Anthony Bourdain Left Loved Ones In Limbo But The Heirs Will End Up Better Than Michael Jackson’s

Via The Wealth Advisor Scott Martin Contributor

He lived on the edge and died without warning. The family needed a disaster plan to minimize strain in the worst moments and smooth the financial transition afterward. These are teachable moments.

Anthony Bourdain chased gusto all over the planet, occasionally tracking into war and disaster zones along the way. There were moments when he could’ve gotten in over his head and never come home.

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A personal disaster plan would have been the responsible way to approach that kind of life. From the way news of his death spread last week, it’s fairly clear that level of forethought just wasn’t his style.

That’s a burden on those he left behind. At a moment when they’re already stunned and vulnerable, it’s up to them to make the hard decisions about managing the press, the authorities and the fans.

Let’s hope that his financial situation was in better shape. While the money will never bring him back, it can at least make life without him easier — provided of course it’s managed properly now.

The personal disaster plan

Enterprises, individual professionals and even well-run restaurants have succession plans. But while Bourdain’s life revolved around his personal participation in every venture, there’s no sign that the work can continue without him.

The TV show is unlikely to ever film again. There won’t be any new expeditions and no new episodes beyond what’s already ready to roll.

There won’t be any new books. There’s no archive of unreleased material waiting for a successor organization to release to bereaved fans.

And the window for him to ever open another restaurant has slammed shut. If he gave much thought to a creative executor to groom the intellectual property he built up in life, again, it would be a surprise.

Otherwise, that person or some other spokesperson he delegated would have stepped up to handle the announcements last week. Instead, everyone looked to Asia Argento, who was understandably shocked and stunned.

The family was quiet. His ex-wife isn’t active on public social media networks and their daughter is only 11. It was up to a colleague to find his body and his network to break the news to the world.

A lawyer, a financial advisor, an agent, a manager: someone could have been authorized to route messaging to the public and make absolutely sure nobody bothered the family.

That didn’t really happen here. There’s no crime in that beyond a missed opportunity to make a tidier transition, whether death comes by surprise or design.

And in the absence of any clear plan on that front, it remains to be seen whether there was a plan to keep his businesses afloat without his personal participation.

Bourdain never really created much of an institution around himself. The copyright on his books was never assigned to any trust, holding company or other entity. While he got production credit on his shows, the actual production company belonged to other people.

There’s no restaurant for his heirs to operate or sell off. He could’ve built a foodie empire to survive him, but evidently wasn’t interested.

His big dream, the Blade Runner themed global food court in New York, stalled last year. Whether that failure to create something lasting preyed on him, we just don’t know.

Again, that level of planning really wasn’t his style. Even if it could’ve made his heirs more comfortable down the road, we would’ve seen the hints years ago.

Healthier, maybe even wealthier

That said, there can be a morbid tinge to building a captive empire of intellectual property and operating businesses. Look at Michael Jackson, who was practically insolvent in life because he’d hoarded other people’s creative output as well as his own.

Jackson’s kids are reportedly billionaires now. He’s the best-selling musical artist in the world. But the cold equations of the estate forced the executors to sell off his songs and back catalog to pay the debts.

Bourdain’s books are seeing a similar posthumous bestseller effect now. Odds are good that ratings of unaired episodes will be the best ever. His daughter will get her piece of that income.

If he left a will — a big hypothetical, all in all — the rights and royalties may well go into a trust for her upkeep now and use when she’s an adult. Otherwise, the money flows into Unified Gifts To Minors Act (UGMA) accounts while the assets themselves sit in Unified Transfers To Minors Act (UGTA) accounts until she turns 18.

Unlike Michael Jackson’s kids, she has an immediate parental guardian to look out for her in the meantime. While mom and dad split up a few years ago, mom is definitely alive and well. As you’ll recall, she’s a professional kickboxer.

Reading between the lines, mom also got the $3 million New York condo as part of the split. She might already have all of the Bourdain cash as it is. Otherwise, sad to say, child support evaporates now.

Whatever Bourdain left behind for his daughter is that support. She can’t touch it for awhile. I hope he made arrangements for someone to monetize his legacy in the here and now.

With the right management, the Bourdain name and likeness stay vibrant and keep generating income. Maybe there actually are book drafts to polish, TV concepts to pitch. There might even be restaurant concepts looking for partners.

The potential here is vast. A creative and savvy executor can turn Bourdain’s name into the empire he never chased in life — maybe even a Michael Jackson scale franchise built on new approaches to food, new grocery models, who knows?

