One of Pennsylvania’s TOP Attorneys Provides Today’s Elder Care / Senior Care Answer on ElderCareMatters.com

Question:  Why would one use a Trust to help plan for long term care?

Answer:   Planning for long-term care involves the consideration of many factors. There are a number of reasons that trusts can be used as part of an individual’s long-term care plan. Sometimes an individual may place assets inside of a revocable living trust. If the individual becomes incapacitated, the trustee will have the ability to manage the trust assets immediately, and those assets can be used for the care of the individual. Revocable trusts are more commonly used as part of planning for an individual’s death to deal with issues such as probate (or multi-state probate), or privacy.

Irrevocable trusts are more commonly used in planning for an individual’s long-term care. If an individual does not have a long-term case insurance policy, they are self-insured for any long-term care needs they may have. That means it is up to the individual to pay for all of the costs associated with long-term care. Medicaid is the federally-funded, state-implemented program which pays the costs of long-term care for individuals who qualify. To qualify for Medicaid, an individual must generally have a very limited amount of assets in his or her name.

Irrevocable trusts can be used, either alone or in conjunction with other planning strategies, to reduce the amount of assets in an individual’s name for Medicaid purposes. By transferring assets into an irrevocable trust, that individual may qualify for Medicaid sooner; and at 5 years after the time of the transfer into the irrevocable trust, those assets are protected from having to be spent on long-term care. The Medicaid rules are very complex, and implementing a planning strategy using trusts should only be done with a qualified elder law attorney to avoid any potential planning failures or pitfalls.

If you need help with this or other legal elder care matters, you can find Elder Law Attorneys near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior Care Resources for Families. You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites
sponsored exclusively by the national ElderCare Matters Alliance.

An ElderCare Matters Partner
Attorney James J. Ruggiero, Jr.

Paoli, Pennsylvania
An ElderCare Matters Partner


Personal Care Contract – Is this income subject to self employment tax?

Question:  Can you tell me if the money that I receive from a Personal Care Contract is subject to self-employment tax? I know that it is subject to ‘income tax’.

Yes, the money you receive under the Personal Care Contract otherwise known as a Personal Service Contract will be subject to self-employment tax treatment.  The tax situation causes some families to look for other solutions to protect the parent’s money.

If you need help with this or other legal elder care matters, you can find Elder Law Attorneys near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior Care Resources for Families. You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites
sponsored exclusively by the national ElderCare Matters Alliance.

An ElderCare Matters Partner
Attorney I. Michael Tucker
Altamonte Springs, Florida
An ElderCare Matters Partner

 


Missouri Elder Law Attorney Answers Today’s Question about Trusts

Question:  When would it make financial sense to place our assets in a Trust? Are there different types of Trusts?

Answer:  A trust is an estate planning document that allows assets and other property that has a title or deed to be re-named in the trust so when the person creating the trust dies, the assets and property in the trust are distributed according to the terms of the trust and avoid probate. The most common reason people create trusts is to avoid having their assets go through the probate process for failure to name a beneficiary. If people are married, they can create their own, individual trusts or a joint trust.

A trust allows the person or persons created the trust (called the “Grantor”, “Settlor” or “Trustmaker”) to handle their money and assets as they always have done so when they have capacity, but if they become incapacitated and unable to handle their finances, a trustee that is appointed then assumes the duties as Successor Trustee. The Grantor may include specific instructions for the Successor Trustee regarding support of dependents, support of the spouse (if both spouses are incapacitated) and other financial matters.

When the Grantor(s) has died, the Successor Trustee will likely have specific instructions about distribution of trust assets to named beneficiaries, charitable organizations or other beneficiaries the Grantor designated. The Successor Trustee may have on-going trustee responsibilities if there are minor or disabled beneficiaries whose inheritance under the trust will continue to be managed by the Trustee.

The most common type of trust is the Revocable Living Trust. It can be changed at any time, can easily accept additional assets as the Grantor acquires new assets and property and only becomes irrevocable (unable to be changed) when the Grantor dies. During the Grantor’s life, the Grantor’s Social Security number is the identification number of the trust and no separate tax return is filed for the trust.

Irrevocable Trusts are used primarily to hold either life insurance, to take advantage of favorable tax treatment of life insurance held in such a trust and to enable the Grantor (the owner of the life insurance policy/policies) to be able to designate to whom and how the life insurance is to be distributed upon his or her death or to protect and preserve assets for estate or Medicaid planning. The terms of an irrevocable trust cannot be changed, other than administrative provisions that may need to be changed due to changes in the law or as a court may allow. Since these trusts cannot be changed, a person considering creating this type of trust should consult with an experienced attorney who knows the pros and cons of creating such a trust. Although these trusts do protect assets for Medicaid and VA planning purposes, they do not allow the Grantor to have access to the trust funds and have other restrictions that may make these undesirable.

