2o Things You Should Know About Elder Law
1. What is Elder Law?
Elder Law is a focus on life care planning to insure that the total health care and estate planning needs of an individual is addressed from a multi-disciplinary perspective that includes the following range of services:
- Asset protection planning
- Medicare and Medicaid planning
- Interplay of long-term care and financial planning
- Use of long-term care insurance
- Health care decision making and health care proxies
- Estate planning
- Wills and real estate strategies to protect the family home
- Housing options and alternatives to nursing homes
2. What are the most pressing Estate Planning issues of concern to elders and their families?
- How can I protect my family home and avoid the state from placing a lien on the home if I enter a nursing home?
- How can I insure I can live at home or in the community and not enter a nursing home?
- How can I protect my estate and life savings?
- How can I avoid probate and pay the least taxes?
- How can I insure my family will inherit my estate and there will be something to pass on upon my death?
3. What are the essential Estate Planning documents every family should know about?
- Wills
- Health Care Proxy
- Power of Attorney
- Deeds with Life Estates and Realty Trusts
- Revocable and Irrevocable Trusts
- Gift Giving Plans
- Asset Protection Plans
4. What is Probate?
Probate is a process that takes place when someone dies with property in their name alone. Joint accounts and property held by husband and wife as tenants by the entirety are not probate property. Joint property and property held as tenants by the entirety passes to the co-owner(s) immediately upon the death of a CO-owner Tenancy in common means that the property is held in equal shares and passes to the individual's estate upon death with all tenants in common having equal rights.
A person dies "testate" with a will and "intestate" without a will. A will should be filed within 30 days of the date of death but is often filed much later without penalty. An individual named as Executor under the will must be appointed by the Probate Court in the county where the deceased resided. If a person dies intestate with property, the property passes by the state law of intestacy upon a petition to the Probate Court appointing an Administrator. Intestate property first passes to a surviving spouse and children in equal shares, and if no children, all to the spouse, or if no spouse, to the children equally. If no spouse or children, then it passes to the next level of heirs starting with parents, then siblings, then nieces and nephews, etc.
5. What are my Federal Estate Tax obligations?
Estate taxes may be due from the estate of the last to die of a husband and wife, or from the estate of an unmarried individual. There is a 100% tax exemption for bequests between spouses, but when the surviving spouse then dies, a higher, "graduated" tax may be owed on the entire estate if planning is not done before the first spouse dies. The estate of each individual, whether married or unmarried, is allowed a lifetime unified gift and estate tax credit or "exemption." While the Federal gift tax exemption will remain at $1,000,000.00, the unified gift tax exemption on the value of the individual's estate on the year of death is as follows:
- 2001 - 2003 $1,000,000.00
- 2004 - 2005 $1,500,000.00
- 2006 - 2008 $2,000,000.00
- 2009 $3,500,000.00
- 2010 Unlimited
- 2011 $1,000,000.00
The effect of Massachusetts estate taxes on an estate were effectively reduced to $0 for most estates in 1996 because the state instituted a "sponge" tax that creates a federal estate tax credit for any estate taxes due to the Commonwealth, but Massachusetts estate taxes were reinstated for deaths occurring on January 1, 2003 or later. The new estate "exemption" for Massachusetts is only for the first $700,000.00 per person in 2003, $850,000.00 in 2004, $950,000.00 in 2005, and $1,000,000.00 thereafter. There is no Massachusetts gift tax.
There is much confusion about "tax-free" gifts. A change in federal law allows each person to now make a tax-free gift of $11,000.00 each to appropriate individuals every year. A married couple can make joint gifts of up to $22,000.00 to each individual every year. Each gift is applied as a "credit" on the estate tax exemptions discussed above. If a person or couple is not concerned about estate taxes, then gifts in excess of $11,000.00 (of $22,000.00) per person may be given with no adverse consequences to the donor or donee, up to the lifetime exemption amount. A Certified Public Accountant (CPA) can advise you as to whether a gift tax return should be filed and can provide you with filing instructions.
6. What is a Health Care Proxy?
Since December 18, 1990, individuals in Massachusetts can complete binding Health Care Proxies. The purpose is to permit you to designate in advance who will make your health care decisions should you become incapacitated or unable to make your own health care decisions. The Agent, or person you appoint must be 18 years of age or older and will be permitted to make a wide range of medical decisions on your behalf if you are unable to make or communicate your wishes.
7. What are the differences between a Health Care Proxy and Living Will?
A Living Will is a legal document that specifies in advance any life-sustaining measures a person refuses to undergo if there is no reasonable expectation of recovery. Typically, a person may refuse the use of feeding tubes, respirators and cardiac resuscitation. The Living Will makes an incapacitated individual's treatment preferences known in a set of limited and specific circumstances and serves as a guide in medical decisions, but are NOT legally enforceable. The Health Care Proxy is not limited to a specific set of circumstances, but allows an Agent the flexibility to make treatment decisions in a wide range of situations. For these reasons, the Health Care Proxy is the recommended method for medical decision making in the event of incapacity.
8. Who will make medical decisions if no Health Care Proxy exists?
If you become unable to make or communicate treatment decisions to health care providers, they will look for an alternate decision maker If a Proxy exists, that person will be your Agent. If a Proxy does not exist, decisions will often be made by a group of people, including family and care providers and, in some cases, a guardian. When no Proxy exists, the medical decision making process is usually slower than with a Proxy. More importantly, treatment decisions made by a committee of family and health care professionals may not reflect your values and beliefs. In sum, the Health Care Proxy assists in having your treatment preferences carried out in the most efficient manner possible.