And without the $400 million debt hole Jackson’s heirs started with, right now Bourdain’s survivors are financially ahead of the game. I know it still hurts, but against the inevitability of pain sometimes the only thing we can do is stack the dollar signs.

When his daughter comes of age, she may pick up the family legacy. It belongs to her. That’s the best bequest of all.

 

How to Protect an IRA From Heirs’ Creditors

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When a person declares bankruptcy, an individual retirement account (IRA) is one of the assets that is beyond the reach of creditors, but what about an IRA that has been inherited? Resolving a conflict between lower courts, the U.S. Supreme Court recently (and unanimously) ruled that funds held in an inherited IRA are not exempt from creditors in a bankruptcy proceeding because they are not really retirement funds. Clark v. Rameker (U.S., No. 13- 299, June 13, 2014).

This ruling has significant estate planning implications for those who intend to leave their IRAs to their children. If the child inherits the IRA and then declares bankruptcy sometime in the future, as a result of the Supreme Court ruling the child’s creditors could take the IRA funds. Fortunately, there is a way to still protect the IRA funds from a child’s potential creditors. The way to do this is to leave the IRA not to the child but to a “spendthrift” trust for the child, under which an independent trustee makes decisions as to how the trust funds may be spent for the benefit of the beneficiary. However, the trust cannot be a traditional revocable living trust; it must be a properly drafted IRA trust set up by an attorney who is familiar with the issues specific to inherited IRAs.

The impact of the Supreme Court’s ruling may be different in some states, such as Florida, that specifically exempt inherited IRAs from creditor claims. As Florida attorney Joseph S. Karp explains in a recent blog post, Florida’s rule protecting inherited IRAs will bump up against federal bankruptcy law, and no one knows yet which set of rules will prevail. While a debtor who lives in Florida could keep a creditor from attaching her inherited IRA, it is unknown whether that debtor would succeed in having her debts discharged in bankruptcy while still retaining an inherited IRA. We will have to wait for the courts to rule on this issue. In the meantime, no matter what state you are in, the safest course if you want to protect a child’s IRA from creditors is to leave it to a properly drafted trust.

Here’s 6 good reasons you should consider a trust…

Trusts can help you control your assets and build a legacy.

Via FIDELITY VIEWPOINTS 06/06/2018

Key takeaways

  • Trusts can help pass and preserve wealth efficiently and privately.
  • Trusts can help reduce estate taxes for married couples.
  • Gain control over distribution of your assets by using trusts.
  • With a trust, you can ensure that your retirement assets are distributed as you’ve planned.

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If you haven’t stopped to consider how a trust may help you pass your wishes and wealth on, you could be making a critical estate planning mistake. Especially for individuals with substantial assets, protecting wealth for future generations should be top of mind.

“People often fail to appreciate the power a trust can have as part of a well-crafted estate plan, but that can be a costly mistake,” says Rodney Weaver, estate planning specialist at Fidelity. “Trusts are flexible and powerful tools that can be used to gain greater control over how they pass their wealth to future generations.”

A trust is a legal structure that contains a set of instructions on exactly how and when to pass assets to trust beneficiaries. There are many types of trusts to consider, each designed to help achieve a specific goal. An estate planning professional can help you determine which type (or types) of trust is most appropriate for you. However, an understanding of the estate planning goals that a trust may help you achieve is a good starting point. Also, please note that this information is based on current tax law.

Benefits of a trust

An effective trust begins with documentation carefully drafted by a qualified attorney with knowledge of your specific situation as well as current laws. Without the appropriate documentation, you and your beneficiaries may not reap the benefits of a trust, some of which are described below.

1. Pass wealth efficiently and privately to your heirs

Perhaps the most powerful and straightforward way to use a trust is to ensure that your heirs have timely access to your wealth. When you transfer your assets to your beneficiaries through a will, your estate is settled through a procedure known as “probate,” which is conducted in state courts. However, probate is a public, legal process that can carry with it some unforeseen negative consequences for the administration of your estate, including:

  • Delays: Probate proceedings will take time, some may take longer than a year. Additionally, if you own property located in states other than your home state, probate may be required in each such state.
  • Costs: Probate fees can be quite substantial, even for the most basic case with no conflict between beneficiaries. A rule of thumb is that probate attorney’s fees and court fees could take over 4% of an estate’s value.1
  • Publicity: The probate process is public. When your will is admitted to probate, it becomes a public record, to be viewed by anyone who wishes to review it. Such transparency can create unwanted scrutiny.

