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Medicaid Planning – Important Considerations When Choosing a Long-Term Care Plan

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Medicaid Planning – Important Considerations When Choosing a Long-Term Care Plan

It’s no surprise that Medicaid planning has been a widely discussed topic considering the overwhelming cost of nursing home care.  For example, the average daily cost of care in the Midwest is approximately $135 per-day.   In Ohio, this same care is around $203.00 per-day. Put another way, your long term care plan must account for $6090.00 per-month.

As an estate planning attorney, I’m often asked whether it’s worth purchasing long-term care insurance. Unfortunately, the answer is specific to each individual’s goals, needs, assets, and more.   However, there are several important considerations everyone should know.   Medicaid planning and elder law are key to estate planning.  At a minimum, those planning for their financial and physical health, should consider the following when choosing a long-term care plan.

Ratings

The financial ratings of a long-term care plan are important when considering purchasing the insurance.  Every company is different and each have different ratings.  The recommendation is to choose a company with an AM BEST rating of A+ or better.  In addition, the assets of the insurance company should be in the billions.  In essence, you want the insurance company to have a high rating and be financially sound.  For more information on ratings, visit:http://www.ambest.com/home/default.aspx

Discounts

There are a number of discounts available when considering your insurance plan.  Some long-term care insurers will allow for group discounts through employers.  Senior clubs and other organizations can also offer discounts from 5%-10% on long-term care.  In addition, some companies will actually allow for a 30%-50% discount when both spouses purchase long-term care.  Good health discounts may also be given when the applicant is in excellent health which range from 10%-15%.  It’s important to realize that not all companies permit these types of discounts and its best to consult with an estate planning or Medicaid planning attorney.   Moreover, each company has its own underwriting guidelines which may change the above mentioned averages.

Tax Considerations

There are several tax considerations when thinking about long-term care insurance.  At the federal level, premiums for long-term care insurance fall into the ‘medical expense’ category.  So, if the premium (or the premium plus other medical expense) is over 7.5% of the adjusted gross income, part of that premium is tax deductible.   Additionally, business owners can deduct the full cost of long-term care insurance protection for themselves and designate individuals, including spouses.

From a national perspective, 26 states offer  some form of deduction or tax credit for long-term care insurance premiums.  In Ohio, there is a deduction for polity premiums.  However, it is absolutely paramount to consult with a Medicaid planning attorney, tax advisor, or financial planner when making these tax considerations.  The tax laws change constantly and the it’s important to understand your options fully.

Tax Qualified Plans vs. Non-Tax Qualified Plans

There are two types of long-term care insurance plans: (1) Tax qualified plans and (2) Non-tax qualified plans.  Tax qualified plans follow the federal HIPAA law (Health Insurance Portability and Accountability Act).   Under this plan, the insured must need assistance with two of the six daily activities necessary for daily living.  These activities include:

  • Bathing
  • Dressing
  • Eating
  • Toileting
  • Continence
  • Transferring

In order to be eligible, the individual must need assistance for a period of 90 days or greater.   These criteria help protect consumers by designating long-term care for those who truly need it.  However, the benefits received are not considered taxable income.   Tax qualified plans are guaranteed renewable.  This means that your coverage can never be cancelled, as long as you pay your premiums.

Non-tax qualified plans allow the consumer to access benefits more quickly.   Here, the insured only needs to fall under one of the above mentioned activities of daily living.  If you speak with a Medicaid planning attorney, you’ll find that these plans are a bit more expensive than tax qualified plans.   (Side note: Cleveland, Ohio Medicaid planning attorneys have been in great debate on the pros and cons of each plan but sticking with a tax-qualified plan is currently my recommendation).

There are numerous other considerations to discuss with your estate planning or Medicaid Planning attorney when thinking about long-term care insurance.  For more information, or to speak with a Cleveland, Ohio Medicaid planning attorney, contact Dan Baron at Baron Law LLC.   Contact Dan at 216-573-3723 today to set up a free consultation.  Dan is a Cleveland, Ohio attorney practicing in the areas of estate planning, Medicaid planning, and business law.

 

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Client Review
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Daniel Baron reviewed our Trust, Wills and HPOA. He provided good feedback as to what needed updating and any necessary additions to the documents. We didn’t have a FPOA which thanks to him we now have. He was able answer any questions we had and proved to be very flexible to accommodate our schedules when it came time to meet. I would recommend him to anyone looking to do Estate Planning

– Tom

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Salary Negotiations

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The Cavaliers have finally cashed in, the curse is broken, and Cleveland is rejoicing! Many Cleveland businesses are experiencing record profits, and with the Republican National Convention around the corner, the boom is expected to continue.

