More Medicaid . . . and MoreThere's new legislation on Medicaid - not Medicare - in New Hampshire that you should consider carefully.
Let's get at it by way of examples. Say you received a generous gift of $50,000 from mom less than 5 years before she needed Medicaid benefits for nursing care. As you know if you read my last Medicaid entry, there's a "look-back" period of 5 years before a gift like that would escape consideration by the Medicaid folks. What the new law says is if you're the recipient of that gift, you can be held liable to the nursing home for mom's bill there, up to the full amount mom gave you. It's a complicated calculation to determine the actual reimbursement obligation, but the takeaway is that you're running an expensive risk if you spend those funds before the 5 year look-back period expires. Instead, what you probably should do during that time is deposit the windfall in a safe investment instrument, and then wait until the 5th anniversary of the gift to break out the champagne. If you've spent the funds prematurely, you may find a Medicaid lien on your own assets when you no longer have enough to pay mom's nursing home bill. The other shoe that the new law drops may land on someone who holds a power of attorney for the nursing home resident. So let's say that you have mom's POA to pay her bills, but now she's run out of money and doesn't have enough to pay the nursing home. If you neglect to file for Medicaid after she takes up residence there, resulting in bills that might have been paid by Medicaid, you could be held personally liable for them in this instance, too. The lesson here is that on the same day you move mom into the nursing home, you'd better leave time to get to the Medicaid office to begin what I referred to last time as her "resource assessment". Remember, that's the process of reviewing her income and assets to find out whether she qualifies for Medicaid from day one - or has to do some "spending down" of her funds beforehand. OK, that's the sobering essence of the new Medicaid law. But permit me, if you will, to make several general observations that are prompted by this state of affairs. Many of us serve as agents under the POAs of elderly or disabled parents, siblings, even friends - and when Medicaid isn't an issue at all. We think of ourselves as generously helping out the people we care about and it makes us feel good - am I right? But we certainly don't expect to be exposing our own assets to any of their obligations, at least as long as we don't run off with the funds - right again? The rub may come, though, when we're not paying as much attention as perhaps we should. Maybe mom has stock in a firm that's well known to be on the rocks, but we don't sell the investment before it finally tanks. Maybe we leave her funds languishing in an anemic checking account while the market is soaring, or in a mutual fund where the fees are eroding the non-performing principal. Or maybe we don't ensure that her taxes or insurance premiums are being paid, and penalties or losses accrue that might have been avoided. The list is as long as the ways we could mess up our own affairs. The question is, who's responsible when our neglect - there's that word again - causes those losses? Look at it this way: If we fell asleep at the wheel while driving mom's car and we ran it into a tree, we'd certainly have to pay up for the injuries and damages. I'm suggesting the same thing could happen if we don't pay attention while in charge of her financial vehicles. Don't get me wrong, though. I'm not suggesting we abandon all our good-guy tendencies toward our loved ones; I'm just urging that if we've taken on responsibilities under their POAs, we'd better sit up and pay attention - and drive carefully. We wouldn't want to wreck our own car, and we certainly don't want to pay for wrecking someone else's. Posted 10/21/2013 Medicaid UntangledTrying to untangle the knot of myths and confusion about the Medicaid program is a daunting task, and it requires a huge disclaimer: There's no way to do this subject justice in a few cryptic paragraphs when the manual that describes all its wrinkles and exceptions is thicker than a phone book.
