Special White Paper Report   Retirement: Have You Prepared?   When planning for retirement it is best that people of different disciplines and trainings work at the table together.  CPAs, financial advisors and elder law attorneys need to put their various disciplines and expertise together to suggest advantages and disadvantages of various options.  One area that needs to be investigated is the area dealing with pensions and social security.  Before determining which pension options to select not only should there be investment considerations but also determination of what the exposure is for long-term care costs.  An analysis needs to be made of what benefits are available for needs such as housing and long-term care.  An examination should be made of Medicaid, Medicare, VA Benefit, what is offered through the Community Care Program through the Illinois Department of Aging and a number of other resources.  Once a determination is made as to what benefits might be available the next analysis should determine how to shift the risk of long-term care planning to the extent possible.  This is extremely important when there is a spouse who will continue to live in the community.  The protection of assets for community spouse can be achieved through the usage of asset transfers, trusts, long-term care insurance and annuities. When considering retirement this is an excellent time to examine your place on the “Elder Care Journey” and make a determination as to whether you have the appropriate estate plan in place.  The Wills, Trusts and Powers of Attorney that you executed 20 years ago when the children were small may no longer serve their purpose.  Rather, these documents may now work against you by transferring assets from a healthy spouse to an ill spouse while the ill spouse it trying to qualify for needs based governmental benefits.  Proper health care and financial powers of attorney need to be obtained to make sure there is someone designated to be able to act in your stead.  The health care power gives another person the ability to access information about your medical needs and consent to various treatments.  A financial power of attorney allows the agent to pay bills, transfer assets and engage in long-term care planning if that authorization is built into the financial power of attorney.  A review of retirement assets should be made in conjunction with the review of the estate planning documents.  Consistency about beneficiary designations needs to be created. Finally, when we look at retirement planning, the paradigm in which your life situation is analyzed needs to change.  Traditionally, attorneys have asked questions such as “What happens if you die?”  The new question that needs to be asked is “What happens if you don’t die, but become ill for a long period of time?”   Preparing for retirement should be something that we embrace and work hard for so that we can ensure that the golden years are protected.  Again, assembling a good team of advisors will enhance your chances in obtaining the right result.   P.S.      Also, don’t miss our new workshop: “Don’t Go Broke in a Nursing Home”, beginning this fall.  Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years – Will, Trust, Taxes, and Asset Protection –           Senior Years – Long Term Care and Nursing Home Protection –           Post Death Years – Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018  PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com NOTE: The information contained in this message is confidential and may be protected by the attorney-client privilege and/or the work product doctrine.  If you have received this electronic message in error, please reply to the sender and destroy this message. Pursuant to federal regulations imposed on practitioners who render tax advice (“Circular 230”), we are required to advise you that any tax advice contained herein is not intended or written to be used for the purpose of avoiding tax penalties that may be imposed by the Internal Revenue Service.    The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. To unsubscribe, please reply to this email.  In the subject line, please write your name and the word “unsubscribe.”  If you are responding on someone else’s behalf, please also include the email address that our message was sent to.  Thank you. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate, or Estate and Trust Administration without the advice of competent legal counsel.  

Special White Paper Report Power of Attorney versus Guardianship Quite often we discover that clients coming to our office do not know the difference between a power of attorney and guardianship.  I would like to take the opportunity to explain it to you in very basic terms. What is a Power of Attorney?  A power of attorney is a legal document where one person, the principal, gives legal authority to another person, the agent, to perform certain acts on the principal’s behalf. There are 2 types of POAs:

