New York Elder Law Attorney Blog

Last week Reuters discussed the growing number of adult Americans who are financially supporting their senior parents. As the author quips, many of these residents have becomes the "Bank of Sons and Daughters" after the recent financial crisis decimated the savings of many elderly family members. According to MetLife's new National Health and Retirement Study, the percentage of adult children spending time and money on their parent's care has tripled in the last decade and a half. This comes as no surprise to our New York elder law attorneys who know that rising long-term care costs, the economic downturn, and failure to plan ahead for senior care places many families in tough situations when a loved one ages and needs extra day-to-day care.

The MetLife data found that roughly a quarter of all adults are currently providing at least some financial assistance to their parents. A similar survey from Caring.com suggests that adult children may be providing even more support, as thirty two percent of respondents said they've spent at least $5,000 on their parents' living expenses within the last year. A large majority of that group admitted that supporting their parents leads them to worry about their own long-term financial situation. As one researcher involved in the data collection explained, "There are just a ton of families where the second or third generation needs to help the first generation. People are asking, a lot, about how to do it."

Not only does financially supporting aging parents often place stress on the finances of the adult children, but, if not done properly, it may actually be harmful to the senior. As each New York elder law attorney at our firm has explained to local residents, it is important to properly tailor financial gifts such that they don't inadvertently disqualify the parent from government benefits. Certain programs are in place to help seniors receive the care they need even if they do not have the resources to purchase it. However, qualification for those programs, such as New York Medicaid, is based on need. If adult children do not take those qualifications into account, they may unknowingly complicate their parent's program participation.

Consultation with a professional in the area is necessary to learn smart ways to provide financial aid. For instance, if small annual gifts are given--up to $13,000 a year--then there are no gift tax consequences. That amount may double if you are married, as both spouses have separate tax-free limits. In other situations, it may be appropriate to help parents with a loan. This avoids gift complications and may be useful to help with specific issues--such as paying off accumulated credit card debt. As one expert explained, "Giving your parents a loan helps them avoid exorbitant interest rates, but they're still responsible for their own debts."

See Our Related Blog Posts:

Adult Children Often Remind Senior Parents of Estate Planning Importance

Tips for Giving Financial Aid to Family and Friends

Last week we shared information about an article written by one of our New York elder law estate planning attorneys that discussed commonly used terminology in the field of elder law estate planning. By learning the meaning behind many of the common buzz words of the process, it is hoped that more community members will take the steps to conduct the necessary planning. The process is important not only so that wishes are carried out upon death but also to protect current property from the costs of long-term care.

Yesterday our New York elder law attorney, Bonnie Kraham, Esq., had another article published in the Times Herald-Record. In this piece she discussed the way that an elder law estate plan is crafted. She specifically highlighted the four major steps that occur upon a new client's visit.

First, it is vital that a lawyer know the unique dynamics of each family so that a plan can meet the specific needs of the individual and their loved ones. It is not a "one size fits all" assembly line approach. Information about an individual's age, heath, marriage history, relationships with family members, and similar details are important to specifically tailor each plan.

Next, documents must be reviewed to provide information to go into the plan and to determine if anything is out of date. A previous will, trust, power of attorney, health-care proxy, and other materials are analyzed to assess their continued benefit. Particularly important in the elder law context, is the need to review all material related to ways in which one may have prepared for long-term health care, including long-term care insurance documents.

Third, all assets much be reviewed. This would include all physical property as well as items like "qualified plans" such as IRA's and 401(k)'s. This step is helpful in determining whether estate taxes will be owed, whether probate will be required, if planning needs to be done for nursing home costs, and similar queries.

The final step involves the actual development of the elder law estate plan. The plan may include a variety of components. For example, an individual may be designated to make medical decisions. A trust could also be drafted with a specific trustee chosen. There remain many different parts of the plan depending on individual unique needs. Once completed, the plan should be reviewed every three years to account for changed circumstances and desires.

Continue reading "Ettinger Law Firm Attorney Explains Basic Components of Elder Law Estate Plan" »

by Michael Ettinger, Esq.

I am unsure how many of you have run into this scam. I have seen it off and on for the last few years and think all should know about it. These companies that flog Medicaid annuities have a deal going with assisted living facilities that essentially says this. We will advertise and promote VA benefits to seniors. When they call us we will refer them to your facility provided you recommend our services, for people who come to you, in assisting them in the VA application (free of charge) and for financial planning. The company is actually in the business of selling Medicaid annuities and they give out Medicaid advice consistent only with the one product they have to sell.

