Saturday, January 24, 2015

Can I Give My Kids $14,000 a Year?

Gift moneyIf you have it to give, you certainly can, but there may be consequences should you apply for Medicaid long-term care coverage within five years after each gift.

The $14,000 figure is the amount of the current gift tax exclusion (for 2015), meaning that any person who gives away $14,000 or less to any one individual does not have to report the gift to the IRS, and you can give this amount to as many people as you like.  If you give away more than $14,000 to any one person (other than your spouse), you will have to file a gift tax return.  However, this does not necessarily mean you’ll pay a gift tax.  You’ll have to pay a tax only if your reportable gifts total more than $5.43 million (2015 figure) during your lifetime. 

Many people believe that if they give away an amount equal to the current $14,000 annual gift tax exclusion, this gift will be exempted from Medicaid's five-year look-back at transfers that could trigger a waiting period for benefits.  Nothing could be further from the truth.
The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medicaid’s asset transfer rules. While the $14,000 that you gave to your grandchild this year will be exempt from any gift tax, Medicaid will still count it as a transfer that could make you ineligible for nursing home benefits for a certain amount of time should you apply for them within the next five years.  

If you think there is a chance you will need Medicaid coverage of long-term care in the foreseeable future, see your elder law attorney before starting a gifting plan. 

If you need assistance with a probate matter, medicaid planning, estate planning or other elder law matters 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, January 21, 2015

The Top 10 Elder Law Decisions of 2014

Below, in chronological order, is our annual roundup of the top 10 elder law decisions for the year just ended. Number three in the list, M.W., was a decision not of a court but of the Director of the New Jersey's Division of Medical Assistance and Health Services.
1. Iowa High Court Rules State May Recover Medicaid Payments From Irrevocable Trust
Holding that the provision of medical assistance creates a debt immediately upon the provision of services to a recipient, the Supreme Court of Iowa rules that the state may recover Medicaid payments from the corpus of a husband and wife’s irrevocable income-only trusts. Estate of Melby (Iowa, No. 12–1593, Jan. 10, 2014).  
2. Long Annuities Not Subject to Medicaid Transfer Penalty While Short Annuities Are
A federal district court rules that five-year annuities purchased by Medicaid applicants are not transfers for less than fair market value, but transfers to 18-, 14-, and 12- month annuities are subject to a penalty period. The court also declines to enforce a state law making it a crime to counsel clients in the disposal of assets. Zahner v. Mackereth (U.S. Dist. Ct., W.D. Penn., No. 11-306 Erie, Jan. 16, 2014). 
3. New Jersey Medicaid Agency Reluctantly Rules That Gift-Annuity Plan Will Work
New Jersey's Medicaid agency holds that a Medicaid applicant who made a substantial gift and purchased an annuity to help pay for the resulting ineligibility period will be eligible for benefits. M.W. v. Division of Medical Assistance and Health Services (N.J. OAL Docket No. 2998-2013, Jan. 28, 2014). 
4. Spouse's Retirement Account Is Available Resource for Purposes of Medicaid Eligibility
According to Arkansas' highest court, the state may count a spouse's retirement account as an available resource when determining a Medicaid applicant's eligibility. Arkansas Dept. of Human Services v. Pierce (Ark., No. CV-13-870, May 29, 2014). 
5. Veterans Benefits Not Countable As Income in Medicaid Eligibility Determination
Veterans pension benefits may not be counted as income for the purposes of Medicaid eligibility if the benefit is the result of unusual medical expenses, a U.S. district court has ruled. Galletta v. Velez (D. N.J., No. 13-532 (RBK/AMD), June 3, 2014). 
6. Transfer of House in Exchange for Promissory Note Is Not Subject to Penalty
A U.S. district court holds that a Medicaid recipient who transferred his house to his daughter in exchange for a promissory note does not incur a transfer penalty and that the promissory note is not an available asset. Peterson v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV-13-1235-W, June 30, 2014). 
7. State Can Recover From Entire Value of Property in Which Medicaid Recipient Had Life Estate
The Idaho Supreme Court rules that the state may recover Medicaid benefits from the entire value of a property that a Medicaid recipient transferred to his daughter while retaining a life estate for himself. In re Estate of Peterson (Idaho, No. 40615, Aug. 13, 2014). 
8. Penalty Period Does Not Begin Until Medicaid Applicant Spends Down Returned Assets
A federal district court rules that the state can recalculate a Medicaid applicant's penalty period when transferred assets are returned, holding that federal Medicaid law does not directly address the issue. Aplin v. McCrossen (U.S. Dist. Ct., W.D. N.Y., No. 12-CIV-6312-FPG, Aug. 25, 2014). 
9. Medicaid Applicant's Irrevocable Trust Is Not Countable Resource
A Massachusetts trial court rules that an irrevocable trust that contains a provision allowing the trustee to distribute the principal to others for the benefit of the beneficiary is not a countable resource for purposes of Medicaid eligibility. O'Leary v. Thorn (Mass. Super. Ct., No. WOCV2013-02013A, Sept. 18, 2014). 
10. Medicaid Applicant's Penalty Period Not Reduced by Use of Transferred Assets to Pay Assisted Living
A New York appeals court determines that a Medicaid applicant's penalty period should not be reduced even though the applicant's daughter used some of the transferred money to pay for her mother’s assisted living facility. Weiss v. Suffolk County Dept. of Social Services (N.Y. Sup. Ct., App. Div., 2nd Dept., No. 2013-09464, 5418/13, Oct. 1, 2014). 