1. Financial
2. Health Care

  In many instances, people will rely on the Illinois Statutory Short Form Power of Attorney for Property for financial matters, and the Illinois Statutory Power of Attorney for Health Care for medical needs.  Contrary to their names, these powers of attorney are not that short.  Nevertheless, depending on the needs of our clients, we often expand these documents even further to include certain provisions that the standard short form does not provide.  It may be a good idea in many circumstances to use the statutory forms because they are easily recognized by health care providers and financial institutions as powers of attorney.  You do not have to use the statutory form and can create your own power of attorney as long as it meets the requirements of the law.  However, once you depart from the statutory forms, you start running the risk that the document that you created may no longer be recognizable or accepted by health care providers or financial institutions.  You also have the ability to strike out and reduce the powers that are listed in the statutory forms.  Quite often, clients don’t want to give all of the powers that the statutory form automatically provides.  Finally, with regard to powers of attorney you can make them immediate powers of attorney or what we call “springing” powers of attorney.  An immediate power of attorney takes effect the day you sign it and can remain in effect for as long as you wish.  A springing power would only come into effect on the triggering of an event, such as a doctor’s determination of your disability.  You could allow powers of attorney to remain in effect for the remainder of your life often referred to as a durable power of attorney, or you can make a power of attorney last for only a short period of time, for example two weeks in order to allow an agent to close a real estate transaction for you.  For estate planning and long-term care planning, a durable power of attorney is obviously more effective. What is Guardianship?  Guardianship is a court-established legal relationship whereby the Guardianship Court appoints a person, the Guardian to make personal and financial decisions for someone who cannot make these decisions on their own (the Ward).  In Illinois, we have several forms of guardianship, but the most common is considered to be guardianship of the person for personal decisions regarding personal care and living arrangements.  The second type of guardianship is guardianship of the estate, wherein the Guardian has control over the assets of the Ward. Quite often a family member or interested person may initiate the guardianship proceeding by filing a Petition in the Guardianship Court in the county where the Ward resides.  The opinion of a doctor is necessary to establish the disability of the individual.  If the Ward is properly served and examined by a guardian ad litem (a court appointed lawyer acting as the eyes and ears of the judge), then the court may appoint a Guardian to make decisions in either the personal area or the financial area or both.  The power that a Guardian has is however, closely scrutinized by the court; before a Guardian can take any actions other than routine day to day matters, a court order must be obtained.  A Guardian is also required to report at least annually to the court on the status of the Wards personal condition and the status of the Wards income and assets. Conclusion For Long-Term Care Planning purposes, we like to have powers of attorney in place so guardianship can be avoided.  Guardianship will have substantial costs associated with it.  However, in many cases either because the power of attorney is inadequate or non-existent, guardianship is often obtained in order to further advance the benefits to the ward. This is another example of the need for proper planning so you have the opportunity to avoid a costly guardianship proceeding and instead rely on your self-appointed agent under powers of attorney to act the way you instruct them to act in the event of your disability.  If you have any questions, please do not hesitate to contact us. Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years – Will, Trust, Taxes, and Asset Protection –           Senior Years – Long Term Care and Nursing Home Protection –           Post Death Years – Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018  PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com NOTE: The information contained in this message is confidential and may be protected by the attorney-client privilege and/or the work product doctrine.  If you have received this electronic message in error, please reply to the sender and destroy this message. Pursuant to federal regulations imposed on practitioners who render tax advice (“Circular 230”), we are required to advise you that any tax advice contained herein is not intended or written to be used for the purpose of avoiding tax penalties that may be imposed by the Internal Revenue Service.    The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. To unsubscribe, please reply to this email.  In the subject line, please write your name and the word “unsubscribe.”  If you are responding on someone else’s behalf, please also include the email address that our message was sent to.  Thank you. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate, or Estate and Trust Administration without the advice of competent legal counsel.

Financial Advisor’s Can Instill Hope and Consumer Confidence.    There is Still A Lot to Protect Out There.    Why not Grow Your Business?   At The Law Offices of Anthony B. Ferraro, LLC, we have taken a number of steps over the years to try to help Financial Advisors round out and deliver services to their clientele. In our opinion, the most important thing you can do in this depressed economy, in our humble opinion, is to create a very proactive message and let your clients know “We are out here, and we can take steps to protect your assets.”  Financial advisors can take the very deliberate step of helping clients protect their assets through the usage of several simple techniques that I will talk about in this update.  Remember, these strategies are designed to provide peace of mind to clients who feel that everything else is working against them. As an advisor, I would offer my clients the following: 

1. Trust Protector for Existing Trusts.  You may want to have all clients consider adding a Trust Protector to their existing trust or trusts.  This Trust Protector can do a couple of different things.  First, in connection with irrevocable trusts, the Trust Protector can provide discretionary asset distribution that the Trustmaker himself cannot undertake.  Second, the Trust Protector can make changes to the trust provisions that, again, the Trustmaker himself cannot make.  This creates flexibility and peace of mind for clients.    

 

1. Dynasty Trust Planning.  This is not just for the Rockefeller’s and Carnegie’s.  Let’s assume you have a client that desires to deliver an estate of $300,000, $500,000 or $700,000 to their children.  The problem is that the client doesn’t trust their daughter-in-law or son-in-law, or for that matter, they may not trust their child.  A Dynasty Trust is a way of holding back a trust distribution at the death of the parents.  This enables the monies to be available for the children or grandchildren, but does not distribute outright all at one time.  This gives parents the peace of mind of knowing that everything that they strived and worked for to accumulate over the years will be available for their children and not squandered shortly after their deaths.  This type of planning may also afford you the opportunity to obtain an introduction to the next generation or two of your client’s family. 

 

1. Grantor-Type Trust.  Explain to clients that grantor-type trusts are advantageous because they will not result in having to file an additional tax return during the life of the Trustmaker (Grantor).  Also explain that a grantor trust is something advantageous and that can be toggled on and toggled off at different points during their life such as for example in connection with planning for veterans benefits.  This is another widely used tool offering protection for clients at a time when all clients are looking for ideas regarding protection. 

 

1. Multiple Trusts.  Sometimes a trust is a great idea.  Sometimes that idea no longer works.  It is a shame to terminate a trust simply because one idea does not work.  Perhaps having several trusts with slightly different objectives can avoid the need to totally eliminate otherwise perfectly valid trusts. 

 

1. Trust as a Beneficiary.  Either in connection with beneficiary designation assets or tax-qualified assets such as IRAs or 401(k)s, a lot of work needs to be done in connection with beneficiary designations.  It really does not matter what is written into wills or trusts if the beneficiary designations are inconsistent with the client’s objectives.  You have a lot work to do as an advisor in connection with beneficiary designations, so let your clients know that you care enough to have reviewed such designations and will even go through the expense of preparing new ones, if necessary. 

 

1. Second Marriages.  These are very common in our society.  A second marriage raises a whole host of issues on which the client needs counseling.  In order to provide protection to the client, the issues associated with second marriage need to be understood and discussed with clients.  This is fertile ground for advisors to be adding value to clients and how they perceive your services.  Please give consideration to second marriage planning as a special niche.

