Attorney Suzanne Sayward talks about Life Estates for our new Smart Counsel for Lunch Series. What are life estates and why might you want one? Please watch and if you have questions or want to learn more please call us at 781 461-1020.
Three Things You Can Do Now
Dear Clients and Friends,
We hope this finds you all well and safe! We want to give you an update on our plans and assure you that we’re here for you. While we may need to close our physical office, please be assured that our team members are well-equipped to work from home and to attend to the important work we are doing for you. You are welcome to reach out to us by phone or email.
Over the past week, we have been thinking about how we can best serve our clients during this uncertain time. Here are three things we can do to help you now:
1. Provide Access to Your Health Care Documents Electronically Contact us if you would like us to send you or your health care agents your health care documents in electronic format. You and/or your named health care agents should store the documents on your smart phone so you have them on hand at all times. Here are our directions for doing so. Please contact Jennifer Poles at poles@ssbllc.com with the names and email addresses of the people to whom you would like us to send your health care documents.
2. Meet with you by Phone or Video Conference Contact us if you would like to schedule a phone or video conference to discuss your estate plan and any updates that may be necessary. We are offering flexible hours – early in the morning, during business hours, or in the evening – to allow you to have these calls at a time that is convenient for you.
3. Provide Answers to Your Long-Term Care Planning Questions Contact us if you have concerns about planning for long-term care needs for yourself or a loved one.
While the new realities of social distancing, sheltering in place, and self-quarantining are consuming our thoughts right now, the important issues addressed by estate planning are still there, and in fact, are more important than ever. We will get through this crisis. During this time and after, we want you to know that we are here to help you, so please don’t hesitate to reach out.
We wish you and your family health and safety during these uncertain times.
Suzanne R. Sayward
Maria C. Baler
Julia K. Abbott
Abigail V. Poole
5 Things to Know about the SECURE Act
What is the SECURE Act?
As you may be aware, a new law which significantly changes the way in which inherited retirement assets will be distributed to beneficiaries went into effect on January 1, 2020. This is the SECURE Act. While the SECURE Act includes some beneficial provisions such as increasing the age at which a participant must begin taking required minimum distributions from age 70.5 to age 72 and eliminating age restrictions for contributions to IRAs for individuals who continue to work, the significant downside to the Act is that it will require most beneficiaries of inherited IRAs or 401ks to withdraw all of the funds in the account within 10 years from the owner’s death. This is a big change from the prior rules which permitted distributions over the life-expectancy of the beneficiary. Read on for 5 Things to Know about the SECURE Act (and how it could impact your estate plan.)
- Your beneficiaries will realize less value from the inherited IRA under the SECURE Act. If you were counting on your beneficiaries receiving a certain amount from your estate which includes large IRAs or employer retirement plans, count again. Under the pre-2020 rules, an individual beneficiary could “stretch out” the withdrawal period over which he was required to take distributions over his life expectancy as of the death of the IRA owner. Since the IRS assumes everyone is going to live until age 80 or so, this could mean a very long withdrawal period if your IRA was left to a child or grandchild.
For example, under the pre-2020 rules, a $1 million-dollar IRA inherited by a 50-year old beneficiary could be distributed to the beneficiary over approximately 30 years. This means that in the first year the beneficiary would be required to withdraw about $33,000 from the $1 million IRA and include that amount in his taxable income. The remaining $966,666 that was not withdrawn would continue to grow tax free. Assuming a modest 5% growth, the balance at the end of the year would be $1,015,000. The following year the beneficiary would have to withdraw 1/29th of the balance in the IRA, or about $35,000 from that IRA. Again, the amount that was not withdrawn, about $980,000 would continue to grow tax free during that year and at 5% would be $1,029,000 at the end of the second year, and so on.
Under the SECURE Act rules for inherited IRAs, most beneficiaries will be required to withdraw the entire balance of the IRA within 10 years of the owner’s death. Applying the new rules to the above example means that if the beneficiary withdraws 1/10th of the IRA the first year, she would withdraw $100,000 and pay income tax on that amount. The remaining $900,000 would continue to grow tax free during the year. Assuming a 5% increase, this leaves a balance of $945,000 at the end of that year. If the beneficiary took out 1/10th the second year, that would be a withdrawal of $94,500 leaving a balance of $850,000, and so on.
