NY Elder Law and Estate Planning Blog

If you did, and you’re looking for extra income, there may be an answer. It’s possible to pay back the money at full retirement age and reapply for full benefits.

Although you can be approved to collect Social Security benefits between age 62 and your full retirement age, this option lowers the benefits available for retirement. For example, if you were born in 1944 and decide to retire at age 62 (four years before your full retirement age of 66), your total benefit reduction is 25 percent. If your full benefit was to be $1,000 a month, your reduced benefit will be $750.

However, a little-known provision of Social Security allows you to withdraw your application for early benefits and reapply for your full benefits. The only catch is that you must pay back all the money you received so far. However, because you do not have to pay any interest on the benefits you received, if you can find the money to repay the benefits, it may be worth it. Effectively, the early benefits become a low-hassle, interest-free loan.

Second marriages are becoming a more common piece of the American experience. The remarried face unique and specific challenges in tailoring their life insurance policies to their individual situation

Deciding on a beneficiary can be a complicated process for the remarried. It’s rarely a simple decision, especially when children from a previous marriage are involved. In that case, it can be difficult to strike a balance between taking care of the current spouse and the previous spouse’s children.

If you already have a life insurance policy listing the first spouse as the beneficiary, it’s important to be sure that the beneficiary can be changed. Sometimes, divorcees can’t change the beneficiary designation; the best move is to take the divorce decree to your attorney to ensure that you don’t violate the decree by changing a policy from your previous marriage. If you can’t change your beneficiary, you may want to buy additional life insurance or retirement plans that will include your new spouse.

Who should be the beneficiary of the new policy? If you name your new spouse, children from the previous marriage aren’t guaranteed any of the money. Likewise, if you name your children, they’re not obligated to take care of your spouse. The solution may be to create a revocable trust, naming the trust as the beneficiary of the life insurance policy. When you die, your life insurance policy will fund the trust, which can be set up however you like. For example, you could allow your spouse to access the money while he or she is alive and have the remainder go to your children after your spouse dies.

In short, choosing a beneficiary for a life insurance policy is not as simple as it seems. Consult with an attorney to determine what the best option in your situation is.

Well Spouses Must Plan Wisely In the Event of Their Partner’s Illness

When a spouse becomes ill, the well spouse is suddenly faced not only with the emotional toll, but the burden of handling all the financial responsibilities and long-term planning on his or her own. If the ill spouse always handled the financial matters, even paying bills can be overwhelming.

Based on the experiences of many of our clients, it has traditionally been the primary breadwinner who managed family finances. But regardless of who kept the family books, often the other spouse is in the dark on the family’s financial matters and recordkeeping. Additionally, the well spouse may not know

what long-term planning considerations have been made for her or what is even available.

This article will provide an outline of things to consider and steps to take when the financial responsibility

and long-term care planning burden passes to the spouse who has generally not had to deal with these issues previously. Though not always possible, it is important to be as proactive as you can and review and familiarize yourself with these matters before a spouse becomes ill.

Locate and Organize Documents

First, it is very important to locate and organize your documents to see what you have, what long-term planning is in place and what needs to be updated. Items to look for include:

• Identification documents: Social Security card, Medicare card, birth and marriage certificates;

• Military records;

• Insurance documents: including health, automobile, homeowners, life, long-term care;

• Legal documents: Last Wills and Testaments, Trusts and Advance Directives (Power of Attorney,

Health Care Proxy, Living Will, HIPAA Release and Burial Designation);

• Financial Information, including bank, brokerage and retirement accounts, stocks and bonds, income, tax records, debts and bills; and

• Any other important items including: the deed to your home, title and registration to automobiles, and

safety deposit box.

Understand Your Present Situation

Once you locate your documents, it is important for you to learn what they are and what purpose they serve. Understand what your assets and expenses are. Regarding your assets, careful analysis should be

made as to what type of account(s) you have, how much money is in it, how the account(s) is(are) titled (who owns it) and whether there are any beneficiaries.

Know what your income is and where it comes from. Does your spouse receive a pension? If so, will it continue if he predeceases you? Do you have any retirement accounts (including IRAs, 401ks, profit sharing plans) that you are required to take minimum distributions from because you have reached the age of 70½?

