Tag

Trust

Jan 20
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The Long Term Care Crisis

By Uncategorized

The Silver Tsunami is Coming

America faces a looming long-term care crisis that threatens both family finances and state budgets.  As the Baby Boomer generation enters its 80s and 90s, demand for assistance with basic daily activities is surging.  Yet most Americans lack adequate savings or insurance to cover care costs that routinely exceed $168,000 annually.

The problem is amplified by widespread misconceptions.

How Is Long Term Care Paid For?

Fifty-six percent of Americans mistakenly believe Medicare covers long-term care, and many also assume their health insurance or disability-income insurance will pay for these services.  They do not.

In reality, Medicare covers only up to 100 days of short-term skilled nursing following a hospitalization, not ongoing long-term care.  As a result, families are left exposed to catastrophic costs that can quickly drain retirement savings and ultimately force reliance on Medicaid after assets are exhausted.

State Resources and Medicaid

This reality places enormous fiscal pressure on states.  Driven by basic supply-and-demand dynamics, the share of annual state Medicaid budgets allocated to Long-Term Services and Supports continues to rise year over year.

Medicaid now pays for roughly half of all long-term care in the United States, placing growing strain on state budgets as middle-class families are forced to “spend down” into poverty just to qualify.  To prevent abuse, Medicaid imposes an intrusive five-year look-back audit, scrutinizing financial transactions to ensure assets were not transferred below market value to appear “poor on paper.”

In Facility Placement versus Home Based Waiver Care

Rhode Island does offer resources to provide assistance in home for families that are doing their best to care for their loved ones at home. The Home Based Waiver is a program where once you establish a medical need, countable assets in accordance with the regulations, you can apply for help to come into the house. Representatives from DHS will meet with the family, determine need, and help coordinate resources to come into the home. This can often act as a lifeline for families and allow them to have some respite or time to get out of the house, for employment or errands.

In facility placement is having your family member reside at the skilled nursing facility. Current Medicaid Long Term Supports and Services rules require individuals to satisfy 4 prongs before they are eligible for LTSS Medicaid benefits:

  1. Medical Need  – applicants must demonstrate that they have a medical need for skilled nursing care.
  2. Countable Resources – applicants must demonstrate that they have countable resources as defined by the Medicaid regulations below $4,000
  3. Monthly Income – must be below $10,190 per month in Rhode Island to be eligible for LTSS Medicaid benefits
  4. No Disqualifying Transactions – applicants must be prepared to demonstrate that they have not engaged in any transfers of assets in the 5 years prior to applying for benefits where they would be deemed to have made a transfer of assets for less than full consideration in return (i.e.: did you make a gift of assets?)

The Importance of Planning

Planning for long term skilled nursing is more critical than ever. The fiscal pressures placed on spouses and families to provide for the level of care needed for our aging family is not a matter of if the services will be need by rather when.

With the ever present 5 year look-back rule the sooner you discuss and execute a plan that establishes a path to Medicaid eligibility the better.

Jul 19
Love0

Spousal Lifetime Access Trust (SLAT)

By Uncategorized

A Spousal Lifetime Access Trust (SLAT) can be a valuable tool to transfer wealth to future generations while helping to ensure your spouse’s financial security.

What is a SLAT?

A SLAT is an irrevocable trust that can provide significant flexibility for married couples. One spouse creates and funds a trust primarily for the benefit of the other spouse. The spouse that is the beneficiary of the SLAT can receive distributions from the trust. Thus, if necessary, your spouse is able to use funds from the trust to maintain their standard of living even though the trust assets have been removed from your estate. SLATs most often terminate at the death of the beneficiary spouse, at which point the trust assets pass to the other SLAT beneficiaries (typically a younger generation), either outright or in trust.

What are the requirements for establishing a SLAT?

