Category : News

Choosing Retirement Account Beneficiaries Requires Some Thought

While the execution of wills requires formalities like witnesses and a notary, the reality is that most property passes to heirs through other, less formal means.

Many bank and investments accounts, as well as real estate, have joint owners who take ownership automatically at the death of the primary owner. Other banks and investment companies offer payable on death accounts that permit owners to name the person or people who will receive them when the owners die. Life insurance, of course, permits the owner to name beneficiaries.

All of these types of ownership and beneficiary designations permit these accounts and types of property to avoid probate, meaning that they will not be governed by the terms of a will. When taking advantage of these simplified procedures, owners need to be sure that the decisions they make are consistent with their overall estate planning. It's not unusual for a will to direct that an estate be equally divided among the decedent's children, but to find that because of joint accounts or beneficiary designations the estate is distributed totally unequally, or even to non-family members, such as new boyfriends and girlfriends.

It's also important to review beneficiary designations every few years to make sure that they are still correct. An out-of-date designation may leave property to an ex-spouse, to ex-girlfriends or -boyfriends, and to people who died before the owner. All of these can thoroughly undermine an estate plan and leave a legacy of resentment that most people would prefer to avoid.

These concerns are heightened when dealing with retirement plans, whether IRAs, SEPs or 401(k) plans, because the choice of beneficiary can have significant tax implications. These types of retirement plans benefit from deferred taxation in that the income deposited into them as well as the earnings on the investments are not taxed until the funds are withdrawn. In addition, owners may withdraw funds based more or less on their life expectancy, so the younger the owner the smaller the annual required distribution.  Further, in most cases, withdrawals do not have to begin until after the owner reaches age 70 1/2. However, this is not always the case for inherited IRAs.

Following are some of the rules and concerns when designating retirement account beneficiaries:

  • Name your spouse, usually. Surviving husbands and wives may roll over retirement plans inherited from their spouses into their own plans. This means that they can defer withdrawals until after they reach age 70 1/2 and take minimum distributions based on their age. Non-spouses of retirement plans must begin taking distributions immediately, but they can base them on their own presumably younger ages.
  • But not always. There are a few reasons you might not want to name your spouse, including the following:
    • He or she is incapacitated and can't manage the account
    • Doing so would add to his or her taxable estate
    • You are in a second marriage and want the investments to benefit your first family
    • Your children need the money more than your spouse
  • Consider a trust. In a number of the above circumstances, a trust can solve the problem, providing for management in the case of an incapacitated spouse, permitting assets to benefit a surviving spouse while being preserved for the next generation, and providing estate tax planning opportunities. Those in first marriages may want to name their spouse as the primary beneficiary and a trust as the secondary, or contingent, beneficiary. This permits the surviving spouse, or spouse's agent if the spouse is incapacitated, to refuse some or all of the inheritance through a “disclaimer” so it will pass to the trust. Known as “post mortem” estate planning, this approach permits flexibility to respond to “facts on the ground” after the death of the first spouse.
  • But check the trust. Most trusts are not designed to accept retirement fund assets. If they are missing key provisions, they might not be treated as “designated beneficiaries” for retirement plan purposes. In such cases, rather than being able to stretch out distributions during the beneficiary's lifetime, the IRA or 401(k) will have to be liquidated within five years of the decedent's death, resulting in accelerated taxation.
  • Be careful with charities. While there are some tax benefits to naming charities as beneficiaries of retirement plans, if a charity is a partial beneficiary of an account or of a trust, the other beneficiaries may not be able to stretch the distributions during their life expectancies and will have to withdraw the funds and pay the taxes within five years of the owner's death. One solution is to dedicate some retirement plans exclusively to charities and others to family members.
  • Consider special needs planning. It can be unfortunate if retirement plans pass to individuals with special needs who cannot manage the accounts or who may lose vital public benefits as a result of receiving the funds. This can be resolved by naming a special needs trust as the beneficiary of the funds, although this gets a bit more complicated than most trusts designed to receive retirement funds. Another alternative is not to name the individual with special needs or his trust as beneficiary, but to make up the difference with other assets of the estate or through life insurance.
  • Keep copies of your beneficiary designation forms. Don't count on your retirement plan administrator to maintain records of your beneficiary designations, especially if the plan is connected with a company you worked for in the past, which may or may not still exist upon your death. Keep copies of all of your forms and provide your estate planning attorney with a copy to keep with your estate plan.
  • But name beneficiaries! The biggest mistake many people make is not to name beneficiaries at all, or they end up in this position by not updating their plan after the originally-named beneficiary passes away. This means that the plan will have to go through probate at some expense and delay and that the funds will have to be withdrawn and taxes paid within five years of the owner’s death.

