- Federal Court Authorizes Post DRA Spousal Annuities

-Mistakes Retirees Make—Beneficiaries with Special Needs

-Penn Treaty’s Long Term Care Business Heads for Rehab

-Estate, Gift & IRA Tax Changes Take Effect

-Can you Recognize Elder Abuse?

- Attorney Parker Presents Statewide Teleconference for Attorneys

-Learn How to Protect Your Family from Long Term Care Costs at our FREE Consumer Workshops in Kingston & Bellefonte

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Federal Court Authorizes Post DRA Spousal Annuities

 

Written By: Jeffrey A. Marshall, CELA*

A Federal Court in Western Pennsylvania has rejected Pennsylvania’s attempt to limit the use of annuities to accelerate eligibility for Medicaid.

When her husband entered a nursing home Adeline A. Weatherbee purchased a DRA compliant annuity for approximately $400,000 that paid her $4,423 per month in income.  Her husband then applied for Medical Assistance to help with the costs of his care.

The Department of Public Welfare (DPW) denied the requested benefits. DPW determined that under the Deficit Reduction Act (DRA) and Pennsylvania’s Act 42, the $4,423 in monthly payments she received was an available resource that could be sold by Mrs. Weatherbee.  Thus, DPW argued, Mrs. Weatherbee had too much in the way of resources for Mr. Weatherbee to qualify for government help with nursing home costs. 

The Federal Court rejected DPW’s arguments and precluded it from denying the requested benefits.  The Court found that DPW’s interpretation of the DRA was not reasonable. The provision of the DRA upon which DPW was relying to deny eligibility “is unambiguous and does not support DPW’s reading of it.”

In addition, the court found that “the Pennsylvania statute upon which the DPW relies [62 PA.STAT.ANN § 441.6(b)] in treating the income from an otherwise compliant annuity as an available resource is inconsistent with the treatment of annuities under the Medicaid Act.”  Thus, section 441.6(b), which attempts to void anti-assignment provisions in annuities, is preempted by the Medicaid Act.

Because it involves an annuity purchased post-DRA the decision opens the door to even greater use of DRA compliant annuities to protect the financial security of married couples from long term care costs. It means that the restrictions found in DPW’s Operations Memorandum (policy guidance) on annuities appear to be in violation of federal law. 

A copy of the decision in Weatherbee v. Richman is available online at http://www.paannuity.com/pdf/Weatherbee_District_Court_Decision.pdf    

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Mistakes Retirees Make—Beneficiaries with Special Needs

Written By: Attorney Jeffrey A. Marshall, CELA*

[Pennsylvania retirees often make legal and estate planning mistakes because of a lack of accurate information and guidance. These mistakes can impact the retirees’ financial security and prevent them from achieving important goals.  This is another in our continuing series of articles that discuss some of the most common mistakes.]

The existence of a child, grandchild, or other potential beneficiary with a disability (often referred to as “special needs”) complicates the estate planning of a parent or grandparent.  Proper planning of your will, trusts, and beneficiary designations becomes even more crucial to protecting your heirs. 

With wise advance planning, you can provide for all of your family members without jeopardizing a special needs individual’s current (or potential) eligibility for important government benefits such as Supplemental Security Income (“SSI”) and Medicaid.  These “needs based” government programs can provide substantial support for your special needs beneficiary but only if you set things up so that the beneficiary will be able to meet the programs’ financial standards.

The rules are complicated and it’s easy to make a mistake.  Here are some of the common mistakes I see retirees making when planning for a special needs beneficiary:

(1) Making outright distributions from a will, trust, insurance policy, annuity, or retirement plan to the special needs individual.  The receipt of this kind of outright inheritance will likely make the beneficiary ineligible for continued SSI and Medicaid benefits .

 (2) Disinheriting the special needs person – which may leave an already vulnerable beneficiary even more dependent upon the uncertain future generosity of the government. 

(3) Leaving property to another family member with an “understanding” that they will use the funds to take care of the special needs individual – this plan is fraught with danger and complexity.  What if the other family member dies, runs into medical or financial or marital difficulty, or becomes estranged from the special needs person? 

(4) Establishing a “support trust” for a special needs beneficiary - which may force the trust’s funds to be spent down before public benefits become available.