  • The donor spouse must gift assets that are their sole property (not property owned by the spouses jointly).
    • If you reside in a community property state (AZ, CA, ID, LA, NV, NM, TX, WA, and WI), you may first need to convert your community property into separate property before making gifts to a SLAT.
  • If two SLATs are created (one for each spouse), they cannot be identical to each other. If they are identical, the IRS can apply the” reciprocal trust doctrine,” which can undo the benefits of your planning.
  • The donor spouse cannot directly retain any rights to the assets gifted.
  • The trust must be irrevocable.

What are the benefits of setting up a SLAT?

  • Your spouse can maintain access to the assets owned by the SLAT if they need additional cash flow.
  • Any asset appreciation after the initial gift occurs outside of your estate.
  • You are responsible for paying income tax on any income generated by the SLAT. Paying income taxes on behalf of the SLAT is not considered an additional gift to the SLAT. The SLAT is able to grow without being reduced by the payment of income taxes, leaving more to pass to your beneficiaries.
  • Assets placed in a properly-established SLAT are generally protected from creditors of the beneficiary spouse.
  • Generally, SLATs can hold S corporation shares.

What are the potential downsides to setting up a SLAT?

  • It is not ideal for the beneficiary spouse to withdraw funds from the SLAT unless they are truly needed. SLAT distributions to the beneficiary spouse bring assets back into their estate and reduce the trust assets that can grow estate tax free for the ultimate beneficiaries.
  • If the beneficiary spouse dies first, the donor spouse loses their indirect access to the trust assets through the distributions to the beneficiary spouse.
  • In the event of a divorce, you may still be responsible for paying the income tax on a trust for the benefit of a now ex-spouse.
  • When your beneficiaries inherit the assets, they inherit the original tax basis you had. This might not be ideal for assets with low basis, meaning the beneficiaries could owe more capital gains tax when they eventually sell. However, many SLAT documents allow the donor spouse to remove a low basis asset and replace it with a high basis asset if those assets have the same value.

Is a SLAT right for you?

SLATs can be a flexible way to transfer wealth to future generations at current values while allowing your spouse to have access to that same wealth. If you want to take advantage of the current estate tax exemption amounts but aren’t quite ready to give up complete access to your assets, a SLAT could be the right strategy for you. By understanding the requirements, advantages, and potential downsides, you can make an informed decision about whether a SLAT is right for your estate planning needs. As always, consult with your tax advisor to tailor a strategy that best suits your situation and goals.

Apr 06
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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 401-401.648.7000 for a no cost phone consultation.

Mar 23
Love0

Estate Planning and the Coronavirus Pandemic

By Uncategorized

Estate Planning Amidst the Coronavirus Pandemic

The Coronavirus (COVID-19) Pandemic has impacted every corner of the world at this point. As medical experts, financial advisors, and our colleagues that specialize in healthcare law, employment law, and other related areas are busy advising clients on the best course of action for the weeks and months ahead, we – as estate planners – also want to remind our clients and friends of some important considerations during these uncertain times.

At this point, we would simply promote the following actions to ensure that your estate planning affairs are in order:

(1) Review your existing documents. Make sure that you have copies (either paper or electronic) of your existing estate planning documents, and review them to confirm that they still reflect your wishes. If you cannot locate your documents, consider calling or emailing your estate planning attorney to obtain copies.

(2) Pinpoint any items that require attention sooner rather than later. As you review, take note of any major changes that may have occurred in your family since you last updated your estate plan. These might include child births, deaths, marriages, divorces, etc. And also consider whether the individuals that you previously appointed to serve as your agents are still appropriate.

(3) Follow up with your loved ones and advisors.

  • Make sure that your loved ones know to contact your estate planning attorney in the event anything should happen to you. This includes your named executor (i.e. personal representative under your will, or trustee of your trust), guardian for your minor children, attorney-in-fact under your financial durable power of attorney, and patient advocate under your health care power of attorney.
  • Consider reaching out to your financial advisor, insurance advisor, etc. to ensure that your beneficiary designations are up to date and discuss any new planning opportunities relative to your current financial status.
  • If you require any medical attention in the near future, confirm that your medical provider has a copy of your patient advocate designation and is informed as to who you wish to have access to your confidential health information.