Special Needs Trusts are another type of trust, but applicable to individuals who are disabled. This type of trust allows a disabled individual to qualify and maintain eligibility for public benefits, such as Medicaid, SSI, food stamps, and keep assets that would usually be counted as disqualifying the individual from these need based programs. The assets in a Special Needs Trust are not available to the disabled person – the funds and other assets are held in the trust and the Trustee has the discretion whether to use the assets for good and services that the disabled individual’s benefit programs do not pay for. The intent of this type of trust is to supplement, not replace, public benefits available to the disabled individual. In this way, a disabled individual can receive an inheritance, maintenance through a divorce, a lump-sum Social Security disability payment or settlement/award from a lawsuit and not have these funds spent-down to regain eligibility or to become eligible for public benefits.

If you need help with this or other legal elder care matters, you can find Elder Law Attorneys near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior Care Resources for Families. You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites
sponsored exclusively by the national ElderCare Matters Alliance.

ElderCare Matters State Coordinator, Missouri
Debra K. Schuster, M.H.A., J.D.
St. Louis, Missouri
Missouri State Coordinator, ElderCareMatters.com


Elder Care / Senior Care Question on ElderCareMatters.com: If my parents die without a Will how will their assets be divided between the children?

Question:  If my parents die without a Will how will their assets be divided between the children?

Answer:  This is a state specific issue and not all of the states treat this the same.  I will speak only to Connecticut law on this subject, which is called intestate succession.  It is highly unusual for both spouses/parents to die at the same time.  Even if it is only minutes apart it is always important to determine the order in which they die.  That being said, lets assume that Mom passed first, even if it was only five minutes before Dad.  The state statutes first consider if there are any surviving issue (meaning children, grandchildren, etc.) of the decedent.  In the question asked we know that there were children.

Next, the statutes look to see if all of the surviving issue are all issue of the surviving spouse (Dad), and if this is the case, then the surviving spouse (Dad) would get the first one hundred thousand dollars, and one-half of the balance of the estate.  As an example, we will assume that in Mom’s estate she had $300.000 solely in her own name.  Dad would get the first $100,000, plus one-half of the remainder (another $100,000) for a total of $200,000 and the surviving issue would get $100,000 to be divided equally between them.

If the surviving issue of Mom were not also surviving issue of Dad, Dad would get one-half of the total estate and Mom’s children would get the remaining one-half to be divided equally between them.  In the above example of a $300,000 estate, Dad would get $150,000 and the surviving issue would get the other $150,000 again to be split equally between them.

This rule applies only to assets owned solely by the decedent.  If Mom and Dad owned any jointly held property, such as a bank account, brokerage account, real estate, etc. upon her death it would pass “by operation of law” to the other named owner.  If Mom owned any assets with named beneficiaries, such as life insurance, annuities, bank accounts, etc. those assets would also pass to the named beneficiary.

As an example, if all the assets Mom owned, i.e. $100,000 worth of bank accounts jointly held with Dad, and real estate worth $200,000 held jointly with rights of survivorship with Dad, when she passed it would all go to Dad and nothing to the children, grandchildren, etc. regardless of who were the natural parents.

Another thing to keep in mind when looking at these situations, is that children who were born out of wedlock and the issue of such children along with legally adopted children are assumed to be natural children for the purpose of this succession of estate assets.

If you need help with this or other legal elder care matters, you can find Elder Law Attorneys near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior Care Resources for Families. You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites
sponsored exclusively by the national ElderCare Matters Alliance.

An ElderCare Matters Partner
George P. Guertin, Esq.
Guertin and Guertin, LLC
North Haven, Connecticut
An ElderCare Matters Partner


Today’s Q&A on ElderCareMatters.com is about the appropriate use of Reverse Mortgages

Question:  When would it make financial sense for my elderly parents to consider a reverse mortgage?

Answer:  Reverse mortgages can be valuable tools for someone who is house rich but cash poor.  Generally, though, given the costs involved and the new restrictions on use, they are best used when other financial resources are extremely limited and the older adult needs to access the equity in order to stay at home.  Reverse mortgages are not to be used to enhance a lifestyle.

If you need help with this or other elder care matters, you can find Elder  Care Professionals near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior  Care Resources for Families

You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites
sponsored exclusively by the national ElderCare Matters Alliance.

An ElderCare Matters Partner
Robert M. Slutsky, Esq.
Robert Slutsky Associates
Plymouth Meeting, Pennsylvania
An ElderCare Matters Partner


Today’s Q&A on ElderCareMatters.com is about providing Elder Care Services for your parents

Question:  May I charge for the elder care services that I provide to my parents, and will these services be tax deductible for my parents?