There are much better ways to plan. The most common estate planning tool is the “Special Needs Trust” which can be created to take effect either during your lifetime or upon your death.  A Special Needs Trust can provide for the beneficiary’s continuing eligibility for government benefits, protect the inheritance from claims for government reimbursement, and protect the inheritance from loss to third parties, including siblings, grandparents, aunts, uncles and friends who may have the best of intentions.    

The Special Needs Trust must be carefully drafted by a lawyer who is familiar with this area of law.  A wrong word can make all the difference between creating a fund that will enhance the beneficiary’s life by supplementing public benefits, and a fund that will quickly be exhausted replacing those government benefits.

Marshall, Parker & Associates has the experience needed to help your family plan to protect your special needs child or grandchild.  Give us a call if you would like to meet and discuss how to best meet your particular circumstances, concerns and goals.

More information regarding the use of trusts in planning for special needs beneficiaries is available on the Marshall, Parker & Associates website at:  http://www.paelderlaw.com/special_needs_planning.html

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Attorney Marshall is available on our website at www.paelderlaw.com/staff.html  

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Penn Treaty’s Long Term Care Business Heads for Rehab

Written By: Attorney Matthew J. Parker, CELA*

Pennsylvania’s Insurance Commissioner announced that Penn Treaty’s long term care insurance business has been placed into court ordered financial rehabilitation, part of a process called receivership.  Located in Allentown, Penn Treaty has more than 126,000 long term care insurance policyholders.   

This court process of rehabilitation will attempt to preserve the assets of Penn Treaty and meet the insurance company’s obligations. Rehabilitation is explained on the Pennsylvania Insurance Department’s website at http://www.ins.state.pa.us/ins. If rehabilitation is unsuccessful, the company may have to be liquidated.                              

For most long term care policyholders, their policies are guaranteed renewable. Therefore, they will not be cancelled provided the policyholder continues to pay the premium. Even if Penn Treaty is liquidated, there are state funds that guarantee a long term care policy up to a maximum of $300,000 per policyholder.  Unfortunately, when an insurance company enters receivership, a frequent consequence is an increase in premiums.   

The struggles with Penn Treaty and Conseco, who recently transferred its long term care insurance business to a private trust, are not surprising to those in the industry. Both companies had struggled with their long term care business in the recent past, from customer complaints to dilatory payment of claims. See Charles Duhigg, “Aged, Frail and Denied Care by Their Insurers”, New York Times, March, 2007.

Unanticipated low interest rates may be driving struggling insurance companies to the brink and even financially sound insurance companies to increase premiums. Interest rates affect the capital reserves needed to pay insurance claims. If your long term care premium becomes unaffordable, see your insurance agent about options, including the ability to reduce coverage or benefits in your policy. Dropping your policy should be a last resort.  

More information about Long Term Care Insurance is available on our website at http://www.paelderlaw.com/long_term_care_insurance_articles.html

 

Attorney Parker can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Attorney Parker is available on our website at www.paelderlaw.com/staff.html   

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Estate, Gift & IRA Tax Changes Take Effect

Written By: Attorney Jeffrey A. Marshall, CELA*

January 1^st welcomed in a number of taxpayer friendly changes to estate, gift and IRA tax rules. 

Federal Estate Tax Exemption Amount Increases

The federal estate tax exemption amount for individuals has increased to $3.5 million for 2009.  This means that married couples can now protect up to $7 million from the federal death tax provided their planning has been set up to take advantage of each spouse’s exemption.   Mistakes can be costly.  The tax rate for estates with assets worth more than the exemption remains unchanged at 45%.

In 2010, the estate tax is supposed to disappear entirely for that one year only -- but don’t count on it happening.   Congress and President Obama appear to be poised to retain the $3.5 million exclusion amount and the 45% top rate for 2010 and later years.

Annual Gift Exclusion Amount Increases

The annual gift-tax exclusion has increased from $12,000 to $13,000. This means you can give as much as $13,000 this year to as many different people as you want without having to worry about gift taxes or having to file any forms with the Internal Revenue Service. In addition to the $13,000 you can pay for someone else's tuition or medical expenses (be sure to pay the institution directly). The lifetime gift-tax exclusion amount remains unchanged at $1 million.