- There are no changes in the distribution rules for a surviving spouse. While the rules regarding inherited IRAs for most beneficiaries have changed, they have not changed as to a surviving spouse. If you leave your traditional IRA or 401k to your spouse, your spouse will have the option to roll it over into his or her IRA and defer required minimum distributions until age 72. If your spouse is already age 72 or upon reaching age 72, the surviving spouse will be able to take withdrawals over his or her then life expectancy. It is only when the surviving spouse dies and the IRA passes on to the remaining beneficiaries, such as your children, that the 10-year rules come in to play and should be considered in your inheritance planning.
- If your IRA is payable to your Trust it gets more complicated. If you require more complex trust planning or you have structured your estate plan to leave your assets to a Trust for the benefit of your children following your death to provide asset protection for their inheritance or to control the distribution of the funds to them, then this change in the law is even more complicated. The reason for this is that distributions from the IRA are income taxable to the beneficiary. If the beneficiary is a Trust, then the Trust will be responsible for reporting as income the distributions from the IRA and paying the income tax unless the distribution from the IRA is distributed out of the Trust to the beneficiary in the same tax year, in which case the beneficiary will report the income on her income tax return and pay the tax. The problem is that the income tax rates on Trusts are much higher than on individuals. An individual taxpayer reaches the highest federal taxable rate of 37% when she has taxable income of approximately $510,000. A Trust reaches that highest taxable rate when it has income of about $13,000. Since no one wants to pay more tax than is necessary, logic dictates that the distribution from the IRA be distributed out of the Trust to the individual beneficiary. However, once the funds are distributed to the beneficiary, the money is subject to the easy reach of the beneficiary’s creditors such as a divorcing spouse, a bankruptcy, a lawsuit or other creditors. In addition, funds distributed out to the Trust to the beneficiary may be spent as the beneficiary pleases which may not be in accordance with your estate plan goals.
- IRAs passing to minor children may be paid out over the child’s life expectancy, but this comes with a price. Under the SECURE Act, if your IRA passes to your minor child, then the distribution can be stretched out over the minor’s life expectancy during the child’s minority. (Note that the special stretch out rules for minors apply ONLY to the minor children of the IRA owner; they do not apply to step-children, grandchildren, or nieces and nephews). Once the child reaches the age of majority, the 10-year rule applies. There are many challenges associated with this new rule. For example, a minor should never be designated as the direct beneficiary of an IRA. Aside from the fact that most people don’t feel comfortable having assets pass into the hands of a young beneficiary, if a minor is named as the beneficiary of an IRA, then a court proceeding called a Conservatorship will be required. This is expensive and time consuming and best avoided. The best practice is to leave an IRA to a minor beneficiary via a Trust. In order for a Trust to be eligible for the life expectancy payout for a minor under the new rules, the Trust must direct that the required minimum distributions be distributed out of the Trust to the minor beneficiary immediately. This may not be such a big deal while the beneficiary is a minor and the minimum distributions are calculated based on his then life expectancy. Further, the minor would have a guardian who will receive and apply the funds for his benefit. However, once the beneficiary reaches the age of majority (which, by the way, under the SECURE Act could be any time between the ages of 18 and 26), requiring that the IRA distributions be distributed out of the Trust and into the hands of the beneficiary could be a significant problem.
For example, if a $1 million IRA is left to a Trust for the benefit of a minor child who is 10 years old at the death of the parent, then the required minimum distribution the first year would be about $14,300. This amount would have to be distributed out of the IRA to the Trust and then out of the Trust to the beneficiary, or his guardian. Because of the small amount that must be distributed during the beneficiary’s minority, the balance in the IRA is likely to be $1.3 million or more when the beneficiary reaches the age of majority. At that point, the balance in the IRA must be distributed to the beneficiary within 10 years. The Trustee will have the difficult task of deciding on the timing of the withdrawals from the IRA. Is it better to give an 18-year old $130,000 each year for 10 years, or should the Trustee defer taking withdrawals from the IRA until the beneficiary is older, and hopefully wiser, even if doing so will mean a larger tax liability? These are hard decisions and will need to made on a case by case basis. Given the requirement that IRA distributions be distributed out of the Trust to the beneficiary in order to obtain the stretch-out during the child’s minority, parents with large retirement assets may choose to forgo the stretch-out in favor of granting the Trustee discretion to retain withdrawals from retirement accounts in the Trust.