Medicaid is, plain and simple, a joint state/federal welfare program, like food stamps. Instead of covering the groceries, however, it's intended to pay nursing home expenses for people who need that level of care but don't have the income and assets to afford it. It's entirely different than Medicare, a largely age-based assistance program that has nothing to do with a person's resources. Let's start with mega-myth #1 - the one that just won't die: A couple must first spend everything they've got on the nursing home, including the proceeds from selling their house, before the one who needs skilled nursing care can qualify for Medicaid assistance. Not true to any extent. Here's the way it actually works. When a person begins to need nursing care, the couple (or at least the healthy spouse) goes into the Medicaid office (it's in Keene for our area) for what's called a "resource assessment" to determine whether they qualify, and if not immediately, what they need to do to qualify. There are 2 components to qualification: income and assets. The only income that matters is whatever Social Security or pension income the nursing home spouse receives. The spouse still at home can keep all of his or her income, no matter how much it is. If the nursing home spouse receives more income than what Medicaid would pay the nursing home per month (currently about $4,800), less any amount the stay-at-home spouse may need from that income to pay regular living expenses, then the whole process stops there and the couple just has to come up with the funds to pay the nursing home. Sometimes, though, even if Medicaid itself won't kick in, the couple may be able to negotiate an amount to pay the nursing home that's less than the regular private pay rate, but still more than Medicaid would have come up with. But let's say the couple clears the income hurdle. Then the assessment looks at the couple's assets - and both spouses' assets are in the pot no matter whose name is on them. Also, not just what the most recent bank statements show, but whatever the past 5 years' records would reveal, i.e., helping the grandkids with tuition payments, sending the little ones out on the Big Red Boat, buying a condo for a recently-divorced daughter - or basically doing anything else during the last 5 years that caused the couple's assets to be given to or used for someone other than themselves. That's the so-called "look back" period you hear everyone whisper about, and it's the real thing - and it's not a myth. For that reason, it's wise to keep all those financial records for at least the past 5 years to avoid having to pay to have them re-created at banks and investment firms. Since you're already keeping them for 7 years for tax purposes (you are, right?), that shouldn't be a new assignment. For assets transferred more than 5 years ago, those are off the radar screen entirely and don't figure in the assessment equation at all. So now we're getting to the real nub of the issue: What assets do get counted? Not your principal residence if there's still a spouse living there. Not your car or other personal belongings like jewelry, art work, tools, or the 48" flat screen. Not your burial plots either. Or term life insurance that doesn't have any current cash value. And most importantly, not half of your financial assets - bank accounts, IRAs, cash value of insurance or securities - up to a total of about $115,000 currently. As an example, let's say all that countable stuff adds up to $300,000. Your spouse at home can keep $115,000 of it (that's OK because it's less than 1/2 of the total) and the rest will need to be spent down to $2,500 before Medicaid starts picking up the tab. That means you've got to use up $182,500. But the key thing to remember at this point is that the spouse at home doesn't need to spend that $182,500 of hard-earned funds on the nursing home. They can be spent on things of real value to the family. Like paying off the mortgage on the house, back real estate taxes, or finally catching up with all that deferred maintenance (new roof, new furnace, new appliances). Even buying a house or condo for the at-home spouse if there's been no personal residence. Or paying off legitimate debts like car loans, credit cards and uninsured medical bills. In short, it wouldn't take a lot of imagination to see where to spend most of those funds without paying them all to a nursing home each month. There you have it in a very tine nutshell. By the way, besides spending up the excess assets, there are a number of planning techniques to consider depending on the circumstances - and I don't mean giving all your assets to your kids and hoping they'll help you out if you need it! Posted 10/11/2013 Making it Clear and Keeping the PeaceLet's face it, most people's planning decisions are more vanilla than Cherry Garcia. They just want to provide for their surviving spouses and eventually split their life's accumulated resources equally among their children. They also want their kids to share the decision-making as co-executors or trustees. No confusion, no hard feelings, no need to say more.