Important resources are available to aid you with this undertaking. Many senior centers offer programs to assist with managing household finances and bills. They also may have volunteers who will review your Medicare coverage with you as well as your medical bills so you understand what you are being charged. If your spouse dealt with the same bank for several years, he may have developed a personal relationship

with them and they may work with you to review your accounts. Additionally, an elder law attorney can

play a vital role in making this process easier for you. He or she can meet with you either at your home or in the office and go through and explain all of your paperwork with you.

Simplify Your Life

You can set up automatic bill payments to have your utility, insurance and telephone bills paid directly from your checking account every month. If your spouse always prepared and filed income taxes on his own, perhaps it would ease the burden for you by hiring an accountant to prepare your taxes.

Social Security

If your spouse dies, it is important to contact the Social Security Administration to advise of his death and to make sure you receive all of the benefits to which you may be entitled. You may be eligible for a one-time payment of $255. Also, if you are considered full retirement age for survivor’s benefits, as defined by the Social Security Administration, you can receive Social Security benefits based upon your deceased

spouse’s earning record. This can be a significant amount if you either did not work outside of the home or earned less than your spouse during the time you were employed. It is important to know that your full retirement age for retirement benefits may be different from your full retirement age for survivor’s benefits. Also, if you are receiving survivor’s benefits you can switch to your own retirement benefit if your retirement rate is higher than the rate you are receiving for survivor’s benefits. The rules are complicated, and, therefore, it is important that you carefully consider all your options before makinga final decision.

Health Insurance

You need to understand what type of health insurance coverage you have, including Medicare. If you have Medicare, review whether you have Part A, Part B and/or Part D. Also, if you and your spouse have a retiree health plan through your spouse’s former employer, does it continue if your spouse predeceases

you? If it does not, you may be eligible for COBRA. COBRA is federal legislation that allows former employees, retirees, spouses and dependent children to temporarily continue group health coverage

that would otherwise be terminated. If you are covered by both Medicare and a group health plan as part of your spouse’s retirement and your husband dies, then you may have the right to elect COBRA continuation coverage with respect to the group health coverage for the maximum period of coverage available (18 to 36 months). If you become covered by Medicare at any time after an election of COBRA

continuation coverage your COBRA continuation coverage will probably end. It is important to know that you only have 60 days from the date of your spouse’s death to elect COBRA coverage so action must be taken promptly. Also, COBRA coverage can be very expensive (i.e., employer can charge up to 102 percent of the employer premium). The additional 2 percent is designed to cover administrative costs.

Legal Documents

Make sure your legal documents are in order and up to date. Set up an appointment with your elder law attorney to review them. If your spouse has become ill, consider appointing someone else as your executor under your will or as agent under your power of attorney and health care proxy. You should review with your attorney whether you need to establish a trust to protect your assets should your spouse need long term care either in a nursing facility or at home.

Long-Term Care

Long-term care is not limited to nursing homes. Today, most care is received at home and it is important for you to understand what options you have available to you and your spouse. Review whether you have long term care insurance and what coverage it provides. It is important to familiarize yourself with the differences between Medicare and Medicaid and what each program can offer you. Geriatric care managers are available to assist you with care planning assessments and provide solutions to your individual long term care needs. If possible, it is important to review, understand and work on these issues. The more familiar you are with these responsibilities, the more comfortable you will become with them and less fearful of handling them on your own. It will help ease your burden and provide peace of mind so most of your attention can be paid to your ill spouse.

Estate planning is a complex task, requiring the advice of a qualified estate attorney. What is the wisest course of action in your situation?

You can hardly read a paper currently without coming across an article about the Brooke Astor case. Sadly, this case highlights what can go wrong when someone abuses the trust inherent in a power of attorney agreement. Although signing a power of attorney is critical to any comprehensive estate plan, it’s wise to put safeguards in place to reduce the risk of financial abuse.

A durable power of attorney allows you to appoint someone to make financial decisions for you in the event of your incapacitation or inability to make decisions for yourself. The word “durable” simply means that the powers granted in the document survive your future incapacity. Without a durable power of attorney, it’s much more difficult for your family to manage your finances in the event of your incapacitation, often requiring court supervision over months of wasted time.

While a durable power of attorney is intended to make things easier for your family if you become ill, it can quickly go awry if it’s written too broadly, without clear boundaries limiting the agent’s powers and responsibilities. Therefore, you must have 100 percent confidence in the person you name as your agent in order to protect your interests.