You’ve been working long hours, picking up the slack, and you’d like to cash in on your efforts. How do you go about asking for a raise?

1. Timing is everything.
• Don’t wait for your next annual performance review (unless it’s just around the corner).
• Do capitalize on the success of a project or period of additional responsibility.
• Don’t ask if the company is making cutbacks or laying people off.

2. Do your homework.
• Research your market value based on position, performance, and education.
• Gather data on the overall job market by talking to a headhunter or an online jobs site.
• Collect information on your performance—sales increases, customer testimonials, growth, etc.

3. Plan your conversation.
• Practice your pitch with a friend who can be tough and push back.
• Talk to your boss about upcoming challenges for the company (preferably prior to the salary negotiation) so you can discuss solutions to these challenges and how you can deliver.
• Schedule a meeting with your boss, letting him or her know that you want to talk about your career growth.

4. Stay calm.
• Don’t allow emotions into the conversation
• Use silence as a tool. Lay out your case and then pause to give your boss time to process.
• Don’t ramble on if there isn’t an immediate response.
• Be clear and specific, but not aggressive.
• Don’t give your boss a sob story of not being able to survive on what you’re making.

5. End positively
• Whatever the boss’ response, be positive. Express thanks for his or her time.
• Ask questions about what you can do in the future to be considered for a raise in the future.
• If possible, rephrase the question. If you realize that your request is not being received favorably, change the word raise to “salary adjustment” which implies market value instead of extra money.

This blog is intended for educational purposes only. It gives general information and not specific legal advice. This advice is not specific to Ohio or Cleveland. For specific legal advice, contact Baron Law at 216.573.3723 or dan@baronlawcleveland.com to speak with an attorney.

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Estate Planning Solution of the Week: Health Care Proxy

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Estate Planning Solution of the Week:  Health Care Proxy

What is a Health Care proxy?  How does that differ from a health care agent?  And what is the distinction between a health care proxy and a medical power of attorney?

The quickest answer is that all three terms are used to refer to someone who has the legal ability to make health care decisions on behalf of another.  However, the law varies by state as to what such a health care agent is called, what legal documents are needed, and what power is granted to that agent.

In Ohio, the term is “attorney-in-fact.”  In order to have someone make medical decisions on your behalf, you would name this person in a Durable Power of Attorney for Health Care.  Ohio does not have a standardized form to establish a power of attorney for health care.  However, there are specific requirements for a valid Ohio Health Care Power of Attorney:

  1. Your designation of an agent*
  2. Your designation of how your agent may act on your behalf
  3. Your signature and date
  4. Signature and date of two witnesses*

*Specific regulations exist as to who you may designate as your agent and who can serve as witnesses.  An attorney from Baron Law can give you the current specific requirements for the state of Ohio.

While Ohio does not have a standardized form that is required, the Ohio State Bar Association has developed forms together with several medical associations.  LeadingAge Ohio has a copy of this form available on their website: http://www.midwestcarealliance.org/aws/LAO/pt/sp/advance_directives”  You may also request a hard copy of the form on their website.

Baron Law is a firm that serves the northeast Ohio area.  For more information, or to begin estate planning for yourself or your loved ones, please contact us at 216.573.3723 or dan@baronlawcleveland.com.  State laws are specific and subject to change.  Schedule your consultation with a lawyer today to ensure that you and your loved ones are protected.

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Changes in Ohio Power of Attorney Laws

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Changes in Ohio Power of Attorney Laws

If you’re an Ohio resident concerned with the estate plan or medical care of a loved one, you should be familiar with Ohio’s laws regarding power of attorney.  Cleveland, Ohio estate planning attorney Dan A. Baron offers the following:

What is a financial power of attorney?

A financial power of attorney (POA) is a legal document an individual (the “principal”) can use to appoint someone (the “agent”) to act on his or her behalf.  This authority can be used for financial, business, and health matters.   Most often, this authority is used when an individual becomes unable to handle his or her own affairs.  However, a POA can be used for other matters such as taking care of business matters.  A principal can name one agent, or two or more co-agents, each of whom can act alone, unless the POA states otherwise.  The POA might allow for each agent to act independently, or as a group.

