Archive for February, 2010

Do I qualify for Medicaid?

Thursday, February 25th, 2010

There are many different services provided by the various states under the program called Medicaid. My comments are focused on Texas residents qualifying for long term care. Many people find themselves in a nursing home ( called a skilled nursing facility in Medicaid ) suddenly after a fall, a heart attack or other serious medical crisis.

Generally there are five requirements in order to qualify for Medicaid. First you must be a citizen of the United States.

Second, you must be a resident of the state in which you wish to apply.

Third, and maybe the most critical is you must be “medically needy”. There are several factors involved, but essentially to meet the medical necessity requirement you must have a disease or medical disorder that requires the attention of a Registered Nurse (RN) or Licensed Vocational Nurse (LVN) on a regular basis.

Your income may not exceed the “income cap” set by statute. Currently it is $2022.00 per month.     If a Qualifying Income Trust is used (often called a Miller Trust or a QIT) then a person with more than the income cap may qualify for Medicaid.  The income placed into the Trust  is deposited into a designated bank account and all of the income is paid to the nursing home (less the personal needs allowance).   There are other exceptions which are more than I can include here.

Finally, your “countable” resources may not exceed $2000.00. This one requirement is complicated enough for a book all of its own. I will write a brief article on this topic soon.

For Medicaid to begin coverage of a nursing home patient, he or she must have been in the facility for at least 30 days.

How Medicaid is applied varies from State to State. An Application is made by the patient, a facility or a family member by completing the required form and submitting it to the Texas Health & Human Services Commission.

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Points to ponder before signing a Will.

Monday, February 15th, 2010

Most people who say they want a new Will tell me they only want a “simple” will.  Few of us can lay claim to living a simple life.   As part of your “estate plan” I have the following questions for you to think about.     Be honest with yourself, your attorney and your family.   If the truth is unpleasant admit it so we can work to make the situation better.

Denial does no one any good.   You cannot fix a problem until you admit a problem exists.    There are solutions for almost every problem if we think about what needs to be done before it comes about.     This article is not meant to provide solutions so much as to help determine what issues should be dealt with.

1.   Do I have children from more than one relationship?

2.   Do my children enjoy being with one another and share willingly?

3.   Do I have any children with psychological, emotional or other behavior problems?

Telling your lawyer before the documents are prepared about possible disagreements among your children allows for planning to reduce disagreement and to appoint the persons who can best deal with any disagreements that might happen.     A Trust is often a good tool to reduce the ability of a “problem” child to cause problems, but it is not the only tool.   Healing emotional wounds now is far more effective and cheaper than letting the family go war in court after we die.   Dispute resolution can be built into our documents if small arguments are likely.

4.  Do I own land in more than one state?

5.   Do I have existing health problems or am I likely to develop health problems?

6.   Do I have adequate savings and/or insurance to pay for any possible health care that I may need after retirement?    (consider Medicare supplemental policies, long-term care insurance,  Medicare prescription policies,  life insurance to fund a trust for spouse or child with special needs,  annuities, etc.)

7.   Do I know how much health care is likely to cost in the future?

8.    Do I have a child or spouse who relies on governmental benefits such as Social Security  (SSI or SSDI),  Medicaid or Medicare for health care?

9.   How many people do I trust who would be willing to accept the responsibility of making health care decisions for me?   Have I actually spoken to these people to make sure they are willing to do so?

10.   How many people do I trust who would be willing to accept the responsibility of paying my bills for me and investing my money or assets?   Have I actually spoken to these people to make sure they are willing to do so?

11.    If  I no longer have family members who are able and willing to help me, do I know how to find trained and bonded professionals to help me with my health care and financial decisions.

12.    If I have a child with severe disabilities do I have an existing care plan  with enough detail and explanation that someone else can step in and take care of my child as I do now or better?    Am I  making adequate plans to fund a special needs trust or  to otherwise provide for more than governmental benefits will provide my child?

If you do not get your wishes down in writing now, how is your family going to know just what you want?   Frequently the planning needs of a family with modest means is greater than for a family with significant insurance or other assets.   There is far more to an estate plan than reducing taxes.   Most of us have far less than one million dollars and do not have the spare money to pay for any medical emergency that may arise.   We need “asset protection planning” more than the wealthy millionaire who can afford to spend money we do not even have.

A good elder law attorney can help guide you through the available solutions to each of the potential problems listed above.   A little planning can go a long way.

