Happy National Healthcare Decisions Day

April 16, 2015


Whether you have already created an advance directive (or advance directives) for your healthcare, or not, National Healthcare Decisions Day is the perfect day to take a minute to consider your wishes regarding your healthcare.  As long as you remain competent, you will be able to make your own healthcare decisions.  What happens, however, if you become incapacitated?  How will your healthcare decisions be made and who will make them for you?  The good news is that you have the ability to be pro-active and create a document, often referred to as a Healthcare Power of Attorney, that will allow others (who you choose) to make healthcare decisions for you.  In addition, you may also choose to create other documents to inform your healthcare providers of your specific wishes, regarding particular healthcare circumstances that may later arise.  If you do not have a Healthcare POA in place, then now is the perfect time to consider creating one for yourself.

If you already have a Healthcare Power of Attorney (POA), in place, then give yourself a pat on the back.  By creating a Healthcare POA you have taken a very important step with regard to future healthcare decisions for yourself, should you later become incapacitated and unable to make your own decisions.  Even though you may have already created a Healthcare POA, National Healthcare Decisions Day is the perfect time to review your POA (and/or other healthcare advance directives), particularly if it has been years since you have last looked at your POA.  If you have not reviewed it recently, are you sure that it still accurately reflects your wishes?  When you do review it, to be sure that it still reflects your wishes, also check to be sure it includes successor agents.  Designating successor agents means that should your first named agent be unable to act on your behalf, there is a better chance that there will be someone else in place to act as your agent.  With regard to the people that you have designated as your agent and successors, do they know that you have done so, and do they know where you are storing the original and/or copies?  Failing to let the people you have designated as your agent and successors know that you have done so, and/or failing to let them know where to find your Healthcare POA if needed, will be fatal to your Healthcare POA working as you intended it to work, in the event of your incapacitation.  Assuming that you have informed your agent and successors that they have been so designated and they know where it is stored, have you also talked with these persons to further explain your wishes?  While advance directives allow you to give written directions to the people you are naming to act on your behalf, it is still important to have a conversation with those so designated to fully explain your wishes and philosophies with regard to your health and healthcare decisions.  Having periodic conversations with your agent and successors is, likewise, recommended to be sure these people remember your wishes and to be sure that they are aware of any changes in your wishes or philosophies, which may have evolved over time.

The available advance directive options for healthcare will vary from state to state.  Thus, it is important to seek advice regarding the options available to you in your state.  If you reside in Illinois and would like information and/or assistance in creating a Healthcare Power of Attorney (POA), or you would like to have your current POA reviewed, contact our office at 630-844-0065 to schedule an appointment.

©Copyright 2015 by Constance Burnett Renzi. All rights reserved.

Our office is, also, available for consultation regarding estate planning (including Wills and/or Trusts), life care planning (powers of attorney), special needs planning, probate, guardianship matters, and/or other elder law issues.  The Elder Law Center, P.C.  proudly serves clients throughout Illinois and is located in Aurora, IL,  in the Chicago Western Suburbs.  Our office can be reached via telephone (630-844-0065) or email through our website: http://www.elderlawpc.com.

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Elder Law Update: “Mr. Cub’s” Will is Confirmed by a Cook County Judge

April 9, 2015

The contested will of Ernie Banks was confirmed by a Cook County Judge on March 31, 2015, with the Court finding that Mr. Banks was of sound mind when he executed a will on October 17, 2015 that left all of his assets to his longtime caregiver.  Mr. Banks’ family contested the will, arguing that he was not competent when it was executed and was coerced by the caregiver into leaving her all of his assets, rather than to his estranged wife and children.  In upholding the will, the Court heard testimony from two paralegals who witnessed the will’s execution and who testified that he seemed of sound mind and not under any constraints.  Whether the battle over the will is truly over remains to be seen as the media reports that Mr. Banks’ wife may pursue an appeal of the decision.

For more information on testamentary capacity, estate planning (including Wills and/or Trusts), life care planning (powers of attorney), special needs planning, probate and/or guardianship matters, or other elder law issues, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center, P.C.  proudly serves clients throughout Illinois and is located in Aurora, IL,  in the Chicago Western Suburbs.

