is let out of the bottle – it is hard to get it back in.

If it seems too good to be true – it probably is

The case is a lesson for both client and attorney. Just because you can do something – does not always mean you should. Deciding on an estate plan with the goal of qualifying for Medicaid benefits is something that must weigh all of the factors and rules. Knowledge of family dynamic, conflicts, tensions, and history are as important as understanding the rules of Medicaid eligibility, assets and income.

Fraud is a badge that does not wash off easily. Having to defend yourself or others from being accused of absconding with the assets of an elderly loved one is not something anyone wants to envision. There are legal consequences – which translate into strained relationships and possibly property and certainly financial penalties with the ultimate loss of liberty.

The author of the article makes the following suggestions when selecting an elder law attorney to work with:

  1. Be careful about selecting your lawyer. Do you want someone who really knows estate planning and/or Medicaid planning? Check out their reputation, their online information, and recommendations from friends and colleagues. Did you meet the lawyer at a promotional seminar at the public library or a local restaurant? Make sure you’re not being sold something you don’t really want or need.
  2. Does a particular Medicaid planning technique sound almost too good to be true? Be suspicious and ask for input from others.
  3. When a lawyer agrees to meet with you and your family member together, that suggests something troublesome. We are supposed to represent just one person, not a whole family. Recognize that your interests and those of your family member might differ, and respect the lawyer’s efforts to maintain that separation.
  4. Recognize that even though an idea — and particularly a Medicaid planning technique — might work, it might also have unintended secondary effects.

 

RMD Tables To Be Updated

By Uncategorized

Required Minimum Distributions: RMD’s

Section 401(a)(9) requires most retirement plans and individual retirement accounts to make required minimum distributions (“RMDs”) over the lifetime of the individual (or the lifetime of the individual and certain designated beneficiaries) beginning no later than such individual’s required beginning date (generally, April 1 in the year following attainment of age 72). This minimum amount is determined by dividing the individual’s account balance by the applicable distribution period found in one of the life expectancy and distribution tables (the “Tables”).

On November 12, 2020 the Department of Treasury is scheduled to publish final regulations updating the Tables, which is in response to an Executive Order issued in August of 2018 directing the Secretary of the Treasury to review the Tables to determine if they should be updated to reflect current mortality data.

RMD’s Tables are being updated

Longer Life Expectancies Reflected

The updated Tables will generally reflect longer life expectancies than presently reflected in the current Tables last published based on 2003 mortality rates. For example, the current Tables use a life expectancy of 25.6 years for a 72-year-old for purposes of calculating the RMD while the updated Tables will use a life expectancy of 27.4 years. This will result in reduced RMDs, enabling individuals to retain larger balances in retirement accounts to account for the possibility of living longer.

The updated Tables will be effective for distributions beginning on or after January 1, 2022 and will include a transition to ‘re-set’ the life expectancy for certain individuals already receiving RMDs based on the prior Tables. For example, an individual who attains age 72 in 2021 will be required to take an RMD no later than April 1, 2022. The updated Tables will not apply to calculate the individual’s 2021 RMD (paid on or before April 1, 2022), but the updated Tables will apply to the 2022 RMD (paid on or before December 31, 2022). The regulations do not include periodic automatic updates to the Tables. Instead, the Treasury and IRS will review the Tables at the earlier of 10 years or whenever a new study of mortality experience is published. The final regulation and new Tables can be found here.

Impact on Medicaid and Estate Planning

RMD’s are a factor that every estate planner must consider into calculations of income and assets for Medicaid eligibility. Understanding the new tables and income that will be forced out to a individual or spouse is important to know as there are minimum and maximum income limits. A personal consult with an estate planning attorney can best illustrate the impact this will have on your plan.

Planning for Generations of Proud Americans

By Uncategorized

Happy 4th of July

On the 4th of July we gather as family and community celebrating the blessings of a free nation where we are able to enjoy the fruits of our labor and pass those blessings onto future generations. We are proud to help you plan and pass along your American dream to the next generation of proud Americans.

 

Should I Convert To A ROTH IRA?

By Uncategorized

What is the difference between a Roth IRA and a Traditional IRA?

Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. Roth IRA rules dictate that as long as you’ve owned your account for 5 years and you’re age 59½ or older, you can withdraw your money when you want to and you won’t owe any federal taxes.

A Traditional IRA is a type of individual retirement account that lets your earnings grow tax-deferred. You pay taxes on your investment gains only when you make withdrawals in retirement.

In addition, when planning for an considering long term care planning and possibly needing to qualify for Medicaid, most states do not deem Qualified Accounts such as 401(K)’s and IRA’s and Roth IRA’s as countable resources.

