Wednesday, November 22, 2017
It's been a while since I've posted any new content on this blog and wanted to make sure that readers were aware that my firm and I are still actively creating new content, but instead of post here, most of the time we post our new material on our firm's website. As always, thanks for reading and let us know if you are interested in learning about a particular area of Massachusetts or Rhode Island Estate Planning or Probate practice.
Sunday, November 20, 2016
The Internal Revenue Service has announced that the basic federal estate tax exclusion for the estates of decedents dying during calendar year 2017 will be $5.49 million, up from $5.45 million for calendar year 2016.
In addition, if a fiduciary chooses to use the special use valuation method for qualified real property, the available aggregate decrease in the value of the property resulting from the choice may now not exceed $1,120,000, up from $1,110,000 for 2016.
The increase in the estate tax exclusion means that the lifetime tax exclusion for gifts will also rise to $5.49 million, as will the generation-skipping transfer tax exemption.
The annual gift tax exclusion of $14,000 will not change for 2017.
For details on many of these and other inflation adjustments to tax benefits, go to: https://www.irs.gov/pub/irs-drop/rp-16-55.pdf
If you want help understanding how these numbers impact your ability to protect your family's legacy from the tax collector, call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Estate Planning Lawyer Matthew Fabisch at 401-324-9344.
Saturday, March 12, 2016
Medicaid (called "MassHealth" in Massachusetts, and "Ritecare" in Rhode Island) is a joint federal-state program that provides health insurance coverage to low-income children, seniors, and people with disabilities. Importantly, unlike almost all other forms of health insurance it covers long-term care in a nursing home for those who qualify.
Because the costs of private long-term care insurance are often too expensive for many families, and because other publicly subsidized programs like Medicare do not cover long term care in a nursing home setting, Medicaid has become the default nursing home insurance for those who can’t afford to pay the approximately $10,000 per month cost of nursing home care. As a result, many people pay out of their own pockets blowing through a life-time of savings for long-term care until they become eligible for Medicaid.
Although their names are confusingly similar, Medicaid and Medicare are very different programs. For one thing, Medicare is an "entitlement" program, that means that all retirees who receive Social Security benefits also receive Medicare as their health insurance. In contrast, Medicaid was initially intended as a form of assistance to the poor. So to be eligible for Medicaid, you must qualify by technically becoming "impoverished" under the program's rules. You can learn more about those rules here.
Also, unlike Medicare, which is completely run by the federal government, Medicaid is run jointly by the federal government and the states. Each state operates its own Medicaid system, which must conform to federal rules in order for the state to be paid money from the federal government, which pays for about half the state's Medicaid costs. (The state must pay the rest of the cost for the program.) This complicates matters, because the Medicaid eligibility rules are somewhat different from state to state and the rules governing the treatment of asset transfers and homes of nursing home residents keep changing as states try to reduce the impact of these programs on their budgets. To be certain of your rights, consult an expert. He or she can guide you through the complicated rules of the different programs and help you plan ahead.
Wednesday, August 26, 2015
As a trust beneficiary, you may feel like you are at the mercy of the trustee, but depending on the type of trust, trust beneficiaries may have rights to ensure the trust is properly managed.
A trust is a legal arrangement through which one person, called a "settlor" or "grantor," gives assets to another person (or an institution, such as a bank or law firm), called a "trustee." The trustee holds legal title to the assets for another person, called a "beneficiary." The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.
If the trust is a revocable trust—meaning the person who set up the trust can change it or revoke it at any time--the trust beneficiaries other than the settlor have very few rights. Because the settlor can change the trust at any time, he or she can also change the beneficiaries at any time. Often a trust is revocable until the settlor dies and then it becomes irrevocable. An irrevocable trust is a trust that cannot be changed except in rare cases by court order.
Beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. The scope of those rights depends on the type of beneficiary. Current beneficiaries are beneficiaries who are currently entitled to income from the trust. Remainder or contingent beneficiaries have an interest in the trust after the current beneficiaries' interest is over. For example, a wife may set up a trust that leaves income to her husband for life (the current beneficiary) and then the remainder of the property to her children (the remainder beneficiaries).
State law and the terms of the trust determine exactly what rights a beneficiary has, but the following five common rights are often given to beneficiaries of irrevocable trusts:
- Payment. Current beneficiaries have the right to distributions as set forth in the trust document.
- Right to information. Current and remainder beneficiaries have the right to be provided enough information about the trust and its administration to know how to enforce their rights.
- Right to an accounting. Current beneficiaries are entitled to an accounting. An accounting is a detailed report of all income, expenses, and distributions from the trust. Usually trustees are required to provide an accounting annually, but that may vary, depending on the terms of the trust. Beneficiaries may also be able to waive the accounting.