  The common theme throughout the six items described above is that they all deal with long-term care planning.  Long-term care planning is not just protection from a nursing home, as we have written about in recent Elder Law Updates.  Long-term care planning involves the long-term, and in the long-term there are all of the issues described above that need to be taken into consideration. Again, we are here to help you communicate with your clients so you can grow your business.  We hope you will continue to serve clients that need hope and ideas in tough economic times.  Let us know if you think that this type of message to your clients would be something of value to them.  Don’t hesitate to share with them this update or invite them to one of our free workshops that we offer.  Please recall that we offer 2 workshops: 1) the “Elder Care Journey” and 2) the “New Estate Planning Essentials,” both of which I think can spread the message of hope and protection that clients are so desperate for.  P.S.      Also, don’t miss our workshop: “The Elder Care Journey – How to Get Financial Assistance for your Nursing Home Care…Without Selling your Home or Leaving your Family Without a Dime” set for the following dates.  Please contact our office at (847) 292-1220 to register. May 18, 2009 at 6:30 PM June 11, 2009 at 4:00 PM June 23, 2009 at 6:30 PM July 9, 2009 at 4:00 PM Call (847) 292-1220 to make a reservation in our training room. You don’t want to miss this workshop! Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years –          Will, Trust, Taxes, and Asset Protection –           Senior Years –             Long-Term Care and Nursing Home Protection –           Post Death Years –       Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018 PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com NOTE: The information contained in this message is confidential and may be protected by the attorney-client privilege and/or the work product doctrine.  If you have received this electronic message in error, please reply to the sender and destroy this message. Pursuant to federal regulations imposed on practitioners who render tax advice (“Circular 230”), we are required to advise you that any tax advice contained herein is not intended or written to be used for the purpose of avoiding tax penalties that may be imposed by the Internal Revenue Service.  The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. To unsubscribe, please reply to this email.  In the subject line, please write your name and the word “unsubscribe.”  If you are responding on someone else’s behalf, please also include the email address that our message was sent to.  Thank you. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate, or Estate and Trust Administration without the advice of competent legal counsel.  

 “Change You Had Better Believe In”   “The only constant is change, inevitable change, continuing change that is the dominant factor in society today.  No sensible decision can be made any longer without taking into account not only the world as it is but the world as it will be.”    No, this was not President Obama stating this, but rather this quote is attributed to Isaac Asimov who died in 1992.  This quote illustrates that as we live longer, as our family changes and our needs change, as the law changes, we too must take action to change.   All of our clients are now living in the present and the present has storm clouds on the horizon.  This requires our clients to think again.  The documents that you created for estate planning purposes when you were 65 may no longer serve the same purpose and worse yet could disadvantageous to you as you move on to possible long-term care.  SAMPLE CASE STUDY: A woman came into our office and her documents were created roughly 10 years ago by another attorney.  Her husband has recently died.  The couple back in 1999 created two revocable living trusts, one for each of them.  This was a good plan at the time and made perfect sense.  The goal at the time was to shelter their estate from estate taxes and avoid probate.  At that time, their combined estate was $1 million but the estate tax laws only allowed them to shelter $600,000.  So instead of paying estate taxes, they prepared a trust designed to allow each them to shelter $600,000 so that no estate taxes will be paid.  This was marvelous planning at that time, but now… 10 years later, the woman’s husband is deceased, and the surviving widow is now 9 years older and has chronic health issues.  Also, there have been tremendous changes in the estate tax laws since she originally did her documents.  Each U.S. citizen can now shelter $3.5 million in assets before any estate taxes are due.  So the same $1 million in assets are sheltered from estate taxes but over half of those assets (approximately $500,000) are in her husband’s trust.  The husband’s trust restricts how wife can use these assets!  She cannot change the beneficiaries and the trust not only does not serve her purpose but is now becoming a problem as we look at planning for long term care. The woman’s Powers of Attorney are no longer adequate.  They do not contain all of the tools that we routinely insert in the Powers of Attorney in order to make them effective for any situation involving Long Term Care. The Question for the Immediate Future:   Have you planned for the issues and costs that will arise in connection with long-term care, either in your own home or at a skilled facility? Please recall that the greatest threat to most Americans is the cost on long-term convalescent care.  Therefore, we urge you to get an update of your estate plan and take into consideration elder law issues and long-term care issues.  The Medicaid laws have changed in many states and will shortly be changing in Illinois.  It is best to obtain all of the tools necessary through an updated estate plan, long-term care plan and updated Power of Attorney while you are healthy and can deal with these issues. Our firm wants you to have the most updated and well written documents available so that you and your family can tackle every situation that will arise as more changes come.  And come they will! Never doubt it! This is a Positive Message I hope you will take this communication as a positive message.  In this update we are trying to inform you and the professionals that serve you that there are many steps that can be taken to protect you and your family as well as your assets.  If we provide for change we can create a better future for yourselves with more control and thereby provide you with greater peace of mind. You have our best wishes! P.S.      Also, don’t miss our workshop: “The Elder Care Journey – How to Get Financial Assistance for your Nursing Home Care…Without Selling your Home or Leaving your Family Without a Dime” set for the following dates.  Please contact our office at (847) 292-1220 to register. May 18, 2009 at 6:30 PM June 11, 2009 at 4:00 PM June 23, 2009 at 6:30 PM July 9, 2009 at 4:00 PM Call (847) 292 1220 to make a reservation in our training room. –       You don’t want to miss this workshop! Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years –          Will, Trust, Taxes, and Asset Protection –           Senior Years –             Long Term Care and Nursing Home Protection –           Post Death Years –       Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018 PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com Much of what’s in this update is based on the work of a prominent Florida colleague.  Any tax advice contained in this communication was not intended to be used, and cannot be used, by you (or any other taxpayer) to avoid penalties under the Internal Revenue Code. The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal counsel.