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Dispelling a Common Misconception:  Annual Gifts do NOT Qualify as an Exception Under the Strict Medicaid Transfer Rules

March 30, 2015

At our office, we frequently meet with clients regarding long-term care planning.  Many times these meetings include counseling clients regarding the Medicaid eligibility rules for a long-term nursing home stay.   (A full discussion of the Medicaid eligibility rules is beyond the scope of this post, as the rules are complex and vary from state to state.)   During these meetings, it is not uncommon for clients to make the following statement, “I know that I can gift $14,000 per year per person, without any negative consequences, if I have to apply for Medicaid.”   Most of these folks are quite surprised when we advise them that their understanding is incorrect and simply NOT true.  

Pursuant to the federal law regarding Medicaid eligibility for long-term care stays at a nursing home, there is a sixty (60) month look-back period in which ALL transfers made by the Medicaid applicant will be strictly scrutinized.   When transfers made during the look-back period are reviewed, a penalty period will be imposed for all “non-allowable” transfers.  A “non-allowable” transfer (made during the look-back period) is a transfer for which there is insufficient documentation to support that the applicant, or his/her spouse, received either  resources or services approximately equal to the fair market value of the amount transferred.  There are “exceptions” to the transfer rules, which may result in certain transfers being treated as “allowable,” even when the transfer was not made for fair market value.  However, nowhere in the Medicaid eligibility laws, rules, and policy provisions, as applied in Illinois, is the transfer of $14,000 per year per person included as an “allowable” transfer.  Thus, pursuant to the Illinois Medicaid eligibility rules, unless an annual gift (made during the applicable look-back period) fits into one of the “exceptions,” the gift will NOT be “allowable,” and it will result in a penalty period being imposed.

The genesis of this misconception is easily explained.   It is the result of confusing the federal gift tax laws with the Medicaid eligibility laws and rules.  According to the IRS, the federal annual gift tax exclusion rules provide that, in 2015, an individual may gift up to $14,000 per year per person without the annual exclusion gifts counting towards the individual’s lifetime gift exemption. This rule, however, is limited solely to the federal estate and gift tax laws, and unless the gift fits into one of the stated “exceptions” for transfers made during the look-back period, it will NOT qualify as an “allowable” transfer under the Medicaid eligibility rules.

Quite simply, the bottom line is that if you or a loved one will likely need Medicaid assistance for long-term care, obtaining legal advice (in your home state) for your specific situation is highly recommended. As noted above, the Medicaid eligibility rules are quite complex and vary from state to state.  As such, it is important to be certain that you are not confusing other laws and rules with the applicable Medicaid eligibility rules in your state.

©Copyright 2015 by Constance Burnett Renzi. All rights reserved.

To discuss elder law issues, estate planning (including Wills and/or Trusts), life care planning (powers of attorney), special needs planning, probate and/or guardianship matters with one of our attorneys, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center, P.C. is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

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Redo Your Estate Plan When You Remarry

January 28, 2015

If you are getting remarried, you obviously want to celebrate, but it is also important to focus on less exciting matters like redoing your estate plan. You may have created an estate plan during your first marriage, but this time it will probably be more complicated–especially if you have children from your first marriage or more assets. The following are some pointers for ensuring your interests are taken care of when you remarry:

  • Take an inventory. The first thing you and your partner should do is each take an inventory of your assets and debts and share it with the other person. Don’t forget to include life insurance policies and retirement plans in your inventories. It is important to be open and honest about money if you want to prevent bad feelings in the future.
  • Decide how you want to handle finances. Once you know what you are dealing with, then you need to decide if you want to combine (or not combine) assets when you are married. For example, if one partner is selling a house and moving in with the other partner, will he or she contribute to the cost of the house? If one partner has significant debt, you may not want to combine finances or make any joint purchases. These decisions need to be made upfront so everyone is clear on what to expect.
  • Decide what you want to happen when you die. You and your future spouse need to figure out where each of you wants your assets to go when you die. If you have children from a previous marriage, this can be a complicated discussion. There is no guarantee that if you leave your assets to your new spouse, he or she will provide for your children after you are gone. There are a number of options to ensure your children are provided for, including creating a trust for your children, making your children beneficiaries of life insurance policies, or giving your children joint ownership of property. Even if you don’t have children, there may be family heirlooms or mementos that you want to keep in your family. Again, open discussions can prevent problems in the future.
  • Consult an elder law or estate planning attorney. Even if you don’t have a lot of assets, you should consult an attorney, especially if you have children. You will definitely need to update your will. You may also need to update or create other estate planning documents such as a durable power of attorney and a health care proxy. If you have significant assets, a prenuptial agreement may be appropriate. In addition, the attorney can help you decide if a trust is necessary to protect your children’s interests.
  • Change your beneficiaries. You may want to change the beneficiaries on your life insurance policy, annuity, and/or retirement plan. If you are divorced, however, you may not be able to change some of the beneficiaries. Bring your divorce decree with you to the attorney so he or she can make sure you do not violate the decree. If you can’t change your beneficiaries, you may want to buy additional life insurance or retirement plans that will include your new spouse.
  • Consider a prenuptial agreement. While you are intending to stay married, things happen. Unlike a first marriage, you may be bringing property to this marriage that you spent decades accumulating and you may be merging two families. You need to decide together what your intentions are for the use of funds while you are living together, if you get divorced and when one of you dies before the other. Failure to think and plan ahead can mean severe heartache and financial costs for you and your family.
  • Consider purchasing long-term care insurance.The physical, emotional and financial cost of long-term care can deplete the savings of all but the most wealthy. While you may be willing to spend your lifetime of savings on the care of a spouse with whom you raised a family and accumulated the funds, you may not want to lose this to the care of a relatively new spouse. Long-term care insurance, while expensive, can permit you and your new spouse to get the care you need without impoverishing the other.