With proper planning, the delays, costs, and loss of privacy can often be avoided.

You may be able to avoid probate and gain greater control over how your estate is settled by establishing and funding a revocable trust. Because the trust is revocable, it can be altered or amended during the grantor’s2 lifetime. After a grantor’s death, the trust acts as a will substitute and enables the trustee to privately and quickly settle the grantor’s estate without going through the probate process with respect to assets held in the trust.

A grantor can also give the trustee the power to take immediate control of the assets held in trust in the event that the grantor becomes incapacitated (and the grantor generally has the ability to define what constitutes “incapacity” within the trust document). This provision can save heirs the time, financial cost, and emotional distress of going to court to request a conservatorship or guardianship over a loved one. Finally, revocable trusts are dissolvable, meaning the grantor can generally pull assets out of the trust at any point during the grantor’s lifetime.

2. Preserve assets for heirs and favorite charities

If you have substantial assets, you may want to consider creating and funding an irrevocable trust during your lifetime. Because the trust is irrevocable, in almost all circumstances, the grantor cannot amend the trust once it has been established, nor can the grantor regain control of the money or assets used to fund the trust. The grantor gifts assets into the trust, and the trustee administers the trust for the trust beneficiaries based on the terms specified in the trust document.

Significantly, while the gift could use up some or all of a grantor’s lifetime gift tax exclusion, any future growth on these assets generally will not be includable in the grantor’s estate and therefore will escape estate taxes at the grantor’s death. The individual lifetime federal gift tax exclusion is set at $11.18 million for 2018.

Irrevocable trusts can also serve several specialized functions, including:

  • Holding life insurance proceeds outside your estate. Generally, without trust planning, the death benefit payout from a life insurance policy would be considered part of an estate for the purposes of determining whether there are estate taxes owed. However, this is not the case if the policy is purchased by an independent trustee and held in an irrevocable life insurance trust (ILIT) that is created and funded during the grantor’s lifetime, with certain limitations (please consult your attorney).

    Despite not being subject to estate taxes at death, the life insurance proceeds received by the ILIT can be made available to pay any estate taxes due by having the insurance trust make loans to, or purchase assets from, the estate. Such loans or purchases can provide needed liquidity to the estate without either increasing the estate tax liability or changing the ultimate disposition of the assets, as long as the life insurance trust benefits the same beneficiaries as the estate does. In particular, this means that illiquid assets like real estate, or tax-inefficient assets like taxable retirement accounts, may not have to be sold or distributed quickly to meet the tax obligation.

  • Ensuring protection from creditors, including a divorcing spouse. An irrevocable trust, whether created during your lifetime or at your death, can include language that protects the trust’s assets from the creditors of, or a legal judgment against, a trust beneficiary. In particular, assets that remain in a properly established irrevocable trust are generally not considered marital property. Therefore, they generally won’t be subject to division in a divorce settlement if one of the trust’s beneficiaries gets divorced. However, a divorce court judge may consider the beneficiary’s interest in the trust when making decisions as to what constitutes an equitable division of the marital property that is subject to the court’s jurisdiction.

Keep in mind, though, that irrevocable trusts are permanent. “The trust dictates how the funds are distributed, so you want to fund this type of trust only with assets that you are certain you want to pass to the trust beneficiaries, as specified by the terms of the trust,” cautions Weaver.

3. Reduce estate taxes for married couples

For a married couple, a revocable trust may be used as part of the larger plan to take full advantage of both spouses’ federal and/or state estate tax exclusions. Upon the death of a spouse, the assets in a revocable trust can be used to fund a family trust—also known as a “credit shelter,” “bypass,” or “A/B” trust—up to the amount of that spouse’s federal or state estate tax exclusion. The assets held in the family trust can then grow free from further estate taxation at the death of the surviving spouse. Meanwhile, the balance of the assets in the revocable trust can be transferred to the surviving spouse free of estate tax pursuant to the spousal exemption. At the death of the surviving spouse, of course, these assets may be included in the surviving spouse’s estate for estate tax purposes.

The estate tax-free growth potential for funds in a family trust can be significant. Say, hypothetically, that you and your spouse live in Florida, which does not have a separate state-level estate tax, and have a net worth of $12 million. If one of you dies in 2018, that spouse’s revocable trust can fund the family trust with $11.18 million without paying any federal estate tax. Over the next 20 years, this $11.18 million could grow in value, all of which would remain outside the surviving spouse’s taxable estate.