IMPORTANT UPCOMING WORKSHOP ON ESTATE PLANNING IN THE NEW MILLENNIM FOR BOOMERS AND NEW RETIREES…   “How to Leave a Legacy for Your Family and Protect Your Hard Earned Money Legally and Effectively”   Presented by: Anthony B. Ferraro Attorney-CPA A Message from Anthony B. Ferraro…   43% of people over 65 will spend at least 408 days in a nursing home.  Even people with wealth may not have liquidity to pay privately.  Especially during these tough times, your estate plan should protect assets from long term care and nursing home costs.  Most clients that come into our office feel that their estate planning is complete because: 1) they are handling their own affairs today, and 2) they have prepared a will or trust that will enable them to distribute their assets on death.  But what happens in between?  Our clients inform us that the biggest problem is not what happens when they die, but rather what happens if they don’t die and live a long period of time while they are ill.  This, restated, is the “Gap,” in their planning. The “Gap” represents that phase of our life or those years where no Long Term Care Planning has been done and long term illness sets in. Long Term Care Planning is the process of putting together the correct documentation such as powers of attorney, asset transfers, and asset protection strategies, in order to create continuity in the management of your assets when you are no longer able to care for yourself and may require in-home care, assisted living or long term skilled or nursing home care.  So, don’t leave yourself vulnerable in the “Gap”.  Instead engage in the process of Long Term Care Planning where you bridge the Gap between your healthy years and death.  Don’t make the mistake in assuming that you will be healthy and then someday die, without intervening years of health crisis and long-term care. With our population continuing to age (the fastest growing population in United States is the 85+ age group) there is certainty that many of us will go from healthy years to disabled years in which we are alive but require a lot of long term care.  Provide for those years.  Contact a Long Term Care Planning attorney so you have the correct tools in place to bridge the “Gap.”  All of our clients tell us that the greatest threat to the financial security of middle Americans is the cost of long term convalescent care.  Don’t get slaughtered in the “Gap”.  Do Long Term Care Planning! Please join me as we explore these and other topics of interest: –          The most important legal document you must have and what it contains. –          Why your parents’ estate plan won’t work. –          How “gifting” can mess up your entire estate plan. –          How to protect your assets from long term care including nursing home costs. –          How paying for your grandchild’s preschool can disqualify you for Medicaid. –          The secrets to Veteran’s Benefits. –          Covering all bases: How to plan for your “non-traditional” family –          Planning for that large retirement plan without paying unnecessary income taxes. –          Why the new Medicaid laws require advanced planning. –          How to protect your children from their creditors, ex-spouses and themselves. –          How to protect and provide for an aging parent. Your attendance at this workshop is free but seating is limited.  Reservations are a must. Please call 847-292-1120   –       You don’t want to miss this workshop! Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years –          Will, Trust, Taxes, and Asset Protection –           Senior Years –             Long Term Care and Nursing Home Protection –           Post Death Years –       Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764 Rosemont, IL 60018 PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com NOTE: The information contained in this message is confidential and may be protected by the attorney-client privilege and/or the work product doctrine.  If you have received this electronic message in error, please reply to the sender and destroy this message. Pursuant to federal regulations imposed on practitioners who render tax advice (“Circular 230”), we are required to advise you that any tax advice contained herein is not intended or written to be used for the purpose of avoiding tax penalties that may be imposed by the Internal Revenue Service. The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. To unsubscribe, please reply to this email.  In the subject line, please write your name and the word “unsubscribe.”  If you are responding on someone else’s behalf, please also include the email address that our message was sent to.  Thank you. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate, or Estate and Trust Administration without the advice of competent legal counsel.

