Savings have been hit hard because of the sagging economy, investment losses,
and depressed home values. Complicating matters is sky-rocketing
health care costs associated with Mom or Dad’s long-term care. An
experienced elder law firm can help preserve assets, connect with
government benefits and resources, and create a contingency plan to
address possible changes.

As you explore options on how to best take care of your parents, it is important that you understand the
legal implications of your good intentions. A false step could result
in lost Medicaid eligibility, adverse tax consequences, or any number
of other legal or financial problems. Discussing your situation with
an elder law attorney should be the first step you take in helping
your parents safely navigate the complex legal and financial issues
associated with caring for them.

Families oftentimes rely on bad advice from family members, their financial
advisor, accountant, or even their attorney, when developing a
financial plan to care for an aging parent.

Take for example the case where an elderly parent builds an apartment
on a child’s property so that he or she can be closer to family.
The money spent by the parent to build the apartment could be
interpreted as a gift that could result in lost Medicaid eligibility
and gift taxes.

People are beginning to understand the importance of involving an
experienced elder law attorney early in the retirement and long-term
care planning process. Nothing should be taken for granted. You
should not make the mistake of relying on common sense to the
exclusion of good legal advice.

John Hale is a <a href=”http://www.thehalelawfirm.com”>Dallas
elder law attorney</a> and <a
href=”http://www.thehalelawfirm.com”>Dallas estate
planning lawyer</a> with The Hale Law Firm. To learn more visit
http://www.thehalelawfirm.com.

HHS heeded warnings by the actuary for Medicare and Medicaid that the program was likely to be insolvent, which would cause premiums to rise for individuals who sign up for the program. As the costs increased, the projected $50 a day benefit would not have been enough to attract healthy, young people to pay for the long-term care program. After much debate, CLASS could not be proven to “…be self-sustaining, financially sound for 75 years, or affordable to consumers.”

Though CLASS has been cut, the rest of the 2010 health care act remains in place, albeit under much scrutiny and debate given political and economic climate. The major provisions of the health law are slated to go into effect in 2014, including insurance exchanges and Medicaid expansion, barring any modifications between now and then.

“By 2020, we know that an estimated 15 million Americans will need some kind of long-term care,” said HHS Secretary Kathleen Sebelius. “If we want our family members, friends, and neighbors to be able to live with the maximum amount of freedom and independence, we need to make sure they have access to the long-term supports that make that possible.”

At this time, the best long-term support is a skilled elder law attorney to assist with long-term care planning and asset protection. The federal government has proven itself unable and unwilling to address long-term care in a meaningful way. With average nursing home costs approaching $4,500 per month, a life savings can be quickly depleted. Further, the majority of Americans are unaware that Medicare covers only short-term rehabilitation.

A free initial case evaluation and consultation with an estate planning and elder law attorney can uncover how one’s assets and income can be legally repositioned to obtain long-term care Medicaid benefits and keep a life’s legacy intact.

Jacob A. Hale is a Dallas elder law attorney and Dallas estate planning lawyer at The Hale Law Firm, P.C. in Dallas and Waxahachie, Texas. To learn more, visit www.TheHaleLawFirm.com or call 888.425.3911.

What choices do we have when we can no longer care for a loved one whose life has outpaced their health? While there are several long-term care alternatives, the two most prevalent are skilled nursing facilities and assisted living communities.

For most, the long-term care continuum meanders along a path from home health to assisted living and then finally to skilled nursing. Assisted living facilities gained popularity in the 1980s as an attractive middle ground. These communities generally offer private rooms, meals, housekeeping, help with medications, and assistance with
basic activities of daily living (“ADLs”). And because the cost of room and board averages around $1,000 less than similarly situated skilled nursing facilities, many families attempt to keep an aging loved one in assisted living for longer than medically advisable. However, because services above and beyond basic room and board are charged a la carte, residents in declining health may find themselves paying more than they would for more appropriate skilled nursing care.

The history of nursing homes in America is much more complex. The modern day skilled nursing facility arose out of the desire to phase out the traditional “almshouses” and “poor farms” of the late 19th and early 20th century. The conditions of these poorhouses were abhorrent, with the elderly living with other impoverished members of the population, including children and the disturbed. In 1935, the Social Security Act unintentionally sparked the rise of the nursing home industry by providing a fixed, steady income to the elderly. For the chronically ill, this income allowed families to consistently pay for nursing care. However, it wasn’t until the introduction of public financing
through Medicare and Medicaid in the 1960s that nursing homes became at once both profitable and affordable.