NOTE – If you do not already have an estate plan, now is as good of a time as any to consider the opportunity before you. Having a will/trust, a durable general power of attorney, and a healthcare power of attorney can certainly contribute to a healthy state of mind.

Sep 05
Love0

9 Estate Planning Terms You Need To Know

By Estate Planning

Estate Planning Terms

No one likes to think about one’s own death. However, planning ahead can help your family avoid unnecessary complications, delay, and expense. This may be done through wills, trusts, joint ownership, and life insurance. In addition, modern estate planning also includes “life” planning through powers of attorney and health care proxies. These enable someone else to act for you in the event of your incapacity. Understanding the following terms is the first step toward planning your estate. However, no estate planning steps should be taken without consulting with a qualified professional.

  • Probate

This is the name for the process in the Probate Court through which the ownership of your assets passes to your heirs. It includes the collection of your assets, the payment of your bills, and the distribution of your estate. It only covers what you own outright, not joint property, trust property, life insurance proceeds, or any assets that have beneficiaries or payable-on-death terms.

  • Will

Your will is a legally binding statement of who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will only covers probate property.

  • Estate Tax

The estate tax applies to both the probate and the nonprobate property of the decedent. For federal purposes, the amount free from taxation is $5.6 million as of 2018 per individual, $11.2 million per married couple. For Rhode Island, a person can pass $1,537,656 free from estate taxation.

Reading your Estate Planning documents is critical to understanding your plan

  • Marital Deduction

On the federal level, anything passing to the surviving spouse of a decedent is not included in the taxable estate and, consequently, is not subject to taxation. All of the couple’s assets are then taxed upon the death of the surviving spouse, unless an estate tax plan has been executed.

  • Trust

A trust is a legal entity under which one person—the “trustee”—holds legal title to property for the benefit of others—the “beneficiaries.” The trustee must follow the rules provided in the trust instrument. An irrevocable trust is one that cannot be changed after it has been created. A revocable trust is one that may be changed or rescinded by the person who created it. Trusts are often used for tax planning, to provide for someone with expertise to manage assets, or to shelter assets to protect them from creditors or for long-term care planning.

  • Durable Power of Attorney

Under a power of attorney, you may appoint someone else to act for you when you are unable to do so yourself. The reason may be your mental incapacity or your inability to be somewhere when needed. The person you appoint—your “attorney-in-fact”—must always act in your best interest and try to make choices you would make if you were able to do so.

  • Health Care Proxy

Similar to a power of attorney, through a health care proxy you may appoint someone else to act as your agent—but for medical, as opposed to financial, decisions. Unlike a power of attorney, the health care proxy does not take effect until your doctor determines that you are incapable of making decisions yourself. Before that decision, your agent may make no decisions on your behalf. You may include in your proxy a guideline for your agent to use in making decisions. These may include directions to refuse or remove life support in the event you are in a coma or a vegetative state. On the other hand, your instructions may be to use all efforts to keep you alive, no matter the circumstances.

  • Community Spouse Resource Allowance (CSRA)

If your spouse has to move to a nursing home, you will have to pay for his or her care out of pocket until he or she qualifies for Medicaid. Under the Medicaid program the nursing home spouse may only have $4,000 in “countable” assets. (Noncountable assets include your home, household belongings, one car, and prepaid funeral plans.) The amount the healthy spouse is permitted to keep under the Medicaid program is known as the “community spouse resource allowance” or “CSRA.” The CSRA is all of the couple’s combined assets up to a cap of $123,600 (in 2018). In some cases, the community spouse is entitled to retain assets above the $123,600 limit when her income is less than the minimum monthly maintenance needs allowance, which is described below.