The most important thing to remember is to be open and honest with your future spouse and your family members about your wishes.

For more on estate planning, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

What Happens to a Medicaid Recipient If the Community Spouse Dies First?

January 7, 2015

When one spouse is in a nursing home and applying for Medicaid, planning has to take into account the possibility that the spouse who is not in the nursing home (called the “community spouse”) may pass away first. This is because the community spouse’s death may make the spouse in the nursing home ineligible for Medicaid.

In order to qualify for Medicaid, a nursing home resident can have only a limited number of assets. Careful planning can allow the resident’s spouse to maintain some assets. However, if that community spouse passes away first and leaves those assets to the nursing home resident, the resident suddenly would be over Medicaid’s asset limit.

While the community spouse can write a will that disinherits the Medicaid resident, most states have laws that allow spouses to claim a portion of their deceased spouse’s estate regardless of what the will says. This is called the elective or statutory share. The amount the spouse can claim varies from state to state.

A spouse can disclaim his or her elective share, but if a Medicaid recipient disclaims the inheritance, it is considered an uncompensated transfer of assets and the recipient may receive a period of Medicaid ineligibility. To avoid this, the community spouse will most likely need a will that addresses this issue. One option is for the community spouse to create a will that leaves the nursing home spouse exactly the amount of the elective share. Another option may be to create a special trust that contains the elective share. You should talk to your attorney to determine the best course of action for you and your spouse.

For more information about Medicaid, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Social Security Benefits to Inch Up 1.7 Percent in 2015

December 16, 2014

The nation’s elderly and disabled Social Security recipients will receive a 1.7 percent increase in payments in 2015. This is expected to raise the average monthly payment for the typical retired worker by $22. The increase is slightly higher than last year’s 1.5 percent cost-of-living adjustment (COLA). The same COLA will apply to pensions for federal government retirees and to most veterans.

As was the case last year, the small rise in benefits will not be whittled down by a Medicare premium increase because the standard Medicare Part B monthly premiumwill remain $104.90 in 2015, the same as it was in 2014.  Most Medicare recipients have their premiums deducted from their Social Security payments.  (In a recent column, Reuters columnist Mark Miller argues that the COLA doesn’t measure retiree inflation accurately and that it’s time to “adjust the adjustment.”)

The COLA by the Numbers

Starting in January 2015, the average monthly Social Security retirement payment will rise from $1,306 to $1,328 a month for individuals and from $2,140 to $2,176 for couples. The 1.7 percent increase will apply to both elderly and disabled Social Security recipients, and individuals who receive both disability and retirement Social Security will see increases in both types of benefits.  The maximum Social Security benefit for a worker retiring at full retirement age, which is age 66 for those born between 1943 and 1954, will be $2,663 a month.

The Social Security COLA also raises the maximum amount of earnings subject to Social Security taxation to $118,500 from $117,000.  This means that those earning incomes above $118,500 will pay no tax on any income above that threshold.

The COLA increases the amount early retirees can earn without seeing a cut in their Social Security checks.  Although there is no limit on outside earnings beginning the month an individual attains full retirement age, those who choose to begin receiving Social Security benefits before their full retirement age may have their benefits reduced, depending on how much other income they earn.