Changes in Ohio law

Effective March 22, 2012, Ohio adopted new laws regarding power of attorneys.   Ohio’s Uniform Power of Attorney Act, or UPOAA, focuses on preventing financial elder abuse.  The law now includes a statutory form with language designed to help prevent agents from abusing their power.  Put simply, the law now demands POA’s to be more specific.  For example, third parties such as a financial institution are not required to honor a general POA.  Now, the law asks that a POA includes specifically which types of assets and accounts the agent is allowed to control.

Ohio provides a statutory form that includes language designed to help prevent agents from abusing their power.  This form can be found in Ohio Revised Code 1337.60.   The form lists actions that an agent may or may not take and includes a section called “Important Information for Agent.”   The principal can simply check the box of the powers he or she wishes to designate.   It’s important to consult with an attorney when implementing one of these forms into your estate plan.

A power of attorney created before March 22, 2012 will still be valid; however, as an attorney to review it in light of the current law and consider using the 2012 statutory POA form.   In sum, UPOAA prohibits agents from performing certain acts unless the POA specifically authorizes them.  Because financial POA documents give significant powers to another person, they should be granted only after careful consideration.

To learn more about drafting a power of attorney, contact the law office of Baron Law LLC.  You will speak directly with Cleveland, Ohio attorney, Dan Baron.  Call today at 216-573-3723 to learn more about how Baron Law can help create your estate plan and power of attorney.

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Springing and Durable Power of Attorney – What’s the Difference?

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Springing and Durable Power of Attorney – What’s the Difference?

When planning for retirement and your estate plan, it’s important to understand how your power of attorney works.  Generally, there are two kinds: springing and durable power of attorney.  A springing power of attorney takes affect if you become incapacitated.  In comparison, a durable power of attorney becomes effective as soon as you sign the document, and continues to be effective if you are incapacitated.

Having control with a power of attorney is a big deal.  The person holding this power may have the ability to control your financial assets, medical decision, and more.  For example, a giving someone financial power of attorney powers gives them the right to make financial decisions on your behalf.  This person might trade stocks, cash in annuities, or transfer assets.  If this person has durable power of attorney, they can make these decisions even if you are not incapacitated.   State laws differ on the particulars of power of attorney, and some financial institutions may require their own versions.

With a springing power of attorney, it’s important to clarify exactly what triggers someone taking over your abilities to make decisions.  Typically, it’s when the principal becomes disabled or mentally incompetent.  However, it could be used in a variety of situations.  For example, someone in the military might create a springing power of attorney form to be prepared for the possibility of being deployed overseas or disabled, which would give a relative powers to handle financial affairs in these specific situations only.

Who determines when someone is mentally incompetent or incapacitated?  This question varies state to state.  However, in general there is usually a formal procedure that your attorney can create.  It’s smart to note in your legal document exactly what the principal considers “incapacitated” to mean.  Often times, people who create a power of attorney form include language that requires a doctor’s certification or mental incompetence or incapacitation.

For more information regarding power of attorney and other estate planning methods, contact Cleveland estate planning attorney Dan Baron at Baron Law LLC.  Baron Law is a Cleveland, Ohio area law firm practicing in estate planning, business, and family law.  Contact Dan Baron today for a free consultation at 216-573-3723.

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What is a Trust?

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Cleveland, Ohio Trust Attorney

What is a trust?  What is the difference between a revocable trust and an irrevocable trust?  Why might my estate plan include either one?

Simply put, a trust helps manage your assets and provides clarity for the future.  A trust is a tool that may be used to achieve your financial goals.  There are different types of trusts for specific situations, from special needs trusts for family members with disabilities to charitable trusts that allow charitable giving while maintaining income as needed.  Trusts also fall into the categories of revocable (or living) trusts and irrevocable trusts.

Differences between a revocable and irrevocable trust

  1. Changes or modifications

An irrevocable trust generally cannot be changed or modified under any circumstances, whereas a revocable trust can be modified or revoked at the discretion of the Grantor.  However, the Grantor may maintain a special power of appointment in an irrevocable trust giving him or her the freedom to modify the beneficiaries without changing the benefits.

  1. Property ownership and asset protection

Assets placed in an irrevocable trust no longer belong to the Grantor.  The trust has its own identity.  The Grantor may still use assets for his or her benefit as specified in the trust, but he or she does not own the assets (much like leasing). Creditors cannot claim assets from the Grantor in this case, as the Grantor does not own the assets.