As the names imply, today’s skilled nursing facilities offer a level of care substantially higher than assisted living communities. Nursing homes are institutional care settings where all medical and personal needs are met. Residents receive physical, social, and psychological care, assistance with prescription drugs, activities of daily living, personal care and hygiene. Length of stay often ranges from temporary rehabilitative therapy to long-term care to hospice care.

Although frequently thought of as temporary destinations for the final months of life, many skilled nursing residents thrive in these facilities for a number of years. As such, it is important to understand the public payment options available to both skilled nursing and assisted living facilities.

Veterans Affairs Aid and Attendance Pension is a potential payment source for both assisted living and nursing homes. However, while a married veteran can receive up to $1,949 in supplemental income ($1,644 for a single veteran), it does not guarantee that the cost of all services will be met. VA Aid and Attendance is a program best suited for those residents with monthly income greater than $3,000.

For residents with lower income, Medicaid typically provides a much greater monthly benefit. For example, a single veteran receiving $1,000 per month in income could receive a VA Aid and Attendance benefit of $1,644 per month. This allows him only a total of $2,644 to meet a $4,000 obligation to the facility. On the other hand, under Medicaid, the same individual is responsible for a co-pay to the nursing home of no more than $940 per month, while Medicaid pays the entire remaining balance ($3,060). In this instance, the Medicaid program provides a benefit almost double that of the VA.

Next to level of care, the question of which public payment option provides the greatest benefit is the most important consideration in choosing between assisted living and skilled nursing facilities. While VA Aid and Attendance is available to both facility types, Medicaid is unavailable in assisted living communities except in rare circumstances.

The availability of Medicaid makes all the difference. If your family member would benefit from the higher level of care and therapy options of a skilled nursing facility, it is crucial to inquire about Medicaid eligibility. Once Medicaid eligibility is established, the resident can almost always receive a more complete level of care at a fraction of the cost. In many instances, Medicaid can make skilled nursing free to the resident. And in no instance will the cost of care under Medicaid ever be greater than the resident’s personal income. Moreover, Medicaid eligibility planning can redirect the resident’s accumulated assets in a way that benefits himself and his loved ones.

Jacob A. Hale is an Elder Law and Estate Planning attorney at The Hale Law Firm, P.C. in Waxahachie. To learn more about this topic, please visit www.TheHaleLawFirm.com or email the author at Jacob@TheHaleLawFirm.com

So you weren’t born a millionaire, huh? Neither was I, but my grand kids might be and so can yours. The IRS—yes, that IRS—has recently made it relatively simple to accomplish. I’m talking about the “Stretch IRA.”

The term probably sounds familiar to you because it has been bandied about over the past decade by any number of financial professionals and its praises have been sung in publications from Time to The Wall Street Journal. But what is it? What does it do? Who is it good for?

Essentially, the “Stretch IRA” or “Multi-Generational IRA” takes advantage of the miracle of compounding to provide us with the greatest generational-wealth building tool available today.

The “Stretch IRA” isn’t a special type of IRA in the way that Roth, SEP or SIMPLE IRAs are. Rather, it is an estate planning concept that attempts to maximize the tax-deferred growth potential of the IRA by leaving its assets in the account for as long as the law allows. In the interest of keeping things interesting, I will limit the discussion of how
a “Stretch IRA” works to an illustration.

Franny and Seymour, both ages 65, have a traditional IRA with a balance of $250,000 earning 8%. During their lifetime, Franny and Seymour take only the Required Minimum Distribution. They have a 45-year-old son, Buddy and a 20-year-old granddaughter, Bessie. Assuming Seymour passes away at 82, and then Franny at 85, Franny and Seymour would have received a total of $355,321 in RMDs from the account and the IRA’s value at Franny’s death will have grown to $585,288.

Let’s say Franny and Seymour designated Buddy (son) and Bessie (granddaughter) as equal beneficiaries of the $585,288 IRA. Buddy, now 65, and Bessie, now 40, have decided to stretch their IRAs. Now, instead of using Franny and Seymour’s life expectancies to determine the RMD, Buddy and Bessie’s can be used. This means that less money will be distributed, allowing the IRA to grow substantially. Over the next 21 years, Buddy will receive $583,114 in total after-tax distributions. Over the next 44 years, Bessie will receive $1,948,520 in total after-tax distributions. Collectively, Buddy and Bessie will have received $2,531,634 after tax.

