Elder Law

An Irrevocable Trust Is An Estate Planning Tool That Allows Assets To Be Shielded From Creditors

Before we can explore the advantages and disadvantages of an Irrevocable Trust we must first explore whether or not it will fit your goals. The main reason is that in the field of Elder Law, establishing an Irrevocable Trust is typically meant to preserve assets, like a home or money, against nursing homes and Medicaid recovery.

An Irrevocable Trust Is An Estate Planning Tool That Allows Assets To Be Shielded From Creditors

Craig Andreoli, Esq., Elder Law and Estate Planning Attorney
Does an Irrevocable Trust Meet Your Goals? Nursing homes are extraordinarily expensive. It is not uncommon to be charged anywhere from $9,000 to $22,000 a month for nursing home services. If you have to privately pay at those rates, you may not have the means to do so for very long. Therefore, many look to the government to pay the fees of such long term care services. The government program that pays for such services is Medicaid. Medicaid is not like most creditors, however, because they have their own recovery laws. The most notable is that they are a “Super Creditor”, meaning they have priority over other creditors. Also, they are entitled to be reimbursed from the Medicaid recipient’s probateable estate upon the recipient’s death for the long term care services they provided. A typical asset that is passed on in probate is the recipient’s primary residence. So, the fear that the government will “take” your home is actually quite founded. Medicaid Qualifications Before you even get to the Medicaid recovery stage you have to be eligible for the Medicaid program. Medicaid can be equated to a country club. You must be accepted as an eligible member before you are entitled to receive benefits, but not everyone qualifies. The first threshold, of course, is that you have enough of a medical need to warrant long term care. Most people looking into the program meet that threshold. The second threshold, as of 2015, is that you must have resources below $14,850.00. On first blush most people do not meet this threshold, but there are several options available to make the threshold attainable. One option is to give your money away. While this method is acceptable for Community Medicaid (where you receive long term care services by a personal care aide in your home), it is not acceptable for Chronic Care Medicaid (where you receive long term care services from a nursing home) unless the transfer was between spouses or to a disabled child. If the transfer was not to a spouse or a disabled child, Medicaid will reject your application because they will assume you gave away the money to become eligible for the Medicaid program. Medicaid is entitled to look back through 5 years of your financial records and if they see any transfers of assets in the amount of $2,500 or greater without consideration (receiving some value back for the transfers), they will penalize you. The penalty is they will refuse to pay for your nursing home care for approximately 1 month for every $12,000.00 of transfers made without consideration during the 5 year look back period. This is why it is extremely important to pre-plan to preserve assets at least 5 years in advance of ever needing nursing home care. The most risk free and tax advantageous place to park assets while you wait out the 5 year look back period is in an Irrevocable Trust. To obtain these advantages, you must “give up” ownership of the asset(s) you want to preserve. However, a properly designed estate plan will minimize any effects of giving up ownership. Advantages of Irrevocable Trusts One of the largest advantages of a properly drafted Irrevocable Trust is that it will preserve assets from creditors. Assets in the Trust will not be available to your creditors or the creditors of your Trustee. The Trustee of an Irrevocable Trust is typically your child. Your child is not the owner of the Trust assets and, therefore, even if your child-Trustee gets divorced, your Trust assets are not part of your child’s marital property. While giving up ownership may sound frightening to you, a properly drafted Irrevocable Trust will actually grant you certain rights that keep you in control of the assets put into the Trust. The way to maintain some decision making and control over your assets is to have the Trust drafted so that it grants you the ability to have control over your Trustee. In other words, if your child listens to what you ask of him, you will have some decision making and control. Even if he does not listen, however, the Trust should be drafted to grant you the right to remove him as Trustee and put a different Trustee in place that will do what you wish. Moreover, your Trustee will not have the right to kick you out of your home and you will still retain your Enhanced STAR real estate taxes. Another advantage of placing your home in an Irrevocable Trust, as opposed to gifting it outright to your children, is that upon your death your children will receive a step up in the basis of your home from the value you purchased it at to the value of the home on your date of death. What does that mean? It means your children will not have to pay capital gains tax if they sell the home soon after your passing. Finally, if you fund the Trust with money, you and your spouse will have the advantage of being entitled to withdraw the income that the money in the Trust generates. After 5 years has elapsed from the time the Trust was funded, anything the Trust holds will be unavailable to Medicaid recovery. Other advantages of the Irrevocable Trust are that it avoids probate and, consequently, probate attorney fees. Disadvantages of Irrevocable Trusts The main disadvantage of the Irrevocable Trust is that you cannot take any of the principal out of the Trust. That is why a lot of time should be spent discussing what exactly should be placed in the Trust in the first place. If you believe that you will never need the equity from your home, like a reverse mortgage or a line of credit, nor will you ever need to live on the sale proceeds from your home, your home is an excellent asset to place in the Irrevocable Trust. Conclusion While we cannot possibly cover all of the issues revolving around Irrevocable Trusts within the confines of this article, you should discuss your specific situation with an Estate Planning attorney and determine whether or not an Irrevocable Trust is right for you. CONTENT DISCLAIMER
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CAUTION: Not All Powers of Attorneys are Created Equal!

