All posts by : Amoruso & Amoruso

Medicaid can pay for the long-term institutional care of individuals who meet certain income and asset requirements. However, if the applicant’s assets and income exceed these limits, he or she may not qualify for Medicaid assistance until the limits are met. Given the high cost of long-term care, people sometimes try to give away their assets before applying for Medicaid in order to become eligible. Of course, state Medicaid agencies want to prevent this, so they require the applicant to disclose all financial transactions made in the last five years. (California is an exception and only requires disclosure of financial transactions made in the last 30 months.)

This five-year period is known as the “look-back period.” In essence, state Medicaid agencies are “looking back” for assets transferred at less than fair market value. If the state Medicaid agency determines that such a transfer was made, it will impose a “penalty period.” And what is the penalty? It is a period of time during which the applicant will be deemed ineligible for Medicaid. The penalty period is calculated by dividing the amount the applicant has transferred by the state’s average cost for private pay institutional care.

Any asset transfer can be scrutinized, regardless of size. Exceptions are not made for gifts to children or grandchildren, charitable donations, or other transfers that seem like “no big deal.” Similarly, informal payments to caregivers or loans to family members can raise red flags. In short, the applicant is considered guilty until proven innocent. The burden of proof lies with the applicant.

It is worth noting that transferring assets to certain recipients will not trigger a penalty period. These recipients include a spouse (or a transfer to someone else if it is for the benefit of the spouse); a trust for the sole benefit of a disabled or blind child; and a trust for the sole benefit of a disabled individual under age 65. The applicant’s home can also be transferred to these recipients without penalty, as well as to all of the following individuals:

• A child under the age of 21
• A blind or disabled child
• A “caretaker child” who resided in the home for two years or more before the applicant required institutional care, and whose care permitted the applicant to delay his or her move to a long-term care facility
• A sibling who lived in the home during the year preceding the applicant’s move to the institution and who has equity in the property

With proper planning it is possible to protect your assets against the transfer penalty. Even if you have already made asset transfers in the last five years and will be applying for Medicaid soon, we may still be able to protect a portion of your life savings.

A Last Will and Testament is an essential legal document that allows you to accomplish a number of important goals. You can name your beneficiaries and specify the assets you want them to receive; name a guardian for your minor children; and choose the person you want to settle your estate (known as the Executor).

In short, a Will helps ensure your wishes are carried out after you pass away. However, it does not ensure that your wishes regarding your finances and medical care will be followed if you become incapacitated. For that you will need other essential documents.

Power of Attorney for Health Care

A Power of Attorney for Health Care, also known as a Health Care Proxy, allows you to name a person you trust to make health care decisions on your behalf if you are no longer able to make them on your own. Medical decisions covered by your Power of Attorney for Health Care can include choice of doctors and other health care providers; types of treatments; long-term care facilities; end-of-life decisions, such as the use of feeding tubes; and do not resuscitate orders.

Power of Attorney for Finances

Similar in concept to the Power of Attorney for Health Care, a Power of Attorney for Finances allows you to designate another person to make decisions about your finances, such as income, assets, and investments, when you can longer make them yourself.

By choosing your decision-makers in advance through powers of attorney, you and your loved ones can avoid the expense, stress, delays, and potential for family infighting associated with a court-ordered guardianship proceeding.

Living Will

A Living Will allows you to express your wishes regarding what medical treatments you want, or do not want, in an end of life situation. A Living Will differs from a Power of Attorney for Health Care in that it details your specific wishes, whereas a Power of Attorney for Health Care allows someone else to make health care decisions for you. Another benefit of a Living Will is that it spares your loved ones from having to make difficult decisions about your care without knowing what you would have wanted.

HIPAA Release

A HIPPA Release lets you choose who can receive information about your medical condition. Hospitals and medical providers can be prosecuted for violating the Health Insurance Portability and Accountability Act (HIPAA) if they reveal your medical information to people not named in your HIPPA Release.

To ensure your wishes are carried out while you are alive and after you pass away, your estate plan should include all of the legal documents mentioned above.

Of course, estate planning can help you accomplish many other goals as well. For example, with a Revocable Living Trust your estate won’t have to go through probate. This will expedite the distribution of estate assets to loved ones and keep your financial information private. A Revocable Living Trust also allows you to stipulate when and under what conditions your heirs will receive their assets, which is useful if you think your children are not yet mature enough to handle an inheritance. Other tools, such as an Irrevocable Trust, can protect your assets against threats like long-term care costs, divorce, creditors, lawsuits, and more.