Therefore, the decision to make is: Do I take the income tax hit now and convert to a Roth IRA, or do I wait take it later when I start drawing down on the traditional IRA or 401(K)?

Should I Convert to a Roth IRA?

Roth IRA conversions have been available for many years. Two recent developments suggest that you reconsider Roth IRA conversions for yourself in 2020:

  • The government’s response to COVID-19 significantly raises the Federal deficit, making it more likely that tax rates will be going up in the future.
  • You may be in a lower tax bracket in 2020, which would reduce the tax cost of the conversion.

Both of these factors make Roth IRA conversions more attractive than they were in 2019. The decision as to whether these factors tip the scale in favor of a Roth IRA conversion will require careful consideration. You will need to consider your overall financial plan and make certain assumptions.

Who should do a Roth IRA conversion?

The ideal candidate for a Roth IRA conversion would check off most or all of these boxes:

  • You can pay the tax on the conversion out of a taxable investment portfolio.
  • You expect that you will be in the highest income tax bracket in the future when IRA distributions would be required.
  • You expect that you will not need to withdraw funds from the Roth IRA during your lifetime.
  • You expect that your estate will be subject to estate tax at your death and your spouse.

Who should not do a Roth IRA Conversion?

Some people who should not do a Roth IRA conversion currently are as follows:

  • People who expect to be in a lower tax bracket at retirement.
  • People who can use IRA distributions to take advantage of the lower brackets.
  • People who want to preserve the option of using income from their IRA to offset future medical costs for long-term care or other significant medical expenses, bearing in mind the the principal balances are protected and currently not deemed a countable resource in many states.
  • People who plan to use their IRA for charitable contributions.

Want to discuss how conversion will impact you? Contact us for a no obligation consultation.

SOURCE: LISI Employee Benefits & Retirement Planning Newsletter #737 (June 9, 2020)

COVID-19 Stimulus Checks and Medicaid

By Uncategorized

Will my COVID-19 Stimulus Check impact Medicaid Eligibility?

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act (passed on March 27, 2020) is a $2 trillion economic relief package intended to help offset the huge financial crisis caused by the Coronavirus (COVID-19) pandemic. As part of the CARES Act, the majority of Americans, including those who are elderly and on fixed income, will receive a one-time stimulus check from the Internal Revenue Service (IRS).

Many Medicaid beneficiaries who live at home, assisted living, adult foster care, or nursing homes are concerned the money will put them over the Medicaid income or asset limit, and therefore, disqualify them from Medicaid benefits. In addition, Medicaid applicants express the same concern that the additional money will cause them to have income or assets over Medicaid’s limits, and as a result, prevent them from becoming eligible for Medicaid.

Stimulus checks will not be counted as income and therefore will not impact Medicaid beneficiaries or applicants. However, should the stimulus money not be spent within 12 months, it may be counted as an asset, and therefore could impact eligibility in the year ahead. Therefore, make sure you spend the funds as soon as possible on eligible purchases in accordance with Medicaid regulations (DO NOT GIFT IT).

Nursing Home Residents

he receipt of a stimulus check by Medicaid beneficiaries who reside in nursing homes will not impact these individuals’ Medicaid benefits. Stated differently, the receipt of the check will not disqualify them from Medicaid nursing home care. This is because Medicaid will not count the money as income, which means it cannot push one over Medicaid’s income limit, and hence, result in the loss of Medicaid benefits.

United States Treasury stimulus payment for Coronavirus CoViD-19 outbreak disease.

While Medicaid-funded nursing home residents are required to surrender all of their income except for a personal needs allowance and a monthly maintenance needs allowance for a non-applicant spouse (if applicable) to Medicaid, the money from the stimulus check will not have to be surrendered to Medicaid. This is because, as mentioned above, the stimulus check is not considered as income by Medicaid. Rather, it can be thought of as a tax refund.

Furthermore, the stimulus check will not count as assets, given the money is spent within 12-months of receiving it. So, within this time frame, a nursing home Medicaid recipient can have possession of the money and it will not impact one’s Medicaid eligibility. However, it is imperative that the money, in its entirety, be spent within one year. If not, the money will count towards Medicaid’s asset limit and can potentially push one over the limit, resulting in Medicaid disqualification.

The money can be spent by nursing home residents in a number of ways. For example, one might buy new clothing, purchase a television for his / her room, stock up on extra snacks, or purchase an irrevocable funeral trust. What one does not want to do is to buy assets that are counted towards Medicaid’s asset limit. For instance, collectors coins would most likely be considered an investment and the value of them would be counted towards the asset limit, potentially causing one to be over the limit and lose Medicaid benefits.