Here is what happened in an actual case in my office recently. Client was told by the assisted living facility to contact the VA assistance company to help "expedite" the process. Company told the client it would take three months to get benefits. It is now nine months and nothing has been received by the family. Client was also told that they did not have to do anything now to protect assets because they could purchase a Medicaid annuity if and when she had to go into a nursing home. Turns out that client has rallied nicely and will be staying in assisted living for the foreseeable future. Family is now setting up a Medicaid Asset Protection Trust (MAPT) but nine months later than they should have but for the poor advice received by the annuity floggers. But also consider this: had the client needed nursing home care, it turned out that the HCFA life expectancy was only 5.5 years which the client, in this case, might have well outlived. The client was never told about the requirement that the annuity be actuarially sound (i.e. all the money had to be paid back to her within the 5.5 years) and what that meant or what the alternatives were. Client, in this latter case, would have been better off with a gift and loan strategy.

The client will be meeting with the assisted living facility next week and sharing this information with them but the lesson for all should be that a New York Elder Law attorney should be consulted when disability occurs or is threatened in order to get all of the options on the table.

By Michael Ettinger, Esq.

A power of attorney will assist you in the event of possible physical incapacitation.
This means someone else can handle your legal and financial affairs that might require your physical presence, such as a real estate closing or refinancing. Later in life, it is imperative that you have your own plan for disability because

You get to choose the people you want to make decisions for you, be it family or friends, and

Your own power of attorney legal document affords them many more options than a legal guardian would have under the law to protect assets. For example, they can move much more in assets more quickly which, in a "move it or lose it" environment is crucial. Nursing homes in New York cost an average of $10,000 a month so the sooner you act, the more of your assets you are able to keep.

A legal guardian has to get a Judge's permission to move or protect assets which can take many months, not only possibly costing tens of thousands in nursing home costs, but potentially the same amount in legal fees to prosecute the matter. Worse yet, after all the time, expense and effort, a Judge may not act in your best interest because sometimes the Judge has a different view of the matter politically or considers the State's interests ahead of those of your family. If you have a power of attorney in the event of disability, the people you have chosen will do what's best for you.

In New York, a Judge has the authority to cancel a power attorney and substitute someone else of the Judge's choosing as your legal guardian. By creating a trust, however, you can completely protect against this. If you have a trust set up, where you name a back-up trustee or trustees, this defeats a guardianship proceeding for the trust assets. The Judge has no authority over the trust, so you are guaranteed to get the persons you choose. If you are unable at present to decide upon specific persons to act as your "power of attorney," you may ask your elder law attorney to perform trustee duties.

Get the person(s) you choose to make difficult financial and legal decisions for you in the event of disability. This often makes the difference between keeping your home and life savings and losing them. A New York elder law attorney can assist in the proper drafting and execution of a power of attorney.

by A.K. Lehmann, Paralegal.

More and more Americans are caring for an older friend or relative. According to the National Alliance for Caregiving and AARP, 43.5 million serve as caregivers to their elders, a 28% increase from 2004. Because of the tough economic climate of recent years - including the high unemployment rate - an increasing percentage of those are receiving compensation for providing care to a relative or friend.

This trend is predicted to rise due to the 2006 change in Medicaid law that makes it harder for people who qualify to give away assets. (A New York State Medicaid attorney familiar with the changing laws can assist in creating trusts that may make it possible to give away assets and still qualify for benefits.)

When caregivers make financial sacrifices it is often appropriate that they receive compensation.

There are various ways to pay relatives or friends with an:
• Hourly wage,
• Annual gifts or lump sum payments, or
• Larger inheritance.

Families must consider estate planning implications, Medicaid eligibility rules, and tax consequences.

Under federal law, when an annual compensation exceeds $1,700., an employer and employee each owes federal payroll taxes of 6.2% for Social Security and 1.45% for Medicare. There are also state taxes. (For more information see IRS Publication 926 "Household Employer's Tax Guide.)

Because of these reasons, elder law attorneys advocate the drafting of a written agreement called "a personal care contract" - before services are rendered.

A written agreement is especially prudent if the care recipient may eventually need to rely on Medicaid. Without an employment contract, Medicaid would consider payments to the caregiver as an attempt to hide assets - a real "no-no" for Medicaid administrators who carefully review applications.

Caregivers and recipients are urged to disclose any compensated caregiving arrangements to family members. New York elder law attorneys see family conflicts and even estate litigation as a result of hidden arrangements.

Source: Wall Street Journal, 12/10/10. "Should You Pay a Relative to Take Care of Mom?" Anne Tergesen

Handling day-to-day money matters isn't always the simplest of tasks - even for those with strong financial acumens. Managing the business of a household can also quickly grow into a formidable task. Paying bills twice; overdrawing on checking accounts and succumbing to questionable investments are perils faced by all, but perhaps even more so as one gets older. This is where family becomes important.

