Estate Planning Bits

10 common estate planning pitfalls

1. Not having a Will: Personal wishes, whether written or oral, will most likely not be followed in the absence of a will. Without a plan, your assets will pass to your heirs according to your state’s laws of intestacy.


2. Not funding your revocable living trust: A property drafted trust will prevent putting your loved ones through the expensive, lengthy and emotionally draining court probate process. 


3. Failing to understand the impact of life insurance proceeds: Many people do not realize that life insurance proceeds are normally included in the estate of the deceased, which can result in approximately 50% of the proceeds going to the IRS instead of your intended beneficiaries. Depending upon the situation, an Irrevocable Life Insurance Trust may be appropriate.


4. Failing to adequately plan for children with special needs: A child with special needs risks being disqualified from receiving SSI benefits and may have to use their inheritance to pay for their care. Depending upon the situation, a Special Needs Trust may be appropriate.


5. Not properly planning for incapacity: People are living longer, and therefore the risk of lacking capacity during your lifetime is increasing. Only with proper estate planning can you be sure that your health and financial affairs will be taken care of in the event of your inability to take care of them yourself.


6. Business planning: With a properly executed plan, you can choose who will own and control your business upon your death, which increases the likelihood of the business continuing as a viable operation.


7. Not preparing for minor children: If you have minor children, you should have a will nominating personal guardians for the children, in the event that both you and your spouse should die prior the children reaching the age of 18. Without a plan, the court will decide without your input where the kids will live and who will make important decisions about their money, education and life.


8. Improper beneficiary designations: Not updating the beneficiary designations on bank accounts, life insurance, IRAs and other assets can lead to unintended beneficiaries.


9. Not periodically updating an estate plan: Generally, people do not like to discuss dying, and therefore people often want to simply execute their estate plan documents and be done with it. However, economic, family, and health changes require revisions to your estate plan.


10. Doing it yourself: Even if a self-prepared will or trust is legally enforceable, estate planning is a complex legal process requiring knowledge in several areas of the law, including estate law, tax law and property law as starters.

by: Todd C. Ratner, Esq.

10 perils of joint tenancy

Joint tenancy is a form of co-ownership. Often, owning an asset such as a home or bank account under a joint tenancy relationship is advantageous. For example, when one of the co-owners dies, joint ownership typically provides the surviving co-owner instant access to the jointly held property, eliminating the need for probate. However, joint tenancy can have its perils.

1. Control Issues: By providing someone with co-ownership, you give them control of your asset. If you add another person as co-owner of your home, you cannot sell or mortgage the home unless that person agrees.


2. Creditor Issues: If creditors seek out your co-owner for outstanding debt owed, the creditors may be able to obtain part of your home or bank account that is held in joint tenancy.


3. Relationship Issues: If you and your co-owner experience a falling out, the co-owner may be able to take all of the money out of the bank account without your approval.


4. Substitute for Will Issues: Many times, parents of several children will place one child’s name on an account and assume that that child will divide assets equally among all siblings. However, this method provides no stipulations over control of the money. The surviving co-owner can do with it what he pleases, with no legal obligation.


5. Uncertainty Issues: Unplanned ownership of property often leads to unwanted results, especially for people unable to manage assets.


6. Tax Issues: Careful planning to eliminate or reduce estate taxes can be completely thwarted by an inadvertently created joint tenancy that passes property outright to a surviving joint owner.


7. Long-term Care Issues: Careful planning to reduce long-term care financing can also be thwarted by an inadvertently created joint tenancy that passes property outright to a surviving joint owner.


8. Marriage Issues: Individual property may become marital property once it is transferred into a joint tenancy.


9. Incompetency Issues: In the event that a co-owner becomes incompetent, part of the property may go into a conservatorship, making it burdensome if the other joint tenant wants to sell some or all of the jointly held property.


