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What is fair for a Family with a Child with Special Needs

Teacher with preschoolerAs parents, it’s hard to treat all children fairly, despite their different personalities and capabilities. Most try to ensure that one child never feels less loved than another. Some will carry that over into their estate planning. However, there are times when inequity may be a better choice. A recent Tickertape article is appropriately titled “Estate Planning for Special Needs Children: Trying to Be Even-Steven?” The article says that one instance when fair is not always equal, is when you’re planning the future for a special needs child after you die.

Children with special needs are typically eligible for state and federal benefits to provide them with assistance for their long-term support. Among the most common are Supplemental Security Income (SSI) and Medicaid. In many states, SSI may qualify children for Medicaid, or Medicaid comes automatically with SSI. These are need-based benefits that are means-tested. SSI recipients have a strict assets threshold of $2,000 for an individual. If a special needs child gets an inheritance, it might push him or her, above that ceiling.  This could result in ineligibility for the program benefits that might be used to cover medical, therapeutic, or housing needs.

When money is paid directly to the child as beneficiary, it can cut SSI benefits. The same is true, if the special-needs heir disclaims the inheritance.

Government benefits may be retained, if an inheritance is set up in a Special Needs Trust (SNT), which is designed to help a beneficiary with special needs and preserve government aid while protecting assets. The trust allocates inheritance assets to the child with special needs, but it’s via a third-party.

However, there might be tax implications. While the inheritance itself isn’t taxed, the income that it generates in a special trust is typically taxable at trust tax levels. Creating an SNT can be complicated, and the rules can vary from state to state. Speak to a qualified trust attorney to be sure that all income is reported properly and there are no deductions left on the table.

Treating children equally when one has special needs, may result in creating an inequality. Because of the government program eligibility requirements, you must consider the net tax implications when dividing your estate. Be straightforward with your children as to your intentions, especially if one child will be needing long-term care. Knowing the plans will help everyone prepare for the future.

Reference: Tickertape (June 14, 2017) “Estate Planning for Special Needs Children: Trying to Be Even-Steven?”

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Myths of the Midlife Marriage

Wedding older coupleThere are numerous money myths that you’ll hear when you consider getting married at midlife, particularly if your spouse-to-be has children from a first marriage. Here are six common myths from Forbes’ recent article entitled “6 Money Myths About Marrying After 50”:

1: Prenups Are Just for The Rich and Famous. This is not true. If you’ve been married before and have children from a previous relationship, a prenuptial agreement is important to ensure that your assets will pass to your children from the prior marriage. What about a first-time marriage? There still might be a need for a prenup, especially if you own significant assets. Don’t think of a prenup as preparing for divorce, but rather more like writing your will. If you don’t have your affairs in order, the state will decide for you—just like dying without a will. After age 50, the focus of a prenup should be on protecting your children and grandchildren. For instance, some states allow a surviving spouse to claim his or her “elective share”, instead what’s in the decedent's will. A prenup allows your spouse to waive the elective share. That means the odds are that your estate plan won’t be challenged by your surviving spouse.

2: Don’t Talk Estate Planning with Your Stepfamily. Estate planning is critical when you have children from an earlier marriage.  Otherwise, your entire estate could pass to your new spouse and not to your own children. Have a candid discussion about your estate planning and prenup with your adult children and your new spouse. This will alleviate some of the concerns adult kids may have about how it will affect their inheritance, when their parent gets remarried.

3: Holding Assets Jointly Is Always Preferable. Long before getting married, couples should decide on whether they want to have separate or joint accounts and if one will sell his or her current home. If one of you sells their home, will the deed to the house you live in be changed to reflect join ownership? It is best to have these discussions before the wedding ceremony.

4: Your New Spouse’s Debt Won’t Impact You. This is a big one. Marrying a person with a large amount of debt, whether it’s college loans or credit card debt, can be a major issue in second marriages. Therefore, spouses should be upfront and candid about their debts before marrying. That way they can plan how to address the debt.

5: It Always Makes Financial Sense to Get Married. This is not always true. It depends on your personal and financial circumstances. Tying the knot may reduce your Social Security benefits, especially if you didn’t work while you were married the first time and can claim spousal benefits that are much higher than your own Social Security benefits. If you have an ill or disabled partner on Medicaid, then you might want to stay unmarried so he or she can to continue to qualify for benefits. The combined marital income might make your partner ineligible for Medicaid.

6: Your Spouse Automatically Has a Right to Make Your Medical Decisions.  This statement is not true. If there’s no advance health directive in place that details your wishes regarding end-of-life care, it’s not a certainty that your new spouse will be able to make medical decisions for you or tell your doctor what treatment you’d want. You should be clear in writing what your wishes are, so your new spouse and your adult kids will not fight over your care. Talk with your new spouse and your adult children, so they know your wishes and set up an advance health care directive. This should be part of your estate plan, which should also be revised to reflect the new marriage.