Oftentimes adult children assume that their parents have everything "taken care of" and parents think their financial affairs are none of their children's business. New research from the Employee Benefit Research Institute (EBRI) reveals that 51% of adult children have never had detailed discussions with their parents about their income and expenses.

As everyone knows, talking about money is perhaps one of the most unapproachable, emotionally difficult and uncomfortable subjects. Yet avoiding discussing them with aging parents could possibly be disastrous, especially when it comes to making sure that their long term health care needs are planned. Sometimes it helps to seek out a New York elder law attorney after the initial conversation.

Here are some suggestions for breaking the ice:

Remember the goal is not to find out how much money is involved. Instead, this important conversation can begin by asking about their advisors or if there is a contingency plan in place for disability. Sometimes siblings split the fiscal responsibility of aging parents - one oversees the day to day bill paying and the other will manage and/or oversee long term investments/financial advisors.

Authored by A.K. Lehmann, Paralegal

Alzheimer's Disease International (ADI), a federation of 73 national Alzheimer's organizations, recently released a report on the economic impact of the disease. In the U.S., there are as many as 5.3 million Americans living with Alzheimer's and every 70 seconds someone in America develops the incurable illness. In 2010, there will be a half million new cases of Alzheimer's. Unfortunately, it looks like the disease is growing exponentially. In 2050, ADI predicts nearly a million new cases every year.

In 2006, Alzheimer's was the seventh leading cause of death in the country. While death rates are thankfully decreasing for heart disease, prostate and breast cancer, Alzheimer's deaths rose 46.1 percent from 2000-2006.

This disease is reaching epidemic proportions and has become a national crisis. Like all terrible illnesses, it discriminates against no one. Long term health costs continue to escalate. Caring for those affected with Alzheimer's and other dementias cost U.S. society a total of $172 billion, including $122 billion in costs to Medicare and Medicaid.

This tremendous strain on the already overburdened state and federal health care costs will only get worse if the U.S. government does not start to invest in substantial research for its cure. Certain evidence-based prevention strategies should be further developed immediately.

Alzheimer's Association is currently working to enact legislation, the "National Alzheimer's Project Office" (S. 3036/H.R. 4689), that will outline a national plan to overcome the Alzheimer's crisis. It will include strategic planning and coordination for the fight against the disease including initiatives for research, care and support.

"We need all Americans concerned about Alzheimer's disease to tell their representatives in Congress and the President to pass the Act [...]," said Robert Egge, Vice President of Public Policy for the Alzheimer's Association.

Families and friends are encouraged to contact their state senators and representatives to show their support for the "National Alzheimer's Project Office" bill (S. 3036/H.R. 4689).
A consultation with a New York elder law attorney is essential to know your rights and to avoid impoverishment if you or a loved one must care for someone suffering from Alzheimer's disease.

The information for this blog post was provided by the Alzheimer's Association. For further information, please visit The World Alzheimer Report 2010.

The recession has caused a dramatic new development in child rearing. According to a 2009 Pew Research Center study, 2.9 million children were being raised primarily by their grandparents in 2008 - up 6% from 2007 and 16% from 2000. The census data attributes financial problems as the chief cause of the sharp rise in seniors now having to assume more "traditional" child-rearing duties.

These duties will cause a real strain on seniors' budgets. Child care costs, like more groceries, clothes shopping, health care and activities can add up quickly. Depending on the length of time a grandparent will now be asked to assist in raising his/her grandchild, these expenses over time could be substantial.
These seniors may find themselves needing to readjust their time and money to accommodate their new and perhaps unexpected responsibilities.

In cases where resources are limited and already designated for long term care or nursing home expenses, it may make sense to consult with a New York elder law attorney. Prioritizing needs and allocating assets often takes an experienced counselor who possesses a broad view of existing financial and legal planning options. For example, a Medicaid Asset Protection Trust may be advisable to protect the assets ahead of time, since there is a five year "look-back" on this type of planning.

Statistic for this blog post came from The Wall Street Journal, 9/10/10

by Michael Ettinger, Esq.

Medicaid annuities have been a viable planning option for New York spouses since The Deficit Reduction Act of 2005.

Say you have a spouse who needs nursing home care (the "institutionalized spouse") but you have more assets than the Medicaid law allows you, the spouse at home (the "community spouse") to keep. Currently, the community spouse may keep about $125,000 in resources (not including the house, which is exempt if a spouse is living there). But what if the couple has $400,000 in assets? That's $275,000 in excess resources.

Many well meaning advisers, including lawyers, will tell you that it is too late and you have to first spend down that $275,000 before Medicaid will pay. Not correct.