Some durable powers of attorney are “springing,” meaning they’re effective only if a certain condition is met (such as a doctor’s estimation that you are incapable of effectively managing your affairs). Other durable powers of attorney are “effective immediately,” which means they work without any certification and stay effective if incapacity happens later.

Under New York law, you can appoint more than one person to act as your agent under a durable power of attorney. If you appoint two people, then you must decide whether they may act separately or together.

Many estate planners believe it’s wisest to require the agents to act together, because both signatures are then required for any action on your behalf. Although this adds an extra layer of protection, it also makes the job of your agents more cumbersome, as routine procedures now require two signatures.

Alternatively, you may require the agent(s) to provide regular accountings to other family members or to a third party, such as a lawyer or an accountant. In many cases, this third party is given the power to replace the agent if the agent is not properly doing his job.

A durable power of attorney is a valuable estate planning tool, not merely a boilerplate form document. When drafted and used properly, it can make things easier for your family in your illness. It is imperative that you carefully consider all the relevant issues when going through this process with your professional advisors.

Can a relative be completely removed from your will?  It’s often possible, but you should check with a qualified estate attorney about laws in your area.

Although we may love them equally, all children aren’t the same, which often leads to complication in the execution of a will.  Some parents feel that one child has received more, and should therefore be content with a reduced settlement in the will’s execution.  In some complicated situations, parents feel that one heir should simply be cut from the will altogether.  Regardless of the reason, disinheriting a close relative–especially a spouse or a child–can be complicated.

Spouses, particularly, are difficult to disinherit completely.  Regardless of your will’s provisions, most states have enacted laws that prevent a spouse from losing everything. In “community property” states, each spouse owns half the community property. Other states have laws that automatically entitle a spouse to specific portion of your estate.

Even if you don’t completely disinherit your spouse, they are often free to choose between the will’s provisions and the benefit the state allows them (the “statutory share,” usually one-third to one-half of the estate). The only solution is to enter into an agreement with your spouse in which you each waive the right to receive anything from the other’s estate.

Disinheriting a child is a different story altogether. Laws vary widely from state to state, with Louisiana being the only state that does not allow an adult child to be disinherited. The wide variety of state provisions regarding children’s inheritance makes it necessary to consult a qualified estate attorney in your state when drafting an airtight will.  While some states do not require that you leave anything to your adult children, most have laws designed to protect minor children. For example, Florida requires that you leave your house to either your spouse or a minor child, if they are living. In addition, there are often laws that protect children born after a will was written. To be safe, even if you are leaving a child nothing, you should specifically mention the child in the will, along with the reason the child is getting nothing or a reduced amount. If you don’t mention a child at all, the state may conclude that you did not intentionally exclude the child.

Disinheriting a close relative is uncomfortable, and often causes fights among family members. Squabbles over wills can drag on for years and prevent your heirs from receiving their inheritance, so if you are planning on disinheriting someone, it is important to take as many precautions as possible and consult with an elder law or estate planning attorney.

May 25, 2008 - Newsday

While my father was in a nursing home receiving Medicaid, his sister died and left him money in her will, and to his children if he died before she did. I am his only child. My lawyer prepared a renunciation and had my father sign it. The lawyer said this was to facilitate the transfer of funds to me without Medicaid claiming it. My father passed away in 2006. Medicaid states that renunciation is not allowed by Medicaid patients, and they are going to court to claim the funds that are still in my aunt’s estate. After paying the lawyer $3,000, do I have any recourse? I’m 71 and my annual income is about $30,000.

AL, North Massapequa

If you told the lawyer your goal was to protect this money from Medicaid, you should ask him to refund his fee. He knows tax law, but he didn’t check the Medicaid rules.

Your father was legally entitled to renounce all or part of his inheritance within nine months of his sister’s death. The amount he renounced automatically passed to the next heir named in her will - you.

Tax law says when you disclaim an inheritance, it’s as if you never had the money. Unfortunately, Medicaid law says your father’s inheritance was a resource available to pay for his care, says Bernard A. Krooks, a Manhattan elder law attorney. By renouncing it, he transferred his assets to you.

That transfer made him ineligible for Medicaid nursing home benefits during a penalty period that’s determined by dividing the amount he transferred by the average monthly cost of a nursing home. “Let’s say he renounced a $100,000 inheritance, for example. If the average monthly cost of a nursing home on Long Island is $10,000, then for 10 months, he’s ineligible for Medicaid,” Krooks says.