And what if Buddy and Bessie had just done the natural thing and taken a lump sum distribution of $292,644 a piece and closed the IRA accounts? For starters, they will both pay $89,517 (at a 33% tax rate) when they file their next tax return. Collectively, Buddy and Bessie will receive $406,254 after tax—less than 20% of what they would have received had they simply stretched the IRA.

The effectiveness of the “Stretch IRA” relies on a few initial assumptions. One is that you have other financial resources for retirement and you and your spouse will not need to dip heavily into your IRA in your lifetime. But primarily, the “Stretch IRA” is for those who would prefer to use their IRA to build enormous generational wealth for their heirs.

So how is it done? It might surprise you — and some financial advisors — to know that the IRA won’t stretch itself. Stretching an IRA is not automatic, nor is it likely to be done. IRA beneficiaries almost always make the mistake of withdrawing more than the RMD, thereby losing tax deferral on the withdrawals. Remember that an inherited IRA is very likely the largest pile of liquid assets that beneficiaries will ever encounter.

The answer is a Stretch IRA Trust. The popular revocable living trust will not work here. The Stretch IRA Trust will ensure that RMDs are taken properly and will offer spendthrift protection against young or unwise beneficiaries. And because IRAs are not inherently asset protected, owning the IRA within a trust will help discourage lawsuits, creditors and divorcing spouses. Further, if a beneficiary is receiving Medicaid or other public disability income, the trust can be structured in a way that ensures those benefits continue and that the government will not reimburse itself from the inherited account. In addition to the protections listed above, the trust can also provide for generation-skipping estate tax.

However, the most important feature of a Stretch IRA Trust might be the control it affords the original owner of the account. With a Stretch IRA Trust, the owner can assert complete control over the path the IRA takes down beneficiary row, rather than simply handing it off to the first beneficiary and letting the wind carry it from there (maybe to a new spouse or children from another marriage). With a little self-discipline and foresight, a wealth planning attorney and your financial advisor can help you transform your IRA into a tremendous opportunity for your family.

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How do you break down a life well spent? We spend our early years charging through bushes and mapping
exotic creek beds near our backyards. As we grow older we winnow our list of potential careers from
the more fashionable fields of shark wrangling and astronautics to lowly careers in lawyering and the like.

But no matter the business we choose, we derive a great deal of satisfaction and distinction from working hard for an honest wage. We start a family with ideas of giving them all the breaks we never caught and all the ones we did. And then we hope to retire into the sunset casting a fishing line with one hand and building birdhouses with the other. And then one day we abruptly pass away in our dreams without even a cold to lead the way.

Never once does an extended stay in a nursing home enter the formula. Even as I write this article, I find my mind pushing hard against the very idea of my wife or my parents, let alone myself, requiring nursing home care.

Unfortunately, the statistics bear out the realities many families have already faced. There are currently around 1.5 million nursing home residents across the United States and the average stay is around two and a half years. The average nursing home cost per month is around $4,000. Further, the majority of Americans are unaware that Medicare does not cover these long-term care expenses.

My own grandfather spent the last years of his life in a nursing facility with Alzheimer’s disease. The financial effects of those years were catastrophic. He passed away impoverished leaving behind my grandmother, three adult children, seven grandchildren, and fond memories of the times we shared.

So the question becomes, how do we plan for the potential of long-term care? How can we assure quality care for life without going bankrupt in the process? The planning can be simple or complex, but in almost every scenario, whether you are just entering retirement or you are in need of immediate care, an elder law and estate planning attorney can help you protect your health and your assets.

There are only three ways to pay for long-term care. The first is long-term care insurance. We encourage every client approaching retirement age to consider a long-term care policy as an important component of a complete estate plan. An advantage of an LTC policy is that it will usually provide for skilled nursing at home in addition to institutionalized care. The drawback is that the premiums on these policies can be expensive, so it is important to shop around for the coverage that best fits your circumstances. The alternatives to long-term care insurance are “private pay” and Medicaid.