Elder law attorneys have a number of good planning options here. One, spousal refusal was the subject of an earlier blog post.

Another planning option, the Medicaid annuity, may in some cases turn out to be the best planning option.

The community spouse purchases a Medicaid annuity worth the excess $275,00 which must make repayments of the full amount of the annuity plus interest with the community spouse's actuarial life expectancy. Now, the $275,000 has disappeared and the institutionalized spouse is immediately eligible for Medicaid, saving nursing home costs of $12,000 or more per month. Spouse at home receives an increased income which is also almost all sheltered from Medicaid.
What if the spouse at home dies first, or before all the payments are made? The children may be named the beneficiary and receive the balance of the payments.

by Michael Ettinger, Attorney at Law
The Medicaid Asset Protection Trust (MAPT) is a technique commonly used by elder law attorneys. It consists of an irrevocable trust, usually set up by a parent of parents sixty-five and older. One or more of the adult children are named as "trustees" to manage the trust for the benefit of the "beneficiaries" who remain the parents during their lifetimes. For example, the parents retain the right to the exclusive use and enjoyment of the home and the income from all of the trust assets. The establishment and "funding" of the trust, i.e. retitling the home and the investments in the name of the trust, starts the five year look-back period running. After five years, those assets become exempt and are protected from the costs of long-term care.

Once the MAPT is established, there are certain things the parties can and cannot do. Below are a list of the "Do's and Don'ts" concerning the MAPT.

Do make all transfers to your trust, as advised by the law firm, in a timely manner.
Do use trust assets for repairs or improvements to the home or other property in the trust.
Do use trust assets for payment of real estate taxes and homeowners insurance.
Do take dividends and income on trust assets on at least a quarterly basis.
Do call the law firm when you wish to make a gift from the trust to any of your beneficiaries.
Do call the law firm when a Grantor needs Medicaid benefits or dies.
Do call the law firm when personal or financial circumstances change significantly.
Do call the law firm if you wish to change trustees or break the trust.
Do provide your homeowner's insurance company with the "letter of instruction" and a copy of the trust for real property transferred to the trust.
Do provide your CPA or tax preparer with the "letter of instruction" regarding the trust tax return
and the "letter of instruction" tax deductibility of legal fees.
Do choose your trustee carefully to avoid the expense (and unpleasantness) of changing
the trustee.
Do call the law firm if you want to take out a reverse mortgage on the property in the trust.

Don't use trust assets to pay telephone or utility bills.
Don't use trust assets to pay personal expenses.
Don't use trust assets to purchase an automobile.
Don't take principal or capital gains from trust assets.
Don't transfer IRA's or 401(k)'s to the trust.
Don't allow beneficiaries to return to the trust or the Grantor any gifts made from trust assets.
Don't make additional transfers to the trust without advising the law firm.

by Michael Ettinger, Esq.
A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), allows seniors, age sixty-two and older, to tap the equity in their homes. The demand for these loans is exploding due to the lingering effects of the recession and the leading edge of the boomer generation reaching retirement age.

The attractiveness of these loans are that no payments are made on the loan until the home is sold, the last owner vacates for assisted living or nursing home care or the last owner dies. After death, the loan repayment terms allow an additional twelve months for estate administration and probate.

The difference between the sale price and the loan goes to the heirs under the will or living trust. If the home sells for less than the loan, the estate owes nothing since these loans are covered by insurance, taken out by the borrower, to repay the lender for any shortfall. While the insurance adds 2% to the cost of the loan, the mortgage insurance fee is tax deductible.

Although about half of reverse mortgages are taken out to pay off existing mortgages, thereby eliminating payments, there are other options besides taking a lump sum. Borrowers may also take out a line of credit or receive a monthly check for a term certain, such as ten or twenty years, or for life. Proceeds are received tax-free. Since the loan is based solely on the equity in the home, there is no income check or credit check required.

The amount that you may borrow depends on your age and the value of the property. For example, maximum loan amounts on a fixed rate mortgage for home values up to $625,500 or more are $324,070 for a sixty-two year old and $384,850 for a seventy-five year old. Homes of lower values receive proportionately less loan amounts.

Due to the high cost of the mortgage repayment insurance (2%) and the loan origination fee (2% of the first $200,000, 1% of amounts over $200,000, with a cap of $6,000), these loans are not recommended where the homeowner may move or sell in a few years or is at risk for long-term care and may need Medicaid planning. Once a reverse mortgage is placed on a home, it is not amenable to being protected from nursing home costs with a Medicaid Asset Protect Trust.

A consultation with an experienced elder law attorney can help you weigh the pros and cons of going forward with a reverse mortgage, as well as available alternatives, such as home equity loans, selling the home and trading down, or opting to rent.