In short, while wills are important, in large part because they name a personal representative to take charge of your estate and they name guardians for minor children, they are only a small part of the picture. A comprehensive plan needs to include consideration of beneficiary designations, especially those for retirement plans.

 

Be on the Lookout for New Medicare Cards (and New Card-Related Scams)

The federal government is issuing new Medicare cards to all Medicare beneficiaries. To prevent fraud and fight identity theft, the new cards will no longer have beneficiaries' Social Security numbers on them.

The Centers for Medicare and Medicaid Services (CMS) is replacing each beneficiary's Social Security number with a unique identification number, called a Medicare Beneficiary Identifier (MBI). Each MBI will consist of a combination of 11 randomly generated numbers and upper case letters. The characters are “non-intelligent,” which means they don't have any hidden or special meaning. The MBI is confidential like the Social Security number and should be kept similarly private.

The CMS will begin mailing the cards in April 2018 in phases based on the state the beneficiary lives in. The new cards should be completely distributed by April 2019. If your mailing address is not up to date, call 800-772-1213, visit www.ssa.gov, or go to a local Social Security office to update it.

The changeover is attracting scammers who are using the introduction of the new cards as a fresh opportunity to separate Medicare beneficiaries from their money. According to Kaiser Health News, the scams to look out for include phone calls with callers:

  • claiming to be from Medicare looking for your direct deposit number and using the new cards as an excuse,
  • asking for your Social Security number to verify information,
  • claiming Medicare recipients need to pay money to receive a temporary card, or
  • threatening to cancel your insurance if you don't give out your card number.

There is no cost for the new cards. It is important to know that Medicare will never call, email or visit you unless you ask them to, nor will they ask you for money or for your Medicare number. If you receive any calls that seem suspicious, don't give out any personal information and hang up. You should call 1-800-MEDICARE to report the activity or you can contact your local Senior Medicare Patrol (SMP). To contact your SMP, call 877-808-2468 or visit www.smpresource.org.

For more information about the new cards, click here and here.

Proving That a Transfer Was Not Made in Order to Qualify for Medicaid

Medicaid law imposes a penalty period if you transferred assets within five years of applying, but what if the transfers had nothing to do with Medicaid? It is difficult to do, but if you can prove you made the transfers for a purpose other than to qualify for Medicaid, you can avoid a penalty.

You are not supposed to move into a nursing home on Monday, give all your money away on Tuesday, and qualify for Medicaid on Wednesday. So the government looks back five years for any asset transfers, and levies a penalty on people who transferred assets without receiving fair value in return. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.

The penalty period can seem very unfair to someone who made gifts without thinking about the potential for needing Medicaid. For example, what if you made a gift to your daughter to help her through a hard time? If you unexpectedly fall ill and need Medicaid to pay for long-term care, the state will likely impose a penalty period based on the transfer to your daughter.

To avoid a penalty period, you will need to prove that you made the transfer for a reason other than qualifying for Medicaid. The burden of proof is on the Medicaid applicant and it can be difficult to prove. The following evidence can be used to prove the transfer was not for Medicaid planning purposes:

  • The Medicaid applicant was in good health at the time of the transfer. It is important to show that the applicant did not anticipate needing long-term care at the time of the gift.
  • The applicant has a pattern of giving. For example, the applicant has a history of helping his or her children when they are in need or giving annual gifts to family or charity.
  • The applicant had plenty of other assets at the time of the gift. An applicant giving away all of his or her money would be evidence that the applicant was anticipating the need for Medicaid.
  • The transfer was made for estate planning purposes or on the advice of an accountant.

Proving that a transfer was made for a purpose other than to qualify for Medicaid is difficult. If you innocently made transfers in the past and are now applying for Medicaid, consult with your elder law attorney. 

 

 

New Federal Law Puts Focus on Preventing Elder Abuse

A new federal law is designed to address the growing problem of elder abuse. The law supports efforts to better understand, prevent, and combat both financial and physical elder abuse.