But what if your plans are more like a banana split? Say you decide to leave the summer retreat to just one of the kids - maybe the one who uses it the most or has done the most work on it - or you want one of them to get your great-grandfather's prized clock - because she's the family historian and will most appreciate the heirloom - or you want to leave more, maybe much more, to one of the kids because of all the help he's given you or because of all the financial help you've already given the other kids - and maybe you want just the youngest of the kids to have charge of settling everything because she's the most diplomatic. I could go on and on, but I think you can see how these decisions could lead to a full-fledged food fight. Not a pretty sight, but unfortunately one I've seen quite a few times. OK, what to do? Sure, you could gather all the kids together around the Thanksgiving turkey and lay out the plan while you're still around. It might be your last holiday gathering, but you'd have the satisfaction of total transparency to compensate for the lack of ongoing communication with them. Or, you could say nothing at all at any point, and let the chips fall where they may. Some of the less-well-remembered may take your name in vain a few times, particularly because they won't understand your motives, but you won't be around to be offended, and it's yours to do with as you please anyhow, right? But you could also write up your thinking in a carefully reasoned letter that explains the whole plan as clearly as you can state it. No advance warning, but no leaving them in the dark either. Look, under these circumstances they're not all going to be happy or agree with your decisions no matter what you do or say, but why let them create a narrative for you that may be totally off-base. Plus, waiting to tell your story until the time comes keeps your options open - and your thinking may change. I see that happen all the time. The black sheep may turn out to be the prodigal daughter. The child who lives closest to you may be the one who pays the least attention when you really need help. So why burn any bridges now, when you may want or need those bridges later. And if you've told them all what you plan to do, it's pretty awkward - and likely even more divisive - when you later tell them you've changed your mind. Posted 05/22/2013 Time for a Trust Tune-up?Now that the dust is settling on the new tax law, and the rules have become as permanent as anything can be in Washington, it's pretty clear that most people's estates aren't going to be paying federal estate taxes any longer. Each of us now has a personal tax exemption of $5,250,000 (to be further adjusted for inflation in the years to come), and if our own estate doesn't fully consume that exemption, our spouse's estate can use the rest of it, in addition to his or her own. That means unless a couple has more than $10,500,000 in total assets these days, federal estate taxes aren't one of the fronts requiring the same degree of attention as in the past.
There is at least one tax planning opportunity here, however, and I'll try to explain it as simply as possible. When a person dies, the values of the estate assets get "stepped up" to their date-of-death values. So even if you bought Apple when it was $10, and it's $400 when you die (I could have said $700 a few months ago), all the potential capital gains tax that would ordinarily be due on a sale gets wiped out, and the tax is figured on $400 per share instead of $10. The problem is that much estate tax planning was done when the exemption amounts were much lower, say, $500,000, and people's trusts were structured on that basis. That kind of planning has been turned on its head now, and while those trusts don't cause any estate tax harm under the new rules, they don't help with capital gains taxes nearly as much as they could. Here goes a simple example. Let's say the Apple stock was at $400 when you died, and your estate got the "step-up" in value to that amount. Then, by the time your spouse died after 20 more years, the Apple was at $1,000. If your trust was set up the way most are now, the kids would pay a capital gains tax on the difference between $400 and $1,000 when they eventually sold the Apple at your spouse's death. That's because there wouldn't be another "step-up" up in value at that point. If the trusts were revised, however, the stock could qualify for another "step-up" and all the capital gains tax could be saved to pay for something a lot more enjoyable. Let us know if we can help. (Posted 05/02/2013) HIPAA ComplianceIf I've had anything to do with your planning, most of you have completed Health Care Directives, to give a trusted person the ability to make health care decisions for you if you're unable to do so yourself. If you reviewed them before you signed, you may have noticed that they give your agent the right to have access to your medical records. The reason this is specifically mentioned is that under the Health Care Insurance Portability and Accountability Act of 1996 or HIPAA (yep, it's a federal law), your medical records are so extremely confidential that even your spouse or child isn't allowed to see them - or talk about them with your doctor - without your written OK. While privacy is certainly a good thing in the abstract, it seems - to me - a little over the top to lock them up, even from your closest family members, like they're nuclear launch codes. Then again, Congress' mantra seems to be, "anything worth doing is worth overdoing." Please pardon the mini-editorial.
Those of you whose Health Care Directives pre-date 1996 don't have the medical records release. That's a reason in itself to consider a new one, but it's also likely that the person you named as your agent - or backup agent - almost 20 years ago may no longer be the right choice. Plus, I would be nervous that an authorizing document that old might be considered too stale to be recognized when the critical need arises - and it will be too late at that point to execute a new one. Check yours out if you can still find the copies, or let me know and I'll make more for you. In the meantime, I want to make sure those of you without a medical records authorization are covered, as well as any of you who may want someone else to have access to your medical environment. We'll supply the necessary form free of charge if you give us a call, and I think you'll be able to figure out how to complete it - unlike many we have to wrestle with on a regular basis. I've added to the form that a copy of the original should be honored; however, it might be a good idea to have several originals, just in case a hospital or physician requires that for their records. We'll also be happy to hold an original for you here if that would be helpful in a pinch. (Posted on 04/05/2013) More About OrganizationWhenever we lose someone important to us, particularly when it happens suddenly and too soon, we eventually think about whether we'd be leaving a big mess for our own families to sort out if it was us who left that way. I've written before about organizing all your critical information in one convenient place, and you can read that one again here at our website. What I want to talk about this time is what to keep and where - and what to pitch in the shredder, so people don't start using the word "hoarder" in the same sentence with your name. My wife says I have no credibility on this subject, so do as I say, not as I do.