- If you have a Roth IRA, this change is actually beneficial. Under the old rules, inherited IRAs, including Roth IRAs, had to be paid out either within 5 years of the owner’s passing, or over the life expectancy of the beneficiary. The life expectancy option was almost always the best choice as it minimized the taxes and maximized tax-free growth. However, the life-expectancy withdrawal method required that every year beginning with the year after the death of the IRA owner, the required minimum distribution calculated on the beneficiary’s then life expectancy be distributed out of the IRA to the beneficiary. Under the new 10-year rule, the entire amount of the IRA must be distributed by the end of the 10th year following the death of the owner; however, a beneficiary is not required to take the distributions in equal installments. Since distributions from a Roth IRA are not income taxable to the beneficiary, a person who inherits a Roth IRA under the SECURE Act can refrain from taking any distributions for 10 years and allow the value of the Roth IRA to grow tax-free for that 10-year period. After 10 years, the beneficiary will be required to withdraw the entire balance from the Roth but the amount withdrawn is not taxable income to the beneficiary since distributions from a Roth are income tax free.
The bottom line is that everyone who has significant retirement assets should review their estate plan with an experienced estate planning attorney who is familiar with the provisions of the SECURE Act, to understand the impact the Act will have on the distribution of these assets to their beneficiaries. We are happy to review this with you and encourage you to be in touch to schedule a time to meet with one of our attorneys to evaluate how the enactment of the SECURE Act will affect your family and your estate plan.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
Febraury, 2020
© 2020 Samuel, Sayward & Baler LLC
“I Just Need a Will”
Potential clients sometimes call our estate planning and elder law firm to make an appointment to see an attorney stating that they “just need a Will.” Ironically, a Will is often the least needed estate planning document. For many people, their estate will pass to their intended beneficiaries without a Will exactly as it would if they had a Will. That’s because the Massachusetts intestate law that determines the people to whom an estate will be distributed in the absence of a Will, is in keeping with the distribution and inheritance planning wishes of many people.
Massachusetts law regarding wills and inheritance provides that if a member of a married couple dies without a Will and all of the couple’s children are children of the marriage, then the estate of the deceased spouse will pass entirely to the surviving spouse. If the surviving spouse later dies without a Will without having remarried, her estate will pass to their children in equal shares. Further, many married couples own all of their assets jointly (their home, bank accounts, investment accounts) or have beneficiaries designated to receive their assets (IRAs, 401Ks, life insurance, etc.). In that case, no assets pass under the terms of the Will and instead pass by operation of law (joint ownership) or via the ‘contract’ made with the financial company or life insurance company when that beneficiary designation form was completed.
Of course, for people who do not have a situation that fits neatly under the intestate statute, a Will, and often a Trust, is vital. This includes blended families, people who have beneficiaries with disabilities or special needs or beneficiaries who struggle with addiction or beneficiaries who are spendthrifts. It also includes those with minor children and those who want to reduce estate tax or provide creditor protection for the inheritance they leave their beneficiaries.
Frankly, the essential estate plan documents that everyone over the age of 18 should have in place include a durable Power of Attorney and a Health Care Proxy. These documents appoint someone to pay bills, manage assets, deal with the insurance company and make medical decisions if the person making those documents has an accident or gets sick and cannot do those things for himself. The law does not make it easy for someone to do these things in the absence of Power of Attorney or Health Care Proxy. In the case of incapacity without those documents in place, the law requires a court proceeding to appoint a conservator to manage an incapacitated person’s finances and another court proceeding to appoint a guardian to make medical decisions. These are expensive, time-consuming, and public proceedings and best avoided.
Give us a call us at 781-461-1020 and let us help you create the right estate plan (even if you just need a Will) for your family.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
December, 2019
© 2019 Samuel, Sayward & Baler LLC
5 Things to Consider Before Getting Hit by the Bus
In my estate planning and elder law practice we discuss the hard topics of sickness and death with our clients and help them plan for their legacy and the possibility of incapacity and the eventuality of death. A primary purpose of undertaking this legacy and inheritance planning is to lessen the burden of these events on loved ones. We often use the euphemism ‘getting hit by the bus’ to begin the discussion and get our clients thinking about what the reality of that situation would look like if they were suddenly no longer available or experienced an early or unexpected demise. Here are five things to consider before getting hit by the bus.