In a revocable trust, the Grantor retains complete ownership of the property.

  1. Estate taxes

As seen above, in an irrevocable trust, the Grantor no longer owns the property.  Thus, it is not included in the value of property at the time of death.  A revocable trust does not change ownership, and thus the value of the property would be included at the time of death. However, keep in mind the unlimited marital exclusion.  Surviving spouses may effectively pass their estate, tax free, to their spouse.  In addition, the 2016 estate tax exclusion is $5.34 million.

  1. Trustees

With an irrevocable trust, the Trustee should be an independent person chosen by the Grantor.  The Trustee should not be a family member, as this could create conflict.  However, with a revocable trust, the Grantor most often serves as the Trustee, maintaining control over the assets in the trust.

  1. Income tax effects

With an irrevocable trust, the trust is its own entity and typically has its own tax identification number and is responsible to file a 1041.  For a revocable trust, the Grantor still owns the assets and files everything on their 1040.

As seen above, the main purpose of an irrevocable trust is to protect assets.  The main purpose of a revocable trust is to avoid probate, simplifying the transfer of assets.  Determining the reason for the trust will allow the Grantor to make an informed decision about what type of trust is best for his or her situation.

And as with all legal and financial planning, laws change, so a consultation with an attorney is advised before creating a trust or any estate plan.  For more information, or to speak with an expert, contact Baron Law LLC at 216-573-3723 or email Dan@baronlawcleveland.com.

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Estate Planning – Trends Following the American Taxpayer Relief Act.

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Estate Planning – Trends Following the American Taxpayer Relief Act.

A recent survey concluded that sixty percent of Americans are afraid they will outlive their retirement.   Thus, there has been a moving trend that people are more concerned about wealth preservation compared to wealth transfer.  For example, a fifty year-old man in the top income quintile in 1980 could expect to live 31.7 more years.  A fifty year old man in the top income quintile in 2010 could expect to live 38.8 more years.  At $75,000 per-year of spending, increased longevity creates an additional $532,500 in cost. Thus, estate planning methods have changed and the American Taxpayer Relief Act has adopted new laws conforming to the wealth preservation vision.

Up until recently, many estate planning attorneys would urge clients to include a trust in their estate planning package.  A trust is a good means to avoid creditors and shield assets from other liabilities.  However, because of the recent changes in the American Taxpayer Relief Act (“ATRA”), trusts are most often not necessary – even for the wealthy.   Pre-ATRA, an estate planning attorney would set up a trust with an amount equal to the deceased’s remaining exemption.  This is often called a “bypass trust,” or B or credit shelter trust.  Assets would often not be included in the spouse’s estate.  The balance would go to the spouse outright or to marital deduction (A) trust, eliminating tax after the first spouse dies.  In the end, these assets (plus any appreciation) will be included in the spouse’s estate.

Post-ATRA no changes the landscape for estate planning by offering several wealth preservation concepts.  First, the concept of “portability” means that the surviving spouse can add to his or her own exemption whatever amount of exemption the deceased had not used during their lifetime.  Thus, a bypass trust is not needed to avoid wasting the exemption.  However, the Deceased Spousal Unused Exemption Amount (DSUUEA) is not indexed for inflation.  In addition, ATRA now permanently sets the estate, gift, and generation-skipping transfer (GST) tax exemptions at $5 million and indexes that amount for inflation.  Therefore, in 2016 a married couple could avoid the gift tax for any amount less than $10,900,000.00 ($5.4 million x 2 for married couples).

People are living longer and the ATRA has adjusted for that.  For more information, contact Cleveland, Ohio estate planning attorney Dan Baron.  Call Baron Law LLC today.  You will speak directly with an attorney who will help you with your estate planning and tax planning needs.  Baron Law LLC is a Cleveland, Ohio law firm located in Independence, Ohio.

Bypass Trusts

Ohio Bypass Trusts – Cleveland, Ohio Attorney

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Cleveland, Ohio Trust Attorney

Ohio Bypass Trusts

Bypass trusts, or “credit shelter” trusts, have historically been an important estate planning tool that shields probate assets against estate taxes.  Most often, a bypass trust is found in your spouse’s will.  Each spouse directs that if you are the first spouse to die, then your solely owned assets be used to fund the bypass trust with up to whatever personal estate tax exemption is at the time.  Since 2013, the estate tax exemption is $5.25 million.  After death, money is used to fund the trust.  The money can come from a variety of sources including, probate assets, assets in a revocable living trust, life insurance policies, and retirement accounts.  Note however, that some retirement accounts cannot avoid certain federal taxes.