10. Distribution Issues: Joint tenancies deprive you of the flexibility of a will or trust in which you can stagger the distribution ages of the beneficiaries. In a joint tenancy arrangement, the joint tenant receives the asset all at once.

By: Todd C. Ratner, Esq.

Crisis planning upon institutionalization

When a loved one is institutionalized, your financial situation may be impacted. Here are some tips to help you transition:

1. Engage competent counsel. It is very important to ensure that the lawyer you have selected is knowledgeable in elder law. This sub-specialty of estate planning allows lawyers who are specially trained to assist with tax, estate planning, and asset protection planning for the benefit of a client.
2. Review tax issues. Any time there is a gift, transfer, or any transaction involving real estate, stocks, bonds, and often CD’s or bank accounts, income tax, estate tax, and gift tax consequences must be reviewed. Whether assets pass during lifetime or at death make a significant difference in whether there will be a capital gain or no gain. Similar rules apply relative to real estate, especially whether a person obtains their exemption from tax upon the sale of the principal residence. Tax rules change frequently, and therefore, it is important to be sure that the advisor and accountant are involved in the planning process.
3. Purchase a pre-paid funeral plan. In most states, including Massachusetts, it is permissible to pre-pay a funeral or establish an irrevocable trust for one’s burial expenses. At the current time, any reasonable expenditure as a pre-paid expense is allowable if part of a irrevocable contract. Most funeral homes are aware of the rules of Medicaid eligibility, and if married, the husband and wife are both permitted to pre-pay their funerals without any look-back period.
4. Open burial account. In addition to pre-paying a funeral, any person who is applying for Medicaid is also permitted to have a $1,500 burial account. This account must be listed as a burial account, and no funds may be added in the future or withdrawn except for interest, which may accrue on this account during its lifetime. Again, there is no disqualification period for setting up an irrevocable burial account even when a person is already institutionalized.
5. Purchase a new vehicle if allowable. A reasonable amount may be spent on a car if the person who is institutionalized has a spouse living in the community who is not institutionalized. Transportation is not a necessity, but the regulations permit a car to be purchased. That is not to say that a “luxury car” should be purchased upon a spouse entering a nursing home, but rather, a reasonable sum may be expended.
6. Purchase new home and make home improvements. In the event that a person is renting and has sufficient assets to purchase a house or condominium, this may be an acceptable transaction so long as there is a community spouse who is living at home. However, if a person is institutionalized and is single, without any reasonable likelihood of returning to the community, then clearly, a purchase is not allowable. There are special rules regarding purchases of real estate with one or more names, as well as mortgages and reverse mortgages, all of which are techniques that require special attention. In addition, home improvements and renovations are allowable so long as there is a community spouse living in the premises.
7. Purchase personal items or household goods. Certain items of tangible personal property are allowable to be purchased. These would include new furnishings, carpeting, a new television, clothing, and other goods that are allowable under the regulations. Again, the rules regarding these items vary from state to state and are also changed within a state frequently, so attention must be paid to the regulations regarding asset purchases.
8. Pay debts if legitimately eligible to be repaid. The payment of debts is also allowable, including paying on a mortgage. Other debts, such as outstanding medical bills, credit card bills, etc. are allowable, but the bills may be carefully scrutinized to ensure that the goods charged are for the institutionalized person and/or their spouse.
9. Take a vacation if possible. If able to, the expenditure of money on one’s self is allowable, including the taking of a vacation. However, paying for a vacation for an entire family would be frowned upon. But, as opposed to having funds spent on long-term care, a person may expend funds on himself, such as taking that long deserved and anticipated vacation.
10. Review all proposed expenditures with an elder law attorney before making any payments, decisions, or gifts. Before taking any action in all of the above options, it is vitally important to check with a qualified attorney, preferably an elder law attorney, who will be able to look at each particular situation individually to determine the best course of action. There are no two situations that allow any “boilerplate” technique to be taken, but rather, similar to medical care, each person is looked at individually, and a plan is prepared for their specific situation regarding family, assets, and proposed care.