 If you need assistance with a probate matter, medicaid planning, estate planning or other elder law matters 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.

Sunday, January 4, 2015

Review Your Estate Plan for a Secure New Year

As we bask in the afterglow of a joyous holiday season and turn our thoughts to the new year a review of our estate plans is an essential step to make sure our assets are protected from creditors, taxing authorities, nursing homes, and others who pose a potential threat to the financial well-being of ourselves and our families. 

1. Review and update beneficiary designations on insurance policies, 401(k) plans, and IRAs.

Did you get married this year? Have a child? Get divorced or start a new job? Now is a great time to take stock of the beneficiary designations to make sure that these assets, that pass outside of probate, are directed to go to the person you want. If you entered a second marriage and either of you has kids from a previous relationship you also might consider whether a qualified terminable interest property QTIP trust is helpful to protect those children's inheritance. 

2.Update advanced heathcare directives and guardianship designations. 

The person or persons nominated as your children's guardian need not be the person you choose to otherwise serve as trustee or executor or your estate. Make sure your agent and doctors all have copies so that they know your wishes in the event of an emergency. New in Rhode Island are Medical Orders for Life Sustaining Treatment or MOLST forms. These forms, which supplement a durrable healthcare power of attorney, are printed on neon pink paper and filed with your physician. Once this form is filed it must be followed by all of your medical providers and in any Rhode Island healthcare facility where you go for care.   

3. Review your will and trust documents to make sure they still do what you want them to do. 

Are your basic estate planning documents designed to protect your home and other assets from estate taxes, probate fees, or nursing home expenses? Will they still accomplish this goal? Has someone explained to you how changes in state and federal law will impact your will and trust documents?  While Massachusetts rules have remained largely constant over the past two years, there are at least two major changes to estate planning rules that Rhode Islanders need to worry about. One change eliminated the so called cliff that subjected the entire value of a Rhode Island estate to the state estate tax if the total value of the estate exceeded a certain inflation adjusted value. Now, state estate taxes are only paid on the "excess" value of the estate above $1,500,000. The second significant change is to no longer permit use of the so called "lady bird" deed in qualifying for Medicaid nursing home coverage. While those who had transferred thier title prior to July 1,  2014 are grandfathered, that particular option is no longer available to those who are looking at asset protection estate plans. Understanding how these and other changes impact your existing estate plan will ensure that it still meets your goals.

4. Check will and trust distribution ages.

By law beneficiaries of your will, will inherit the sums you left for them at the age of 18, unless your documents specify otherwise.  For this reason, many people designate that a child's inheritance should be held in trust until they are 25 or 30 in the hopes that they have sowed any wild oats and are just a little bit more responsible. 

5. Revisit your life insurance coverage.  

Many have life insurance policies that are too expensive for the benefit received or are otherwise misaligned with thier financial plan and interests. Others are woefully underinsured, exposing thier family and loved ones to unnecessary risk of financial ruin if something should happen.