Let's start with tax records. You should keep copies of your filed tax returns indefinitely. Those are the financial history of your life, and older ones are hard to recover, even from the IRS. The period for filing for an additional refund is 3 years, so you should keep your supporting information at least that long, too. If the IRS wants to come after you for more tax, they also have 3 years - unless you've seriously understated your income; then they have 6. If you haven't filed a return at all or have filed a fraudulent return, they have forever. So, if you're in either of those last categories, I hope you're reading this somewhere without an extradition treaty - and I suggest you keep all those receipts handy. As for other records, you should keep your vital statistics records forever and in a safe place - those are the human history of your life. That means things like birth and marriage (and divorce) certificates, military service discharges, adoption and citizenship records, cemetery lot certificates, and passports should be kept in a safe deposit box or fireproof safe. They can be reproduced, but the process is often tedious, expensive and slow. That's the same for original stock certificates, life insurance policies, and promissory notes for loans you've made. Of course, you should also keep things there that can't be replaced - the gold piece your grandfather gave you, important letters from a parent or child, maybe even digital copies of your family photos. People always ask about putting their original wills or deeds in a safe deposit box. I say no. I've mentioned before that original wills and other estate planning documents are better off in the safe deposit box of the lawyer who prepared them. The lawyer can get to them immediately when the time comes, can easily make you more copies, and can quickly turn them over to the family or another lawyer. Don't worry about loading up the box with copies of your will either - or even the deed to your home. It's good to have the will (and trust, if you have one) copies handy at home, so you can review them periodically, and copies aren't legally significant anyhow. Your deed was recorded in the county registry, and you can go look at it there online whenever you want. Just Google it at "NH Deeds". Also, If you want others to have access to your safety deposit box once you're gone, make sure the bank's records are set up correctly to allow that. Otherwise, no one will be able to get in there until an executor is appointed, and it will be hard to appoint an executor without your will, if that's where it is. Sort of a Catch-22 that won't be nearly as funny for your family as the book Posted on 03/20/2013 Still More Decisions!Recently, I passed on some thoughts about how to assess and choose the right folks to act for you if you're unable to tend to business yourself - whether that's with or without a pulse. Now I want to add some suggestions about what to do with those planning documents once you've made your choices and gotten them signed up. And let me take this opportunity to remind those of you who have unsigned drafts of documents in your possession that you really haven't made your choices yet. Until the documents are properly executed, they're not going to do you much more good than helping to get the wood stove started.
