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Tuesday, June 05, 2012
Pennsylvania Filial Responsibility
What is filial responsibility? It's an old (but existing) law in Pennsylvania that allows nursing homes to come after children of parents in nursing homes for unpaid bills. It's an unpopular law that made more sense hundreds of years ago.
Recently, a case was decided in the Superior Court of Pennsylvania that awarded $100,000 to a nursing home, collected from an adult child of a mother who was under care for less than a year. It was a strange case, and very few cases are on the books under this law. But this is a concern for elder law practitioners. My view is that this case will probably (hopefully) result in changes in the law.
An expert on filial responsibility discusses the developments in this 4 minute video. https://www.youtube.com/watch?v=cD-vLRK3vmc&feature=youtu.be
Tuesday, June 05, 2012
Jeremy Wechsler Releases New Book on Estate Planning
Looking for a great resource on estate and retirement planning? Jeremy Wechsler, your Estate & Elder Law Attorney, recently co-authored a new book with Peter R. Wechsler, his father and Your Retirement Quarterback. The book is an easy read but full of valuable information on estate and retirement planning.
Learn more about the book here: https://solvingtheretirementpuzzle.com
Friday, February 10, 2012
Do You Need Long-Term Care Insurance?
Is Long-Term Care Insurance a Good Bet?
Economists argue that even if Medicaid spend-down rules were tightened significantly, Long-Term Care insurance would still be unfavored by consumers.
It is sometimes claimed that reducing the amount of assets an individual can keep while qualifying for Medicaid would increase the purchase of long-term care insurance.
Now, two professors of economics have estimated that tightening Medicaid spend-down rules would do little to encourage the purchase of LTC insurance.
While Medicaid recipients may keep only about $2,000 in assets in most states, their spouses may retain over $100,000 in Pennsylvania. In the Fall 2011 issue of the Journal of Economic Perspectives, the authors estimate that a $10,000 decrease in the level of assets an individual and their spouse can keep while qualifying for Medicaid would increase private LTC insurance coverage by 1.1 percentage points.
"To put this in perspective," they write, "if every statein the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law, this would decrease average household assets protected from Medicaid by about $25,000. This, in turn, would increase the demand for private LTC insurance by only 2.7 percentage points. While this represents a large increase in insurance coverage relative to the baseline ownership rate, the vast majority of households would still find it unattractive to purchase private insurance."
Overall, the authors are pessimistic about the prospects for encouraging more Americans to buy LTC insurance unless Medicaid is completely restructured or done away with altogether. They note that LTC insurance is a poor deal, particularly for men, who get back only about 33 cents on the premium dollar they spend, and that for a 65-year-old man of average wealth, 60 percent of the private insurance benefits would have been paid by Medicaid. However, life insurance policies with long-term care riders may be a better bet, and our office can provide more information on these products if you are interested.
The authors say that even if the implicit Medicaid "tax" on LTC insurance were eliminated, "other factors could still prevent the market for LTC insurance from developing." These factors include the availability of informal insurance provided by family members, the liquid assets in the home serving as a "buffer stock of assets," and the difficulty many individuals have in "making decisions about long-term, probabilistic outcomes."
Monday, January 30, 2012
Gifting the House For $1: Good Idea or Not?
Many people ask us if it is a good idea to give their home to their children. While it is relatively easy to do, giving away your house can have major tax consequences, among other negative results.
GIFT TAX ISSUES: When you give anyone property valued at more than $13,000 in any one year, you have to file a gift tax form. Also, under current law you can gift a total of $5.12 million over your lifetime without incurring a gift tax. If your residence is worth less than $5.12 million, you likely won't have to pay any gift taxes, but you will still have to file a gift tax form. Congress may change the gift tax exemption, which is now scheduled to revert to $1 million in 2013 unless Congress acts.
CAPITAL GAINS TAX ISSUES: While you may not have to pay gift taxes on the gift, if your children sell the house right away, they may be facing steep taxes. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,000. If you give your house to your children, the tax basis will be $150,000. If the children sell the house, they will have to pay capital gains taxes on the difference between $150,000 and the selling price. The only way for your children to avoid the taxes is for them to live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes.
Inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property's tax basis would be "stepped up," which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences.
PA INHERITANCE TAX ISSUES: In Pennsylvania, there is no gift tax. However, to avoid PA Inheritance Taxes (the rate is 4.5% for assets passed to children or grandchildren), you must live at least one year from the time the gift was made. Often times, 4.5% of inheritance tax is worth paying rather than gifting the house in this manner, due to the risks involved.