For wealthy clients, it can be more advantageous to privately pay than to try to qualify for Medicaid. However, for clients with modest estates, Medicaid planning can be critical to avoid the financial and emotional trauma that accompanies a costly stay in a nursing home.

Medicaid is a jointly funded state federal program designed to assist the elderly and disabled. The Medicaid program imposes strict income and resource limitations on applicants and most of our clients arrive with the preconception that they must “spend down” their life savings in order to qualify. This is not true.

The Medicaid rules are expansive and complex, but the legislature has purposefully allowed for the careful repositioning of one’s assets in order to qualify. It is important that the planning be done artfully because Medicaid imposes stiff penalties for improper transfers. A good estate planning and elder law attorney can help navigate these rules to effectively preserve the property of the nursing home resident and ensure that their spouse’s standard of living is not diminished. Further, the attorney can make certain that these assets are subsequently passed down to the next generation rather than to the government.

While a comprehensive Medicaid planning strategy is beyond the scope of this article, a free initial case evaluation and consultation with an estate planning and elder law attorney should uncover how one’s assets and income can be legally repositioned to obtain long-term care Medicaid benefits and keep a life’s legacy intact.

A life well spent doesn’t always play out as we expect, but financial peace of mind is well within your reach. When long-term care becomes an issue in your family, don’t delay in discovering the opportunities an estate planning session can provide.

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The handy thing about an estate planning practice is that it may be the only area of the law that applies to everyone. What I mean is, you can avoid criminal lawyers by staying on this side of the law; you can avoid family lawyers by staying married or staying single; and you can avoid tax lawyers by staying unemployed. Avoiding lawyers was the national pastime long before nine guys with mustaches trotted out onto a diamond for the first time. There is no doubt that avoiding lawyers is healthy and reasonable, but I would submit to you that an estate planning attorney has the potential of providing valuable and essential assistance to every person, regardless of financial or family circumstances.

Barring any major Biblical occurrences, nuclear launch parties or serious medical breakthroughs, we are all destined to live a certain amount of time, accumulate modest or extravagant property, and then pass on to the next life leaving our friends, family and life’s work behind. The numbers don’t look good. One hundred percent of us will go the way of the doornail and half of us will experience a prolonged mental or physical disability before we do. It would all be very depressing to think about, except that we allow ourselves the small luxury of pretending that it won’t happen to us. At least not any time soon. This is the main reason why 70% of Americans pass away without an estate plan.

It isn’t just the admission of mortality that keeps people from visiting an estate planning attorney. Many people simply haven’t had the time or occasion to lift that copy of the Texas Probate Code from their coffee table and leaf through the intestacy provisions. If you are one of those people, you may be operating under incorrect assumptions about how the state will distribute your property if no will or other estate documents are in place.

Texas uses a one-size-fits-all distribution scheme that rarely fits anyone. A modern life is too complex and unique. The subtle intricacies of our family and property relationships go unnoticed by an intestacy plan created by the legislature to reflect the “average” person. And once you pass without a will, it is too late for family and friends to introduce evidence to the contrary.

Thankfully, Texas allows us the tremendous privilege of deciding who will receive our possessions when we go and under what conditions. With few exceptions, we are free to be as specific charitable, creative or ornery as we like.

So what does estate planning really entail? Modern estate planning was originally made necessary by the introduction of the federal estate tax in 1916. Consequently, the major thrust of the practice was devoted to helping wealthy families avoid this tax. During the past century, the goals of estate planning have evolved and expanded and so has the clientele.

Today, estate planning attorneys must merge the laws of wills, taxes, insurance, property, health care and trusts so as to gain the maximum benefit of all laws. A well-designed estate plan should do more than simply assign property to heirs when you die. It should also include a plan to accumulate, conserve and enjoy property while you are living.

For wills, trusts, deeds, medical and durable powers of attorney, partnership agreements, and corporation instruments, only an attorney may be necessary. But an estate planning attorney will also recommend and orchestrate a network of trusted professionals to contribute accounting, financial planning and insurance expertise.

Typically, the practice of law is reactionary. A problem occurs and a lawyer is called in to respond. Estate planning is different. It allows us to proactively uncover and avert potential problems before they arise. An effective estate plan ensures the smooth transition of the client’s personal and property affairs from working life to retirement, through times of disability, and finally into death.

So as we plunge forward into a new year, give yourself the gift of peace of mind by exploring the opportunities
that an estate planning session can provide.

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