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A small estate affidavit may be used in place of a formal estate proceeding (opening an estate before a judge) to collect the decedent’s (person who died) assets when the total value of the decedent’s assets are less than $100,000 and include no real estate.

An affidavit must be completed which states the names and addresses of the heirs at law (individuals who will receive the assets) if the decedent died without a will or the beneficiaries’ names and addresses if the decedent had a will. The affiant (individual who signs the affidavit) must state that no estate proceeding before a court is pending nor is one comtemplated. He must also state that all funeral expenses have been paid and that there is no unknown claimant (debtor) and no known claims against the assets which have not been paid. All assets must be listed on the affidavit as well.

No notice is required to heirs, beneficairies or creditors. The affiant can be held financially responsible to creditors of the decedent who rely upon the affidavit and who suffer a loss because of their reliance.

The small estate affidavit does not need to be filed with the court.

It is a useful tool whern there is no question about the debts of the decedent and there are assets in the decedent’s name which need to be accessed. Continue reading

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Withdrawals are usually tax-free when one inherits a Roth IRA, but minimum withdrawals are required each year using the same rules as for any inherited IRA.

A non-spouse beneficiary should have the account retitled as an inherited Roth IRA using this format: John Doe, Deceased (date of death) Roth IRA F/B/O (for the benefit of) John Doe, Jr., Beneficiary.

Roth IRA owners are not subject to required withdrawals during their lifetimes; however, their beneficiaries are subject to required withdrawals beginning the year after the owner’s death. The IRS publication 590 provides the amount to take out each year based on the beneficiary’s life expectancy.  A 50% penalty is imposed for not taking a distibution from an inherited IRA.

For multiple beneficiaries, it is preferable to split the original account into separate inherited accounts for each beneficiary before taking the original owner’s distribution for the year he died, if it was not already withdrawn before the death. This way each heir can take distributions using his own life expectancy – a big advantage if the beneficiaries range widely in age.

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When parents set up a Third Party Special Needs Trust, it is created by and funded with the assets of the parents. The parents are considered to be the “third party”. The trust is not set up with the assets of the special needs child, and the transfer may not be created to make the parents eligible for Medicaid paid nursing home care.

The Trustee has wide discretion in making distributions to or for the benefit of the special needs child. For this reason, the Trustee should be familiar with and responsive to the particular needs of the special needs child, should have knowledge of the government benefit programs and the effect the trust may have on eligibility for these programs. The Trustee should be in good health, reliable and financially astute.

If a special needs child has received an inheritance, gift, bequest, lawsuit award or settlement, child support, alimony or divorce property settlement, the receipt of these assets can disqualify a child for means tested benefits such as Medicaid and Supplemental Security Income. In cases like these, a Self-Settled Special Needs Trust should be established to preserve the child’s eligibility for the government benefits. Better practice is to have a Third Party Special Needs Trust already in place so that the inheritance, gift, bequest, lawsuit award or settlement, child support alimony or divorce property settlement can be made payable to the Third Party Special Needs Trust thereby allowing any Special Needs Trust funds remaining after the death of the special needs child to be distributed to remaining family members.

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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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We discussed in our last entry that a CCRC is an acronym for a Continuing Care Retirement Community.  It is a facility that allows residents to move from independent living to assisted living to skilled nursing care as their mental and physical states change.

The issue we will discuss today concerns the timetable for the return of the buy-in price when the resident dies or moves from the facility.

Many CCRCs return up to 90% of the buy-in price within 30-60 days of the resident’s death or transfer to another location. This is the optimum mode of distribution for the resident or families of the resident .

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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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A CCRC (Continuing Care Retirement Community) is a facility that allows residents to move from independent living to assisted living to skilled care as their mental and physical states change.  They are usually a facility where a person can buy in to the community, pay a monthly sum and receive a portion of the buy-in price when they move out, die or when the resident’s quarters have been resold.  There are some CCRCs that are on a straight rental basis.

One issue that has received much attention lately is the ability of the CCRC to dictate when a person must transfer to a higher standard of care within the facility.  The CCRC contract usually states that if a resident can no longer be cared for at a certain level then the facility can move that resident to a higher level of care.  The disagreements and then the subsequent lawsuits appear when the management of the facility gives notice to a resident that she can no longer remain at a certain level of care, but the resident- and even the resident’s physician- argue that the current level of care is adequate for her condition.  The issue becomes whether the facility can force the resident to a higher and probably more expensive care level notwithstanding the protests to the contrary.

Courts, however, have been reticent to disturb the CCRC Agreement in these cases.  Favoring the language and the sanctity of the Agreement, they have almost always sided with the facility.  Their logic is that the contract left the final decision with the facility, so the facility has the final word on whether the resident moves to a more intensive care level.

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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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