Early beneficiaries who will reach their full retirement age after 2015 may now earn $15,720 a year before Social Security payments are reduced by $1 for every $2 earned above the limit. Those early beneficiaries who will attain their full retirement age in 2015 will have their benefits reduced $1 for every $3 earned if their income exceeds $41,880 in the months prior to the month they reach their full retirement age.

For 2015, the monthly federal Supplemental Security Income (SSI) payment standard will be $733 for an individual and $1,100 for a couple.

For a complete list of the 2015 Social Security changes, go to: http://www.ssa.gov/news/press/factsheets/colafacts2015.html

For more ElderLawAnswers information on Social Security, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Estate Planning for a Vacation Home

November 3, 2014

If you are lucky enough to own a vacation home, then you need to figure out what will happen to it after you are gone. Many parents hope to keep vacation homes in the family, but guaranteeing that can be tricky.

While meant to be fun and relaxing places to get away from everyday life, vacation houses can cause problems between siblings after their parents pass away. Some siblings may want to use the house, while others may need cash and want to sell. There may be disputes over who pays maintenance costs or when different families can use the house.

One option for passing on a vacation home is to leave it to your children in your will. The problem with this is that if the children own the house equally as joint tenants or tenants in common and one sibling wants to sell, that sibling can demand to be bought out. If the other siblings can’t come up with the money to buy out the sibling, the sibling who wants out can force the sale of the house.

Before you decide to leave your vacation house to your children outright, you should have a family meeting to find out whether all the children actually want the house. If they do, you should discuss who will be responsible for maintenance and property taxes, and who has the right to use the property, among other issues.  Putting a plan in writing can help prevent or resolve disputes down the road. The plan can also include a buyout option if any heirs decide they do not want to own the property. The buyout price can be less than if the property is sold to a third party and payment terms can extend over several years.

Rather than giving the property to your children outright, you can also put it in a trust or a Limited Liability Company (LLC). LLCs have become a popular estate planning tool for vacation homes. Using an LLC allows parents to transfer interest in the LLC to their children while still retaining control. Parents can use the annual gift tax exclusion to slowly gift their children additional interest in the LLC each year. The LLC agreement can designate a property manager, provide instructions on maintenance costs and property taxes, and include buyout options. Property in an LLC is also protected from creditors.

Another option is to put property into a qualified personal residence trust (QPRT). A QPRT allows the parents to live in the home for a certain number of years and at the end of the term, the children own the home. The main purpose of a QPRT is to reduce taxes on property, but QPRTs are tricky and must be set up just right or there will be no tax savings. For more information about QPRTs, click here.

To determine the best way to protect your vacation home, please call the Elder Law Center at 630-844-0065 orcontact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

Medicare’s Nursing Home Rating System Is Misleading, NY Times Finds

October 7, 2014

From hotels to movies, a five-star rating denotes top quality.  But this is not necessarily the case with nursing homes, according to a recent New York Times investigation.  The revelation serves as a reminder that when looking for a nursing home, you should not rely solely on Medicare’s rating system to make your decision.

For the past five years, Medicare has employed a one- to five-star rating system to help consumers evaluate a nursing home’s quality. The ratings are based on a facility’s performance in three areas: quality-of-care measures, nurse staffing levels and health inspection reports. Consumers can find the ratings on Medicare’s Nursing Home Compare website.

New York Times investigators concluded that the rating system is based on incomplete and misleading information and may be giving consumers a false sense of security. The staff level and quality statistics ratings are based largely on self-reported data that the government does not verify. The ratings also do not take into account state fines and enforcement data or consumer complaints to state agencies. In addition, the Times reports that nursing homes have learned how to “game the rating system” to boost their ratings.  As a consequence, in 2013 nearly half of the nation’s 15,000 nursing homes had four- or five-star ratings, and nearly two-thirds of facilities on a federal watch list for quality nevertheless received high ratings in the self-reported areas of staffing and quality.

When Medicare unveiled its five-star rating system in 2008, ElderLawAnswers reported the concerns of Toby Edelman, senior policy attorney with the Center for Medicare Advocacy, who noted that two of three criteria used in the ratings are self-reported, “Relying on nursing homes to describe accurately how well they are doing . . . just doesn’t make sense,” Edelmen said at the time.

The rating system is just one factor to consider when selecting a nursing home, and it should not be the only factor. You will need to visit the nursing home and talk to residents and family members. In addition, you should check with your state’s long-term care ombudsmen to find out if there have been any complaints filed against the nursing home.