9. What is Durable Power of Attorney?
In certain situations individuals may authorize another person or persons to legally act on their behalf in handling their property. When accomplished through a written legal document, a Power of Attorney is created. The person creating the power, the Principal, specifies in the legal document the specific authority they want the other person, the Attorney in Fact, to possess. "Durable" means that the Power of Attorney will remain in effect even if the Principal becomes incompetent. A Power of Attorney can be revoked by a competent principal at any time.
10. What can a Durable Power of Attorney do?
An Attorney in Fact (the person acting on behalf of the Principal) will only have those powers specifically granted to him or her by the Principal. The Principal can authorize the Attorney in Fact to complete a broad range of activities, including signing checks, making investment decisions, entering into contracts, making gifts, creating trusts, and transferring property. The Principal can grant to the Attorney in Fact the power to do most things the Principal could have done for him or herself. This is a very powerful estate planning tool, and should be granted to be used with discretion and care.
11. What is the difference between Durable and Non-Durable Power of Attorney?
The regular, or non durable, Power of Attorney, is effective immediately, but automatically terminates when the Principal becomes incompetent. If incompetency does occur, perhaps the time when a Power of Attorney is most necessary, in order to manage the incompetent individual's estate, that individual's family would need to seek the appointment of a guardian or conservator from the Probate Court. Alternatively, if a Durable Power of Attorney exists, the power of the Attorney-in-Fact to act on the Principal's behalf continues even after the Principal becomes incompetent.
12. What is the difference between a Springing and Present Durable Power of Attorney?
In Massachusetts, Durable Powers of Attorney are governed by statute. There are two basic forms a Durable Power of Attorney can take: (1) a present Durable Power of Attorney; and (2) a "springing" Durable Power of Attorney. A present Durable Power of Attorney authorizes the Attorney in Fact to act for the Principal as soon as it is executed. A springing Durable Power of Attorney becomes effective only upon the incapacity or incompetency of the Principal.
13. What is a Homestead Declaration?
Massachusetts law permits homeowners to protect a portion of the equity in their homes from (future) creditors by declaring their family residence as their "homestead". The homestead laws are based on public policy, which recognizes the value of securing a home for the family regardless of the householder's financial condition. The homestead declaration protects the equity in one's home from claims of creditors up to $300,000. To get this protection, the homeowner must file a declaration with the Registry of Deeds where the deed to the property is recorded. The law permits only one homestead declaration for co-owners under age 62 and two homestead declarations for co-owners who are age 62 and above or disabled. Therefore, homeowners who are age 62 and above or who are disabled can protect up to $600,000 in equity in their homes if both owners file separate declarations of homestead
14. What will a Homestead Declaration not protect the house from?
- Medicaid lien if the owner requires nursing home care
- Federal, state, and local taxes, assessments, claims and liens
- First and second mortgages
- Debts, encumbrances or contracts existing PRIOR to the filing of the declaration of homestead
- Judgment that spouse pay support to the other spouse or for minor children
15. If I already have a Homestead Declaration recorded, do I have to record a new one when I turn 62 in order to get the added protection?
Yes. The two homestead exemptions come under separate sections of the statue and require separate declarations. For example, each person having a joint ownership interest in a principle residence who is elderly or disabled may individually claim a $300,000 exemption. This allows a doubling of the exemption in the case of spouses, both of whom are elderly or disabled.
16. What if I deed the house to my children and reserve a Life Estate, do I lose the homestead?
Yes, but you can declare a homestead on your reserved life estate.
17. What is a deed with a Reserved Life Estate?
A deed is a document showing proof of ownership of real property. A deed with a reserved life estate is used when you wish to pass your real property to someone upon your death, but wish to live in and maintain control of the property until your death. A deed with reserved life estate allows you to live on the property with the responsibility to keep up and maintain the property. A benefit of this type of deed is that the "remainder" is passed immediately upon your death to whomever you appoint, and also avoiding the probate process. A disadvantage is that the property cannot be fully sold without the assent of the life and remainder estate holders. While a step up in basis for capital gains tax purposes will be realized upon the death of the life estate holder, the life tenant age 55 or older will loose the Section 121 capital gains tax exclusion if the real property is sold while the life tenant is living.
18. What is the difference between Medicaid and Medicare?
Medicare is a federal health insurance program associated with Social Security Insurance benefits for the elderly and disabled that assists in paying for medical expenses, but does not pay for extended nursing home care or prescription drugs. Medicaid is a joint federal-state assistance program based on financial need, which comprehensively pays for the medical and health maintenance needs of those receiving coverage . It also pays for long-term nursing home care for individuals and members of couples.
19. How can I tell if I am eligible for Medicaid?
Medicaid is available to the elderly, disabled, blind, children, and other groups in need of coverage elder individuals who meet the financial eligibility rules, and for those persons eligible for Supplemental Security Income (SSI). Medicaid eligibility criteria differs by category, but for those age 65 and over, the asset limitation is $2,000 for an individual. The income limit for an applicant living in the community is $736 per month, although excess income may be "spent down" on medical care to receive benefits. For nursing home coverage, all monthly income over $60 must be paid to the nursing home, although there are exceptions if there is a spouse still living in the community.
20. If I need a nursing home, but my spouse does not, will I still be able to get Medicaid?
Yes. A portion of the couples' countable assets are called the "community spouse asset allowance" and Medicaid allows the community spouse to keep at least $89,280.