While outright gifts of $13,000 per year per recipient are excluded from gift taxes, they are not exempt for purposes of Medicaid qualification.  Under Medicaid rules cumulative gifts in excess of $500 in any one month can create a period of ineligibility for Medicaid (e.g. for nursing facility or home care) if made within 5 years of applying for assistance.  

IRA Minimum Distributions Requirement Suspended for 2009

Owners of IRA, 401k and 403b accounts are generally required to take minimum distributions from their retirement plans each year after they turn 70½. Failure to take the minimum distribution subjects the plan participant to a special tax of 50% of the amount he or she should have withdrawn. However, as a result of The Worker, Retiree and Employer Recovery Act of 2008, this tax penalty rule has been suspended for one year only - 2009.

The suspension of the minimum distribution requirement also applies to younger beneficiaries who have inherited an IRA, including beneficiaries who are required to take their entire account balances within five years of the original owner’s death.

You are still permitted to take any distributions you want from your retirement plan (subject to other applicable tax rules) – you just are not required to take minimum distributions for this one calendar year.  (Given the plunge in the stock market, Congress didn’t want to force seniors to sell stocks in a down market.) The next required minimum distribution will be for calendar year 2010.

Attorney Marshall can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Attorney Marshall is available on our website at www.paelderlaw.com/staff.html  

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Can You Recognize Elder Abuse?

Written By: Shelly Heikes, Planning Specialist

Many of us think we know what it means to be abused, i.e. physically pushed, slapped or restrained. But what about the many other forms of abuse that face seniors today, financial abuse, intimidation, neglect? Would you know where to turn if you or a loved one were a victim of abuse? Would you know what signs to look for?

Take for instance Sally; she is an 86 year old widowed woman. Sally lives alone; her Grandson Johnny comes over and takes her to the store and her doctor appointments since she doesn’t drive anymore. Sally has noticed that each time Johnny comes over lately, he always asks her for money. Knowing that she is on a fixed income, Sally often has to tell Johnny “No.”

One afternoon, Johnny came over to help decorate for Christmas; they were having a lovely time. Sally started to feel tired, so she rested in her chair while Johnny finished decorating. When Sally awoke she called to Johnny, but he didn’t answer, that’s when she noticed that Johnny was coming out of her bedroom. When she asked what he was doing he said “nothing, I …umm…thought I heard something upstairs….it was nothing.” Puzzled, Sally paid no mind, and Johnny left.

That evening Sally was getting ready for bed and noticed her night stand was in disarray, upon closer inspection, she could see that her box of extra checks from the bank was open; she looked in and saw that there were a few checks ripped out. Then the next day, Johnny came by and told Sally that his car needed some work done, could he borrow some money? Sally said she didn’t have any until the beginning of next month and Johnny became very agitated. He screamed at Sally, and told her she was “worthless, after all I do for you; the least you could do is give me some money!” Sally asked Johnny about the missing checks and he became enraged, he grabbed Sally’s arm and bent down so the two were face to face, and said “ if you would just give me the money, I wouldn’t have to do that! And if you tell anyone, they will take you away and put you in a home, is that what you want?”

This went on for years; Johnny would bully Sally, and help himself to whatever he wanted around her house, knowing that his Grandmother was dependent on him. Sally never told a soul, she felt so alone, and ashamed. How could this happen to her, and by her own “loving” Grandson?

Abuse of seniors takes many forms, and you owe it to yourself, your family and neighbors to be vigilant, and recognize the signs:

·         Look for any abrasions, bruises, fractures, burns or any other injury without logical reason - these may be signs of physical abuse.

 

·         Look for signs of mental abuse such as threats, intimidation or humiliation.  Signs may include low self-esteem, withdrawal, extreme changes in mood, suicidal behavior, confusion or disorientation.

 

·         Be watchful of signs of neglect, such as poor hygiene, malnutrition, improper medication, or soiled clothing.

 

·         Look for an unusual or large bank account withdrawals.  This may be a sign that someone is exploiting the elderly person's financial resources.

 

·         Keep an eye out for the common signs that they may be falling prey to a scam, such as frequent calls from telemarketers, shoddy home improvement work, numerous product purchases or ongoing charitable or religious donations.  The loss of what may seem a minimal amount of money to someone with an average income may result in an elderly person having to go without food, medication or possibly his or her home.

