Articles Posted in Estate Planning

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Open enrollment for Medicare runs from October 15th to December 7th this year. If you are eligible for Medicare, you are more likely than ever to be the target of Medicare related scams this year. Medicare scammers are smart and they know exactly what types of scenarios, incentives and stories are most likely to ensnare seniors.

Typical scam calls may be about a refund of premiums, the need for a new Medicare card, false offers of free medical services and bogus Medigap plans. No matter the story used, service offered, or purported identity of the caller, the objective is for the scammer to obtain the senior’s Social Security number by slowly extracting as much personal information as possible from their victim.

Here are some important things for seniors to remember about Medicare to help weed out fake callers:

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At our office we are frequently approached by elderly clients who are considering a second marriage later in life. A new romantic relationship can mean new friends, new experiences, increased happiness and an overall better quality of life. That being said, older couples do have some important issues to consider when deciding whether or not to take the plunge. Adult children, retirement plans, long-term care consideration and government benefits are all topics that should be discussed thoroughly before an elderly couple decides to marry.

A particularly sensitive issue is what happens to the family home. Whether the couple decides to remarry, or decides that they would prefer to just live together, it is important to plan for what will happen to the home they decide to cohabit. Seniors in this situation are faced with the competing goals of wanting to keep the equity of the home in their family, while wanting to provide a place for their significant other to live should the owner predecease. Through the use of proper estate planning such as a life estate or properly drafted land trust, this can be achieved. Care should be taken to ensure that assets are available to maintain the home and that the owner’s family understands their wishes.

Another sticky topic, is how to pay for long-term care and what happens if one spouse requires Medicaid benefits. Long-term care can be very expensive and the Illinois Department of Human Services will require that a spouse’s assets be taken into consideration even in the face of trust and prenuptial agreements when reviewing an application for Medicaid benefits. One spouse’s refusal to make their assets available for the care of another can have a significant negative impact on Medicaid eligibility. We strongly advise against later in life marriages when the need for Medicaid benefits to pay for long-term care is relatively foreseeable.

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No area of our practice causes more confusion and angst for seniors and their families as the question of how to pay for nursing home care. Within that practice area, no topic causes more problems for seniors as asset protection planning. Myths abound about how to protect assets prior to applying for Medicaid. Some of the most common are: 1) that a Medicaid applicant can transfer $14,000 per child per year; 2) that the kids can be added to financial accounts to shield assets; or 3) that investing in annuities will solve all their problems. In fact all of these theories about asset protection are wrong. Worst of all, engaging in these activities can leave the senior in an incredibly precarious position.

The $14,000 per child myth is based on IRS gifting rules which have no relationship to Medicaid eligibility or planning; adding your children to your account will have no effect on how Medicaid counts the assets when determining your eligibility for benefits; and the rules concerning Medicaid and annuities has changed dramatically over the years to that point that only one, very specific type of annuity will help a Medicaid applicant qualify for benefits while preserving assets.

Even playing by all the rules can created problems. For example, current Medicaid rules will not take into account any transaction that occurred more than five years before the application for benefits. This leads many seniors to transfer their assets to children well in advance of applying for Medicaid benefits.  Unfortunately this creates a whole new set of problems. Assets transferred to children are now vulnerable to the creditors and spouses of the kids. There can also be serious capital gains and real estate tax implications for transferring property to children that must be taken into account.

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Recent natural disasters have highlighted the need for more comprehensive emergency and evacuation plans for nursing home facilities. Hurricanes Harvey, Irma and Marie each caused significant property damage, resulted in loss of life, and left many seniors stranded for days without electricity, air conditioning, sufficient access to medications and doctors, no way to contact family members, and rapidly dwindling food and water reserves.

Federal regulations on nursing home emergency preparedness were issued in September of 2016 and should be fully implemented by November of this year. The new regulations sound fairly comprehensive. They address things such as an emergency plan & procedures, communications, training and back-up power systems. The problem is that the new regulations are vague and give no specific guidance or standards by which these new procedures should be evaluated. Critics of the new regulations fear that the lack of specificity in Federal guidelines will lead to inconsistencies in planning and implementation.

Luckily for those of us that live in the Midwest, we have little to fear from hurricanes. However, severe snow storms, summer heat waves and tornadoes have all been known to effectively trap seniors in nursing facilities or in their homes. As we head into winter we urge our clients to check in with elderly clients often. If the senior lives in a nursing home, we suggest the family inquire after emergency procedures and to establish a reliable means of communication with the senior such as a personal cell phone. For those seniors living at home, we suggest families procure sufficient water and non-perishable foods to meet the senior’s needs during extender periods of extreme cold or heavy snows. We also suggest making advanced arrangements for snow removal.

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Gary Cohn, a White House advisor on tax-planning, uttered these words to a group of senate Democrats recently.  To Cohn, his comment underscored the fact that very few of the uber wealthy pay estate taxes anyway so eliminating the tax would do very little to the revenue side of the government’s ledger.

But Mr. Cohn has a point here.  Only 1 out 500 Americans are affected by the tax and those that are usually use a myriad of IRS allowed techniques to eliminate the tax all together. Some of these strategies are the following:

Using the Annual Exclusion(now $14,000 per person) to gift monies and/or assets out of their estates.

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Many of our clients have children or grandchildren (beneficiaries) that need protection from their own proclivities even as adults.  Some of these habits include addictions, poor spending habits or just not living up to their potentials.

So what is a parent or grandparent to do?  Why not use an “Incentive Trust”?  An Incentive Trust is a type of trust that attempts to encourage and reward “good behavior” and discourage “bad behavior” of the beneficiaries.