For example, say Molly dies leaving her son $1 million in a 401K plan.  Molly directs the money to a trust.  The trustee is to pay the trust ‘income’ to the son annually, and distribute the principal to the son when he reaches age 35.  The 401k plan distributes a $million lump sum to the trustee a few days after Molly’s death.  Barring an unusual provision in the trust instrument or applicable state law, the entire $1 million plan distribution is considered the trust ‘corpus.’  On the federal income tax return for the trust’s first year, the trust must report $1 million in gross income.  The trustee invests the money that’s left after paying the income tax on the distribution, and pays the income from the investments each year to Molly’s son.

If properly structured, assets in a bypass trust will not be included in your surviving spouse’s estate.  Instead, the money will ‘bypass’ your spouse’s taxable estate at their death and pass tax free.  Any amount in excess of the current federal estate tax exemption would then be distributed outright to the surviving spouse or is used to fund a marital trust or qualified terminable interest property (QTIP) trust.

Although bypass trusts have been used for years, they have become somewhat unnecessary.  Since 2013, the new laws allow a surviving spouse take up to $5.25 million tax free.  This is because the new laws allow this amount under the federal estate tax exemption.   Thus, unless you have a fairly large amount of assets, a living will would do the trick and allow for $5.25 million to be passed on tax free.

For larger estates, bypass trusts can offer advantages.  For example, growth in the assets of a bypass trust are not excluded from the gross estate of the surviving spouse and may run up against the estate tax exemption amount in effect when the surviving spouse dies.  In addition, any lifetime gifts you make that are taxable will decrease your estate tax exemption amount – decreasing the amount that can be put into the trust at your death.

For more information on trusts, living wills, or other estate planning tools, call Cleveland, Ohio attorney Dan Baron at Baron Law.  Baron Law provides legal representation to business owners and individuals.  Call today for a free consultation at 216-573-3723.  You will speak directly with a Cleveland, Ohio attorney who can help you with your legal needs.

Baron Law LLC

Debt after Death – What Every Family Member Should Know

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Cleveland, Ohio Probate Attorney
Debt after Death – What Every Family Member Should Know

You come home one day to find a letter from a credit card company demanding $5,000 for the debt of your late husband. The credit card company demands payment and threatens to take legal action against you if the debt is not paid. Don’t be afraid of these bullies. Here’s what you need to know.

First, the credit card company is correct in their efforts to collect a debt from the estate. Debts to not die with the deceased but instead go through the estate. However, creditors cannot hold you personally liable. Instead, in most cases, creditors may only assert claims against the estate. If the debts exceed the value of the estate, then the creditors may not come after family members.

Of course, there are exceptions. When dealing with the debt of a deceased person it’s important to consider whether you’re a co-signer on a note. Each account holder can be held legally responsible for an outstanding balance. Thus, if you co-signed for a mortgage or a car loan, you are still personally responsible for the debt. Using the example above, let’s say that you never used the credit card and all the purchases were your late husband’s. Unfortunately, if you co-signed the credit card application then you’re still liable for the debts. This rule only applies to co-signers, not authorized users.

It is the role of the executor of the estate to pay the deceased person’s outstanding bills. It is recommended that executors contact a qualified probate attorney to understand the probate laws and processes. If you are not the executor of the estate but are receiving phone calls and/or letters asking you to pay, you should refer the creditor to the executor. If they are persistent, send a certified letter stating that the person is deceased and you are not responsible for paying the debt. Don’t let yourself be intimidated into paying a debt you are not responsible for. If the bill collector is making claims you don’t believe are true, such as saying you are a co-signer on the account, ask for proof. Let them know you are aware of your rights and will report them if they do not stop calling you. Harassing bill collectors can be reported to the Federal Trade Commission (877-382-4357) and state attorney general’s office.

In sum, heirs and loved ones are not responsible for a decedent’s debts. If the person incurred the debt in his name alone, creditors either receive payment through the probate process or they don’t receive payment at all. For more information regarding probate and estate planning contact Cleveland, Ohio probate attorney Dan Baron. Call today for a free consultation at 216-573-3723. Baron Law LLC is your Cleveland, Ohio estate planning law firm.