The prevalence of elder abuse is hard to calculate because it is underreported, but according to the National Council on Aging, approximately 1 in 10 Americans age 60 or older have experienced some form of elder abuse. In 2011, a MetLife study estimated that older Americans are losing $2.9 billion annually to elder financial abuse.

The bipartisan Elder Abuse Prevention and Prosecution Act of 2017 authorizes the Department of Justice (DOJ) to take steps to combat elder abuse. Under the new law, the federal government must do the following:

  • Create an elder justice coordinator position in federal judicial districts, at the DOJ, and at the Federal Trade Commission
  • Implement comprehensive training on elder abuse for Federal Bureau of Investigation agents
  • Operate a resource group to assist prosecutors in pursuing elder abuse cases

The law requires the DOJ to collect data on elder abuse and investigations as well as provide training and support to states to fight elder abuse. The law specifically targets email fraud by expanding the definition of telemarketing fraud to include email fraud. Prohibited actions include email solicitations for investment for financial profit, participation in a business opportunity, or commitment to a loan.

The law also addresses flaws in the guardianship system that have led to elder abuse. The law enables the government to provide demonstration grants to states' highest courts to assess adult guardianship and conservatorship proceedings and implement changes.

“Exploiting and defrauding seniors is cowardly, and these crimes should be addressed as the reprehensible acts they are,” said Senator Chuck Grassley (R-Iowa), a co-sponsor of the legislation, adding that the legislation “sends a clear signal from Congress that combating elder abuse and exploitation should be top priority for law enforcement.”

For more information about the law, click here and here.

Long-Term Care Insurer Cannot Be Sued for Elder Financial Abuse

Long-term care insurance policyholders suing Bankers Life and Casualty Company were dealt a blow by the Oregon Supreme Court when it ruled that the state's elder financial abuse statute does not apply to their case.

Residents of Oregon who bought long-term care insurance policies from Bankers Life and Casualty Company sued the insurer five years ago in federal court. The policyholders claimed that the company violated Oregon's elder financial abuse law by purposely delaying and denying insurance claims. The policyholders alleged that, among other things, the company didn't answer phone calls, lost documents, wrongly denied claims, and paid less than policyholders were entitled to.

The lead plaintiff, 87-year-old Lorraine Bates, moved into an adult foster home in 2009 but Bankers refused to pay her claim, saying the facility didn't meet its policy requirements. Another plaintiff, Eileen Burk, purchased a long-term health-care policy from Bankers.  After she moved into an assisted living facility, her son had trouble filing a claim with the insurance company because the company refused to assist him.

After the federal district court dismissed the lawsuit, the policyholders appealed to the U.S. Court of Appeals for the Ninth Circuit.  Because the legal question centered on the state’s elder financial abuse law, the appeals court asked the Oregon Supreme Court to determine whether the policyholders could sue the insurer under state law for wrongful withholding of money. The financial abuse law prohibits an entity or person that is holding or controlling an elderly person's money from withholding that money if the money was acquired from the elderly person. The policyholders argued that the insurance company acquired money in the form of premiums from the insurance company and then refused to return it in the form of benefits.

The Oregon Supreme Court determined that the elder financial abuse statute does not apply to an insurance company that delayed the processing of claims and refused to pay benefits. The court rules that the law applies only when one person or entity holds the money that still “belongs to” the elderly person. According to the court, the money the policyholders paid to Bankers became Bankers' money and no longer belonged to the policyholders.

To read the Oregon court’s decision, go here: http://www.publications.ojd.state.or.us/docs/S064742.pdf.

Report Finds Lack of Government Oversight of Assisted Living Facilities

The government is spending billions to fund assisted living services through Medicaid, but government oversight and regulation of assisted living facilities is lacking, according to a new government report.

Medicaid funds long-term care services for low-income individuals. It is primarily used for nursing home care, but 48 states have opted to give assisted living residents the ability to receive Medicaid benefits, mostly through “waiver” programs that promote home health care. More than 330,000 people in assisted living are receiving more than $10 billion in Medicaid benefits to pay for those services. Because the number of individuals receiving long-term care services from Medicaid in assisted living facilities is only expected to grow, the Government Accountability Office (GAO) surveyed state Medicaid agencies and interviewed officials for a report on federal oversight of these facilities.