  • Minimum Monthly Maintenance Needs Allowance (MMMNA)

The Medicaid rules also govern the amount of income the community spouse is entitled to once the nursing home spouse qualifies for Medicaid. Normally, the community spouse keeps his or her income and the nursing home spouse pays his or her income to the nursing home, keeping only a $50.00-a-month “personal needs allowance.” However, if the healthy spouse’s income is low, he or she may be entitled to a share of the nursing home spouse’s income. In each case where a married nursing home resident qualifies for Medicaid, the Department of Human Resources calculates a “minimum monthly maintenance needs allowance” or “MMMNA” for the community spouse based on his or her housing costs. This will range from a low of $2,057.50 to a high of $3,090.00 a month (in 2018). If the community spouse’s own income is below his or her MMMNA, he or she will be entitled to a share of the nursing home spouse’s income to make up the difference.

Want to learn more? Contact Attorney Matthew J. Leonard, Esq. at 401-401.648.7000 or at mleonard@smsllaw.com to arrange for a free consultation.

Mar 29
Love0

MassHealth Denial Trust Case Overturned

By Uncategorized

Denial of Medicaid Benefits based on Income-Only Trust Overturned

A Massachusetts Superior Court has overturned a MassHealth denial of coverage for a nursing home resident who MassHealth found had countable assets available from a trust she had created.

MassHealth who administers the Medicaid program for Massachusetts residents has been aggressively challenging and contesting applications where the applicant was the beneficiary of an Income-Only trust. MassHealth would take the position that assets held in an Income-Only trust are considered available to the applicant to be used on their own care and thus would disqualify them from Medicaid eligibility.

MassHealth will need to be more welcoming of Income-Only trusts

An Income-Only Trust used for Medicaid purposes states that the grantor of the trust shall, as the name indicates, only be entitled to receive income from the trust. If the terms of the trust also state that the grantor shall never be able to receive principal from the trust, the assets in the trust will not be deemed an available resource for the Medicaid applicant. Massachusetts has not followed this rule and denied Medicaid benefits to applicants despite these terms in the trust. With this new decision, MassHealth has been told that it was improper to deny applicants Medicaid benefits of the the basis of Income-Only Trusts.

This decision is welcome news for many estate planners seeking to clarify the role Income-Only trusts play in the estate planning process.

CLICK HERE TO READ THE ARTICLE

The usage of Trusts in Estate Planning is a critical component. The rules and terms contained in the trust dictate how various governmental agencies will view the trust. Having a clear understanding as to interpretation of language as to important benefits such as tax treatment, control issues or Medicaid qualification is required. This decision with MassHealth brings clarity to language that prior was in flux.

Want to learn more about Irrevocable Income-Only trusts? Contact our office for a no-cost consultation to see if they fit into your estate plan.

Apr 10
Love0

Estate Planning Protects Your Loved Ones and Savings

By Medicaid Planning and Gifting

ESTATE PLANNING: For All Stages Of Life

Don’t put your life savings at risk. Meet with an attorney to discuss your estate plan. We have a plan for all ages and stages of life. Call attorney Matthew Leonard at 401-401.648.7000 for your free consultation.

Procrastination in most things in life will bring about bad results. Estate Planning is no exception. It has been said that A FAILURE TO PLAN IS A PLAN TO FAIL. In the context of estate planning – it is very true.

Regardless of if you are single, newlywed, married with kids, empty nesters or retired.

Regardless if you are in fine health, average health, or failing health.

Regardless if you are rich, poor or all measurements in between.

With your estate plan you get to ensure that your assets are protected during your life, and then the people you are most concerned for get to benefit from what you have died. Meeting with an attorney to discuss your story – your concerns – your wishes is the only way you can ensure your dreams and wishes are fulfilled.

Contact our office to discuss your estate planing goals.

 

Dec 08
Love0

Special Needs Trust Fairness Act Passes

By Uncategorized

Special Needs Fairness Act

Yesterday, the Senate passed the Special Needs Trust Fairness Act. After the President’s signature, individuals with disabilities, who have capacity, can create their own (D)(4)(A) special needs trusts. This ends the false presumption in American law that all individuals with disabilities lack the mental capacity to handle their own affairs. No longer will individuals in need of a special needs trust, but without parents or grandparents, face undue legal difficulties.

specialneedstrust

 

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