ASSET PROTECTION ISSUES: By transferring your house to your children, you are making all of their future financial and family problems YOUR problems. That means the house could end up being taken away due to creditor problems, bankruptcy, litigation, or divorce. Would you want your son-in-law to get part of your house while you're still living?
MEDICAID/LONG-TERM CARE ISSUES: Beyond the tax consequences, gifting a house to children can affect your eligibility for Medicaid coverage of long-term care. There are other options for giving your house to your children, including putting it in a trust or selling it to them. Before you give away your home, consult with an elder law firm such as our law firm, where we can advise you on the best method for passing on your home.
CONCLUSION: "Gifting the house for $1" is a phrase that's tossed around quite a bit, and several families go ahead with this planning. As you can see, casual planning like this is fraught with potential landmines. Be careful. There are options out there to transfer the house properly. Speak with an estate planning or elder law attorney about this type of planning.
Sunday, January 22, 2012
Caution: Do-It-Yourself Wills
Is it a good idea to write your own will? I can’t answer that question without being somewhat biased, because as an attorney, I know that there are complex and unique issues that each family and individual faces. Therefore, it does concern me when I hear of someone writing his or her own will without an attorney’s help.
My mission as an attorney is to build a long-term relationship with each client and provide superior service to him or her. The stack of paper in a binder or folder that I eventually hand to my clients is not what they find valuable. They just find it heavy! So the question is, where is the value in working with an attorney on my estate plan? My clients tell me that they find value knowing that they have a trusted legal advisor that has taken the time to learn about their needs, their goals, and the unique aspects of their lives. Unique lives translate into unique estate plans.
When I hear about do-it-yourself estate planning, I can’t help but get nervous for the folks that use those products. Here’s what concerns me about folks writing their own will:
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Failure to protect your assets: As an attorney, I always talk to my clients about their kids and grandkids, and I make sure that an asset protection plan is put in place. I want to make sure the client’s kids or grandkids are protected from themselves and others, including their creditors, spouses (or ex-spouses), business partners, legal judgments, etc. I can assure you that you cannot design a one-size fits all form for an asset protection plan, which is more important than ever today.
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Failure to create an asset preservation plan: A will and power of attorney is important but only the start for many estate plans. A major concern for retirees and people close to retiring is making sure an asset preservation plan is crafted, so that if you go into a nursing home, the house will be safe and some assets will also be safe from Medicaid spend down.
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False sense of protection: Doing it yourself and convincing yourself you only need the “simple will” may give you a false sense of protection, when in fact your situation is more complex. By complex, I mean things like second marriages, kids with financial issues, real estate under water, uncertain financial future, family conflicts, etc. I can assure you that these types of issues won’t go away when you pass on—in fact, our experience shows they only magnify if they’re not dealt with while you’re still here.
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Legal issues and problems with the documents: Let’s be honest, you don’t know what you don’t know when it comes to estate planning. Work with a trusted advisor that knows what you need. Would you pull your own tooth? Do surgery on yourself? Estate planning and asset preservation is best done with the help of a professional.
Are you going to spend more money on an estate plan with an attorney? Yes. But do you really want the “cheapest” plan? Worse, are you making matters more complex by doing it yourself and saving a few bucks?
I make my living by being passionate about helping families deal with their estate planning goals, fears and hopes to ensure they leave a legacy they can be proud of, no matter what happens and when it happens. Think about estate planning as saving your family time, money, aggravation, conflict, and from your estate being unnecessarily spent down on long-term care. Then, the real value of working with a professional will be realized.
Tuesday, December 06, 2011
Asset Preservation: Your HOME
Preserving your assets is possible even if you are about to enter into a nursing home. But the worst thing you can do is wait until you're no longer healthy to start planning. Instead, start planning while you are healthy!
Like most people, if you own a home, typically that's your greatest concern when you sit down to consider what assets are most in need of protection.
Consider an example: Jon and Mary, both 68, own a $250,000 home. They have two children. Neither has long-term care insurance. Jon's health is a source of concern, but his doctors are confident that based on current information, he will not need long-term care for at least another 7-10 years. This presents a great opportunity to plan in advance.
With our customized Nursing Home Protection+ Account solution, we can protect Jon and Mary's home from ever being taken if Jon goes into a nursing home. Even better, when Jon and Mary both pass on, the house won't be subject to estate recovery. In other words, their two children will be able to inherit the house, even if Medicaid wants to re-coup their costs by taking the house.
This type of asset preservation requires special skills and must be done carefully after considering many factors.
If you're interested in this type of planning, please contact our office today.
Monday, November 28, 2011
Evaluate Your Estate Plan
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2012 is quickly approaching, and there is no better time than now to re-evaluate your estate planning goals.