The GAO found that there are both gaps in state reporting of cases of harm to assisted living residents — such as abuse, neglect and exploitation — and a lack of guidance from the federal government on what needs to be reported. States are required to monitor “critical” incidents that may harm a beneficiary’s health or welfare, but they have leeway in determining what they consider a critical incident. While all the states considered physical assault, emotional abuse, and sexual assault to be critical incidents, three states don’t monitor unexpected or unexplained deaths and seven states don’t monitor the threat of suicide. In addition, more than half of the 48 states couldn't tell the GAO the number or nature of critical incidents at assisted living facilities.

“Medicaid beneficiaries receiving assisted living services include older adults and individuals with physical, developmental, or intellectual disabilities, some of whom can be particularly vulnerable to abuse, neglect, and exploitation,” the report notes.

The GAO report recommends that the federal government clarify state requirements for reporting program deficiencies and require annual reporting of critical incidents. According to the report, states need clear guidance on what incidents should be reported and the government needs to ensure that the states provide that information on time.

To read the GAO report, click here.

To read a New York Times article about the report, click here.

 

 

A Guidebook to Planning for Old Age

Joy Loverde. Who Will Take Care of Me When I’m Old? Plan Now to Safeguard Your Health and Happiness in Old Age. New York, NY: Da Capo Press, 2017. 313 pages. Click here to order book via IndieBound.org

Millions of Americans are facing old age essentially alone.  One in three baby boomers is single or no longer part of a couple due to divorce or death.  Others may be in a relationship where chronic illness has struck both partners simultaneously. Children may live too far away or lack the resources to offer a parent meaningful help. 

But there is no reason why circumstances like these should bar anyone from a quality old age.  It just takes planning, which is where this empowering book comes in. Full of helpful checklists and worksheets, Who Will Take Care of Me When I’m Old? is an essential guide to preparing for and navigating the inevitable losses that aging entails – the loss of functioning, the loss of loved ones and friends, and the loss of income.

Joy Loverde, a consultant and speaker on aging issues and the author of The Complete Eldercare Planner, has written a self-help book that offers both emotional and practical advice.  The first chapters address overcoming the psychological barriers to planning.  After all, the prospect of growing old and needing care is something most people would prefer not to think about, much less plan for.  One early section suggests ways to avoid self-sabotaging thoughts.  Other section headings include “Lessen the Grip of Guilt” and “Motivate Yourself.”

The book then turns to the planning work at hand.  An early chapter deals with how to stay afloat financially.  Near the top of the list are getting one’s legal affairs in order, including consulting with an elder law attorney.  Loverde suggests ways to create an income stream in retirement and lists scores of job possibilities.  She even has recommendations for lowering grocery bills. 

Succeeding chapters present ideas and resources for successfully aging in place alone, exploring housing options both in the U.S. and abroad, coping with widowhood, “foraging for a family,” staying connected with those you know and making new friends, and evaluating medical providers.  One chapter is devoted to considerations in adopting a pet.

The final chapters deal with strategies for coping when old age becomes seriously challenging.  Loverde covers “the game changer” of chronic illness, including how to effectively advocate for yourself or find a professional to advocate for you.   A chapter titled “‘Just Shoot Me’ Is Not a Plan” maps strategies for ensuring quality care at the end of life.  There is even a list of resources for those considering “suicide tourism.”

Throughout the book, Loverde provides names of helpful organizations, and one fun feature is that each chapter ends with one recommended book, YouTube video, movie, song and TED Talk on that chapter’s topic.  Near the end Loverde includes a multi-page goldmine of useful websites (ElderLawAnswers among them).

This is not the kind of book anyone looks forward to reading, but it is a book that is essential reading for anyone who wants to start laying the groundwork now for the best possible old age. 

To read more about Who Will Take Care of Me When I’m Old?, click here.

 

 

 

 

Estate Planning and Retirement Considerations for Late-in-Life Parents

Older parents are becoming more common, driven in part by changing cultural mores and advances in infertility treatment. Comedian and author Steve Martin had his first child at age 67. Singer Billy Joel just welcomed his third daughter. Janet Jackson had a child at age 50. But later-in-life parents have some special estate planning and retirement considerations.

The first consideration is to make sure you have an estate plan and that the estate plan is up to date. One of the most important functions of an estate plan is to name a guardian for your children in your will, and this goes double for a parent having children late in life. If you don't name someone to act as guardian, the court will choose the guardian. Because the court doesn't know your kids like you do, the person they choose may not be ideal.