We invite you to contact us at your earliest convenience to discuss your unique planning needs and goals.

Whenever a new president takes office, “discussions” about taxes are sure to follow. During his campaign, President Biden proposed a number of changes to the tax code that would affect wealthy Americans. One proposal, however, could impact people of more modest means: modifications to, or the elimination of, the basis step-up rule.

What do we mean by step-up in basis? Basis, in this case, refers to the value of an inherited asset for tax purposes. One could use the value of the asset when it was originally purchased, or one could use the value of the asset when the original owner passed away and the asset was bequeathed to a beneficiary. The latter value could be considerably higher than the original purchase price.

A step-up in basis uses the higher value, the “stepped-up” value. Assessing the value of an inherited asset in this way translates into lower capital gains tax liability. Let’s look at a hypothetical example.

Say an investor purchased 1000 shares of stock at five dollars a share, meaning the investment was originally worth $5,000. Over time, the value of the stock increased to 25 dollars per share and the original investment was now worth $25,000, a gain of $20,000. When the investor passed away, she left that stock to her son. Without a step-up in basis, the son could be responsible for paying capital gains tax on that $20,000 increase in value. However, with a step-up in basis, any capital gains tax would be based on the stepped-up value of $25,000. If the son sold the stock at the same price he inherited it, he would not have to pay capital gains tax on the $20,000 increase in the value.

The step-up in basis also applies to other appreciated assets, such as a house. Let’s say a property that originally cost $200,000 was worth $400,000 when the original purchaser passed away. If the house was left to the purchaser’s daughter, the step-up in basis would mean the daughter doesn’t have to pay capital gains tax on the $200,000 increase in value (from $200,000 to $400,000). Instead, the value of the property would be “stepped up” to $400,000 for tax purposes.

You can see how the step-up in basis can dramatically lower one’s capital gains tax liability. Eliminating it could have serious financial consequences for the beneficiaries of appreciated assets.

It is important to note that the elimination of the step-up in basis, or even a modification of it, is by no means a certainty. According to the Tax Policy Center, efforts to eliminate the step-up in basis were made in 1976, 2001, and 2015. And while several senators have announced a bill designed to put an end to the step-up in basis, the passage of such a bill could prove difficult in an evenly divided senate. President Biden’s latest proposal would eliminate the step-up in basis to gains over $1 million, with protections for farms and family-owned businesses given to heirs.

For now, it’s all talk. Fortunately, with proper planning, it is possible to protect your assets, inherited or otherwise, against changes to the tax code.

Simply put, probate is a legal process for settling debts and distributing assets after a person passes away. There are many myths and misconceptions about the probate process, the most common of which we will dispel here.

If the Decedent Had a Will, His or Her Estate Won’t Have to Go Through Probate

While a will allows you to choose the executor of your estate, name a guardian for your minor children, and convey your wishes about who receives your assets after you pass away, it does not allow your estate to avoid probate. As a matter of fact, part of the probate process involves determining the validity of a will.

The Only Way to Avoid Probate Is to Create a Trust

Trusts are powerful estate planning tools capable of helping you accomplish a wide range of planning goals, including probate avoidance. However, having a trust is not the only way your estate can avoid probate. Assets held in joint tenancy with rights of survivorship, payable on death accounts, and multiple party accounts with financial institutions can also avoid probate.

It Takes Years to Complete the Probate Process

We’ve all heard stories about celebrities and wealthy families fighting over estate assets for years on end. And if you are expecting an inheritance, it can seem like years before probate is completed and you actually receive your inheritance. The truth is that while probate can be frustrating, time-consuming, and fraught with delays, the vast majority of estates are settled within a year and oftentimes require considerably less time than that. Most states also allow for what is known as a summary probate when an estate is small and other conditions are met. Summary probates can be completed in a few months. Factors that influence the amount of time required to probate an estate include the number of beneficiaries, the size and complexity of the estate, disagreements between beneficiaries, will contests, the lack of a will, and situations where the decedent had a large number of creditors or debts.

It’s Best to Name the Oldest Child as Executor of the Estate

An executor is the individual who administers an estate during probate. You can name your executor in your will. (If there is no will, the court has the authority to select a “personal representative” to administer the estate.) Although many people want their oldest child to serve as executor, doing so is not a requirement. In fact, it may not even be the wisest choice. Given the importance of the executor’s role and the numerous responsibilities involved in the probate process, you should put a great deal of thought into choosing your executor.

