Illinois Estate Planning and Elder Law Blog

One simple way you can reduce estate taxes is to give some of your assets to your children (or anyone else) during your life. There is no limit on how much you may give during your lifetime, but if you give any individual over $14,000 (in 2016) in one year, you must file an IRS Form 709 reporting the gift to the IRS. The amount over $14,000 will be counted against the $5.45 million lifetime tax exclusion for gifts.

The $14,000 figure is an exclusion from the Form 709 reporting requirement. You may give $14,000 to each of your children, their spouses and your grandchildren (or to anyone else you choose) each year without reporting these gifts to the IRS. In addition, your spouse can duplicate these gifts. For example, a married couple with four children can give away up to $112,000 in 2016 with no gift tax implications and no need to file anything with the IRS. However, if spouses elect to split a gift of $28,000 to one individual, Form 709 must be filed for both spouses to use the $14,000 exemption.

So an individual with $6 million in assets and two children and two grandchildren could gift to them in one year $56,000 (4 times $14,000) without filing anything with the IRS. If that individual made these gifts for ten years, he would have reduced his $6 million in assets to a figure under the current $5.45 million exemption and would owe no Federal Estate Tax at his death. Continue reading

In Illinois, assisted living facility residents covered by Medicaid are not at risk of being evicted if they leave the facility for a temporary hospitalization.

The Illinois Medicaid program pays for services not just in nursing homes but in assisted living facilities which are meant to provide a home-like alternative to nursing homes. The Nursing Home Reform Law authorizes Medicaid to pay a nursing home to hold a room for a Medicaid recipient who is temporarily absent due to hospitalization and entitles the resident to return to the first available room.

Medicaid does not make similar payments on behalf of residents of assisted living facilities and the facilities are not required to give admission priority to returning residents. Illinois is one of only a handful of states which makes retainer payments to assisted living facilities on behalf of residents who are temporarily absent. Because of this law, Illinois assisted living facility residents covered by Medicaid are not at risk of being evicted if they leave the facility for a temporary hospitalization. Continue reading

The Estate Tax was put in place in 1916 to raise revenue to finance World War I. In a recent article in the Wall Street Journal, Laura Saunders explains how this tax started as a levy with a top rate of 10% and an exemption of $50,000 (about $1,000,000 in current dollars) and today has a top rate of 40% and an exemption of $5.45 million.

The Estate Tax has never affected many people, often only affecting 2% of individuals who die each year. Also, the Estate Tax can be reduced or eliminated by putting in place planning techniques, such as gifting up to $14,000 each year to as many relatives and friends as one would like to reduce the estate size at death.

Proponents of the Estate Tax point to the goal it seeks to achieve of limiting concentrations of wealth. Opponents of the tax claim that it damages the nation’s economy by forcing sales of assets at depressed prices.

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Oregon has passed a law which allows the appointment of an individual to access the digital assets of someone who has died. This authority must be provided for in a Will, Trust or other estate planning document.

Illinois currently has no laws regarding digital assets after an individual dies.

Google and Microsoft have their own set processes regarding accessing an account when the owner has died. Yahoo and Twitter have no set processes. Facebook allows naming a “legacy contact” who can access your account after you die.

One way around the issue is to use an on line password manager, e.g. LastPass, which allows you to store account information in one place. If you were to die, the individual you had provided the information regarding the master password could use it to access all of your digital accounts. Continue reading

You become eligible for Medicare as soon as you turn 65, and delaying your enrollment can result in penalties, so it is important to act right away.

There are different options to consider when signing up for Medicare. Medicare consists of four major programs: Part A covers hospital stays, Part B covers physician fees, Part C permits Medicare beneficiaries to receive their medical care from among a number of delivery options, and Part D covers prescription medications. In addition, Medigap policies offer additional coverage to individuals enrolled in Parts A and B.

Medicare enrollment begins three months before your 65th birthday and continues for seven months. If you are currently receiving Social Security benefits, you do not need to do anything. You will be automatically enrolled in Medicare Parts A and B effective the month you turn 65. If you do not receive Social Security benefits, then you will need to sign up for Medicare by calling the Social Security Administration at 800-772-1213 or online at It is best to do it as early as possible so your coverage begins as soon as you turn 65.

If you are still working and have an employer or union group health insurance plan or if you are retired and still covered under your employer’s health plan, it is possible you do not need to sign up for Medicare Part B right away. You will need to find out from your employer whether the employer’s plan is the primary insurer. If Medicare, rather than the employer’s plan, is the primary insurer, then you will still need to sign up for Part B. Even if you are not going to sign up for Part B, you should still enroll in Medicare Part A, which may help pay some of the costs not covered by your group health plan.