Medicaid is entitled by law to recover benefits paid during that penalty period from the inheritance your father renounced. It’s a waste of legal fees for you to contest the agency’s claim, Krooks says.

It would have been better to have had your father accept his inheritance, he said. He could then have given half of it to you without endangering his ability to pay for the nursing home. Here’s how:

Dad inherits $100,000. He gives $50,000 to his son. Assuming a $10,000 monthly nursing home cost, the gift makes him ineligible for Medicaid for five months. Dad lends the remaining $50,000 to his son in exchange for a promissory note. The loan is to be repaid in over five months in $10,000 installments. Dad uses those payments to pay for his nursing home care during the five-month penalty period.

The term of the loan cannot exceed Dad’s life expectancy, and it must carry a fair interest rate. When done correctly, says Krooks, the loan has no impact on Dad’s Medicaid eligibility.

My stepfather’s will stated that I would get his house, but his sister could live there until her death. I looked up the property records, and the house is in her name. Will my stepfather’s will take precedence? I really do not understand why he would have put the house in her name when he included it in his will.

The deed takes precedence over the will. If your stepfather transferred it to his sister during his lifetime, she gets the house.

But the deed may have been transferred by mistake after his death. “I’ve seen that happen,” says Eric Kramer, an estate lawyer at Farrell Fritz in Uniondale. Check the date on which the deed was transferred to the sister. If it’s after your stepfather’s death, you should speak to the attorney handling the estate and have it corrected.

By: Bernard A. Krooks, Certified Elder Law Attorney

Unfortunately, Medicare coverage of long-term care is extremely limited and subject to significant restrictions. Thus, if one of us or a loved one gets sick and requires long-term care we must either pay out-of-pocket or rely on Medicaid. One way to minimize the burden of paying out-of-pocket is to purchase long-term care insurance. This can help assist with the cost of care at home, in assisted living or in a nursing home. However, this type of insurance must be purchased in advance and many seniors do not qualify due to pre-existing conditions. Of course, those of us who are healthy enough and who can afford long-term care insurance should certainly consider this when doing our own estate planning.

Thus, seniors are often forced to rely on Medicaid to pay for long-term care. However, Medicaid has its own set of complicated rules and regulations which Congress recently tightened in the Deficit Reduction Act of 2005 (the “DRA”). To qualify, an applicant can have no more than $4,350 in non-exempt assets. As part of their Medicaid planning individuals sometimes transfer or gift assets to family members in order to reduce their assets to the Medicaid allowable amount. As a result of the gift, a period of ineligibility, commonly referred to as a “penalty period,” is imposed. Under the DRA, the penalty period now begins when an individual goes into a nursing home (if it is within 5 years of the transfer), applies for Medicaid benefits and has assets below allowable levels. The length of the penalty period is determined by dividing the amount gifted by the regional nursing home rate, i.e. the rate for the nursing home in the county in which the individual is institutionalized. The 2008 regional rates are as follows: Northern Metropolitan (including Westchester, Dutchess and Rockland) - $9,316; New York City - $9,636; and Long Island - $10,555. For example, if a Westchester nursing home Medicaid applicant gifts $93,160, he will be ineligible for Medicaid nursing home benefits for 10 months commencing when the applicant is in a nursing home, has non-exempt assets of no more than $4,350 and has applied for Medicaid nursing home benefits. If the individual gifts assets in March 2008, but doesn’t go into a nursing home and apply for Medicaid until February 2009, the period of ineligibility will run from March 2009 until January 2010.

When calculating a penalty period, the Medicaid agency must use the rates in effect for the year in which the individual applies for Medicaid. The regional rates change each year and are updated annually, effective January 1. As such, an increase in the regional nursing home rate creates a shorter penalty period. Thus, even if the gifts were made in 2007, the 2008 regional rates would be used if that is when the person applies for nursing home Medicaid. Gifts made prior to February 8, 2006, are not subject to the DRA rules and the penalty period starts in the month after the transfer. For example, if an individual gifted $93,160 in December 2005, he was ineligible for Medicaid for 10 months from January 2006 until November 2006.

The DRA also increased the “look-back” period, the period during which Medicaid looks back at one’s financial history, from 3 years to 5 years. Therefore, if an individual goes into a nursing home within 5 years of transferring assets, a penalty period will be imposed.

The Medicaid asset transfer rules are fraught with traps for the unwary. Be careful as you navigate these waters.