Elder Law Update – July 2009

1. Keeping Your Beneficiary Designations Current. According to Consumer Reports “Money Adviser,” it is very important to keep your beneficiary designations up-to-date on your financial accounts. By doing so, you will make sure your life savings doesn’t end up in the wrong hands, like and ex-spouse or estranged sibling or distributed under court supervision.

Do’s and Don’ts of Beneficiary Designation Forms according to Consumer Reports:

  • Don’t leave beneficiary forms blank or name your estate. If you do your account will be included in your probate estate and distributed per the instructions of your will. If you do not have a will then the court will decide who gets your money and this requires probate in court.
  • Do list a primary and a contingent beneficiary. By listing a contingent beneficiary you are covered if the primary beneficiary dies before you do. It is often suggested that you name your spouse as the primary beneficiary and then a contingent beneficiary which can be a person or trust. Be careful naming a trust or you can blow certain tax benefits.
  • Don’t name a minor as a beneficiary. Until they reach the age of 18 children cannot open up bank accounts or invest an inheritance they might receive by themselves and will need a guardian or custodian to control funds. A better approach would be to name a trust as beneficiary for the minor children. With a trust you can stipulate an age at which the children will receive their money. You can also delay distribution to Junior longer.
  • Do review you choices on older accounts and policies. It is important that you contact your broker, insurance agent or bank and ask who is listed on your accounts as beneficiaries, especially since some companies have gone under or have been acquired by others. When this happens, occasionally beneficiary documents are shredded or lost in transition. If you need to re-do or update the beneficiary designation forms you might be able to obtain new ones from the company’s website or you can call and request them. Your estate planner also might be able to obtain them for you. (Keep a copy for your own records!)

2. Low-Cost Insurance to Help Ill Elderly Remain at Home. Senator Edward Kennedy released an expansive health care plan that includes a national long-term care insurance program. The program would offer basic help for the elderly and disabled. Under this proposed plan, Americans would pay roughly a $65 premium per month (which is far less than the typical cost of private long-term care insurance), and after contributing for at least 5 years, participants would be eligible for a benefit of not less than $50 a day. This might seem like a modest amount when compared to the average cost of a nursing home, but this amount would pay for a range of services that would allow an individual to stay at home longer.

3. Guardian May Conduct Medicaid Planning. A New York court allowed a guardian to conduct Medicaid planning on behalf of his great aunt, but the court requires that the money be placed into a trust for his aunt’s personal needs. Some Illinois courts also try to provide the same opportunity for planning.

4. Prepaid Burial…A Rip Off? A 2007 AARP survey of 1,087 Americans 50 and older found that 23 percent of them had made pre-payments on funerals, burials or both. However, there have been a number of funeral homes throughout the country who are not honoring the pre-paid burial plans purchased by customers. One of the common complaints is the casket bait and switch. This is when a customer asks for a specific casket and after they pass that casket is no longer available and the funeral home offers a lesser-quality model. A second complaint is when a customer tries to cancel their policies. Most funeral homes do not give refunds and many states do not require a funeral home to make full refunds. A third complaint is when customers try to transfer their policies to another funeral home whether it is in the same state or a new state after the customer has moved. But, the biggest complaint is outright fraud. Most states require that sellers deposit 70 to 100 percent of the customer’s money into trust accounts and the money should remain untouched until it is needed to pay for the service. But some funeral homes do not deposit the required amount and if they do they do not keep it there until the money needs to be used or sometimes they withdraw the money if the funeral home is strapped for cash. Some states allow pre-paid funerals to be funded by insurance policies rather than trusts and those plans are regulated separately under insurance laws. Because of the lack of federal oversight that leaves regulation of the pre-paid policies up to the states, therefore depending on state law purchasers of pre-paid policies may have little recourse when their pre-paid policies disappear.

Before you buy…

  • Think it over. It might not be necessary for you to purchase a pre-paid burial plans in-most cases. Instead you could deposit money into a separate interest bearing account at the local bank and on your death the named beneficiary could use the money to pay for your funeral expenses. Just make sure you choose a beneficiary that can be trusted.
  • Bring a magnifying glass. Make sure you read the fine print carefully and make sure you know what is covered. If there are uncovered expenses, like flowers, clergy honoraria, death certificates, etc. make a list and inform your survivors so they know what still has to be paid.
  • Ask about refunds. Be certain the contract can be transferred to another funeral home or that your money can be refunded to you if you move or change your mind. You might also want to find out if there is a penalty for canceling the policy or missing a payment.
  • Follow the money. Know where the money is being invested. If it is being used to purchase an insurance policy, make sure the insurance company is highly rated, if the payments are going to go to a trust account, find out the bank or institution that will be holding the funds.
  • Plan for change. Find out what happens if your circumstances change. What if something you requested is no longer available? What if the funeral home changes ownership? What if your family decides on a simpler, less expensive funeral?
  • Review your finances. If you are trying to qualify for Medicaid you can put some of your money into an “irrevocable” pre-need funeral plan as a way of spending down your assets.
  • Talk to an elder law attorney. This is the most important. Have your elder law attorney review any pre-need contract before you sign.

(Some of the contents of “Prepaid Burial…A Rip Off” are taken from a well written illuminating article “R.I.P. Off” by Barry Yeoman found in the AARP Magazine for January and February 2008.)

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: http://abferrarolaw.com/

Email: abferraro@abferrarolaw.com

P.S. Also, don’t miss our new workshop: “Don’t Go Broke in a Nursing Home“, beginning this fall.

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

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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

Websitehttp://abferrarolaw.com/

Emailabferraro@abferrarolaw.com

 

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.

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.