If you don’t have an employer or union group health insurance plan, or that plan is secondary to Medicare, it is extremely important to sign up for Medicare Part B during your initial enrollment period. Your Medicare Part B premium may go up 10 percent for each 12-month period that you could have had Medicare Part B, but did not take it. In addition, you will have to wait for the general enrollment period to enroll. The general enrollment period usually runs between January 1 and March 31 of each year.

With all the deductibles, copayments and coverage exclusions, Medicare pays for only about half of your medical costs. Much of the balance not covered by Medicare can be covered by purchasing a Medigap insurance policy from a private insurer.

Medicare also offers Medicare Part C (also called Medicare Advantage). You must be enrolled in Medicare Parts A and B to join a Medicare Advantage plan (the name for private health plans that operate under the Medicare program). If you join a Medicare Advantage Plan, the plan will provide all of your Part A and Part B coverage, and it may offer extra coverage, such as vision, hearing, dental and other health and wellness programs. Most plans include Medicare prescription drug coverage.

Finally, Medicare offers prescription drug coverage under Medicare Part D. If you are not going to sign up for a Medicare Advantage plan with prescription drug coverage, then you will want to enroll in a prescription drug plan at the same time you sign up for Parts A and B. For every month you delay enrollment past the initial enrollment period, your Medicare Part D premium will increase at least one percent. You are exempt from these penalties if you did not enroll because you had drug coverage from a private insurer, such as through a retirement plan, at least as good as Medicare’s. This is called creditable coverage. Your insurer should let you know if its coverage will be considered creditable.
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The basic concept of a reverse mortgage is that the bank will make payments to the homeowner, rather than the other way around. The payments can be a single lump sum, a line of credit or a stream of monthly payments. The bank does not have to be paid back until the homeowner moves out or passes away.

But the bank must be paid back at that time. For a senior who moves to a nursing home, this means liquidating an asset that is non-countable for Medicaid purposes and turning it into a countable asset that must be spent down before the former homeowner can qualify for Medicaid coverage.

In addition, because the bank is advancing money without knowing for sure when it will be paid back, there are high upfront costs to reverse mortgages. These mortgages are limited to about half of the equity in the home, which may not meet the homeowner’s needs.

There is an alternative that in many instances better meets the needs and goals of older homeowners – the private reverse mortgage. This is a private loan, usually from a family member, to the homeowner secured by a mortgage on the senior’s home.

Advantages for the senior homeowner:

• It is cheaper. The upfront costs of paying an attorney to set up a private reverse mortgage may be a small fraction of the cost of a commercial reverse mortgage.

• Interest rates are lower. The interest rate on a private reverse mortgage is set by the IRS each month and is less than the interest rate on a commercial reverse mortgage.

• There’s no limit on what percentage of the home equity may be borrowed. The ability to tap into more equity in the home can delay the day of reckoning when the senior must move to a nursing home just because there is not enough money to pay for caregivers.

• The loan need not be paid back until the house is sold, so if a senior moves to a nursing home, he can keep his house.

• Once in a nursing home or other facility, the senior can continue to receive payments on the private reverse mortgage if needed to maintain the house or pay for extra care in the nursing home.

Advantages for family members:

• What is good for a parent or grandparent is good for the entire family. To the extent the senior can save money in mortgage costs, the bigger the ultimate estate that will pass to the family.

• The ability to tap into equity in the home can mean that family members who are providing assistance can either alleviate the burden by hiring more paid caregivers or be paid themselves for providing care.

• While current interest rates are very low, the rates set by the IRS are higher than money markets and certificates of deposit are paying these days. This means that the family member or members advancing the funds will earn a little more than they would if the money were sitting in the bank.

• A private reverse mortgage can help protect the equity in the home because it takes precedence over any claim by Medicaid.

The family of any senior who owns a home but who has little in savings should consider the private reverse mortgage as a way to help parents and grandparents.

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DINK is estate planning lingo for dual income no kids. As Jamie A. Downes points out in her article: Just the Two of Us: Estate Planning for the Childless Dual-Income Household, childless couples where both spouses work are becoming more prevalent.

These couples are often looking to pass their assets to friends, charities or even a pet. Without estate planning such as a Will or Trust in place, their assets will pass according to state law which does not allow for any assets to go to friends, charities or pets.

Another advantage to DINKs putting in place an estate plan is to allow the designation of an agent under a Power of Attorney for Health Care. This agent has legal authority to make health care decisions for the individual (principal) who created the Power of Attorney. Most people with children name a child as an agent after their spouse dies. DINKs do not have this option. This makes the creation of a Power of Attorney for Health Care even more important. Continue reading

California recently passed a law allowing a doctor to prescribe a life-ending drug for a terminal patient. It is the California End of Life Option Act, and it comes into effect this June. This law brings to five the number of states allowing end-of-life decisions (California, Oregon, Vermont, Washington and Montana).