4. Gain control over the distribution of your assets

By setting up a trust, the grantor is able to establish ways that the assets are to be passed on to the beneficiaries. For example:

  • Distributions for specific purposes. A grantor can stipulate that the trustees of a trust shall make money available to children or grandchildren only for college tuition or perhaps for future health care expenses.
  • Age-based terminations. This provision can stipulate that the trust’s assets shall be distributed to heirs at periodic intervals—for example, 30% when they reach age 40, 30% when they reach age 50, and so on.

If you are charitably inclined, you may also want to consider establishing a charitable remainder trust, which allows the grantor, and possibly the grantor’s spouse and children, to receive an annual payment from the trust during his or her lifetime, with the balance transferring to the specified charity when the trust terminates. The grantor may also receive an income tax charitable deduction based on the charity’s remainder interest when property is contributed to the charitable remainder trust.

For more on charitable trusts, read Viewpoints on Fidelity.com: Charitable giving that gives back.

5. Ensure that your retirement assets are distributed as you’ve planned

You may be concerned that a beneficiary of a retirement account will liquidate that account and incur a large income tax obligation in that year as a result. To help alleviate that concern, by naming a properly created trust as the beneficiary of a retirement account at the grantor’s death, the trustee can limit withdrawals to the retirement account’s required minimum distributions (RMDs), required of each beneficiary.

6. Keep assets in your family

You may be concerned that if your surviving spouse remarries, your assets could end up benefiting their new family rather than your own loved ones. In this case, a qualified terminable interest property (QTIP) trust provision can be used to provide for a surviving spouse while also ensuring that at their subsequent death, the remainder of the trust’s assets are ultimately transferred to the beneficiaries identified by the grantor in the trust document.

Building your legacy

The purpose of establishing a trust is to ultimately help you better realize a vision for your estate and, in turn, your legacy. Therefore, it’s important to let your goals for your estate guide your discussion with your attorney and financial adviser as they help determine what kind of trust and provisions make sense for you. It is vitally important that the trust be properly drafted and funded, so that you and your beneficiaries can fully realize all the benefits available.

Download our Free Guide To Estate Planning here>

Let me know if you have any questions or need help setting up the best type of trust for you and your family.

Regards, Brian

How to Talk About Moving to a Retirement Home: ‘It’s a Journey’

Having a conversation about moving — whether it’s with a relative,
even a spouse — brings up lots of anxiety. Here’s how to go about it.

Medicaid Applicants & Home Care: Centers for Medicare and Medicaid Services Clarifies Penalty Period Start Date

The Centers for Medicare and Medicaid Services (CMS) has clarified when a transfer penalty begins for Medicaid applicants who are seeking home and community-based services. The penalty period begins when the applicant would begin receiving services were it not for the penalty period.

Brian Raphan, P.C.

After Congress passed the Deficit Reduction Act of 2005 (DRA), CMS issued a guidance letter that a penalty period would not start to run until the date the “individual is eligible for Medicaid and is receiving institutional level of care services” [emphasis added]. But home and community-based services only become “services” once applicants are enrolled in the state’s waiver program and Medicaid is providing coverage. This caused a “Catch-22” for Medicaid applicants who were applying for home and community-based waivers: The penalty period would not begin to run until the applicants began receiving waiver services, but the applicants could not begin to receive waiver services until the penalty had run.

On April 17, 2018, CMS finally issued a new guidance letter, changing the start date of the penalty period to the date the “individual is eligible for medical assistance under the State plan and would otherwisebe receiving institutional level [of] care services” (emphasis added). This means that an applicant for home and community-based services will be eligible once the applicant meets the financial and non-financial requirements for Medicaid eligibility and the level-of-care requirements.

8 Common Mistakes in Medicaid Planning>

 

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.

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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. Medicaid Planning without a qualified attorney can lead to costly mistakes. To read more about common Medicaid Planning mistakes people make visit my website by clicking here.

Regards, Brian

 

Did You Know Choosing Retirement Account Beneficiaries Can Have Tax Implications?

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.

If you have any question or planning needs, feel free to contact me.

Regards,

Brian

Social Security Beneficiaries Will Receive a 2 Percent Increase in 2018

In 2018, Social Security recipients will get their largest cost of living increase in benefits since 2012, but the additional income will likely be largely eaten up by higher Medicare Part B premiums.