Right off the bat I'll say that you're going to be better served if your lawyer holds your original documents in a safe or vault at his or her office. Lawyers don't charge for doing so (they like keeping that connection with you!) and when you lose the copies they gave you when you signed the documents, they can make more copies for you from the originals, again without charge. I can't tell you how many times this happens - sometimes multiple times for the same folks. If you kept the originals and then lost them, that would be like not having signed them in the first place, and at some point it could be too late to fix the problem. Likewise, it's not a great solution to keep original documents in your safety deposit box. Sometimes those are hard for agents or family members to get into if the signature authority isn't set up just right, or maybe they'll have a hard time even finding the key. As for who else gets copies of the documents besides you, that's totally your call, but I also have some thoughts on that subject. Unequivocally, your primary and backup health care agents should have a copy of that document, as should your regular physician. It can't do any harm, because those documents are only activated once a medical decision is made that you aren't capable of acting for yourself. Plus, the rare but potential need for quick decision-making in a heart-stopping emergency trumps any desire to keep this document under lock and key. When it comes to all the other documents - durable powers of attorney, wills and trusts - my rule of thumb is, don't part with copies unless the time has arrived for the respective agents to take over. For POAs that means when you actually want the agent to take over for you in carrying out the duties and responsibilities you've conferred. Look at it this way, you wouldn't give someone your checkbook while you're still able to write checks, so until you want the agent to write them for you, don't turn over the authority to do so. Besides, writing checks for the cable bill generally isn't the kind of emergency that demands split-second action. I say hold onto copies of your wills and trusts, too, simply because passing them out to your beneficiaries can cause extreme awkwardness or damage relationships when you later decide to make critical changes. And nearly everyone will, at least once, decide that the kids need to be a wee bit older to be trusted with your life savings, or that Billy the nephew isn't really a worthy recipient of those precious fridge magnets after all. I mean, when you think about it, your wills and trusts are just works in process until you-know-when, and no one wants their first or second draft published. (Posted on September 14, 2012) Who Do You Trust?I'm calling this topic "Who Do You Trust?", because it's about deciding who to trust when you'll need someone else to tend to your business. Yes, I'm talking about when one of the Big D's strikes, and I don't mean daydreaming. I'm referring to Death or Dementia, and your need then for others to give you or your family a helping hand. That might mean serving as the executor of your will, or trustee of your trust, or even taking on your model children for the remainder of their bratwurst years. It might also mean serving as your agent for handling financial affairs or for making those torturous end-of-life decisions.
First, let's dispel a few misconceptions. Your spouse doesn't get to serve in any of these roles just by virtue of that relationship; he/she needs to be appointed in a legal document like anyone else. The exception is that, ready or not, he/she does get the little darlings. Also, there's no legal requirement that any of these roles be filled by a NH resident - that might be more convenient in some respects, but not mandatory. Finally, it's not necessary to choose different people for each role, or to use family members at all. Capable and trusted friends or family members might fill several or all the roles if they're crazy (er, willing) and have the time. Here are a few guidelines I've found helpful in making the various choices: Legal and financial agents - they ought to be handling their own affairs in a competent manner in order to take on yours, too; and it would be helpful if they're somewhat nearby (though technology is an amazing thing), in order to have the best access to your mail, banks and professional advisors. Health care agents - they need to be on the same page with you about issues like Do Not Resuscitate orders and discontinuance of artificial life support; it doesn't matter how smart they are if, when the time comes, they aren't willing or courageous enough to carry out the wishes you've clearly expressed. Executors and trustees - they not only need to be financially competent, but should be fair-minded and diplomatic enough to command the respect of your beneficiaries; after all, unless you spell out every detail for them (most people don't), they'll have to decide how to divide up the china and silverware, and who gets your collection of fridge magnets. (Don't laugh, that will be major undertaking for my executor.) Guardians of children - they need to be people who'll raise your kids at least sort of the way you would; that doesn't mean they're the smartest or the most financially savvy or the most diplomatic; it does mean, though, that you admire the job they're doing - or did - with their own kids, that they live somewhere you'd want your kids brought up, that your kids don't totally despise them or their kids, and that they're young enough to keep at it until the chicks can leave the nest. And it goes without saying (but I will anyhow), they all need to know and approve ahead of time that you're saddling (er, naming) them in these important roles. No one wants kids with suitcases showing up at their door unexpectedly. Lastly here, you need to revisit your choices at least every 5 years. Some of your choices may have had Big D issues of their own; your financial gurus may have filed under Chapter 7; and your guardians may have moved from the Monadnock Region to a high-rise someplace with a frightening crime rate. (Posted August 30, 2012) Be Your Own Mortgage CompanyHow many of us have been to a mortgage loan closing where our eyes glazed over at all the forms we had to sign - and all the fees we had to pay? Many lenders even have a form that says if they've made any mistakes, we'll sign a do-over form. Wouldn't we all like to have a mulligan if we screwed something up? I bet that Olympic hurdler who tripped over the very first one would like to have said, "Why don't we just start this thing over - I wasn't quite ready to go." And the fees are for stuff like a flood insurance certificate, even when everyone knows the property hasn't flooded since the last ice age.