- Access to Money. If you were hit by that bus, would your family be able to get access to funds to pay your bills, take care of you and your family, or pay for funeral expenses? Who would manage your funds in the event of an early death? What if you don’t have any close family members? Is there someone who will do this for you? For many people their financial information is now available only via online access; they do not receive monthly statements in the mail. This can be a real problem if you have not prepared a list of your accounts (and, at the risk of horrifying IT people everywhere, your passwords) and made this information available to at least one trusted person. Consider how someone would figure out what you own and how to access it.
- Life Insurance and Other Benefits. If you have one or more life insurance policies, does someone know about them? Do your beneficiaries know they are your beneficiaries? One NBC news story estimated that there is more than $1 billion of unclaimed life insurance sitting with insurance companies because the beneficiaries are unaware of the existence of the policies. If your employer, or former employer, offers life insurance, disability insurance or other benefits, does anyone in your family know this? If you receive a pension, does that pension continue for the benefit of your spouse? In full? In part? How will your spouse know that she is receiving the full amount to which she is entitled if you meet an untimely death? Have you checked your Social Security benefits lately so that you know the benefits to which your family would be entitled in the event of your death or disability? You can do that on the Social Security Administration’s website.
- Health Care Proxy & End of Life Medical Decisions. Does your family and your Health Care Agent understand your wishes for end of life care should you suffer a stroke or other debilitating event that leaves you incapacitated? It is so important to have these conversations, both to ensure your wishes are carried out and for your family’s peace of mind. I have clients who had to make end of life decisions for loved ones and who felt as though they did not have a clear understanding of the decision their family member would have made. This left them feeling troubled for a long time. The American Bar Association publishes a Tool Kit for health care decisions which includes a Health Care Proxy Quiz intended to help people start the conversation about end of life decisions. The Conversation Project is “dedicated to helping people talk about their wishes for end-of-life care” and is a great resource for these discussions which can be difficult.
- Final Arrangements. Does your family know your wishes regarding burial or cremation? Who should be notified of your passing? How will these folks be found? Making this information available to the people who will make final arrangements for you is critical. This is especially important for people who do not have family nearby, or who may be estranged from their family.
- Last Will and Testament. Do you have a Will and if so, does your family know where to find it? A Will is an important part of your estate plan. Inquiries about the existence of a Will for a deceased person appear regularly on the Massachusetts Bar Association listserv, posted by attorneys for surviving family members who don’t know whether or not their loved one left a Last Will and Testament. Don’t let this happen to you. Inform your family and the person you’ve named as your Personal Representative of the name of your attorney and the location of your important estate planning documents including your Last Will and Testament. If you haven’t yet made a Will, put that at the top of your to-do list.
It is always hard for family and friends when someone passes away. In addition to grieving, there are the tasks and seemingly never-ending paperwork that need attention following a death, even more so if it is an early or untimely death. For some people, a health diagnosis serves as a wake-up call to get their affairs in order. When an unexpected event results in death or incapacity, there is no time for that. Every day is a gift for all of us. Take a minute to imagine what would happen if you ‘got hit by the bus’ and then plan to ensure that your family has access to the information they need. We can help – if you don’t have an estate plan, or if it’s been more than five years since you’ve reviewed your Last Will and Testament, call us at 781/461-1020 or email us to schedule an appointment with an estate planning attorney to make sure you have a strong plan for your legacy. In the meantime, watch out for that bus!
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
October, 2019
© 2019 Samuel, Sayward & Baler LLC
Why we ask for your Financial Information in Advance of your Estate Planning Meeting
When someone schedules an estate planning or long-term care planning meeting with an attorney at our firm, they are asked to complete our Client Questionnaire and send it to us prior to that meeting. This is the case for both clients who are new to us who don’t already have an estate plan and for returning clients who are coming in to update their estate plan. There are often questions about why we need this information so I thought I would take the opportunity this month to explain why this is so important when it comes to estate planning.
Q. Why do you need detailed information about my assets? We ask for detailed information about your assets, including their value, how they are owned, how beneficiaries are designated, and the nature of the asset (i.e. whether an account is an IRA or other type of qualified retirement account or not) so that we can properly advise you about probate avoidance, long-term care planning, legacy planning, as well as estate planning and estate taxes.