Pending Medicaid Law Changes Pose Challenges to Nursing Homes and Residents   In prior issues we wrote about the new pending Medicaid law changes as they relate to gifts or asset transfers.  Illinois has not yet adopted the new law but may have to. You may recall that under the old law a gift created a period of ineligibility from the date of the transfer.  For instance, prior to February 8, 2006 a $30,000 gift in Illinois would create a 5 month penalty from the date the gift was made if the nursing home monthly cost is, for example, $6,000 a month.  So, if the gift was made 12 months ago, the penalty would have already expired. Under the new law, for gifts made after February 8, 2006 the penalty period will not begin until the person is in a nursing home and already spent down to $2,000 in Illinois.  Only at that time will the penalties start. In other words, if the same $30,000 gift was made after February 8 and then the person spent his or her assets down to $2,000 in Illinois, only at that time would the penalty period begin tolling.  In that case, the gifted funds would have to then be used for the cost of care to get through the penalty period.  But what if the funds are not longer available…for instance if they were paid for college tuition or given to charity or to an individual who simply no longer has them?  What will happen then? This is a major problem and one that nursing homes will have to face in the coming months.  Prior to this law minor asset transfers would not cause major problems for the nursing homes since the penalties would have expired by the time the applicant was spent down.  Under the new law, however, every transaction will have to be scrutinized.  Even small gifts or transfers will cause penalties which won’t even being to expire until the person is otherwise spent down.  It has been common practice to have the nursing home help the potential Medicaid applicant apply in the past.  This was probably not a huge risk under the previous laws.  The new laws, however, make this very risky from possibly a legal and cash flow perspective.  That’s because it will now be much more important to verify exactly what has been spent and given away because the law now has no “grace period” for asset transfers.  An example will suffice to show where the problem lies.  Let’s take the example with Mrs. Jones who is a resident of Shady Acres Nursing Home in Cook County Illinois.  Let’s say that a few months from now she is applying for Medicaid since she has now spent down.  But in March of 2010, assuming the new law was passed; let’s say she has made a gift to her granddaughter for tuition at Rockhurst College.  Assume that the amount of the tuition payment was $6,000.  Under the old law that would have meant there would be a penalty of 1 month (i.e. the $6,000 gift divided by $6,000, assuming 6,000 is the average cost of a nursing home in Illinois.)  Under the old law there would have been a 1 month penalty from the date of the transfer.  Under the new laws, however, the penalty won’t start until her assets are spent down to $2,000.  Now if the social worker at the nursing home fills out the application and doesn’t realize how the new law will affect these situations, then the application will be filed in anticipation of the receipt of Medicaid benefits.  Imagine the surprise of the nursing home administrator when he or she later finds out (usually some 30 to 45 days after filing the application) that the application was correctly denied according the new rules now in effect.  What will the nursing home do in this case?  Well their recourse is to file a request for a hardship waiver.  The new rule provides for this.  The problem is that in the past the granting of hardship waivers have been few and far between.  What’s more…the hardship is for the resident in that he or she will be denied needed care if the application is approved.  The hardship is not, however, for the nursing home to help their cash flow.  You can imagine the issue this will cause in the coming months when nursing homes begin to deal with the documentation required for their residents who may or may not have the ability to reconstruct their financial records to the extent called for by the new law.  In addition, the granting of hardship waivers is a process that has been very tedious and will certainly serve to slow down the approval of the Medicaid application.  All of these reasons have led some commentators to call the new law “The Nursing Home Bankruptcy Act of 2006.” While we’re not sure it’s that dire…we are sure that it will cause challenges for nursing homes and their residents.  That’s also why what were once simple Medicaid applications should no longer be viewed that way.  The services of an elder law attorney who thoroughly understands the new rules regarding the Medicaid changes as well as how to apply for hardship waivers is recommended.  P.S.      Also, don’t miss our workshop: “The Elder Care Journey – How to Get Benefits Coverage for your Nursing Home Care…Without Selling your Home or Leaving your Family Without a Dime” set for the following dates.  Please contact our office at (847) 292-1220 to register. May 12, 2009 at 4:00 PM May 18, 2009 at 6:30 PM June 11, 2009 at 4:00 PM June 23, 2009 at 6:30 PM Call (847) 292 1220 to make a reservation in our training room. –       You don’t want to miss this workshop! Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years – Will, Trust, Taxes, and Asset Protection –           Senior Years – Long Term Care and Nursing Home Protection –           Post Death Years – Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018 PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com Any tax advice contained in this communication was not intended to be used, and cannot be used, by you (or any other taxpayer) to avoid penalties under the Internal Revenue Code. The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal counsel.

Do You Have a Loved One Who Is Having Memory Loss or Mobility Problems?    Understand The Basics of Medicaid and Long Term Care Coverage or…”What You Can and Cannot Keep” In order to understand Medicaid qualifications for Long Term Care, you first need to know how Medicaid treats your assets.  Basically, Medicaid breaks your assets down into two separate categories.  The first are those assets which are exempt and the second are those assets which are non-exempt or countable.  Exempt assets are those which Medicaid will not take into account (at least for the time being).  While the laws in Illinois differ in some respect, generally the following assets are exempt:

• The Home, (so long as the equity is not greater than $500,000.)  The home must be the principal place of residence.  The nursing home resident may be required to show some “intent to return home,” even if this never actually takes place.

 

• Household and personal belonging, such as furniture, appliances, jewelry and clothing.

 

• One vehicle, there may be some limitation on value

 

• Prepaid funeral plans and burial plots.

 

• Cash value of life insurance policies, as long as the face value of all policies added together does not exceed $1,500.  If it does exceed $1,500 in total face amount, then the cash value in these policies is countable.  Also, term life insurance is exempt. 

 

• Cash (e.g. a small checking or savings account) not to exceed $2,000 in Illinois.

