Medicaid’s Benefits for Assisted Living Facility Residents

Assisted living facilities are a housing option for people who can still live independently but who need some assistance.  Costs can range from $2,000 to more than $6,000 a month, depending on location. Medicare won’t pay for this type of care, but Medicaid might.  Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

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Don’t Risk Having Your Medicaid Application Denied by Do-It-Yourself Medicaid

A Pennsylvania appeals court rules that an appeal filed by a nursing home five years after the state denied Medicaid benefits to a resident is untimely and that there was no breakdown in the administrative process that would justify allowing the appeal to proceed. Congdon v. Department of Human Services (Pa. Commw. Ct., No. 1817 C.D. 2015, May 25, 2016).

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Seven Events That Require an Immediate Call to Your Special Needs Planner

It is a great feeling to have your special needs plan in place for your loved one.  But, like all good plans, it may need to be adjusted as your circumstances change, especially with special needs plans that last a life time.  So, it is important to have your plan reviewed periodically by a competent special needs attorney.  If you haven’t had your plan reviewed recently, here are 7 events that may require changes to your plan.

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Impact of Obergefell v. Hodges on Estate Planning and Elder Law

The Supreme Court of the United States issued its landmark opinion in the case of Obergefell v. Hodges on Friday, June 26, 2015. The opinion covered a series of consolidated cases in which the petitioners brought suit challenging state bans on same-sex marriage. In an opinion written by Justice Kennedy, the Supreme Court ruled that 1) the Due Process and Equal Protection Clauses of the 14th Amendment require states to issue marriage licenses to same-sex couples and 2) that the 14th Amendment requires states to recognize same-sex marriages that were valid in the state in which they were performed.

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Father suffers and dies alone as children sue his loving companion, but she sues them right back: surprise ending to a sad tale

Elder abuse has been called the silent epidemic, but not all cases are what they seem. When a 90 year old gentleman (Frank) gifted $100,000 to his companion of 25 years (Marilyn), he intended to provide for her based on their loving relationship, as his estate documents left everything to his children. When he was later diagnosed with dementia, and his health failed, Marilyn took care of him 24/7, including dressing, bathing and feeding him. Even when he became verbally abusive, she cared for him because she “loved him and because he needed me, and I needed him even as he was. I was happy to be with him.” You see Frank’s family moved next door to Marilyn’s in 1956, each with 3 children, with Marilyn’s husband having died in 1959, and Frank’s wife in 1983. After a year of friendship they became more than friends, and at the ages of 69 and 61 Frank and Marilyn began a romantic relationship that lasted 25 years, with Frank moving into Marilyn’s home in 1985 and selling his own house.

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How to Protect Inherited IRAs After the Clark v. Rameker Decision

In the case Clark v. Rameker the United States Supreme Court handed down a landmark, unanimous decision that held that inherited IRAs are not “retirement funds.”

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Major Changes to New York State Estate, Gift & Generation Skipping Tranfer Taxes

With the passage of the New York State Budget for 2014-2015 substantive changes were made to the New York State Transfer Tax System (Estate, Gift & Generation Skipping Transfer Taxes). Under prior law, $1,000,000 was excluded from tax under the New York Exemption. Effective April 1, 2014, the new legislation imposes a tax on a decedent’s entire taxable estate, but allows a credit, known as the “Applicable Credit Amount”, against the tax imposed. For decedent’s dying between April 1, 2014 and March 31, 2015, the New York exemption (called the “Basic Exclusion Amount”) is $2,062,500. 

The new State Exclusion Amount is phased in over the next five years and will ultimately, as of January 1, 2019, approximate the Federal Applicable Exclusion Amount. As noted above, the new legislation features a generous credit which essentially eliminates the New York Estate Tax for estates which do not exceed the State Basic Exclusion Amount. However, the Applicable Credit Amount is rapidly phased out for decedents with taxable estates in excess of the new State Basic Exclusion Amount.

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Rolling GRATs

In our last blog on “Planning With GRATs”, we discussed how a Grantor Retained Annuity Trust (GRAT) can be an effective wealth transfer technique without incurring a gift tax or utilizing one’s lifetime gift tax exemption. A risk, however, with a long-term GRAT is if the Grantor dies prior to the expiration of its term. Death of the Grantor would subject the trust assets, including any income and appreciation, to estate tax. To reduce the mortality risk (especially for elderly clients or for those with health concerns), there is an estate planning technique that utilizes shorter-term GRATs.

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“Age Wise” Series on WMHT / PBS

The Pierro Law Group is proud to be a sponsor of this year’s WMHT / PBS series “Age Wise” that takes a realistic and optimistic look at aging. 

The first episode, “Where We Live”, explores housing choices that can benefit older adults as they age, and help them find the best option. There will be an encore airing on Sunday, August 31st at 1:00pm.

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Planning with GRATs

A Grantor Retained Annuity Trust (“GRAT”) can be a powerful estate planning tool for transferring wealth to family members with little or no gift or estate tax cost. The Grantor creates an irrevocable trust and transfers assets to the trust in exchange for an annuity payable over any term of years. To the extent the trust assets grow at a rate greater than the IRS Section 7520 rate, the excess is transferred to the beneficiaries free of estate and gift tax at the end of the trust term. With historically low interest rates, now may be a great time to establish a GRAT using assets that are expected to appreciate in value. A GRAT can help reduce estate tax exposure, providing the Grantor outlives the trust’s term. 

In a traditional GRAT the value of the property contributed to the trust is reduced by the value of the annuity payments made to the Grantor during the trust term. The balance or “remainder” projected to be on hand at the expiration of the GRAT term, which is calculated based on the IRS Section 7520 rate at the time of transfer, is considered a gift and subject to gift tax.

To avoid a gift upon formation of the GRAT, the retained annuity is designed to equal the value of the assets transferred based upon the term of the trust and the IRS Section 7520 rate at time of formation. The annuity payments can be a fixed percentage of the initial transfer or a fixed percentage of the trust’s assets, recalculated on an annual basis. Since a GRAT is a “Grantor Trust”, the assets held are not eroded by income or capital gains tax. 

A “Zeroed-Out” or “Walton” GRAT is designed so the present value of the annuity payments is equal to the value of the assets contributed to the trust, so the present value of the remainder interest is zero. Any appreciation of the GRAT assets above the IRS Section 7520 rate pass to the beneficiaries gift-tax free.

The key to a successful GRAT is for the trust assets to generate returns that exceed the IRS Section 7520 rate. Historically, long-term investments yield higher average returns and therefore, longer term GRATs typically have a greater chance of outperforming the benchmark 7520 rate. Locking a GRAT in at a low rate also increases the chances of success. Many affluent individuals increase the savings by setting up multiple GRATs with varying terms.

If the GRAT asset performance is flat or decreases, the GRAT unwinds as if it had never been created. There is little downside since the grantor receives back everything in the form of annuity payments.

While GRATs offer no guarantee of success, they remain a relatively simple and effective wealth transfer strategy. Like any investment or planning technique, taking advantage of GRATs sooner than later offers more wealth transfer opportunity. Depending upon the age and health of the grantor, individuals may want to consider some form of life insurance to mitigate the adverse consequences of death during the term. At the Pierro Law Group we seek to maximize the benefits of any estate planning technique, whether a GRAT or otherwise. We work with clients, their families and trusted advisors to ensure a cohesive and comprehensive estate plan. Please contact us to learn more about GRATs and how they may play a roll in your estate plan.

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