By: Hyman G. Darling, Esq.

Estate Planning is a process

Many clients do their planning at year end, which is not necessarily the best timing. Planning should carry through the entire year. Now that tax day has passed, it’s as good a time as any to review and update your estate plan. Like your annual physical, it is wise to also have a legal checkup. The following are a few areas that should be considered, although they may not all be appropriate for everybody:

Update Your Estate Plan

Are your Health Care Proxy, Power of Attorney and Will up to date? Are the individuals named within the documents still appropriate to serve as well as receive your assets? Are they healthy? Are their marriages also healthy? If not, perhaps your documents need to be reviewed to provide for preservation of assets for the beneficiaries so they don’t become their liabilities.

Plan For Retirement

Is it time for you to consider when you should collect Social Security? Have economic changes made it necessary for you to work longer but possibly still take Social Security benefits sooner? Is your health insurance in order, or do you need to purchase some other plan, such as a Medigap policy, to ensure you have the coverage you need until you’re able to obtain Medicare benefits? Naturally, if you are in your 20s through 40s, these issues seem way too remote to consider, but other issues should be considered such as saving for retirement and to attending to a child’s education expenses. In fact, if you are relatively young, perhaps you are worried about paying off your own college expenses.

Consider Long-Term Care Insurance

Most seniors are concerned about having their assets spent on long-term care expenses in the event they need institutionalized care or require 24/7 home care. A long-term care policy can help if you’re qualified to obtain the coverage and can afford it. If you can’t afford it, an elder law attorney can present alternatives, like using a reverse mortgage or having children share the cost, etc. It is an option that should not be overlooked, but it must be reviewed to determine whether it is an option for the client or not.

As with all life plans, just because documents are signed, does not mean the plan is good forever. It should be reviewed and revised as laws, finances, and family dynamics change.

by: Hyman G. Darling, Esq.

2009 Medicaid and Medicare Amounts

You can refer to this chart for 2009 Medicaid and Medicare amounts.

Demystifying terms used by estate planning attorneys

Agent: The person given legal authority to make financial decisions for a person through a durable power of attorney document or the legal authority to make health and medical decisions for a person through a health care proxy document.

Artificial Life Support: Medical equipment and other technology used to prolong the life of a person who is seriously ill by sustaining essential body functions, like breathing.

Assets: Personal possessions of value, including cash, bank accounts, real estate, vehicles and investments.

Beneficiaries: The people named in the will to receive the estate of the person upon his or her death.

Conservator: The person appointed by the courts to make financial decisions on behalf of a person.

Custody: Legal responsibility of a person.

DNR:  Stands for “Do not resuscitate” and refers to a person’s instructions that, if his or her heart or breathing stops, the doctor should not try to restart it.

Durable: When a power of attorney document is durable, it is valid even after the person with dementia can no longer make his or her own decisions.

Execute: To legally sign or “carry out” a legal document.

Executor: The person named in a will to manage the estate of the person upon his or her death.

Grantor: The person for whom a living trust is created.

Guardian: The person appointed by the courts to make health care decisions on behalf of a person (sometimes also includes financial decisions.)

Health care agent: The person given legal authority to make health care decisions for a person through a health care proxy document.

Legal capacity: The level of judgment and decision-making ability needed to sign official documents.

Probate:   The process used by the court to distribute the property of a person who has died.

Trustee: The individual or bank chosen to manage the property (assets) in the trust document of a person.



by: Todd C. Ratner, Esc.

Medicare and Medicaid – what’s the difference?

I often hear someone using the wrong terminology for explaining a Medicare or Medicaid benefit, so I would like to offer an explanation. While I will not attempt to provide all of the specific benefits of either program, suffice it to say they are two separate and distinct programs offered by the government.

Medicare is a purely federal program that is administered by the government for individuals who are 65 and older or disabled.