  These are basically the assets which Medicaid will ignore, at least for now.  Keep in mind, however, that the estate recovery unit may come back to recoup payments made to a Medicaid recipient after the death of the recipient and the recipient’s spouse if they are married.  Most other assets which are not exempt (i.e. the ones not listed earlier) are countable.  This includes checking accounts, savings accounts, certificates of deposit, money market accounts, stocks, mutual funds, bonds, IRAs, pensions, second cars and so on.  While there are some minor exceptions to these rules for the most part, all money and property, as well as any item that can be valued and turned into cash is a countable asset, unless it is one of those listed earlier as exempt. While the Medicaid rules themselves are complicated and somewhat tricky, for a single person it’s safe to say that you will qualify for Medicaid so long as you have only exempt assets plus a small amount of cash, (i.e. $2,000 in Illinois). For a married couple the community spouse (i.e. the one not needing nursing home care) can receive the “Community Spouse Asset Allowance” (CSAA) which is the amount of non-exempt assets the “resident spouse” is permitted to transfer to the “community spouse” without affecting the resident spouse’s eligibility.  The current CSAA is $109,560.  Of course, this does not mean there are not things which can be done to protect assets beyond these levels.  Instead, this issue of the Elder Law Update is designed to review the basics in a way which a caseworker from the Department of Human Services in Illinois would do so.  P.S.      We have helped numerous local families successfully protect their home and savings.  As a courtesy to our existing clients we are offering for 30 days a no risk, no obligation free consultation.  Just call my office and make an appointment.  Again, for this month our initial consultations are at no charge. P.S.S.  Also, don’t miss our workshop: “The Elder Care Journey – How to Get Benefits Coverage for your Nursing Home Care…Without Selling your Home or Leaving your Family Without a Dime” set for the following dates.  Please contact our office at (847) 292-1220 to register. April 8, 2009 at 4:00 PM April 23, 2009 at 6:30 PM May 7, 2009 at 4:00 PM Call (847) 292 1220 to make a reservation in our training room. –       You don’t want to miss this workshop! Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years – Will, Trust, Taxes, and Asset Protection –           Senior Years – Long Term Care and Nursing Home Protection –           Post Death Years – Estate, Probate, and Trust Administration   “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018 PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abfcpalaw@aol.com Any tax advice contained in this communication was not intended to be used, and cannot be used, by you (or any other taxpayer) to avoid penalties under the Internal Revenue Code. The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal counsel.

Think You Don’t Need Long Term Care Planning? Think Again!! 1.         Alzheimer’s Projections.  Recently during a Senate Special Committee on Aging hearing, a couple of prominent politicians noted that there is no single effort that would do more to lower the cost of entitlement than preventing the onset of Alzheimer’s disease.  They noted that Alzheimer’s will cost Medicare and Medicaid a projected $19 trillion between the years 2010 and 2050.  It was noted that a five year delay of onset would save approximately $8.5 trillion over that same period.  It was further noted that the human pain and financial burden of Alzheimer’s is so great and the potential breakthroughs in science are so encouraging, that a Manhattan type project approach to Alzheimer’s is justified.  2.         More Coming.  A respected report says that 5.3 million people in the U.S. have Alzheimer’s.  An estimated 5.3 million Americans have Alzheimer’s and each patient on average costs Medicare three times more than patients without the disease.  3.         Kin Using Elders’ Funds in Downturn.  Recent studies show that family members are often inappropriately using an elder’s funds in economic down turn.  It has been noted recently by some long term care ombudsman that children don’t have the legal authority to make some decisions for parents.  Worse yet, some of the decisions that are made by children on behalf of their parents are purely economically motivated.  One case was noted where a nursing home resident was blocked from receiving antibiotics because her daughter cited a “do not resuscitate” clause in her mother’s Living Will.  The suspicion is that the daughter was trying to hasten her inheritance.  Seniors are advised to be cautious because sometimes the power of attorney given to a family member can give an unscrupulous person license to exploit.  This is not a reason not to have a power of attorney but rather should signal that caution and counseling are required in providing such power. 4.         Impact of Long Term Care.  A recent report indicates that nearly two-thirds of U.S. households are at risk of being unable to maintain their standards of living due to long term care costs.  5.         Avoid a Crisis…Talk to Mom & Dad. It is recommended that children sit down and have a heart to heart talk with mom and dad as their capabilities for maintaining independence in their household begin to dwindle.  Joint accounts are dangerous.  Adding a loved one to a bank account can affect Medicaid planning, as well as expose your account to the loved one’s creditors.  When a person applies for Medicaid for long term care coverage, the state looks at the applicant’s assets to see if the applicant qualifies for assistance.  If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to the account.  Furthermore, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets for Medicaid purposes.  Another problem with joint accounts is that the account can become vulnerable to the joint account owner’s creditors.  Finally, be sure you can trust your joint account holder because he or she will have full access to the account.  In our opinion, there are better ways to conduct estate planning and planning for disability.  The power of attorney is a better approach and will provide your agent access under power of attorney to your finances in case of your disability.  If you are trying to avoid probate, a trust may be better than a joint tenancy account as well.  You need to discuss these issues with an elder law attorney.  6.         Ways To Pay For Long Term Care. Remember the possibilities of covering the cost of long term care.  The most common ways are:

1.  
   1. Paying out of pocket
   2. Carrying long term care insurance
   3. Qualifying for Medicaid by obtaining legal guidance and a legal spend down of your assets.  Strict compliance with state laws is necessary.
   4. Lastly, getting a reverse mortgage.