Estate planning can be broken down into three distinct areas: tax planning, legacy planning, and long-term care planning. Which area is the most important to you? Once you determine that, you can update your plan based on your goals.
Tax Planning
Tax planning has not been at the forefront in the last few years for most families. The federal estate tax exemption is $5 Million per person, and $10 Million per married couple, so only a small percentage of individuals are affected. However, you should be aware that in 2013, the estate tax exemption will revert to $1 Million per person unless Congress acts. 2013 will come sooner than we think, and while both political parties have an incentive to come together on taxes, all bets are off. Keep reading our newsletter to keep posted on federal estate taxes.
Legacy Planning
Legacy Planning is an important component of estate planning for many families today. Legacy planning ensures that your plan is crafted carefully so that any conflicts in the family are avoided, and that your children, grandchildren or other beneficiaries are protected against themselves and others.
Long-Term Care Planning
Excessive long-term care costs are a concern for many families today. As people live longer and long-term care costs rise (much faster than inflation), the question becomes how you protect your estate from being spent down completely on health care costs. There are proven asset protection strategies that help to preserve part of your estate. The earlier you plan (i.e., while you're still healthy), the better.
Your Next Steps
I recommend that you sit down with your family and review your estate plan every year. You may find that minor or major changes need to be made. Perhaps you were more interested in tax planning a few years ago, but now realize you need to focus on long-term care costs and how to protect assets against those costs. Once you decide changes need to be made, make sure to implement those changes as soon as possible.
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Monday, October 31, 2011
Nursing Home Costs - Rising Fast?
MetLife recently released their Market Survey of Long-Term Care Costs for 2011, and the statistics do not bode well for seniors and those that need long-term care.
A few statistics from the report that you should know about:
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The average cost of a nursing home (private room) across the USA increased 4.4%, from $229 per day to $239 per day.
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On average across the country, a semi-private room costs $78,110 per year, and a private room costs $87,235 per year.
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In Philadelphia, the average costs are higher. The average private room costs $285 per day, with the high being $325 per day. At the average, the cost per year is $104,025 and at the high, the cost per year is $118,625. Ouch.
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Assisted Living Facilities: On average, they cost $3,477 per month, an increase of $184 or 5.6% from 2010.
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Home Health Care: Average hourly rate is $21, and the daily rate for Adult Day Services is $70.
We continue to point out to our clients that long-term care costs are rising, probably faster than inflation. If you have concerns about long-term care costs, you should speak with an elder law attorney who can help your family plan craft a plan for preserving part of your estate in case long-term care is needed. Elder law professionals have a variety of tools available, such as long-term care insurance, trusts, sophisticated gifting strategies, and more.
Monday, October 17, 2011
CLASS Dismissed
Last week, the Obama administration formally shut down the CLASS Program, part of the Affordable Care Act (Obamacare). CLASS would establish a long-term care insurance program that individuals could pay into and then receive a daily benefit if they needed long term care.
But, the experts figured out that not enough people would sign up for the voluntary program. Thus, it would end up becoming insolvent, adding to the deficit and costing taxpayers.
Insolvent? Adding to the deficit? Costing taxpayers a lot? Sounds like Medicaid, Medicare and other entitlement programs!
Our political leaders just can’t seem to find a way around the problem of ballooning long-term care expenses. Meanwhile, a nursing home costs approximately $8,000 per month and at least 33% of people will spend on average 3 years in a nursing home during their lives. Do the math, and that adds up to almost $300,000.
Yes, Medicaid will cover the cost of nursing home care, but only when you have nothing left. The CLASS program aimed to fix this problem, but it was a failure.
Monday, September 19, 2011
Five Myths About "Living Trusts"
Is the Revocable Living Trust, sometimes just called a Living Trust, the ultimate estate planning tool? It depends who you ask, and what state you’re in.
In Pennsylvania, Living Trusts aren’t used commonly as an estate planning tool. Instead, practitioners in Pennsylvania, as well as clients, tend to favor Wills as the fundamental estate planning tool.
Here are five myths about Living Trusts in Pennsylvania:
Myth #1: Living Trusts save, reduce or avoid taxes:
A Living Trust is NOT a tax reduction or avoidance strategy. You simply cannot avoid estate or inheritance taxes by using a living trust. It used to be that more people were effected by the federal estate tax, and that married couples could reduce their estate tax by using credit shelter trusts. But you could do the same thing in a Will!
Myth #2: They prevent estate challenges:
A Will is easier to challenge than a Living Trust, because a Will is probated and is public. However, just because a Living Trust isn’t probated, doesn’t mean it can’t be challenged in court. It just takes a little more time, effort and money to do so.