The other half of this rant is about getting approved for the mortgage in the first place. If you haven't been working for the same employer for at least 2 years, you can forget about the lender taking your current income into account, and if your income is irregular because it's based on commissions or other fees for service, you might as well be on food stamps for all the consideration that's going to get you. My apologies to the bankers on this list, but they may have been in the same boat themselves. Which brings me finally to the point of this. Because our children and grandchildren are having a terrible time getting mortgages these days to buy a house or, heaven forbid, to do something harebrained like starting a business, we should consider being their mortgage companies. What I mean is that if we've got cash languishing in a CD or money market account that's paying nano percent (or is any place else that's doing us no good, like under the Tempur-Pedic), we could loan it to our offspring at, say, 3-5%, and make it a win-win for everyone. The kids wouldn't have to run the loan application gauntlet and pay all the fees, and we could get a better return on our listless funds. Even if our funds are tied up in investments we can't afford to sell, we might consider a low-interest portfolio loan from our brokerage firm, and loan those funds to the kids at a comparable rate. There are a couple of things to watch out for, though. It really needs to be an arms-length deal, even though you plan to have Thanksgiving together. The loan obligation should be documented in an official promissory note that provides for the interest and the payments, and you should hold a mortgage on the property itself. That's not because you'd foreclose if the kids were late with a payment, but because if they got into financial trouble - someone sued them after a motor vehicle accident or they went bankrupt or got a divorce - you'd have a legal basis for getting your money back before anyone else got theirs. Of course, we can also make annual exclusion gifts to the kids ($13,000 per person), but if we can't afford to do that, or if we're already doing it and there's a need for more (most houses cost a bit more, even these days), we should consider the private mortgage option. So put on your green eye shade, drive a hard bargain on the interest rate and payment terms if you want, but do like the old TV show and keep it "all in the family." OK, maybe that's a flawed analogy - Archie Bunker would never have made a loan to Meathead! (Posted August 20, 2012) First, Get Organized!These messages aren't intended to ruin your day by reminding you repeatedly about the transitory nature of human life. No, they're aimed at getting you organized, so you can forget about that dreary topic and spend more time enjoying life - maybe you'll smile a few times, too, if I can pull it off.
I led with that preface because this installment is going to sound like a downer, no matter how I sugar-coat it. My point is, you need to have your affairs in order for your family, so they can spend their time remembering what a wonderfully thoughtful person you were - without tearing out their remaining hair trying to figure out why you left them such a mess. Here's what I'm talking about. If you were to die suddenly tomorrow (sorry!), would your family really know enough about you to write a meaningful obituary; would they know what kind of service you wanted, if any at all; and would they know how to reach old or distant friends you'd want contacted right away? I'm guessing "no" for many of you. Let's head farther into the weeds. Would they know about all your financial affairs? That is, would they know about all your accounts (bank, brokerage, mutual fund, retirement), including account numbers, and how to contact the right people for values and transfer information? Would they know about your current life insurance, if any, including where the policies are kept and whether that dusty old thing from Acme Insurance of Cucamonga is still in effect? Would they know whether you have a safety deposit box; where the key is; and what they might find when they get in there (Al Capone clearly dropped the ball on this one.)? OK, you get the point. Still, it sounds like a lot of work, right? It probably is the first time around, but pick a rainy Sunday and use the Nike method - just do it! We all have computers now - you wouldn't be reading this otherwise. So input all the information I'm talking about, plus anything else that comes to mind and might be helpful (family Social Security #s, donations in lieu of flowers, who to contact to appraise your cereal box collection). Then, just hit "save" and you're done for now. When anything changes, just tweak the information and keep saving it. Finally, print a copy and leave it in your desk marked "open me first". I'm a nervous flier, so when a trip is looming, I make sure everything is up to date even before packing my suitcase. If you need a template to use to get started, let me know and I'll e-mail one. Then, if the unimaginable happens, your family will thank you, as well as miss you, and they won't have to go on an Easter egg hunt just to figure out what you've been up to all these years! (Posted July 2, 2012) |
Phil RunyonPhil Runyon has been practicing law in Peterborough, NH, for over 50 years. He has regularly sent out emails to his clients, keeping them updated on changes in the law that effect estate planning, and writing about other relevant concepts or planning techniques. Archives
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