News from Samuel, Sayward & Baler LLC for January 2019 includes the articles: Five Answers to Your Questions about Using Trusts to Save Estate Taxes, GETTING ORGANIZED in 2019, Ask SSB, Retirement Account Caution: Change in Firm or Provider Requires Confirmation of Beneficiaries, and What’s New at Samuel, Sayward & Baler LLC.
Retirement Account Caution: Change in Firm or Provider Requires Confirmation of Beneficiaries
Here is something to be aware of if you have IRA, 401(k), 403(b) or other retirement account. At Samuel, Sayward & Baler we are careful to advise you about how to designate the beneficiaries of your retirement accounts consistent with your estate plan. In some cases, customized beneficiary designations are required to ensure these accounts are distributed properly to achieve your planning goals.
There are two circumstances in which these beneficiary designations can be disrupted and over which you have no control:
- If your financial advisor changes firms. Although your accounts may move with your advisor to the new firm (if you so choose), your beneficiary designations may not necessarily move along with your retirement accounts. If your financial advisor has changed firms, be sure to confirm with your advisor that beneficiaries have been correctly designated on your new retirement accounts established at the advisor’s new firm.
- If your employer or former employer changes its 401k or 403b provider. Beneficiary designations on employees’ or former employees’ accounts typically do not move over to the new provider, and beneficiaries must be re-designated. This is another circumstance where action is needed to ensure that beneficiary designations are correct.
If the owner of a retirement account passes away with no beneficiary designated on that account, the account is payable to the account owner’s estate. Although the funds in the account may still be distributed consistent with the owner’s estate plan (assuming the account did not have a beneficiary designation different from the rest of the owner’s estate plan), there will be no opportunity for continued tax deferral or a so-called “stretch” payout of the retirement account over the life expectancy of the beneficiary. The account instead must be distributed in a lump sum to the owner’s estate, or at best over a 5-year period, and the income tax payable on the account must be paid all at once. This is a very bad result from a tax planning perspective.
If one of these situations occurs, do not delay in ensuring that your beneficiary designations are in place and are consistent with our recommendations and your estate plan. In all cases, we recommend that you request written confirmation of beneficiary designations so that you can confirm that beneficiaries are designated correctly. If you would like us to review your designations we are happy to do so.
Q: It’s likely that my mom will need to go into a nursing home soon. She does not have a lot of money but she still owns her home. Will we need to sell her house to pay for her care?
A: As with all long-term care matters, your question is more complicated than it seems. The short answer is ‘no’, your mom will not be required to sell her home to pay for her nursing home care. Medicaid, often called MassHealth in Massachusetts, is a state and federally funded program that will pay for the long-term care costs of people who are both medically and financially eligible for the program. In order to be eligible for long-term Medicaid benefits, the applicant cannot have more than $2,000 of ‘countable assets.’ Bank accounts, investments, retirement assets such as IRAs, the cash value of life insurance, and deferred annuities are examples of countable assets. A person’s primary residence is not a countable asset. As such, someone who has less than $2,000 of countable assets and owns her home may be eligible for Medicaid to pay for her long-term care nursing home care. However, that is not as good as it sounds. For one thing, a nursing home resident who is receiving Medicaid benefits must pay all but a small portion of her monthly income to the nursing home. As such, unless the home is rented out, or unless family members are willing and able to pay the real estate taxes, insurance, water and other utility bills, there is no money available to maintain the home. Further, the state wants to recover the benefits paid on behalf of the Medicaid recipient and will place a lien on the property. The house will likely need to be sold following the death of the MassHealth recipient in order to satisfy the lien.
There are many other factors that need to be considered in connection with the home and Medicaid eligibility including the marital status of the applicant, whether any gifts were made, and whether there are any exceptions to the prohibition on transfers in a family’s situation. Because of the complexities involved in applying for Medicaid benefits to pay for long-term nursing home care, it is advisable to consult with an experienced elder law attorney as soon as you anticipate that nursing home care may be necessary. Please call us if you find yourself in this situation.
November 2018 Newsletter
News from Samuel, Sayward & Baler LLC for November 2018 includes the articles: Five Questions to Ask Before Creating an Irrevocable Trust, How to Prepare for a Bear…..After Ten Years of Bull (markets), National Special Needs Law Month – October, Ask SSB, and What’s New at Samuel, Sayward & Baler LLC.
July 2018 Newsletter
News from Samuel, Sayward & Baler LLC for July 2018 includes the articles: 5 Things That Can Derail Your Estate Plan, Retirement Planning: Are You Taking Steps to Assure Peace of Mind?, When Should I Update My Estate Plan?, Ask SSB, and What’s New at Samuel, Sayward & Baler LLC.
April 2018 Newsletter
News from Samuel, Sayward & Baler LLC for April 2018 includes the articles: Ask SSB, Five Questions to Ask Yourself when Choosing a Trustee, What You Need to Know About Medicare, Lessons Learned from an Injury, and What’s New at Samuel, Sayward & Baler LLC.
September 2016 Newsletter
News from Samuel, Sayward & Baler LLC for September 2016 includes the articles: Five Times to Review and Update Your Estate Plan,Financial Industry Trends and Updates, Massachusetts’ Highest Court Overturns Case Which Eroded Asset Protection Aspect of Trusts, Did You Know?, and September Smart Counsel Series.
News from Samuel, Sayward & Baler LLC for May 2016 includes the articles: Five Examples of DIY Estate Planning Gone Bad, Estimating and Planning for Health Care Expenses During Retirement, and Proposed Expansion of Medicaid Estate Recovery.
News from Samuel, Sayward & Baler LLC for February 2016 includes the articles: Five Reasons to Call Your Estate Planning Attorney, Key Questions to Ask When Investment Markets are Down, MassHealth’s Treatment of Irrevocable Income Only Trusts as Murky as Ever, and Samuel, Sayward & Baler Becoming More Environmentally Friendly.
News from Samuel, Sayward & Baler LLC for November 2015 includes the articles: Five Basic Medicaid Eligibility Rules, How Much Retirement Savings is Enough: A One-Hour DIY Self Estimate, Asset Protection is Not Just for Creditors Anymore, and Beware of IRS Scam!!!!