Myth #3: They avoid probate because probate should be avoided:
Pennsylvania probate is pretty simple, and a run-of-the-mill estate can be probated by the Executor him or herself without the help of an attorney. So probate shouldn't necessarily be avoided at all costs and you shouldn't be scared of probate in PA. Yes, living trusts avoid probate, but your living trust must be 100% funded with ALL of your stuff to do that! Even missing ONE small bank account means your loved ones will have to go through probate. Anyway, probate is not a big deal in Pennsylvania, unlike in other states such as California (yes, living trusts are popular there because probate is a COURT supervised process!).
Myth #4: A Living Trust will make things easier at the end of my life:
Not really… It is probably takes just as much work to probate the will, settle the estate, etc., as it does to manage an ongoing trust. Trusts need to comply with many rules, tax returns must be filed annually for trusts, and more. A living trust will usually require the help and services of a professional.
Myth #5: I need a living trust to shelter assets from nursing home costs:
A living trust would NOT be a good tool to use if you want to shelter some of your assets from being spent down by nursing homes. You need to use a Medicaid Asset Protection Trust, which is IRREVOCABLE, and establish and fund this trust when you’re still healthy. A living trust used in a situation like this would be a disservice to you and your family.
LIVING TRUSTS MAKE SENSE IN SOME SITUATIONS, BUT NOT ALL SITUATIONS. Estate planning is an individual process that's unique for everyone. A qualified attorney can help guide you to what estate planning tools you need.
Want more information on what estate planning tools make sense for you? Call us today at (215) 706-0200 to schedule your complimentary visit.
Wednesday, September 07, 2011
Fall 2011 Estate Planning Essentials
Our blog entry this week focuses on five topics that have been hot button issues for clients over the last few months. Estate planning continues to evolve and therefore, we must continue to “think different."
Estate Planning in General: Estate planning today isn’t what it was 5 or 10 years ago. For most families that I see today, saving estate tax dollars is not an objective, because there are simply no taxes to begin with! But just because the tax problem went away (at least for the time being) doesn’t mean you shouldn’t plan. Our clients come to us to make sure their kids and grandkids will be taken care of properly, and that their estate is setup and optimized properly to achieve those goals. In other words, there are many more reasons to engage in estate planning than simply to save taxes.
Powers of Attorney: To put it bluntly, we are living longer. A Will by itself won’t suffice anymore. A Will is a death document, and only kicks in upon your passing. As we live longer, we have more time where we may be incapacitated or incompetent to make decisions. Therefore, powers of attorney, appointing someone to take over your affairs, continue to become more essential.
Long-Term Care: Long-term care costs are rising. See last week's blog entry on the latest average costs in Pennsylvania for long-term care. It is essential that middle class families plan for long-term care costs. There are strategies that can be employed to save at least part of your estate from costs that could ravage your estate.
Non-Probate Assets: More and more, people are acquiring assets that don’t pass their Will, such as IRA’s, 401(k)’s, life insurance, and annuities. In general, any asset with a beneficiary designation form avoids the Will and avoids probate. But it doesn’t mean you shouldn’t plan or protect those assets with trusts or other devices, and it doesn’t mean you should ignore them when planning your Will and estate.
Gifting: 2011 and 2012 present great opportunities to make large gifts without incurring gift taxes. You can optimize your estate plan and take care of your kids or grandkids with life insurance, pensions for life, and other great tools. Gifting may be more limited come 2013, so now is the time to act.
Fall is typically our busiest time for estate planning. Make your appointment now and reserve some time with me today if you want to optimize your estate plan. Call my office today at (215) 706-0200 or schedule an appointment online on our web site.
The Law Offices of Jeremy A. Wechsler assist clients with Estate Planning, Wills, Trusts, Asset Protection, Special Needs Planning, Powers of Attorney, Will Challenges and Probate/Estate Administration in Willow Grove, PA as well as Abington, Hatboro, Dresher, Horsham, Bryn Athyn, Huntingdon Valley, Fort Washington, Jenkintown, Glenside, Oreland, Warminister, Wyncote, Ambler, Elkins Park, Flourtown, Philadelphia, Warrington, Cheltenham, Gwynedd Valley, Jamison, Feasterville Trevose, Richboro, North Wales, Blue Bell, Lafayette Hill, King of Prussia, Collegeville, Oaks, Phoenixville, Oxford Valley, Langhorne, Penndel, Bristol, Fairless Hills, Bensalem Plymouth Meeting and Furlong in Philadelphia County, Bucks County and Montgomery County.
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