Note: for Veterans who qualify for nursing home care in a Vet Nursing Home, the closest facility of which we are aware is in Manteno, Illinois. 7.         Is It Time to Update Estate Plans?  Because of the uncertainty regarding estate plans and laws that may shift treatment, formula clauses in Wills and Trusts can become problematic.  The current Federal Estate Tax exemption amount of $3,500,000 creates this situation, but there are a number of solutions to this problem.  One is to put the full exemption amount into a family trust while making sure that your spouse is a major beneficiary of that trust and can receive distributions liberally and for broad purposes.  8.         Watch Your CDs.  Not all Certificates of Deposit are the same.  Recently, the SEC accused a former Texas financier of fraud.  The allegations are that the scheme revolved, in large part, around the sale of suspicious high yielding CDs.  The CDs were not insured by the FDIC, resulting in a lot of people being unable to protect their life savings.  Some CDs are covered by the FDIC, which currently offers insurance of up to $250,000 per person, per bank.  Additional coverage can be obtained depending on how you hold the CD. 9.         What you Need to Know About Estate Planning.  You need to have a Will and maybe a Trust.  You also need either a standard, enhanced, or comprehensive Power of Attorney for Property for Long Term Care Planning.  You need to have Living Wills and advanced medical directives to avoid a situation like Terry Schiavo.  Special Needs Trusts are often essential when there are family members who are physically or mentally challenged.  The estate tax right now is as favorable as it has been in a long while.  Each U.S. citizen is entitled to up to $3.5 million of assets before they have to pay estate tax.  For a couple, that adds up to $7 million, if planned properly.  Please remember that the federal exemption amount under current law is scheduled to go back to $1 million in 2011. 10.        Housing Bubble Impacts Elderly.  Because of the recent housing slump, many elderly are not obtaining the needed support and care which they would be afforded by moving into retirement communities or assisted living facilities.  Many are effectively stranded in their own homes.  Without the ability to sell their houses or condominiums, many cannot afford to buy into retirement homes that require substantial down payments just to move in.  So they are taking themselves off of waiting lists and staying at home.  The inability to sell their home or condo is isolating a lot of the elderly.  At present count, there are 4.2 million unsold homes in the United States, but it is unknown how many of those are occupied by people 65 years or older.  P.S.      Also, don’t miss our new workshop: “Don’t Go Broke in a Nursing Home” beginning in the fall. Call (847) 292 1220 to make a reservation in our training room.  You don’t want to miss this workshop! Long Term Care Planning Attorneys The “3 Phase” Lawyers   Legal Counsel Assisting You in the 3 Phases of Your Life:   –           Maturing Years – Will, Trust, Taxes, and Asset Protection –           Senior Years – Long Term Care and Nursing Home Protection –           Post Death Years – Estate, Probate, and Trust Administration     “Educate to Motivate”   Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764  Rosemont, IL 60018 PH (847) 292-1220 FAX (847) 292-1221 Website:  abferrarolaw.com Email:  abferraro@abferrarolaw.com Any tax advice contained in this communication was not intended to be used, and cannot be used, by you (or any other taxpayer) to avoid penalties under the Internal Revenue Code. The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material.  If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice.  You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal counsel.  

Caring for A Veteran at Home VA Benefits May Cover the Cost As we discussed in a previous Elder Law Update, the Veteran’s Administration provides a wonderful pension benefit for those individuals who served at least one day during a period of wartime and are not disabled due to non-service connected reasons (aging related issues, Alzheimer’s, Parkinson’s, multiple sclerosis, and/or other physical disabilities). This pension, referred to as “Aid and Attendance Allowance”, will pay not only for the long term care provided in a nursing home or assisted living facility, but will also pay for care provided to the veteran in their own home. So, for those veterans and widows (widowers) who are eligible, these benefits will allow family members to be paid for the care they are providing a loved one, so long as certain criteria are being met. The “Aid and Attendance” (A and A) benefit is available to a veteran who is disabled and requires the aid of another person to perform the personal functions required in everyday living. A veteran can show they are eligible if they have a substantial need for assistance with the activities of daily living. Such activities include bathing, dressing, meal preparation, etc. A veteran would also qualify for this pension if they can show they need the attendance of another person in order to avoid the hazards of his other daily environment. The need for assistance does not have to be permanent. A family member can provide in-home care for a veteran who is applying for aid and attendance. In order to meet the disability criteria, the care services provided by an unlicensed relative must be prescribed by a health care professional (ex., doctor, RN, LPN or licensed physical therapist) and the professional must consult with the unlicensed relative caregiver at least once a month (in person or by telephone) to monitor the regimen. In addition, there must be a valid care contract in place and the caregiver must be receiving no more than fair market value for services he or she is providing. Simplified Example: Harry Smith is a 67 year old veteran and, due to his health needs, his doctor has stated he needs assistance with bathing, meal preparation, medication administration and other activities of daily living in order to remain at home. He and his daughter, Jane agrees that she will spend 5 hours a day with Harry, 7 days a week. The fair market value for her services is $12 per hour, and they enter into a contract reflecting those terms. Harry’s income is $1,800/ month, his medications are $200/month and he is paying his daughter $1,680/month. Rather than deplete his saving of $45,000, he applies for a service pension through the VA. The VA considers the $200/month for medications and the $1,680/month he is paying to his caregiver daughter unreimbursed medical expenses and “subtracts” the amount from his income. In other words, when calculating his pension, the VA considers his income to benegative $80. He applies for benefits and is eligible for $1,520/month to help cover the cost of his prescriptions and care contract! If you or someone you know is a Veteran receiving care in their home, please encourage them to file a claim for this benefit. It would be prudent to seek the guidance of an experienced elder law attorney who is familiar with veteran’s benefits. An attorney skilled in elder law can provide a veteran and the veteran’s family with pre-filing consultations to determine the appropriate steps that must be taken and to help determine if it would be right to apply for this VA benefit. P.S. Also, don’t miss our workshop: “The Elder Care Journey – How to Get Benefits Coverage for your Nursing Home Care…Without Selling your Home or Leaving your Family Without a Dime” set for the following dates. Please contact our office at (847) 563-4887 to register.