• Medicare Part D is the most familiar to most individuals, since it has been in the limelight in the past couple of years. It provides specifically for prescription drug and related expenses.
• Part A of Medicare covers hospitalization expenses, which are basically in-patient care costs.
• Part B pays for physician services as well as other related medical supplies and expenses.
• Part C of Medicare is what is known as Medicare Advantage, which works similar to a Health Maintenance Organization (HMO,) where you choose to obtain benefits such as Medicare Parts A and B from a specific organization that provides these services.

Medicaid is the federal program that is administered separately by each state. The U.S. government and the state each share the cost for the program, which is basically for individuals in need of medical care, hospitalization, and all types of medical services, but who are usually low income with nominal financial assets.

A person who qualifies for one program may not qualify for the other. In addition, Medicare is a program within which everyone has a right to obtain benefits once they meet the age requirements, but in order to obtain Medicaid benefits, you must meet financial requirements.

An easy way to remember the difference between Medicaid and Medicaid is that MediCARE attends to your care for medical expenses, and with MedicAID, you qualify only when all investments are depleted and you can no longer afford to pay for your own care.


by: Hyman G. Darling, Esq.

Estate recovery – protecting your assets from the government

Although Medicaid is basically a Federal program, it is administered by each state separately and funded by both the state and Federal Government. Therefore, each state is entitled to enact its own rules and regulations regarding the administration of the Medicaid system, and this also includes recovery.

Medicaid recovery is a program by which, if a person dies and had assets that were otherwise inaccessible or non-countable, upon death, the state Medicaid department may have a right to recover the funds up to the amount the Medicaid program expended. Some states claim assets only against probate assets of the Medicaid recipient upon death, whereas other states have a program called expanded recovery, which means they may reclaim assets which are probateable or not probateable.

A recent case indicates the need to maintain a plan even after a Medicaid applicant has been approved for medical assistance. In this Minnesota case, a husband was institutionalized on a permanent basis and qualified for Medicaid. Many of the assets, including the house, were owned jointly at the time of the application and approval. Subsequent to the approval, the community spouse (wife,) who was living in the home, transferred some of the assets to herself and her children.

The husband subsequently died, and the wife died several months thereafter. The state attempted to collect funds that it paid on behalf of the husband’s Medicaid claims from the wife’s estate. Her Estate contested the matter, and the highest court in the state, the Minnesota Supreme Court, heard the case upon appeal.

The decision handed down from the court was such that the substantial amount of the claim by the state was unable to be claimed from the surviving spouse’s estate. The court found that the surviving spouse had effectively and legally transferred her interest before she died, thus precluding recovery from her estate. Therefore, it determined that there was no basis from the Medicaid department to establish any claim against the estate, since the wife died and had not been on Medicaid.

The effectiveness of the planning was evident in that if the wife had predeceased her husband, her interest in the property would have reverted back to him, which would have either thrown him off Medicaid or allowed him to remain on Medicaid, but upon his death, Medicaid would have been able to recoup all the funds against his properties. In addition, the wife, the community spouse, had taken the necessary steps to protect assets so that if she had been institutionalized, there would not have been the significant amount of assets that she would have had to expend for her long term care expenses, as well as preventing the state from recouping any recovery against her estate.

By: Hyman G. Darling, Esq.

Tax deductibility of assisted living facilities

With the number of baby boomers growing, more people are electing to move to assisted living facilities as opposed to waiting until a long term care facility may be necessary. With the sale proceeds of the house being non-taxable in most cases due to the exemptions available, these funds may be placed into other investments, which will now produce income that was not generated by the house.