Reference: Forbes (February 13, 2017) “6 Money Myths About Marrying After 50”

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Massachusetts Looks at Changing Special Needs Trusts

Old ladyA recent article in The Boston Globe, “MassHealth may force seniors to make hard choice,” explains that disabled seniors in the state may need to scrap the trusts they created to pay for extra services, like home health aides, or risk losing public benefits.
MassHealth, the state’s Medicaid health insurance program for nearly two million low-income and disabled residents, is contemplating changes to its eligibility requirements that would make it harder for residents over age 65 to establish special-needs trust (SNTs) accounts and still qualify for nursing home care and other health services from state and federal government programs.
Massachusetts officials say the proposed changes are designed to ensure that the state’s Medicaid rules adhere to the 2008 federal Medicaid guidelines, along with reducing the strain on the $15 billion MassHealth budget. These changes would require disabled seniors to spend down their personal financial resources, including money that’s held in a trust, before using MassHealth.
“As part of our regulations review, MassHealth proposed some clarifications to its eligibility regulations to ensure compliance with both federal and state law,” said Sharon Torgerson, a spokeswoman for MassHealth.
Advocates for disabled seniors say the changes will deny some residents small comforts that improve their quality of life. This change, they argue, could wind up costing the state more money by making those who are living independently move into more expensive nursing home care financed by taxpayers.
Individuals must get approval from their trust administrators to spend money, and they typically must submit bills for expenses like dental work not covered under Medicaid, health aides, clothing, and utilities.
The median annual cost for a shared room at a nursing home facility in Massachusetts in 2016 was about $135,000, according to an annual survey conducted by Genworth Financial, Inc.
Trusts have traditionally been a method for disabled seniors and their families to plan for long-term care—particularly if they have complex needs but don’t have children to help with expenses. To qualify for the state program in Massachusetts, an individual’s assets can’t exceed $2,000, and monthly income is limited to $100. Trust money had traditionally been exempt from those eligibility requirements.
However, in 2008, the federal Centers for Medicare & Medicaid Services clarified the rules, telling states that, in general, disabled individuals over 65 couldn’t transfer money into a pooled trust without a penalty. Essentially, that meant they couldn’t go on Medicaid until they had used up their assets. Officials explain that there are other factors considered in determining Medicaid eligibility, like the amount of money in a trust and why it was deposited.
Pooled trusts and transfers are complicated issues. These transfers don’t automatically make someone ineligible for Medicaid, a spokeswoman for the Centers for Medicare & Medicaid Services explained.
Massachusetts health officials in December held a hearing on the proposed changes. They’re considering comments from the public before making a final decision.
Reference: Boston Globe (January 3, 2017) “MassHealth may force seniors to make hard choice”

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Take a Guess How Much the Average American Family Caregiver Spends Annually on Elder Care for a Loved One?

Calculator“Almost $7,000 a year. That’s what the average American family caregiver spends each year on household, medical and other expenses for a loved one.”

The annual costs of elder care crosses generations, according to a recent CBS MoneyWatch article entitled “How to ease the pain of paying for elder care.”

Statistics show that Baby Boomers spend 13% of their annual income on unpaid caregiving, and those ages 71 to 91, called the Silent Generation, spend about 25%, mostly on spouses or partners. The GenXers—ages 35 to 50—spend about 24% of their annual income on caregiving for parents, and millennials (ages 18 to 34) spend the largest percentage, at 27%. This is surprising when millennials usually are thought of as mooching off of their parents.

A family meeting is a great way to assess your family’s financial and aging status and to plan for what may be required throughout the year. These types of discussions can help you plan for future elder care expenses in order to place them into a budget, along with your own retirement savings and savings for children’s education.

You can also ease the financial burden of caring for a loved one by investigating government programs. Many advocates anticipate legislation that will aid family caregivers. State and local governments may also give some tax breaks and other aid programs for seniors, particularly those individuals needing home renovations to stay in their homes. Those tasked with caregiving should also look into neighborhood religious and community groups for support. There may be senior- and disabled-specific funding programs, along with able-bodied volunteers who can help lighten the load.

Another option is aging life care professionals or what used to be called “geriatric care managers.” These professionals can help you untangle the messy world of elder care, including finances. These consultants are typically experienced social workers, gerontologists, and other health care professionals. They can help investigate potential local financial resources, provide assistance when your family is facing medical or other emergencies, and point you to an experienced elder law attorney for estate planning, such as power of attorney, health proxies, and other important documents.

Reference: CBS MoneyWatch (December 23, 2016) “How to ease the pain of paying for elder care”

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Elder Law Attorneys Help Seniors and Their Families

Bigstock-Extended-Family-Relaxing-On-So-13907567The (Fort Worth TX) Star-Telegram recently published an article, “Elder care attorneys can help with long-term care, Medicaid.” The article explained that this segment of the legal profession focuses on the needs of older and disabled adults. Elder law attorneys focus on issues of guardianship, estate planning, probate, veteran’s benefits and Medicaid.

One thing that most seniors don’t plan for is long-term care. Many people are trying to pay for long-term nursing care. A focus of elder law is how an elderly person can pay for it. With this in mind, the majority of long-term care is paid for by Medicaid, so understanding how that program integrates with estate planning is important. For example, you wouldn’t want a bequest in someone’s estate planning to adversely impact your Medicaid planning. A family member may be ineligible for Medicaid if they inherit something.

Completing the Medicaid application can also be a challenge. Elder law attorneys see many of their clients’ applications initially denied. An experienced attorney may be successful on appeal. It might be a mistake at Health and Human Services (HHS). The best way to do this is to ask for the assistance of an elder law attorney. People who apply on their own may be denied and won’t question it—or even realize that they can question it.

Some people worry that their parent will go broke before they need costly end-of-life care and they’re afraid that Medicaid patients received substandard care. However, they should receive the exact same care as a private pay or short-term disability in the nursing home. Even so, you should look at several facilities, speak with residents and staff, and observe the conditions before making a choice.

There is also a lot of bad information floating around about Medicaid eligibility. Some folks believe they won’t qualify. However, some assets, like a house and vehicles, are exempt when qualifying for Medicaid. This allows the community spouse — the one remaining at home — to continue to support themselves.

Also, there are a few elder law attorneys who receive an extra certification called a Certified Elder Law Attorney, or CELA. It’s a national certification program that requires five years of practice in elder law and a written exam.

Reference: The (Fort Worth TX) Star-Telegram (October 14, 2016) “Elder care attorneys can help with long-term care, Medicaid”

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