The stimulus check will either be directed deposited in the nursing home resident’s bank account or be mailed to the address on one’s 2018 or 2019 tax return. To further clarify, if a refund was issued via direct deposit for one’s tax return, the stimulus check will be directed deposited in the same bank account. If not, the check will go in the mail. Persons who do not have to file tax returns, such as Social Security recipients, will receive stimulus checks in the same manner in which they receive their Social Security benefits. Therefore, if one receives his / her Social Security payment by direct deposit, the stimulus check will automatically be received via direct deposit also.

Spouses of Nursing Home Residents

Spouses of nursing home residents on Medicaid (called Community Spouses), who are not on Medicaid themselves will receive a stimulus check. The receipt of this check will not impact their spouses’ Medicaid eligibility in any manner. First, and foremost, the money from the stimulus check is not considered income by Medicaid, and even if it were, the income of a non-applicant spouse is not considered in the continuing Medicaid eligibility of his / her nursing home spouse.

For Medicaid beneficiaries, the entire check needs to be spent within 12-months of receiving it or the remaining funds will count as assets towards Medicaid’s eligibility. However, the same rule does not hold true for community spouses. To be clear, there is no time limit in which a spouse of a nursing resident must spend his / her stimulus check. Furthermore, non-applicant spouses can spend the stimulus check in any manner they choose, such as paying rent or mortgage, utility bills, food, or even on a splurge, such as a pricey piece of jewelry.

No matter how long it takes for the community spouse to spend the funds, and regardless of how they are spent, it will not impact the institutionalized spouse’s Medicaid eligibility. In other words, a community spouse can be rest assured that it will not cause the nursing home resident to lose his / her nursing home Medicaid benefits. This is because the assets of the non-applicant spouse are not considered for the continuing Medicaid eligibility of his / her Medicaid beneficiary spouse. (The community spouse’s assets are only considered when determining initial eligibility).

The community spouse will receive the stimulus check either via direct deposit or in the mail. Exactly the manner in which it will be received will be based on one’s 2018 or 2019 tax return and how a refund was issued. For instance, if one received a refund via the mail, the address on file will be used and the stimulus check will be mailed to that address. For those who are not required to file tax returns, such as recipients of Social Security, the check will be received in the same way in which their monthly Social Security benefit is received. This means that if it is deposited directly in one’s bank account, the stimulus check will also be directly deposited.

Please note that the institutionalized spouse will also receive a stimulus check. However, at this time, it is not known if the check will be issued separately from his / her community spouse’s check. It is our assumption that if 2018 or 2019 tax returns were filed jointly, the couple will receive one check (couples who filed joint tax returns are eligible for double the amount of a single filer), while if tax returns were filed separately, each spouse will receive an individual check. Again, for persons on Social Security, there is no need to file tax returns. In this case, checks will automatically be received in the same manner in which Social Security benefits are received.

How Much Will the Stimulus Check Be?
The amount of the stimulus check, also called an economic impact payment or recovery rebate, may be for as much as $1,200 / person.

• Individuals who earn up to $75,000 / year will receive a $1,200 check.
• Married couples, filing jointly who earn up to $150,000 / year, will receive a $2,400 check.
• Individuals who earn up to than $99,000 / year will receive a check, but it will be for less than $1,200.
• Married couples, filing jointly who earn up to $198,000 / year, will receive a check, but it will be for less than $2,400.

Payments will be based on one’s tax returns from 2018 or 2019. Please note that for disabled persons and seniors who receive Social Security payments, it is not necessary for a tax return to be filed. (Persons who receive Social Security benefits generally do not have to file a tax return). Rather, the IRS will automatically send out economic impact payments to these individuals.

Checks will be received either via direct deposit or in the mail.

SOURCE: American Council On Aging 

Will I Ever Live In A Nursing Home?

By Uncategorized

How Much Care Will You Need?

The duration and level of long-term care will vary from person to person and often change over time. Here are some statistics (all are “on average”) you should consider:

  • Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years
  • Women need care longer (3.7 years) than men (2.2 years)
  • One-third of today’s 65 year-olds may never need long-term care support, but 20 percent will need it for longer than 5 years

Distribution and duration of long-term care services

Type of care Average number of years people use this type of care Percent of people who use this type of care (%)
Any Services 3 years 69
 

At Home

Unpaid care only 1 year 59
Paid care Less than 1 year 42
Any care at home 2 years 65
 

In Facilities

Nursing facilities 1 year 35
Assisted living Less than 1 year 13
Any care in facilities 1 year 37

Who Pays for Long-Term Care?

The facts may surprise you.