In addition to naming a guardian, you may also want to set up a trust for your children so that your assets are set aside for them when they get older. If the child is the product of a second marriage, a trust may be particularly important. A trust can give your spouse rights, but allow someone else — the trustee — the power to manage the property and protect it for the next generation. If you have older children, a trust could, for example, provide for a younger child's college education and then divide the remaining amount among all the children.

Another consideration is retirement savings. Financial advisors generally recommend prioritizing saving for your own retirement over saving for college because students have the ability to borrow money for college while it is tougher to borrow for retirement. One advantage of being an older parent is that you may be more financially stable, making it easier to save for both. Also, if you are retired when your children go to college, they may qualify for more financial aid. Older parents should make sure they have a high level of life insurance and extend term policies to last through the college years.

When to take Social Security is another consideration. Children can receive benefits on a parent’s work record if the parent is receiving benefits too. To be eligible, the child must be under age 18, under age 19 but still in elementary school or high school, or over age 18 but have become mentally or physically disabled prior to age 22. Children generally receive an amount equal to one-half of the parent's primary insurance amount (PIA), up to a “family maximum” benefit. You will need to calculate whether the child's benefit makes it worth it to collect benefits early rather than wait to collect at your full retirement age or at age 70.

To make a plan for late-in-life parenthood, contact your attorney.

Home Health Care Patients With Chronic Conditions Are Having Trouble Getting Medicare

Medicare is supposed to provide up to 35 hours a week of home care to those who qualify, but many Medicare patients with chronic conditions are being wrongly denied such care, according to Kaiser Health News. For a variety of reasons, many home health care agencies are simply telling patients they are not covered.

Medicare is mandated to cover home health benefits indefinitely. In addition, Medicare is required to cover skilled nursing and home care even if a patient has a chronic condition. Unfortunately, many home health providers are not aware of the law and tell home health care patients that they must show improvement in order to receive benefits.

According to a Kaiser Health News article, confusion over whether or not improvement is required (it is not) is one part of the problem. Another issue is that home health care workers are afraid they will not get paid if they take on long-term care patients. In an effort to crack down on fraud, Medicare is more likely to audit providers who provide long-term care. This encourages providers to favor patients who need short-term care.

In addition, Medicare’s Home Health Compare ratings website may be having a negative effect on home health care agencies' willingness to provide for long-term care patients. One measure of care qualification is whether a patient is improving. Because patients with chronic conditions don't necessarily improve, they could lower an agency's rating. Also, under a rule that just went into effect, home health care agencies cannot dismiss a patient without a doctor's note. This may make agencies even more reluctant to take on long-term care patients.

If you are wrongly denied Medicare home health benefits, you can appeal, although you may have to be persistent to get coverage. The Center for Medicare Advocacy has a self-help packet for navigating appeals.

 

Costs of Some New Long-Term Care Insurance Policies Going Down in 2018

While long-term care insurance costs are up in general, some policies are going down in 2018, according to the 2018 Long Term Care Insurance Price Index, an annual report from the American Association for Long-Term Care Insurance (AALTCI), an industry group.

A married couple who are both 60 years old would pay an average of $3,490 a year combined for a total of $333,000 of long-term care insurance coverage when they reach age 85. This is down from 2017, when the association reported that a couple could expect to pay $3,790 for the same level of coverage. Jesse Slome, the AALTCI’s director, cites two reasons for the change: “There are fewer insurers offering traditional long-term care insurance policies currently and some of the higher priced insurers sell so few policies that we excluded them from this year’s study as they really were not representative of the market conditions.”

Rates for single men and women have gone up in 2018, however. A single 55-year-old man can expect to pay an average of $1,870 a year for $164,000 worth of coverage, up from $1,665 in 2017. The same policy for a single woman averages $2,965 a year, up from $2,600 in 2017. Overall, women still pay more than men.

One thing that remains the same year to year is the importance of shopping around. The survey shows that costs for virtually identical policy coverage vary significantly from one insurer to the next.

This year’s index compares policies sold in Illinois and was conducted in January 2018.

For the association's 2018 index showing average prices for common scenarios, go here: http://www.aaltci.org/news/wp-content/uploads/2018/01/2018-Price-Index-LTC.pdf