For more information on how to choose a nursing home, click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

What’s the Difference Between Medicare and Medicaid in the Context of Long-Term Care?

September 5, 2014

Although their names are confusingly alike, Medicaid and Medicare are quite different programs. Both programs provide health coverage, but Medicare is an “entitlement” program, meaning that everyone who reaches age 65 and is entitled to receive Social Security benefits also receives Medicare (Medicare also covers people of any age who are permanently disabled or who have end-stage renal disease.)

Medicaid, on the other hand, is a public assistance program that that helps pay medical costs for individuals with limited income and assets. To be eligible for Medicaid coverage, you must meet the program’s strictincome and asset guidelines. Also, unlike Medicare, which is totally federal, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state’s Medicaid costs. (The state picks up the rest of the tab.)

Medicare and Medicaid Coverage of Long-Term Care

The most significant difference between Medicare and Medicaid in the realm of long-term care planning, however, is that Medicaid covers nursing home care, while Medicare, for the most part, does not.  Medicare Part A covers only up to 100 days of care in a “skilled nursing” facility per spell of illness. The care in the skilled nursing facility must follow a stay of at least three days in a hospital. And for days 21 through 100, you must pay a copayment of $152 a day (in 2014). (This is generally covered by Medigap insurance.)

In addition, the definition of “skilled nursing” and the other conditions for obtaining this coverage are quite stringent, meaning that few nursing home residents receive the full 100 days of coverage. As a result, Medicare pays for less than a quarter of long-term care costs in the U.S.

In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a long-term care insurance policy, most people pay out of their own pockets for long-term care until they become eligible for Medicaid.

The fact that Medicaid is a joint state-federal program complicates matters, because the Medicaid eligibility rules are somewhat different from state to state, and they keep changing. (The states also sometimes have their own names for the program, such as “Medi-Cal” in California and “MassHealth” in Massachusetts.) Both the federal government and most state governments seem to be continually tinkering with the eligibility requirements and restrictions. This is why consulting with your attorney is so important.

As for home care, Medicaid has traditionally offered very little — except in New York, which provides home care to all Medicaid recipients who need it. Recognizing that home care costs far less than nursing home care, more and more states are providing Medicaid-covered services to those who remain in their homes.

It’s possible to qualify for both Medicare and Medicaid.  Such recipients are called “dual eligibles.”  Medicare beneficiaries who have limited income and resources can get help paying their out-of-pocket medical expenses from their state Medicaid program. For details,click here.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

How to Protect an IRA From Heirs’ Creditors

August 1, 2014

When a person declares bankruptcy, an individual retirement account (IRA) is one of the assets that is beyond the reach of creditors, but what about an IRA that has been inherited?  Resolving a conflict between lower courts, the U.S. Supreme Court recently (and unanimously) ruled that funds held in an inherited IRA are not exempt from creditors in a bankruptcy proceeding because they are not really retirement funds. Clark v. Rameker (U.S., No. 13-299, June 13, 2014).

This ruling has significant estate planning implications for those who intend to leave their IRAs to their children.  If the child inherits the IRA and then declares bankruptcy sometime in the future, as a result of the Supreme Court ruling the child’s creditors could take the IRA funds.

Fortunately, there is a way to still protect the IRA funds from a child’s potential creditors.  The way to do this is to leave the IRA not to the child but to a “spendthrift” trust for the child, under which an independent trustee makes decisions as to how the trust funds may be spent for the benefit of the beneficiary.  However, the trust cannot be a traditional revocable living trust; it must be a properly drafted IRA trust set up by an attorney who is familiar with the issues specific to inherited IRAs.

The impact of the Supreme Court’s ruling may be different in some states, such as Florida, that specifically exempt inherited IRAs from creditor claims.  As Florida attorney Joseph S. Karp explains in a recent blog post, Florida’s rule protecting inherited IRAs will bump up against federal bankruptcy law, and no one knows yet which set of rules will prevail.  While a debtor who lives in Florida could keep a creditor from attaching her inherited IRA, it is unknown whether that debtor would succeed in having her debts discharged in bankruptcy while still retaining an inherited IRA.  We will have to wait for the courts to rule on this issue.  In the meantime, no matter what state you are in, the safest course if you want to protect a child’s IRA from creditors is to leave it to a properly drafted trust.

To discuss elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.