Answer:   In general, the answer is yes and maybe.  If you are providing elder care services that word normally be paid for, you can charge a fee as well.  However, whether you want to do that depends upon a number of factors, some financial, some personal.  If one or both of your parents ultimately needs to apply for Medicaid, any payments made to family members will be scrutinized.  The fees would have to be reasonable for the services provided (as compared to normal providers of that services who have similar qualifications), may require a comprehensive written contract setting out the terms of engagement and be documented and reasonable services given the circumstances (i.e. you cannot charge for 24 hour personal caregiving if your parents are playing tennis 3 times per week).  Some states will require that you report your income from these paid services on a schedule C on your tax return. 

There are also personal issues you need to work around.  Are there other family members providing the care?  Are they going to be compensated as well?  Will they resent you being paid.  How will this work within your parents’ testamentary plans? Will your payments deplete their estate causing friction among the other family members who expected to receive money but will not because your services cost your parents a substantial amount of money.  How will your parents feel about that? 

Tax deductibility is going to depend on if you can convince the IRS that the need for your services was a medical necessity that would qualify them as an unreimbursed medical expense.  If your parents are in a nursing home, these deductions are more easily documented.  For personal services provided by a family member you would need documentation from a physician that the services you are providing medically necessary in the event of an audit.

If you need help with this or other legal elder care matters, you can find Elder  Law Attorneys near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior  Care Resources for Families.  You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites
sponsored exclusively by the national ElderCare Matters Alliance.

An ElderCare Matters Partner
Robert M. Slutsky, Esq.
Robert Slutsky Associates
Plymouth Meeting, Pennsylvania
An ElderCare Matters Partner


Estate Planning Attorney defines difference between a Will and a Living Will

Question:  What Is the Difference Between a Will and a Living Will?

Answer:  A will deals with assets, whereas a living will deals with medical care. Many States have done away with the so-called living will and replaced it with the advance health-care directive (“AHCD”). An AHCD can accomplish a variety of objectives, from saying who will make health care decisions for you if you cannot communicate with your doctors, to saying under what circumstances conventional health care will be withheld from you so that nature will be allowed to take its course.

If you need help with this or other legal elder care matters, you can find Elder Law Attorneys near you on ElderCareMatters.comAmerica’s National Directory of Elder Care / Senior Care Resources for Families.  You can also find Elder Law Attorneys on ElderLawAttorneys.us and Estate Planning Attorneys on EstatePlanningAttorneys.us – 2 additional websites sponsored exclusively by the national ElderCare Matters Alliance.

smakuakane
Scott A. Makuakane, Esq., CFP

Est8Planning Counsel LLLC
Honolulu, Hawaii
An ElderCare Matters Partner


On today’s ElderCareMatters.com a New York Elder Law Attorney answers family’s question about Power of Attorney

Question:  Would  you please provide our family with some information about a Power of  Attorney?

Answer:   Below are 10 Q&As about a Power of Attorney that will help you further understand this legal document:

1. What is a Power of Attorney?

A Power of Attorney is a legal document in which you can appoint an agent to make financial transactions on your behalf if you are not present to make these transactions.

2. What is the difference between a Power of Attorney and an Executor?

A Power of Attorney is in effect only during your lifetime. An Executor takes over the management of your estate upon your death. You name the Executor in your Will.

3. What is a durable Power of Attorney?

A durable Power of Attorney states that the Power will be in force even if you become disabled.

4. How do I appoint an agent?

The Power of Attorney form is a form that must be signed before a Notary Public.

5. What powers can I give to my agent in the Power of Attorney?

The form lists the areas of authority that you delegate. These include real estate transactions, banking transactions and insurance transactions, to name a few. However, the Power of Attorney does not in itself authorize the agent to make unlimited gifts.

6. How can I authorize my agent to make gifts?

A Power of Attorney can be personalized to indicate the authority to make gifts and the limits, if any, on this authority.

7. My bank has its own Power of Attorney Form. Do I need it?

A general Power of Attorney must be honored by banks. However, they sometimes are reluctant to honor them, so if you can sign the bank form, it is often easier for the agent to make transactions later on.

8. Whom should I appoint as my agent?

You should appoint only someone whom you trust explicitly. You may also appoint two people acting together as an additional safeguard.

9. If any accounts and house are all jointly held, do I need a Power of Attorney?

The joint accounts should be able to be accessed without the Power, but for real estate, a Power of Attorney will be needed.