The payment to the assisted living facility (ALF) is mainly non-deductible, but in many cases, a portion of these expenses may in fact be deductible. This amount, which may be construed to be qualified long-term care costs, is deductible if it is for necessary rehabilitative services, maintenance or personal care services that are:

• Required by the individual who is deemed to be chronically ill and
• Paid pursuant to a plan of care by the licensed health care practitioner

While the rules are fairly specific, the IRS regulations that attempt to clarify the Internal Revenue Code for deductibility of these expenses are not as clear as one may wish. Maintenance or personal care services that provide assistance for an individual who is deemed to be chronically ill or disabled are normally deductible (subject to IRS limitations) if the individual needs require help with two activities of daily living (ADLs.) These ADLs include:

• Feeding
• Toileting
• Transferring
• Dressing
• Bathing
• Continence

Therefore, if a person is able to perform all of these duties and is merely obtaining custodial care at the assisted living facility, the payment or any part of it to the ALF will not be deductible. Similarly, if the facility is operated by a non-profit agency, the amount paid will also not be deductible as a charitable expense, since services are being provided for the payment, which is not considered a contribution.

If deductions are going to be taken, a test must be met, and it is also suggested that a qualified certified licensed care professional or practitioner provide a written plan that can be used as evidence in the event that the IRS questions the deductibility of certain payments. Although there is no definition set forth in the Internal Revenue Code for a plan of care, it is one of the best sources of establishing the credibility of the need for services.

Most ALFs also provide each resident, each year with a calculation of the costs of care that is deductible if all tests are met. Naturally, if there are any reimbursements made to the individual, these amounts must reduce the deductible expenses by the amount of payment received via governmental, private or otherwise. The facility normally provides these calculations on a year-to-year basis, which may change as various administrative and professional services change from year-to-year.

Naturally, if a person is disabled and living in a facility, with or without additional assistance, the full amount of care may be deductible if it is determined that this person must be institutionalized and is not any longer able to remain at home alone. It may also be a prudent decision to review the assets a person is utilizing for long-term care. If that person has a significantly large retirement plan, it may be beneficial to withdraw further funds from the plan, which may deductible as medical expenses, as opposed to merely withdrawing funds from a savings account. In this manner, retirement plan assets, although they will not continue to grow, will not be taxed by the beneficiaries at a significantly higher income tax rate, but rather, will allow other assets to pass income tax free to beneficiaries.

By: Hyman G. Darling, Esq.

Why women need an estate plan

Women experience unique economic realities. They tend to live longer and move in and out of the workforce due to career interruptions for child birth and elder parent care. This means that women often qualify for much lower pension benefits and receive lower Social Security benefits due to their years employed and salaries attained, which cannot be increased by the husband’s pension or social security if he experiences an untimely death.

Fewer years in the workforce, fewer years with a single employer, and lower pay are all factors that may contribute to a lower average pension for females, and Social Security benefits are calculated based on a person’s highest 35 years of earnings. If a benefit recipient does not have 35 years in the workforce, the Social Security Administration will add zero-earnings years to his or her record to equal 35 years.

Moreover, women often have diminished retirement savings due to the health care costs for the spouse who dies first, (usually the male.) Women most often become the caretaker for their husbands, which reaps immeasurable financial benefits by delaying the significant expense of nursing home care. But, who is there when the widowed wife needs assistance, as the average nursing home cost in Massachusetts is approximately $7,500.00?

Women must work with their husbands to implement a plan to ensure that the total health care and estate planning needs of their family is addressed. They should be guarded against the incapacity and the death of their spouse.

There are certain documents that are regarded as necessities for life in today’s active, uncertain society to protect loved ones:

• Durable Power of Attorney: This document that establishes who will attend to your financial decisions in the unfortunately event of your incapacity.
• Health Care Proxy: This document that ensures that medical decisions are carried out in accordance with your intentions in the event that you become mentally or physically disabled to the extent that you cannot make informed decisions on your own behalf.
• Will: This document provides for an orderly distribution of your assets.

However, the above documents are just the tip of the estate planning spectrum. It is also important that to consider Medicare and Medicaid (MassHealth in Massachusetts) planning, interplay between long-term care and financial planning, use of long-term care insurance and housing options and alternatives to nursing homes, to name a few.

By: Todd C. Ratner, Esquire