March 19, 2009 at 6:30 PM

April 8, 2009 at 4:00 PM

April 23, 2009 at 6:30 PM

Call (847) 292 1220 to make a reservation in our training room. •- You don’t want to miss this workshop!

Long Term Care Planning Attorneys

The “3 Phase” Lawyers

Legal Counsel Assisting You in the 3 Phases of Your Life:

– Maturing Years – Will, Trust, Taxes, and Asset Protection

– Senior Years – Long Term Care and Nursing Home Protection

– Post Death Years – Estate, Probate, and Trust Administration

“Educate to Motivate”

Anthony B. Ferraro Attorney-CPA The Law Offices of Anthony B. Ferraro, LLC The Estate & Trust, Elder and Asset Protection Law Firm Columbia Centre I 5600 N. River Road, Suite 764 Rosemont, IL 60018 PH (847) 563-4887 FAX (847) 292-1221 Website: https://abferrarolaw.com/ Email: abferrarolaw@abferrarolaw.com Any tax advice contained in this communication was not intended to be used, and cannot be used, by you (or any other taxpayer) to avoid penalties under the Internal Revenue Code. The Illinois rules of Professional Conduct require attorneys to identify unsolicited communications to prospective clients as Advertising Material. If the context requires, please consider this letter and the enclosed literature to be Advertising Materials. This document is for discussion purposes only and is not intended to be, nor should it be, considered as legal advice. You should never attempt Medicaid planning, Estate Planning, Probate or Trust Administration without the advice of competent legal counsel.

THE LAW OFFICES OF ANTHONY B. FERRARO ANTHONY B. FERRARO ATTORNEY-CPA

Estate Tax Relief. Some in Congress and have claimed to have repealed the estate tax. However, the new tax repeals the estate tax for only one year- 2010. Due to budgetary restrictions, the new law allows the current estate tax rules, rates and exemptions to come back in force in 2011. Thus, under the new law, estate taxes continue- but with an increasing exemption from $1 million to $3.5 million through 2009- until 2010 when it is repealed for only that one year. Planning Note: Estate tax repeal has now become estate tax complexity and uncertainty under this legislation. The prospect of the automatic reinstatement of 2001 estate tax rules in 2011 will force Congress to face the entire issue again, under perhaps entirely different political circumstances, and certainly a different President. This means that most Americans may face an even larger estate tax burden unless Congress takes further action. Phase-out schedule. The phase out of the estate tax will follow a slow timetable:

Year	Top Estate	Estate Tax	Gift Tax
	Tax Rate	Exemption Amount	Exemption Amount
2001	55%	$675,000	$675,000
2002	50%	$1 Million	$1 Million
2003	49%	$1 Million	$1 Million
2004	48%	$1.5 Million	$1 Million
2005	47%	$1.5 Million	$1 Million
2006	46%	$2 Million	$1 Million
2007	45%	$2 Million	$1 Million
2008	45%	$2 Million	$1 Million
2009	45%	$3.5 Million	$1 Million
2010	Repealed	n/a	$1 Million
2011	55%	$1,000,000	$1,000,000 *

Modified Carryover Basis. To complicate matters further, once estate taxes are fully repealed in 2010, a modified carryover basis rule immediately goes into effect. At that time, death becomes an income tax problem. The basis of assets received from a decedent will carry over from the decedent, rather than be stepped up to fair market value at the date of death or alternate valuation date as is now the law. With proper planning, two exemptions will save many estates: 6. $1.3 million of basis will be allowed to be added to certain assets; and 7. $3 million of basis will be permitted to be added to assets transferred to a surviving spouse. Not all property is eligible for an increase in basis. Property acquired by a decedent by gift from a non-spouse less than three years before death is excluded (to prevent “gifts” of low basis assets in anticipation of stepped-up bequests). Consider: Real estate or other assets that remain in the family for generations will require generations of accurate records of basis. But without accurate basis records kept over decades, the IRS will win on the burden of proof issue, thereby keeping basis low and taxing those assets “artificially” high. Gift tax remains in effect. To prevent significant use of gifts to transfer income-laden property from higher to lower rate taxpayers, the new law retains a modified gift tax. In 2002 the gift tax exemption becomes $1,000,000. Starting in 2010, gifts in excess of a lifetime $1 million exemption would be subject to a gift tax equal the top individual income tax rate at that time. copyright 2002, The Law Offices of Anthony B. Ferraro, LLC