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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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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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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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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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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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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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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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.

On May 22, 2014 for the 19th Annual Elder Law Forum we will once again bring together virtually all of the stakeholders in Long Term Care (LTC) – providers, attorneys, financial advisors, caregivers, administrators, government staff and others – as we share the latest developments in this dynamic, ever changing field.  As of this writing there are 175 registrants for the Forum, with each discipline facing challenges as the ever-increasing “senior” baby boomer population continues to make its way into retirement years, turning 65 at a rate of 10,000 a day!

On the financing front, momentum may finally be on our side. There is a growing consensus that no one exclusive solution – public or private – is the answer for all people or all situations.  Medicaid Managed Care has finally made its way to us, and a big reason for the gravitation to that model is cost containment, seeking to capitate the State’s cost (see our prior blog entry on Medicaid Managed Care).

The private LTC Insurance industry has struggled as well.  Underestimations of the percentage of people keeping their policies over the long term, and the ongoing low interest rate environment have led, by extension, to higher than expected claims experience.  The result for consumers has been higher premiums than we’ve ever experienced (on both new policies and some of those that have been in force for some time), tougher underwriting standards that have prevented some people from being able to qualify for LTC Insurance, and a less profitable product that has led some carriers to exit the market.

Also, carriers are moving toward “gender-specific” pricing for their products.  That means that women – especially single women and women who apply with a spouse or partner but only the woman is approved for coverage – will pay higher rates than before when rates were the same for men and women.

In spite of all that perceived (or real?) negativity, there are signs of some bright spots in New York State.  Although we saw the exodus of a few carriers in recent years, we’ve seen some stability in the remaining carriers in the last 12-24 months.  Many people believe the market is going through a similar evolution to the Disability Income Insurance market in the early to mid-1990s.  The result of that shift has been a more stable DI market.

In addition, unlike most of the other states in the nation, at least as of press time, here in NY there is currently only one carrier that has rolled out gender-specific pricing.  So, there is still time for women to lock in lower rates before the other carriers follow suit. 

The other factors affecting rates – interest rates and persistency rates – have also seen a “bottoming out.”  Interest rates, for good or for bad, can’t get much lower, lessening the potential susceptibility of policies issued now to future rate increases of the magnitude we’ve seen in some instances.  And, the premiums for LTC Insurance now incorporate higher persistency rates, further insulating them – though not protecting them completely – from the possibility of future increases.

Importantly, here in the state of NY, the NYS Partnership for Long Term Care recently enhanced its program with significant results.  The Partnership, as you may know, rewards New Yorkers who plan in advance by purchasing a Partnership-certified policy, by providing Medicaid asset protection for those policyholders who exhaust policy benefits and still need care.

The New York State Partnership made two important recent changes that make it possible for a higher percentage of New Yorkers to afford coverage.  They rolled out a 2-year plan, and an optional 3.5% compound inflation rider, so that policyholders can purchase a policy that provides total asset protection while keeping the premium affordable.  No other state has anything close, and combined with New York’s 20% income tax credit policies are far more affordable now for many people.

Finally, newer generations of products have evolved whereby one can combine life insurance and long-term care insurance into one policy.  Doing so may ensure that policyholders have long-term care protection, while also ensuring that the premiums paid – and then some – come back to the policyholder’s heirs in the event the policy is not needed for long-term care.  The so-called “Hybrid” policies can offer life insurance benefits, indemnity payments for LTC and a guaranteed return on investment that has attracted a variety of new policyholders, including the affluent, who did not buy traditional LTCI.

We’ll examine what ALL these changes mean to us, as well as to the clients, patients and constituents we serve on May 22 – don’t miss it!

By: Louis W. Pierro, Esq. and Bob Vandy, CLU, ChFC, LUTCF, CLTC – V.P. Marketing at New York & National Long-Term Care Brokers

Healthcare in America is a scandal.  The battles fought over the Affordable Care Act have dominated our political landscape, stoking the fires of both the left and the right, with the media that panders to each adding a daily dose of gasoline. A recent article by Michael Fischer in the April 17, 2014 edition of ThinkAdvisor entitled “Retiree Social Security Benefits to be Wiped Out by Healthcare Costs” portends a looming crisis of epic proportions. The article focuses on a new retirement Healthcare Cost Index, created by HealthView Services, which “shows that middle-class Americans are approaching the day when they will have to use their entire Social Security benefit to pay for their healthcare.”  As disastrous as the index appears to be, consider this shocking fact: it does not include Long Term Care costs. Our prior blog posts covered 2014 Medicaid Changes in New York (including the rollout of Managed Long-Term Care) and the Current Issues in LTC Insurance. This post will highlight the current efforts in Washington and Albany to craft policies and programs that can serve the needs of our burgeoning population of seniors and people with disabilities, while preserving Medicare, Medicaid, Social Security and the public fisc.


Long-Term Care, for decades the forgotten stepchild of healthcare, has gained significant attention from policymakers of late, as the 78 million Baby Boom generation is now between the ages of 50 and 68 years.  Many of the boomers have witnessed the stress on their families and the financial ruin faced by their parents who have failed to prepare for the ruinous expenses of Long-Term Care, and it appears that they are now in a position to do something about it.  An author who follows aging issues for Forbes magazine, Howard Gleckman, published an article on April 9, 2014, entitled “Finally, Modest Progress Toward Long-Term Care Financing Reform”.  
 
For the past 19 years, our annual Elder Law Forum has chronicled the policies and programs designed to cover Long-Term Care, and the woeful inadequacy of existing systems to accommodate the aging population.  We discussed a program enacted through the Affordable Care Act called the “Class Act”, which as predicted when we first saw the legislation has failed miserably and was repealed in January of 2013.  The President then appointed a Long-Term Care Commission, which issued a report that highlighted many of the problems, but offered few solutions.  Since that time, as Gleckman reports, “a wide range of private interests including Long-Term Care providers, consumer groups, the insurance industry, and policy analysts seems to be moving toward a broad consensus on how to address this important and difficult issue.”  He states that “the solution is likely to include some mix of private insurance and a public safety net beyond Medicaid-the current government program that is the single biggest payer of Long-Term Care services and support.”

We will once again be exploring the concept of a public-private solution to Long-Term Care financing at the 19th Annual Elder Law Forum, and our breakout session led by Gail Holubinka will be dedicated to reviewing reports by LeadingAge (Dan Heim of LeadingAge New York will be one of our presenters), the Bipartisan Policy Center (a Washington based group led by Sen. Bill Frist, Tom Daschle and former Health and Human Services Secretary Tommy Thompson), the Society of Actuaries and others. Panelists Bill Schroth, Brian Johnson and I will present the highlights of each position, and we will then have an opportunity for open dialogue on how to craft an appropriate solution for Long-Term Care. Don’t miss this unique opportunity to immerse yourself in the turbulent seas of aging in New York State!

By: Louis W. Pierro, Esq.