Probate Avoidance. One of the primary goals of estate planning is to pass assets to family at death without the need for probate. Probate is the court process of changing the title on an asset when the owner of the asset passes away. Probate can take a long time, cost a lot of money, and cause surviving family members much aggravation. As such, many folks want to avoid probate. There are several ways to avoid probate depending upon an individual’s circumstances and the type of assets he or she owns. In order for us to advise you about your options for probate avoidance our estate planning and probate attorneys need to know about your assets.
Estate Tax Planning. Although the federal estate tax is not currently a concern for many people because our current tax code permits each person to pass on $11.4 million of assets free of any federal estate tax, this is not the case in Massachusetts where we have a $1 million exemption for estate taxes. As such it is important to consider estate tax planning. Whether your estate will owe federal or Massachusetts estate tax depends upon the value of your taxable estate when you pass away. In order to determine whether your estate will be liable for estate taxes and to advise you about your options for reducing or eliminating that tax, we need to know the nature and value of your assets.
Long-term Care Planning. Long-term care planning is typically planning to preserve assets from having to spent down on long-term care costs. Such planning can be done in advance (the need for long-term care is not imminent) or in a crisis (nursing home care is imminent or likely within the next few months). In either case, our long-term care attorneys, need to have detailed information about assets and income in order to advise you about your options for planning to preserve your assets. When we are working with a married couple, information about both spouses’ assets is needed since eligibility for some long-term care benefits programs is contingent on both spouses meeting the criteria imposed by the benefits program.
Estate Planning. Estate planning is done to make sure your assets pass to the people you intend at your death. How an asset is owned and how beneficiaries (if any) are designated on an asset will determine how that asset will be distributed at your death. In order to give you advice about whether or not changes to asset ownership or beneficiary designations are necessary based on your estate planning goals, we need to know how assets are owned and how beneficiaries are designated currently, so we can work with you to create the most accurate estate plan for you and your family.
Q. Why do I have to complete a Client Questionnaire if I am already a client? An important aspect to having an estate plan that actually accomplishes your goals is to keep your plan up to date. Your life is not static – family situations change, health changes, income and assets change, etc. These factors have an impact on the type of estate plan you should have and the provisions of your plan. We actively encourage our clients to regularly review and update their estate plan to ensure the success of that plan. Returning clients sometimes question the need to complete an updated Questionnaire saying that ‘nothing has changed.’ If it has been more than a few years since you filled out a Client Questionnaire, completing an updated Questionnaire will ensure that we are best able to advise you. We would be happy to send you a copy of the most recent Client Questionnaire we have on file for you so that can you work off of that in updating your information Just ask Jen to send that to you when you schedule your appointment. Having an updated Questionnaire in your file will also help us help your family members in the event you become incapacitated, and at the time of your death, as we will be able to give them information about assets, help them locate a safe deposit box, etc. This can save a lot of time and effort for family members.
Q. The Questionnaire is 14 pages long – do I really need to fill out the entire form? Yes, we do want you to complete the Questionnaire in its entirety. Some of the sections may not apply to you and you should indicate that on the form. For example, we ask about ownership interests in a business – if you do not own an interest in a business, you will skip this section. If you do not have life insurance, you will skip that section. The last page of the Questionnaire asks about your goals for your planning – is reducing taxes important to you? Are you concerned about protecting the inheritance you leave your children from their creditors, such as a divorcing spouse or a lawsuit? We want to know what is important to you so that we can help you create the right estate plan that is best for you and your family.
Q. Do you share that information with anyone outside of your firm? Of course not! We are lawyers, and confidentiality is of paramount importance to us. Our staff is also well-trained on keeping all client information, including the names of our clients, confidential.
We’re here to help you achieve your estate and long-term care planning goals. Whether those goals are probate avoidance, estate tax reduction, preserving assets from the high cost of long-term care, or simply the peace of mind in knowing that you have put your affairs in order, successful legacy planning begins with our collection of the information requested on our Client Questionnaire.
August, 2019
© 2019 Samuel, Sayward & Baler LLC
Ask SSB
Q: My neighbor put her house in a trust. Should I put my house in a trust?