By Craig Andreoli, Esq., Elder Law and Estate Planning Attorney

What is a Power of Attorney?

A Power of Attorney is a document that authorizes the “agent” to represent or act in various legal matters on behalf of the “principal.” The agent, previously called an attorney-in-fact, but after a recent change in the Power of Attorney laws, is now simply called “agent”, is essentially an alter ego of the principal. The agent is authorized to act on behalf of the principal with respect to any and all matters listed in the Power of Attorney, with the exception of those acts which, by their nature, by public policy, or by contract require personal performance. The agent also has a fiduciary relationship with the principal, meaning he/she must act in the best interest of the principal. Failure to do so could result in criminal or civil liability against the agent. You should seriously consider having a properly worded Power of Attorney drafted on your behalf or making sure the one you already have is properly worded. Why? Well, for two primary reasons:

1) To Preserve Your Income

“Community” Medicaid (a/k/a Home Care Medicaid) includes payment for personal care aides to come to your home; adult day care; and other similar services provided through the new Managed Long Term Care Program. Community Medicaid is different from “Chronic Care” Medicaid (a/k/a Nursing Home Medicaid). A typical planning technique with Community Medicaid involves “pooled trusts”. If you are successful in obtaining Community Medicaid benefits and you earn $825.00 or more in monthly income, then you must contribute the “overage” (that amount over $825.00 in income per month) to Medicaid to receive the benefits. Income includes your Social Security, pension, traditional IRA distributions, and dividend payments. In other words, the Medicaid recipient is left with only $825.00 on which to live. Fortunately, Medicaid allows payment of the overage to certain charities that run pooled trusts, instead of payment of the overage directly to Medicaid. In turn, for a nominal fee, the pooled trust company will use the deposited overage to pay for the Medicaid recipient’s living expenses, such as food, rent, real estate taxes, clothing, and utilities. This arrangement allows the Medicaid recipient to have the income needed to pay typical living expenses and the ability to stay in his/her home. The recurring problem we are seeing however, is that by the time people come into our office seeking help with a Community Medicaid application and with the establishment of a pooled trust, the Medicaid applicant is either already incompetent and/or the Medicaid applicant’s Power of Attorney form does not have the proper language in it granting the agent the powers to establish trusts, such as pooled trusts. If the Medicaid applicant is already incompetent, he/she cannot sign a new Power of Attorney with the proper language set forth within it and, thus, the Medicaid applicant would not be able to establish a pooled trust. This could make it difficult or even impossible for the Community Medicaid recipient to have enough money to pay his/her living expenses and be able to stay in his/her home.