 

·         Talk about their daily activities and contacts to ensure that nothing unusual is occurring or being concealed. 

 

If you have any reason to suspect that an elderly Pennsylvania resident is being victimized, call any Area Agency on Aging, the Department of Aging statewide elder abuse hotline at 1-800-490-8505, or the Attorney General’s Elder Abuse Unit at 1-866-623-2137.

 

If you are in the Greater Williamsport Area:                                        

You can also contact Wise Options – Williamsport YWCA - To schedule an appointment, call (570) 323-8167 or our Toll-Free Number at 1-800-326-8483 (Crisis Calls Only)

Female or male, child or adult, rich or poor — anyone can be a victim of abuse. The YWCA's Wise Options department is a safe haven. They offer help and hope to anyone victimized, or abused. Their free and confidential services are available 24 hours a day, 7 days a week, and 365 days a year.

If you are in Union County:

Contact the Union County TRIAD program sponsored by the Union County’s Sheriff Department 570-524-8716

We have recently added some material to our website on the general subject of avoiding consumer fraud.  The material was originally prepared by Deputy Sheriff Ernest Delp III of the Union County Sheriff’s Department for the Union County TRIAD and is published on our website with his permission.  The material is available at www.paelderlaw.com/pdf/TRIAD_elder_abuse.pdf 

Shelly can be contacted at webmail@paelderlaw.com or at 1-800-401-4552. More information about Shelly is available on our website at www.paelderlaw.com/staff.html

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Attorney Parker Presents Statewide Teleconference for Attorneys

Certified Elder Law Attorney Matthew J. Parker co-presented a PBI presentation on Medicaid Spousal Annuities: What We Have Learned So Far From The James and Weatherbee Cases. He co-presented the session with Certified Elder Law Attorney Kemp Scales of Titusville.

The one hour course was intended to teach other Pennsylvania attorneys how to protect additional resources using specialized Medicaid annuities.  Although Federal Medicaid law has long allowed the use of these annuities, the Department of Public Welfare has attempted to place limits on their use.  Over the past few years, numerous cases have been decided at the state and federal level that have struck down DPW’s argument. 

Most notably, Attorney Parker’s landmark decision in the Third Circuit Court of Appeals in James v. Richman ruled in favor of the community spouse.  The decision was handed down in November and is precedential, therefore, binding on courts in Pennsylvania, New Jersey and Delaware. And it should carry great weight in other parts of the country as well.  During the teleconference, Attorney Parker explained the James case and discussed how the decision may  pave the way for expanded use Medicaid Annuities to protect the financial security of a community spouse.

Attorney Scales won his case, Weatherbee v. Richman (USDC Western District of Pennsylvania, No1:07-cv-00134), which also questioned DPW’s attempt to limit the use of spousal annuities in a post-DRA environment.  (See article above entitled Federal Court Authorizes Post DRA Spousal Annuities)

 

More information about the James Case is available on our website at http://www.paelderlaw.com/James_Decision_2008.html

 

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Learn How To Protect Your Family from Long Term Care Costs

at our FREE Consumer Workshops

-Saturday, January 24, 2009 from 10:00 AM until 12:00 PM at Grico’s Restaurant, 311 Market Street in Kingston

 

-Saturday, January 31, 2009 from 10:00 AM until 12:00 PM at Bonfatto’s Restaurant, 205 Park Place in Bellefonte  

 

 More information available on our website at www.paelderlaw.com/workshops.html  

 

 Contacting Marshall, Parker & Associates for Assistance

Marshall, Parker & Associates is a nationally recognized law firm which provides long-term care planning, estate planning & estate administration services to Pennsylvania clients from our offices in Jersey Shore, Williamsport, Wilkes-Barre and Scranton.

If you or someone you know needs assistance with estate planning or with qualification for Medicaid benefits for nursing home or home care, please call us toll free at 1-800-401-4552.

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*Attorneys Marshall and Parker are certified as Elder Law Attorneys by the National Elder Law Foundation under authorization from the Pennsylvania Supreme Court

**In addition to her law degree, Attorney Colbert holds an advanced legal degree (LLM) in Estate Planning from the University of Miami School of Law.

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