A: Whether or not your house should be held in a trust depends on your unique circumstances and goals. Owning your home in a living trust means that it will avoid probate at your death. Certain types of trusts can also be used preserve your home for your family in the event you need long-term care. That type of trust is an irrevocable trust. Although an irrevocable trust can provide asset protection, it also means that you give up unfettered access and control over your home. For some people, the adverse consequences of putting their home into an irrevocable trust outweigh the benefits.
Whether transferring your home into a revocable or irrevocable trust is right for you can only be determined after you review the advantages and disadvantages of such a transfer with your attorney in light of your particular circumstances and goals.
Medicaid and Staying in Your Home versus the Nursing Home- 5 Things to Know
One of the most frequent concerns I hear from clients in my estate planning and elder law practice is the fear of losing their home to the nursing home if they need long-term care. This is a valid concern when it comes to Medicaid and estate planning. Long-term care can cost upwards of $14,000 per month. If the long-term care recipient is not able to pay those costs, then Medicaid (sometimes called MassHealth in Massachusetts) will pay. However, there is a cost associated with having MassHealth pay long-term care costs. First, in order to be eligible for Medicaid benefits to pay for that care the applicant must meet the strict financial criteria imposed by the program. Second, to the extent a Medicaid recipient owns assets at his death, the state can seek reimbursement from those assets for the funds it expended on the Medicaid recipient. So, what happens to the home when the owner needs long-term care? Here are five things to know about Medicaid and the home.
- You don’t have to sell it, but there will be a lien. Many people think that they must sell their home in order to be eligible for MassHealth benefits. Sometimes they believe this because they have been told so by the long-term care facility caring for their loved one. This is not the case. The home is a so-called ‘non-countable’ asset (up to $878,000 of value in 2019) for purposes of determining Medicaid eligibility. That means that a person can receive Medicaid benefits to pay for nursing home costs and still own his home. However, the Commonwealth will file a lien against the property with the registry of deeds unless the owner’s spouse or a child or sibling who meets specific requirements is still living in the home. The amount of the lien is the amount the state pays on behalf of the Medicaid recipient. As such, the house cannot be sold during the owner’s lifetime without re-paying the state. In addition, the applicable MassHealth regulations require that the lien be satisfied within 9 months of the appointment of a Personal Representative following the death of the homeowner.
- Keeping the home can be challenging. Although the regulations permit a Medicaid recipient to own her home, this can be challenging since all but a small amount of the recipient’s monthly income must be paid to the nursing home each month. As such, there is no income available to pay the real estate taxes, insurance, utility bills and the cost of upkeep on the home. In some cases, family members will pay these expenses and hope to be reimbursed when the home is eventually sold. In other cases, the home will be rented and the rental income used to pay the property expenses. Both of these options present challenges and should be thoughtfully considered before embarking on either and require proper Medicaid planning with an attorney that specializes in long-term care matters.
- Transferring ownership of the house to the spouse in the community is usually advisable. Many married couples own their home as tenants by the entirety which is a special form of joint ownership for married couples. This form of ownership means that when one spouse dies, the house belongs entirely to the surviving spouse without the need for probate. Although the house is a non-countable asset and the state is not permitted to file a lien against the property if there is a spouse residing in the home, it is usually prudent to transfer the home into the name of the community spouse when one spouse needs long-term nursing home care. The reason for this is to protect the home from a lien (see #1 above) in the event the community spouse predeceases the nursing home spouse. There is no ineligibility period imposed for transfers of assets between spouses (see #4 below).
- Special rules for certain transfers of the home and the look-back period. The general rule for long-term Medicaid benefits eligibility is that if the applicant (or his or her spouse) gave away assets within the 5-year period preceding the application for benefits, he or she will not be eligible for benefits. This is sometimes referred to as the Medicaid look-back period. This penalty applies to transfers of the home as well as other assets even though the home is a non-countable asset. However, there are some exceptions to this transfer penalty rule. The most commonly used exception is the exception for transfers between spouses. The Medicaid regulations permit assets, including the home, to be transferred between spouses without the imposition of any penalty period. Taking advantage of this exception is a good way for a married couple to protect the home from a Medicaid lien or claim when one spouse needs long-term care. Other exceptions to the transfer penalty include transfers to a blind or disabled child, to a child who has provided care to the applicant (subject to a variety of requirements), and to certain types of trusts.