2) To Ensure That Your Agent Has Unlimited Gifting Powers

Older Power of Attorney forms usually cap gifting in some manner. We typically see Power of Attorney forms with the following type of language: “An agent can gift to children or grandchildren $10,000.00 per year or the amount of the federal gift tax exclusion in the year that the Power of Attorney was executed.” In other words, the gifting powers in the older Power of Attorney forms usually cap the amount allowed to be gifted and restrict such gifting to blood relatives. A newer “Medicaid-focused” Power of Attorney, on the other hand, would allow gifting to third parties and even trusts, and the gifting would be unlimited. Using this “gifting” power, an agent could contribute the Medicaid recipient's excess income to a pooled trust, as explained above, to preserve that excess income for the purpose of paying the Medicaid recipient’s living expenses. Additionally, a properly worded gifting provision would also allow gifting of larger assets, such as a home or large sums of money, to an Irrevocable Trust, which could help preserve those large assets from Medicaid recovery laws. Once again, none of this can be done without proper gifting provisions in the Power of Attorney form. Notably, if a Medicaid applicant is seeking Chronic Care benefits, gifts over $1,500.00 must be made 5 years prior to the application so as not to affect eligibility, but if he/she is only seeking Community benefits, gifts in any amount can be made in the month prior to the application without affecting eligibility. It should also be noted that if a Medicaid applicant makes gifts in contemplation of Community Medicaid benefits and then in the future that Medicaid recipient’s health deteriorates, those gifts may affect his/her eligibility to obtain Medicaid Chronic Care benefits. However, that is why a well thought out strategy should be devised with an elder law attorney even if the applicant only needs Community Medicaid benefits at the present time.

What Is The Alternative If There Is No Power of Attorney In Place Or If The Power of Attorney Does Not Have The Proper Language In It?

Without any Power of Attorney or with a Power of Attorney that does not have the language in it that was discussed above, a guardianship proceeding would need to be commenced in the Supreme Court to appoint a guardian for the principal that no longer has mental capacity to manage his/her property. A guardianship proceeding is time consuming and the costs could be well over $5,000.00. More importantly, it could take more than a year after the proceeding is commenced until the incapacitated person is appointed a guardian. Lost time and money could be avoided by simply having a properly drafted Power of Attorney executed now, while competency is not an issue. The bottom line is that if you do not have a Power of Attorney and want to be sure that you have an agent with proper authority to act on your behalf if you become incapacitated, or if you check your existing Power of Attorney and it does not grant your agent the necessary powers discussed above, you need to have a properly drafted Power of Attorney prepared and executed now that allows your agent unlimited gifting powers and the ability to establish trusts. The cost of a new Power of Attorney is a mere fraction of the cost of a guardianship proceeding or the total amount you could lose if you have to pay your “overage” to Medicaid every month. In the end, a properly drafted Power of Attorney will save you time and money and will help avoid numerous problems that your agent could face in the unforeseeable future. CONTENT DISCLAIMER
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Why You May Need an Elder Law Attorney

Who hasn’t heard the old cliché, getting old isn’t for sissies. The truth is that as you age, the cliché becomes more and more accurate.

Why You May Need an Elder Law Attorney

By Lewis I Knopf, Certified Senior Advisor (CSA)® & Daily Money Manager at LK Daily Money Management

We all know that “stuff” happens as we become older and at some point, some or all of these issues will probably come knocking on the door of everyone who has reached a “certain” age.

Often the confusion and stress associated with age-related issues can be best ameliorated with the help of a trained and experienced professional.

Consider turning to an experienced Elder Law Attorney for assistance with the following situations:

  • Preservation/transfer of assets
  • Medicaid applications
  • Medicare claims and appeals
  • Social security and disability claims and appeals
  • Supplemental and long-term health insurance issues
  • Disability planning, durable powers of attorney, living trusts, “living wills”
  • Guardianships
  • Estate planning
  • Probate Administration and management of trusts and estates
  • Long-term care placements in nursing home and life care communities
  • Nursing home issues
  • Elder abuse and fraud recovery cases
  • Housing issues

Remember that you don’t have to go it alone, and in many situations contacting an Elder Law Attorney will save you stress, confusion and potentially significant sums of money.