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Valuation Discount benefits may disappear

Monday, February 8th, 2010

Many sophisticated tax planners have helped wealthy clients avoid estate taxes by using something called “valuation discounts”.    An asset that cannot be sold is worth less than another asset that can easily be sold.   This is a common concept used in business to value various types of property.    This is especially true in the area of corporations, partnerships and other business entities.

A good estate planner could take a valuable and easily valued asset like land, stock in a corporation sold on a stock exchange or even cash and put it into a limited partnership that had no market on which the interest in the partnership could be easily valued or sold.   Further the person with the valuable property could receive a minority interest in the new partnership and the loss of control would create additional valuation discounts on the value of the partnership.  This is true even though the assets within the partnership remain easily valued and easily sold.

New tax regulations are being prepared that will create a category of “disregarded restrictions” for family owned entities.   This will result in the property being valued for tax purposes as if the container with the value discounts did not exist.   This is going to be a highly partisan and heavily lobbied issue.

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New Income Tax Problems & Probate

Monday, February 8th, 2010

We are finally in the tax year no one thought would really happen.   This year we have no “Death Tax”.

Rule 1:  If you are the Executor or Administrator for the Estate of someone who dies this year make sure you talk to an experienced CPA or other tax preparer.  This is going to be an issue missed by many probate attorneys who do not also work with estate planning or tax issues.

The issues for the beneficiaries on their tax returns are going to be complicated and have to do with something called “tax basis”.  The good news is that this year will be the only year probate administrators will need to deal with this issue.   The tax rules that existed in 2000 will lock back into place and we will again be able to use the step up in basis rules again.

Even better is that for those of us with a small estate  our executor can elect to create a “stepped up” basis  of up to $1,300,000.00 of $3000,000.00 if the property passes to a surviving spouse.

Until this year heirs and beneficiaries received a tax basis on inherited property based on the Fair Market Value at the date of death.   Frequently called “stepped-up” basis.  This is a fairly simple value to obtain and results in very little income tax due when the property is sold by the beneficiaries.   This is especially true if the property was sold soon after the death of their parent or spouse.

Now the  beneficiaries’ tax basis is  the tax basis of the person who died (Decedent).    Generally this will be the amount that the Decedent paid for the property plus certain other amounts spent on the property.

More likely than not, most of the Decedents did not keep the records required to establish the tax basis and the beneficiaries will have no idea of where to look for those records.   This could create large income tax bills for beneficiaries with an executor who did not hire a good tax preparer or persons with larger estates.     On the other hand in a large estate the amount saved on not paying the estate tax more than offsets the additional income tax on gains from the sale of what will probably be long-term capital assets that are taxed at much lower income tax rates.

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Why probate?

Friday, February 5th, 2010

I am often called and asked if someone needs to probate a Will.   The legal answer is that the person named as executor has a duty to present the will for probate by the Probate Court.

The practical answer depends on the circumstances.  A Will has several functions or purposes.  The primary purpose for most people is to pass ownership or title to the persons named in the Will.   By presenting the Will to a Court the Will is determined to be valid.   A Will has no legal effect until a Court makes the required determinations that it was properly signed and witnessed, makes a full distribution of the estate, is accepted by the Court as valid and decides if there is a need for administration.

This last phrase is the real question that most people are asking.   One reason to present the Will for probate is that there is land in Texas that is conveyed by the Will, or that there is other property that the executor/administrator can collect and distribute more easily than the individual beneficiaries (heirs).  Stock is one such asset.  Sometimes a Will can be probated without the necessity of an administration, merely a simple hearing and everything is done.

Sometimes the collection of the assets and the sale of those assets is more simply done by having one person to be responsible for doing the various tasks that need to be done.   Instead of five or six people attempting to work out their schedules to sign documents, meet the various attorneys, accountants, realtors, contractors and other persons and agree on the price, etc. the executor makes the decisions and gets the work done so the money and other property can be distributed.

Another reason to probate is that if the Will is not probated the property passes to persons other than those named in the Will.   If there is no Will, Texas has a  law that defines who receives the dead person’s property.  These persons are called “heirs”.  This determination can become very complicated and expensive.  Sometimes the heirs and beneficiaries are the same.  If the person who died was married more than once the  results are frequently different.

A third reason to probate is because there a debts owed that need to be paid out of the estate.  Frequently many of the assets owned by the person who died ( this property is called the estate) can be protected from creditors as “exempt” property by use of the Texas Probate Code.  A “Dependent” Administration is a very effective form of asset protection.

This is not a complete explanation, but hopefully it gives you a good idea of the information that must be considered when deciding if probate is necessary or not.  It is usually a good idea to consult an attorney experienced in probate to find out the best choice.

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