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Cost of living increases are tied to the consumer price index, and an upturn in inflation rates and gas prices means recipients get a small boost in 2018, amounting to $27 a month for the typical retiree. The 2 percent increase is higher than last year’s .3 percent rise and the lack of any increase at all in 2016. The cost of living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $127,200 to $128,700.

The increase in benefits will likely be consumed by higher Medicare premiums, however. Most elderly and disabled people have their Medicare Part B premiums deducted from their monthly Social Security checks. For these individuals, if Social Security benefits don’t rise, Medicare premiums can’t either. This “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries: those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who get both Medicare and Medicaid benefits. In the past few years, Medicare beneficiaries not subject to the hold harmless provision have been paying higher Medicare premiums while Medicare premiums for those in the hold harmless group remained more or less the same. Now that seniors will be getting an increase in Social Security payments, Medicare will likely hike premiums for the seniors in the hold harmless group. And that increase may eat up the entire raise, at least for some beneficiaries.

For 2018, the monthly federal Supplemental Security Income (SSI) payment standard will be $750 for an individual and $1,125 for a couple.

For more on the 2018 Social Security benefit levels, click here.

State Properly Valued Sale of Medicaid Applicant’s Life Estate…

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An Ohio appeals court rules that the state correctly valued the sale of a Medicaid applicant’s life estate using the specific state Medicaid life estate law as opposed to the more general law on determining fair market value. Stutz v. Ohio Department of Job and Family Services (Ohio Ct. App., 3rd Dist., No. 15-17-02, Aug. 21, 2017).

Barbara Stutz owned a life estate in her property and her sons owned the remainder interest. She entered a nursing home and applied for Medicaid. The state approved the application but decided the life estate was an asset that must be valued. Ms. Stutz appraised the life estate at $2,000 and sold it to her sons for $1,800. The state determined that the correct life estate value was $24,941, and it imposed a penalty period on Ms. Stutz for an improper transfer of assets.

Ms. Stutz appealed, arguing that the state should have used the general definition of fair market value in state law, which defines fair market value as the going rate that property can be expected to sell for on the open market, to value her life estate. She presented evidence that local realtors and bankers valued her life estate at $2,000. Instead, the state used the state law that applies to Medicaid and life estates and ruled that $24,941 was the correct value. Ms. Stutz appealed to court, and the trial court affirmed the state’s decision.

The Ohio Court of Appeals, 3rd District, affirms, holding that the state properly valued the life estate. According to the court, “a specific statute prevails over a general statute,” so the state correctly used the life-estate-value statute rather than the general fair-market-value statute.

For the full text of this decision, go to: http://www.supremecourt.ohio.gov/rod/docs/pdf/3/2017/2017-Ohio-7287.pdf

For more on Medicaid Planning go to: http://www.raphanlaw.com/medicaid-planning-

Medicaid Benefits – House Transfer: Deed Does Not Conflict

Reservation of Power of Appointment in Deed Does Not Conflict With Conveyance of Property to Children

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A Massachusetts appeals court rules that as part of Medicaid planning, a woman could reserve a power of appointment in a deed conveying property to her children while reserving a life estate for herself. Skye v. Hession (Mass. App. Ct., No. 16-P-282, Apr. 28, 2017).

Margaret Hession sought legal assistance to protect her house in the event she might need Medicaid benefits. As part of the Medicaid planning, she executed a deed transferring her house to her children. The deed reserved a life estate for her and granted her a special power of appointment that allowed her to appoint the property to any person except herself, her creditors, her estate, or her estate’s creditors. Ms. Hession decided her daughter Deaven Skye should inherit less than her other children. She wrote a will that exercised her power of appointment and reduced Ms. Skye’s interest in the property from one-third to 5 percent.

After Ms. Hession died, Ms. Skye objected to the will and argued that the power of appointment was void. The trial court dismissed Ms. Skye’s objection and admitted the will to probate. Ms. Skye appealed, arguing that the provisions in the deed granting the remainder interests and reserving a power of appointment are irreconcilably repugnant to each other.

The Massachusetts Court of Appeals, rules that the reservation of the power of appointment is consistent with the other provisions of the deed. According to the court, “because of the reservation of the life estate, the deed conveyed not present possessory estates but rather remainder interests; and, because of the reservation of the power, the remainder interests were defined, in part, by this limitation.” The court specifically does not express a “view on the effect of the reserved power of appointment on [Ms. Hession’s] strategy of avoiding MassHealth look-back period regulations.”

READ THE TOP 8 MISTAKES IN MEDICAID PLANNING HERE>