Under the California law, an adult with capacity may request a prescription for an aid-in-dying drug if:

  1. The individual’s attending physician has diagnosed the individual with a terminal disease (less than 6 months to live), and a consulting physician confirms this diagnosis;
  2. The individual has voluntarily expressed the wish to receive a prescription for an aid-in-dying drug;
  3. The individual is a resident of California (California driver’s license, voter registration, income tax return or other evidence);
  4. The individual documents his request pursuant to the requirements set forth in the statute, which include at least two separate oral requests at least 15 days apart and a written request; and
  5. The individual has the physical and mental ability to self-administer the aid-in-dying drug.

A request for the prescription may not be made through a power of attorney, agent or other source. The request must be made directly by the individual diagnosed with the terminal disease. The individual may withdraw or rescind his request for the aid-in-dying drug at any time, regardless of the individual’s mental state. In other words, even if the person no longer has capacity, he may decide not to go through with the use of the aid-in-dying drug. Continue reading

Just as we create estate plans for our eventual demise, we also need to plan ahead for the possibility that we will become sick and unable to make our own medical decisions. Medical science has created many miracles, among them the technology to keep patients alive longer, sometimes indefinitely. As a result of many well-publicized “right-to-die” cases, Illinois has made it possible for individuals to give detailed instructions regarding the kind of care they would like to receive should they become terminally ill or are in a permanent unconscious state.

If an individual becomes incapacitated, it is important that someone have the legal authority to communicate that person’s wishes concerning medical treatment. Similar to a power of attorney for property, a power of attorney for health care allows an individual to appoint someone to act as his agent, but for medical, as opposed to financial, decisions. The health care power of attorney is a document executed by a competent person (the principal) giving another person (the agent) the authority to make health care decisions for the principal if he is unable to communicate such decisions. By executing a health care power of attorney, principals ensure that the instructions they have given their agent will be carried out. A health care proxy is especially important to have if an individual and family members may disagree about treatment.

Accompanying a power of attorney for health care should be a medical directive. Such directives provide the agent with instructions regarding what type of care the principal would like. A medical directive can be included in the health care power of attorney. It may contain directions to refuse or remove life support in the event the principal is in a coma or a vegetative state, or it may provide instructions to use all efforts to keep the principal alive, no matter what the circumstances.

Living wills are documents that give instructions regarding treatment if the individual becomes terminally ill or is in a persistent vegetative state and is unable to communicate his or her own instructions. The living will states under what conditions life-sustaining treatment should be terminated. If an individual would like to avoid life-sustaining treatment when it would be hopeless, he needs to execute a living will. Like a health care power of attorney, a living will takes effect only upon a person’s incapacity. Also, a living will is not set in stone; an individual can always revoke it at a later date if he wishes.

A living will, however, is not a substitute for a power of attorney for health care. A living will simply dictates the withdrawal of life support in instances of terminal illness, coma or a vegetative state.

Do not confuse a living will with a “do not resuscitate” order (DNR). A DNR says that if you are having a medical emergency such as a heart attack or stroke, medical professionals may not try to revive you. This is very different from a living will, which only goes into effect if you are in a vegetative state. Everyone can benefit from a living will while DNRs are only for very elderly or frail patients for whom it would not make sense to administer CPR. Continue reading

Learning what not to do can be just as instructive as learning what to do. That is the premises of The 101 Biggest Estate Planning Mistakes.

Author Herbert Nass, an estate planning attorney for 25 years who has represented several celebrities, uses examples from celebrity estate plans as well as his own practice to illustrate what not to do when conducting estate planning. According to Nass, the biggest mistake is not planning at all. Nass points out the problems caused when Sonny Bono, Tupac Shakur and Bob Marley all died intestate. He also documents, among other things, blunders involving personal property, real estate, executors, minors, prior marriages, taxes, disgruntled friends and family, and funerals and burials. While some mistakes are specific to celebrities or the super wealthy, most of the errors could be made by anyone.

Nass intersperses actual excerpts from celebrity wills and stories about celebrity estate plans throughout the book. For example, he cautions against leaving too much money to a pet, as Leona Hemsley did, or selling valuable property too soon after a death, something Jackie Onassis’s family did. Nass’ 101 mistakes range from the legal (e.g., not confirming how property is held before drafting an estate plan) to the practical (e.g., not draining water pipes in vacant houses) to the personal ( e.g., disinheriting your children or grandchildren out of anger).

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