For example, if a beneficiary is known to have bad spending or saving habits, the trustee of your trust can be directed not to distribute any monies or assets to that beneficiary unless the spending beneficiary shows by a check register or other record keeping system that he or she is spending monies responsibly in the eyes of the trustee.  The trustee can be given guidelines as to what the maker of the trust would consider responsible.  This might include percentages put away by the beneficiary for savings, housing, auto and auto allowances.

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When a Petition for Guardianship of an Adult with an Alledged Disability is filed, the Court will often times appoint a Guardian ad Litem (GAL) to conduct an investigation.  The GAL is a local attorney who is responsible for representing the best interests of the Respondent in the guardianship proceeding.  Since the Judge cannot physically go out to meet with each of the parties involved, he/she relies on the reports of the GAL.  The GAL is essentially considered the “eyes and ears” of the Court.

The first task of the GAL is usually to meet with the Respondent (the person with the disability).  The GAL will advise the Respondent of his/her rights in the proceedings and ask various questions to ascertain the opinions of the Respondent.  Often times the GAL will also want to meet with the person who filed the underlying Petition for Guardianship, as well as other family members and caregivers of the Respondent.  Once the investigation has been completed, the GAL will submit a report to the Court that includes any information which the Judge may find relevant.  The GAL will also make a recommendation as to whether the guardianship should be approved and who should serve the role of Guardian.

It should be noted that the GAL represents the best interests of the Respondent.  Sometimes what the Respondent wants is not necessarily what is in his/her best interests.  In that case the Judge may appoint another attorney to represent the Respondent.  If the Respondent objects to the guardianship, the GAL will usually serve as the key witness at trial.

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On February 9, 2017, Representative Bill Mitchell of Decatur, introduced HB3089 to the Illinois House of Representatives.  The proposed legislation would amend the Probate Act of 1975, by adding an additional subsection to 755 ILCS 5/18-3, which provides the notice requirements for probate estates.  This bill has not yet cleared the House of Representatives, as it was referred to the Rules Committee on March 31, 2017, which is where it currently stands.

Section 18-3 of the Probate Act of 1975 states the current requirements for notice of probate estates.  Most probate attorneys are already familiar with these requirements: Publication of creditor notice for three consecutive weeks in the county where the estate is being administered, and mailing direct notice to any known or reasonably ascertainable creditors.  HB 3089 would add an additional subsection which would require direct notice be sent to the Illinois Department of Healthcare and Family Services (DHS) if the decedent was 55 years of age or older or resided in a nursing facility or other medical institution.  HB 3089 further provides that the notice be sent to the Bureau of Collections at the Chicago office of the Department, and must include a copy of the underlying petition as well as the decedent’s social security number and date of birth.

There are a few interesting pieces of this proposed legislation which are worth examining.  The first is the number of probate estates this would impact.  Presumably, a large number of decedents are over age 55 at the time of death.  Furthermore, the notice would also be required for any decedent (regardless of age) who “resided in a nursing facility or other medical institution.”  The concern with this language is that it is broad and undefined.  Does it apply for a decedent who ever resided in a nursing home, or just resided there at the time of death?  What is considered a “medical institution?”  Does it apply for assisted living facilities, rehab, or extended hospital stays?  If this legislation passes, the best practice for attorneys may simply be to send the notice to DHS for every probate estate opened.

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Probate is the process by which a court will supervise the administration of an estate when someone passes away.  Many clients prefer to avoid probate because the process can be time-consuming and costly.  This article will examine the various ways probate can be avoided.

Joint Tenants with Rights of Survivorship.  When there are more than one owner to a piece of property, there are different ways the property can be titled.  One example is joint tenancy.  When a decedent dies while holding property in joint tenancy with another person, the property will pass to the surviving owner by operation of law.  This applies for both real estate and personal assets such as a bank account.

Beneficiary Designation/Payable on Death.  Many assets such as retirement accounts will allow for a beneficiary designation or payable on death designation to be placed on the account.  In this case, when the owner of the account dies, it passes automatically to the beneficiary who is listed on the account.  However, the key for this technique is that there must be a valid and living beneficiary at the time of death.  If there is no beneficiary listed, the asset will pass with the decedent’s estate, which will most likely trigger a probate proceeding.

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Wills do not expire, but certain changes can render them useless. It is important to review your will periodically to ensure it still does what you want. The following are five ways your will can become out of date.

  1.  Your beneficiaries have died. For example, if your will leaves your estate to your two siblings and both die before you, your will is still valid, but it will have no effect on who will inherit from your estate. Instead, your estate will be distributed according to the law in your state, just as if you had died without a will.
  2. You have potential new beneficiaries. A will that was written before you got married will be of little assistance in distributing your estate. Illinois law includes provisions that provide for a spousal share. In this case, Illinois law is dictating where your estate is going, not you.
  3. Your executor is dead or unable to serve. The executor is the person named in your will who oversees the distribution of your property. If the person you named as executor is unable to serve, the court will have to appoint someone else. Beneficiaries may have a say who is chosen, but it may not be someone you would have wanted in the position.
  4. You no longer own property named in the will. If your will attempts to divide your estate equally by giving cash to your daughter and real estate of equal value to your son and the real estate is sold before you die, your son will receive nothing. In this case, your will is no longer ensuring your estate is divided equally.
  5. The law changes. If your estate plan was designed specifically to avoid estate taxes and the estate tax law changes, your will may no longer serve its purpose.

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