CONTENT DISCLAIMER
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When Seniors Need Care: How Knowing Your Options Can Make All the Difference

As our population continues to age, providing for and affording long term care has become a significant concern. Most seniors would prefer to remain in their homes, however, being able to do so safely and without the assistance of their adult children, friends or neighbors can be quite challenging.

When Seniors Need Care: How Knowing Your Options Can Make All the Difference

By Laura Burns
It is often the families that will seek legal advice once they have reached a difficult moment or breaking point – for example, if an elderly parent or relative has fallen, has become seriously ill, or if the care needed has surpassed the ability of the caretakers. Very often, families are surprised by the options and the resources available to assist them with the care of a loved one. Many adult children would prefer to care for their elderly family members themselves. However, due to the demands of their careers, their own family needs and the lack of resources (time, money or expertise, etc.), they are unable to provide the caliber of care needed. There are a variety of services available to seniors who are in need of assistance – whether that need is simply to have help running errands and keeping their home neat, or needing assistance of an aide who can help them with their daily personal care needs. If private payment is an option, many families come to rely upon Companion Companies, who provide placement of a Companion for the family’s loved one. The Companion can offer an array of services to assist with the care of a loved one, including transportation to doctors appointments, grocery shopping, medication reminders, meal preparation, light housekeeping, and even a watchful eye if a loved one is suffering from Alzheimer’s, a Dementia condition or other chronic illnesses. If the need for care includes assistance with bathing, getting dressed, and other personal hygiene activities, a certified nursing assistant may be appropriate and can provide the support the elderly person needs throughout the day. There are many companies throughout Long Island that offer these services, and private payment, long-term care insurance coverage, or coverage through Medicaid can help pay for these services. Unfortunately for our seniors, Medicare, which is the primary insurance provider for those over the age of 65, does not provide coverage for long-term care services. New York State’s Medicaid program can be confusing and it is common for program benefits to be misunderstood. Many families are surprised to learn that they can qualify for Medicaid home care without exhausting their financial resources. The Medicaid program in New York State is a means-tested program - meaning you must qualify financially. For in home care, there is no look-back period regarding eligibility, and therefore, qualifying for Medicaid home care services is a real possibility for many families. This can often be a life-saver, especially those who cannot afford long-term private payment for services. The Medicaid home care eligibility requirements should not however, be confused with nursing home coverage through Medicaid, which is where the five (5) year look back period applies. When considering your options, it is advisable to seek assistance from an attorney who practices in the field of elder law. Generally, it takes approximately three to four months to get Medicaid coverage in place, and therefore approval upon the first submission of the application is essential. In addition and although there is no look back period with respect to home care, many families find that they must transfer or make changes to financial accounts, or transfer real estate to ensure that Medicaid will not seek to file a lien against the property. In certain situations, Medicaid may also seek to recover from an applicant’s estate upon their passing. The transfer of financial accounts or real property will have significant legal and tax consequences, and the assistance of an attorney can help protect families and guide them through the process. Lastly, many families are surprised to learn that there are an array of options with respect to Assisted Living facilities, both concerning the amenities available, as well as the monthly cost (there are also limited Assisted Living facilities that accept Medicaid as partial payment). Assisted Living facilities allow seniors to enjoy the benefits of being independent, while providing the support they need for daily living. When trying to evaluate the options available to assist a loved one, this possibility is often overlooked, or considered akin to a nursing home, which is not the case. Whether your family member requires daily assistance or you are simply concerned about being prepared for the future, knowing all of your options and what you are legally entitled to can make all the difference. As the old saying goes, knowledge is power. *** This article should not be construed to offer legal advice and is written solely for the purpose of providing information. CONTENT DISCLAIMER
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