- Remove the trustee. Current and remainder beneficiaries have the right to petition the court for the removal of the trustee if they believe the trustee isn't acting in their best interest. Trustees have an obligation to balance the needs of the current beneficiary with the needs of the remainder beneficiaries, which can be difficult to manage.
- End the trust. In some circumstances, if all the current and remainder beneficiaries agree, they can petition the court to end the trust. State laws vary on when this is allowed. Usually, the purpose of the trust must have been fulfilled or be impossible.
Sunday, February 22, 2015
While I work with my clients to eliminate many of these challenges during the estate planning process, I saw the issues highlighted by this forbes.com article on probate and family feuds pop up all too often in my time as a probate judge, among those clients who come to me after a loved one with no estate plan has passed, and when do-it-yourself estate planning documents lack the detail and clarity needed to avoid will contest litigation. As with most aspects of estate planning, in my experience, preventing these issues from becoming problems involves carefully determining your wishes and making sure your will and trust documents are carefully drafted to make sure those wishes are carried out.
If you want to make sure your estate plan is drafted to avoid these and other potential pitfalls call the offices of Fabisch Law, L.L.C. to set up a consultation with Rhode Island Probate Lawyer Matthew Fabisch at 401-324-9344.
Wednesday, February 4, 2015
Your will is a legally binding statement directing who will receive your property upon your death. It also appoints a legal representative, often called an “executor” or “personal representative,” to carry out your wishes. The process by which a person’s property is passed to the people or institutions named in the will is called probate. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Examples of property that pass outside of probate and, thus, are not mentioned in a will, include: jointly-owned property, property in a trust, life insurance proceeds, and property with a named beneficiary, such as IRAs or 401(k) plans.
A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” The rules or instructions under which the trustee operates are set out in the trust instrument. There can be a number of advantages to establishing a trust, depending on the individual situation. Particularly important for the basic estate plan, revocable or living trusts give the donor complete control over the trust. The donor may amend, revoke or terminate the trust at any time. The donor can take back the funds he put in the trust or change the trust’s terms. The donor can also title other assets, including non-probate assets in the name of the trust. Thus, the donor is able to reap the benefits of the trust arrangement while maintaining the ability to change the trust at any time prior to death.
Revocable trusts are generally used for the following purposes:
1. Asset management. They permit the trustee (the person who manages the trust) to administer and invest the trust property for the benefit of one or more beneficiaries of the trust.
2. Probate avoidance. At the death of the person who created the trust, the trust property passes to whomever is named in the trust. It does not come under the jurisdiction of the probate court and its distribution need not be held up by the probate process. However, the property of a revocable trust will be included in the donor’s estate for tax purposes.
3. Tax planning. While the assets of a revocable trust will be included in the donor’s taxable estate, the trust can be drafted so that the assets will not be included in the estates of the beneficiaries, thus avoiding taxes when they die.
4. Disability planning. Wills only provide for death. Trusts can help a person have a plan in place in the event of their own illness.
Monday, February 2, 2015
In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to find out you need nursing home care on Monday, give all your money to your children (or anyone else) on Tuesday, and qualify for to have the government pay for your nursing home long term care by qualifying for Medicaid on Wednesday. So it has imposed a penalty on people who give away assets without receiving fair value in return.
This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The period is determined by dividing the amount transferred by what your state Medicaid program determines to be the average private pay cost of a nursing home in your state.
Example: For example, if you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months ($100,000 / $5,000 = 20).
In 2015 the State of Rhode Island has determined that the average private pay cost of nursing home care is $9,113 per month. Massachusetts, which determines the cost on a daily basis, has determined that the number is $300 per day.
Another way to look at the above example is that for every $5,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.
Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months ($400,000 / $5,000 = 80).
A person applying for Medicaid must disclose all financial transactions he or she was involved in during a set period of time -- frequently called the "look-back period." The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during this period. The look-back period for all transfers is 60 months.
Under the current law, the Medicaid eligibility penalty period will not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer.
Returning to the example above, if an individual transferred $100,000 on April 1, 2014, moves to a nursing home on April 1, 2015, and spends down to Medicaid eligibility on April 1, 2016, that is when the 20-month penalty period will begin, and it will not end until December 1, 2017.
In other words, the penalty period would not begin until the nursing home resident was out of money, meaning there would be no money to pay the nursing home for however long the penalty period lasts. In order to make sure your parent is able to receive the nursing home care they need, it is critical to make sure they make adequate arrangements with an elder law lawyer before gifting away their money or property.