The Cost of Probate Is So High That There Will Be Little Left in the Estate for Beneficiaries

While probate can be expensive, it typically costs less you might think. The cost varies greatly based on where the estate is probated, but it generally falls within a range of three to seven percent of the estate’s value. Many of the factors that influence how long probate takes also impact its cost, particularly the size and complexity of the estate and whether disputes arise between beneficiaries.

We can create a plan to help ensure your estate will not have to go through probate. If you are responsible for probating an estate, or think you will be soon, we can guide you through every stage of the process. Contact us today to get started.

The Food and Drug Administration (FDA) has approved a drug purported to slow the progress of Alzheimer’s disease. However, the decision is not without controversy. A recent article by AARP explores this subject in some detail. Here is a synopsis.

The drug, Aducanumab (brand name Aduhelm), was approved on June 7th. While it does not cure Alzheimer’s, it is the first Alzheimer’s medication available in almost 20 years and the only drug that could slow the progression of the disease. How? Testing indicates the drug can break up sticky plaques of protein that accumulate in the brains of many people suffering from Alzheimer’s. Health officials believe that by removing these plaques, Aducanumab may slow the rate of cognitive decline associated with Alzheimer’s. Other drugs currently on the market focus only on addressing symptoms, not causes, of the disease.

The FDA’s approval is conditional, however. Biogen, which developed the drug with Eisai, must conduct additional studies to prove Aducanumab works the way it is intended. If the drug fails to do so, the FDA can withdraw its approval. Other issues surrounding the drug include its price. Biogen estimates that therapy will cost approximately $56,000 per year and it is unclear whether private insurance or Medicare will cover it.

Even so, advocacy groups such as the Alzheimer’s Association have applauded the FDA’s decision, calling it a landmark moment. “We know that slowing decline, particularly with early diagnosis, could add days, weeks, months, maybe even years of active life for individuals and families,” said Kristen Clifford, chief program officer at the Alzheimer’s Association.

Disagreements Within the FDA Over the Drug’s Approval

In November of last year an FDA advisory committee voted against the approval of Aducanumab. Why? Two identical studies produced quite different results. In one study, participants with early onset or mild forms of Alzheimer’s saw their symptoms diminish after being given high doses of the drug. These folks showed signs of improved memory and were better able to manage activities like paying bills and shopping. Unfortunately, participants in the other study did not exhibit similarly positive outcomes.

Of the 11 members on the FDA’s advisory committee, 10 voted against the approval of Aducanumab. After it was approved anyway, three members of the committee resigned. While the FDA does not have to accept the recommendations of advisory committees, it typically does so. In this case, the agency used an accelerated approval process designed for new drugs that offer significantly better results than existing treatments in situations involving life-threatening or serious illnesses.

Inspiring Hope for the Future

In addition to the contention over approval and the high cost of treatment, there are other challenges associated with Aducanumab. For example, not everyone with Alzheimer’s disease will qualify for treatment. Only about two million of the six million Americans currently living with Alzheimer’s are in early stages of the disease and show signs of the sticky plaques that Aducanumab attacks. Determining the presence of these plaques requires costly brain scans and spinal taps that are unavailable to some patients, and the infusion therapy itself may be difficult to access if a patient does not reside near an infusion center. There have also been some troubling side effects, such as tiny brain bleeds or temporary swelling of the brain, which must be closely monitored.

However, according to Jeffrey Cummings, a research professor in the Department of Brain Health at the University of Nevada, Las Vegas, Aducanumab’s approval will foster additional research. “Seeing the fact that we can sort of crack the code of Alzheimer’s disease is just so meaningful, because it will attract funding, which will allow us to test more drugs, which will allow us to eventually make more approvals.”

A recent analysis authored by Cummings notes that there are currently 126 different therapies being tested in clinical trials. Some of these therapies, like the new drug aducanumab, attack the sticky plaques of protein. Others go after different aspects of the disease. Meanwhile, researchers have made great strides in understanding how to preserve brain health and cognitive functioning throughout the aging process using nonpharmacological strategies such as exercise, diet, and controlling blood pressure.

Let us hope that one of the new drugs, or a combination of therapies, will be the key to ending Alzheimer’s disease. Soon!

We invite you to contact us at your earliest convenience to discuss your unique planning needs and goals.