Consumer surveys reveal common misunderstandings about which public programs pay for long-term care services. It is important to clearly understand what is and isn’t covered.

Medicare:

  • Only pays for long-term care if you require skilled services or rehabilitative care:
    • In a nursing home for a maximum of 100 days, however, the average Medicare covered stay is much shorter (22 days).
    • At home if you are also receiving skilled home health or other skilled in-home services. Generally, long-term care services are provided only for a short period of time.
  • Does not pay for non-skilled assistance with Activities of Daily Living (ADL), which make up the majority of long-term care services
  • You will have to pay for long-term care services that are not covered by a public or private insurance program

Medicaid:

  • Does pay for the largest share of long-term care services, but to qualify, your income must be below a certain level and you must meet minimum state eligibility requirements
  • Such requirements are based on the amount of assistance you need with ADL
  • Other federal programs such as the Older Americans Act and the Department of Veterans Affairs pay for long-term care services, but only for specific populations and in certain circumstances

GOOD TO KNOW

Like public programs, private sources of payment have their own rules, eligibility requirements, copayments, and premiums for the services they cover.

Health Insurance:

  • Most employer-sponsored or private health insurance, including health insurance plans, cover only the same kinds of limited services as Medicare
  • If they do cover long-term care, it is typically only for skilled, short-term, medically necessary care

There are an increasing number of private payment options including:

PLAN BEFORE YOU HAVE A NEED

Planning for the eventuality of needing long term care is critical in reducing stress and uncertainty. Meeting with an Elder Law attorney familiar with the rules of Medicaid qualification is a step in the right direction. Contact our office for a no-obligation consultation to see if developing an estate plan with the goal of Medicaid qualification is a right fit for you.

A Delicate Balance

By Uncategorized

Developing your estate plan is a delicate balance between asset access and protection. Work with an attorney who can explain to you what your options are and helps you design that reflects your goals.

Probate & Estate Administration During COVID-19

By Uncategorized

Probate Challenges and Estate Administration Roadblocks During COVID-19 Corona virus Pandemic

Many of our clients are in the midst of settling the estate of a deceased loved one or have just had a loved one pass away and are wondering what comes next. An event such as this has both personal and legal consequences. Below are observations on issues that may immediately present themselves.

Immediate steps may be limited by circumstance. If someone has just died and the cause of death is unknown, public health officials may limit the immediate steps one would usually take until the cause of death is determined and no known COVID-19 risk exists. Depending on circumstances, there may be some delay in physically getting access to the premises, securing them and searching for a will and other documents if they are not in possession of the family or the decedent’s attorney. It is always wiser to have one’s original estate planning documents safely secured off the premises and make sure a trusted individual has access to the storage place.

Once access is permitted, secure the premises if they become unoccupied. Subject to the necessary steps to ensure everyone’s safety (which may include disinfecting) the nominated personal representative may take steps, such as changing locks, necessary to secure the physical contents and financial documents which may remain in the home. These steps can be taken before one’s official appointment. If additional or condominium fees must be paid to allow enough time for an orderly inspection, appraisal, or the like, this can be treated as an expense of the estate.

The legal process of estate administration can begin and continue. While the probate courts of the states in which we conduct estate administrations have limited or closed off physical access to the public, emergency hearings (conducted telephonically) continue and many routine documents can be e-filed. Routine non-contested wills can still be allowed; while reduced staffing at courts may stretch the time frames somewhat, these processes, at least for the present, continue as before. Where that time frame may cause harm to a beneficiary or in some cases, the assets, if the court deems such circumstances an emergency, a hearing to rush the appointment of a temporary fiduciary, called a “executor” or “special personal representative,” can be requested.

Most financial activities can be conducted. With overnight shipping, and technologies such as scanning, secure e-mail, electronic funds transfers, and electronic document signatures, most financial transactions can be conducted virtually once the identities of the parties are established in a fashion compliant with the financial institution’s practices. Thus assets can be transferred to estate or trust accounts, sold and reinvested if desired in order to properly pay estate expenses and distribute funds to beneficiaries. Notarizations still require physical presence although there is a move afoot to accept signatures performed over a videoconference.

Once appointed, electronic communications are vital. As a fiduciary, personal representatives and trustees must take special care to maintain transparency and good chains of communication with each other and the beneficiaries. In a typical administration, one or more introductory or status meetings may occur between co-fiduciaries and the attorney, some with beneficiaries present. Since these will not occur during this unprecedented time, most communication should be in writing. Email has become the standard, often with multiple co-recipients.

Need to speak to an attorney about issues your confronted with during the Pandemic, call our office 401-274-0300 for a no cost phone consultation.