10. Can I appoint my agent so that he or she has authority only if I become incapacitated?

The Power of Attorney is not valid for an agent appointed until he or she has signed the Power of Attorney before a Notary Public. You may execute the Power of Attorney but not have your agent sign until you are incapacitated.

If you need help with your Elder Care Matters, you can find Elder Law Attorneys near you on ElderCareMatters.com and on ElderLawAttorneys.us – two online Elder Care resources that are sponsored by the national ElderCare Matters Alliance.

An ElderCare Matters Partner
Joan Lensky Robert, Esq.

Kassoff, Robert & Lerner, LLP
Rockville Centre, NY  11570
An ElderCare Matters Partner


Elder Law Attorney answers today’s question about gifting assets to avoid Medicaid Spend Down

Question:  I am a 65 year old widow who wants to give all my assets to my son to avoid Medicaid Spend Down.  Can I / should I do this?

Answer:  Taking any action, especially something as dramatic as giving all your money away, as part of a long term Medicaid plan should only be done after a comprehensive evaluation by an Elder Law Attorney who can advise you of the many choices which you have and the impact they will have on your life going forward. Your question lacks enough specific details to advise you what is the best planning strategy for you, but I can tell you it would not be to give all of your assets to your son at age 65.  There are many reasons why your idea is a poor one and not well thought out, including:

  1. If you make a gift of all your assets to your son, they become his so if he is ever sued or has creditors they can take the assets.
  2. What if your son spends the money, how will you support yourself?
  3. If your son does not segregate these assets from his other assets, in some states they would become marital property and therefore your son’s spouse could take a large portion of them if your son got divorced.
  4. What happens if your son were to die before you? Would his heirs, whether they are his wife or children use this money for you or for themselves.
  5. If among the assets you gift to your son is your home, do you realize that it will no longer qualify for any local senior citizen tax breaks, and that when it is sold, your son will have to pay capital gain tax on the proceeds since it is not his principal residence and therefore he does not qualify for the capital gains exemption on your personal residence.
  6. If there are assets that have large capital appreciation, on your death your son will have your low basis and have to pay capital gains taxes on the sale, where if the transfer had been structured properly he would receive the same assets on your death but they would have done a “step up in basis” on your death and therefore your son would not have to pay capital gains tax if sold right after your death.

There are many other reasons why your suggested plan is a poor one. However, given that you are thinking about how to preserve your money for yourself and your family at a relatively young age, if you work with a knowledgeable Elder Law Attorney it is possible to implement a plan that will preserve your money for your children, allow you to use your assets for the rest of your life, receive income from the assets for the rest of your life, still qualify for all personal residence capital gain exemption, many senior citizen tax credits, get a step up basis for capital gains purpose upon your death and still allow you to qualify for Medicaid to pay for your nursing home expenses.  These plans are complex, and a good Elder Law Attorney will do a detailed analysis of the impact of each factor based upon your assets, income and reasonable projected time until you will need long term care.  It is very important that when taking any steps to preserve assets from nursing home costs, that you speak with an Elder Law Attorney prior to taking the steps.  Frequently, such actions can have a negative impact upon you and your family. An Elder Law Attorney can usually assist you in achieving your goals while avoiding these negative impacts.  So, I strongly urge you not to gift your assets to your son, but retain an Elder Law Attorney to help you prepare and implement a plan that avoids the negative impact yet still allows you to achieve your goal of asset preservation. Good Luck.

If you need help with your Elder Care Matters, you can find Elder Law Attorneys near you on ElderCareMatters.com and on ElderLawAttorneys.us – two online Elder Care resources that are sponsored by the national ElderCare Matters Alliance.

James C. Siebert, Esq., An ElderCare Matters Partner
James C. Siebert, Esq.
Arlington Heights, Illinois
An ElderCare Matters Partner


Today’s Q&A on ElderCareMatters.com: Challenging Parents Estate Plan

Question:  What is the most common reason for children challenging their parents Estate Plan?

Answer:  In my experience, the disinheritance of a child is the number one reason for a challenge to an estate plan. The child is typically hurt because he or she feels “left out,” angry because his or her siblings were treated better and embarrassed because the whole family knows that he or she was disinherited. This is another reason to avoid probate, how would you like the world to know that your parents disinherited you. These strong emotions, coupled with a perfectly natural desire for an increase in financial well-being inevitably cause problems and sometimes generate a lawsuit against the trustee and the other children in the family.

If you need help with your Elder Care Matters, you can find Elder Law Attorneys near you on ElderCareMatters.com and on ElderLawAttorneys.us – two online Elder Care resources that are sponsored by the national ElderCare Matters Alliance.

hweatherby
Henry C. Weatherby, Esq., CLU, ChFC, CEBS
Bloomfield, Connecticut
An ElderCare Matters Partner


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