- Long-term care insurance can help. Long-term care insurance is insurance that pays for care at home, in assisted living, or in a nursing home. This type of insurance can be expensive, however, there is a lot of flexibility in the type of policies available and the amount of coverage that can be purchased. Massachusetts has a law preventing the state from filing a lien or claim against the home if the Medicaid recipient has a long-term care insurance policy which meets certain minimum criteria. In order to protect the home, the policy must: 1) have a minimum benefit of $125/day; 2) provide coverage for a period of at least 2 years; and, 3) still be in place at the time of admission to a long-term care facility. (Note that long-term care policies issued prior to March 15, 1999, need only provide for $50/day of coverage in order for the owner to be eligible for the lien exception.)
The prospect of losing one’s home to long-term care costs is scary. However, there are steps that can be taken to reduce the risk that this will happen. If you or a loved one are faced with the prospect of long-term care or entering a nursing home and want to protect your home or other assets from loss to future long-term care costs, seek advice from an experienced elder law attorney to learn about your options for doing so.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
June, 2019
© 2019 Samuel, Sayward & Baler LLC
Health Care Decision-Making in a Crisis
I recently had the opportunity to read an article in a professional journal on health-care decision-making during a crisis when nothing is in writing. It discussed a study that interviewed physicians and other health care providers caring for people who had not named a health-care decision maker and did not have the capacity to make their own health care decisions. In some states (but not in Massachusetts), state law will dictate who becomes a surrogate decision-maker when the incapacitated person has failed to do so. In most cases that person is the spouse or next of kin. However, that surrogate may have no idea what the ill person’s wishes are or that surrogate may be the last person the patient would have chosen (think estranged spouse or child). In other circumstances, family members may disagree on care options. The most difficult situations are patients without immediate family to make health care decisions for them who had not designated someone else to do so. In many cases, it was unclear whether the decisions being made were reflective of the patient’s wishes.
The article underscored the importance of doing the following:
- Sign a Health Care Proxy that names the person you want to make health care decisions for you if you are unable to do so and at least one back-up decision-maker. Ideally, this is someone who you see and speak with often, and with whom you have had an opportunity to discuss your wishes on more than one occasion.
- Make sure the contact information for your Health Care Agents is correct in your Proxy, and keep it up-to-date.
- Give your Health Care Agents and your physician a copy of your Health Care Proxy.
- Keep a copy of your Health Care Proxy on your smart phone so that it is easily accessible in a crisis and ask your Health Care Agent to do the same.
- Communicate your care preferences to your Health Care Agents, either in conversation or in writing.
- The Proxy Quiz from the ABA Commission on Law and Aging
Ask SSB
Q: My daughter told me that she can get a Will form off the internet that I can fill out and that way I will avoid an expensive legal fee. If I have a pretty simple situation is there any reason why I shouldn’t do this?
A: Yes! There are many reasons why you should not use a Will form from off the internet, just like there are many reasons why you should not do your own dental work! Here are just a few:
- Most situations are not simple. Many clients who come to see me tell me at the outset that their situation is simple, but as we talk, it often turns out that things are not quite so simple. Common circumstances which merit more than a simple Will include
- a child or grandchild with special needs
- a child who is in a shaky marriage or has money troubles
- a desire to protect assets from long term care costs
- a second marriage, especially where there are children
- having a taxable estate
- ownership of a family business, commercial real estate or a beloved vacation home
- Language is important. The wording in your Will determines how your estate will be distributed. If your Will says, ‘I leave everything to my children in equal shares’ what happens if a child predeceases you? Will his share go to his children or will it be distributed among your other children? What do you want to have happen? Engaging an estate planning attorney to prepare your Will means that your intentions will be carried out, and that there will be no ambiguity that could lead to family disputes or unnecessary court involvement after your death.
- Most people need more than just a Will. While having a Will is important, creating documents to address the possibility that you may experience a period of incapacity in your life is just as important. These documents include a durable Power of Attorney, a Health Care Proxy, HIPAA Authorization and a Living Will.
In many ways your Will is your legacy to your family; it is the last thing you say to your loved ones. A well-planned estate, including a Will prepared by an experienced estate planning attorney for your unique situation, tells your family that you care enough about them to ensure that your intentions are carried out effectively and in the most cost-effective manner possible.
Call us – we can help you ensure that your wishes are carried out.