When it comes to elder law, specific planning must be done in order to protect an elder person’s interests, assets, and create a process for making medical decisions. Over the next several weeks, Family Estate Planning Law Group will be honing in on several topics of concern relating to elder law. This series of blog posts will also highlight some new cases that have come down in Massachusetts affecting planning, as well as cover some little-known income tax issues that often arise in elder law planning.
Elder law planning has become separate and distinct from estate planning, since the rules and regulations regarding elder law are significantly different than those for estate planning laws. Questions arise such as, “How can I protect my home from nursing home expenses while still being able to control and live in it?” and, “Does the giving of $14,000 annual exclusion from gift taxes affect my Medicaid eligibility?” This area is extremely complex and one common theme is that you must consult with an attorney who specializes in elder law planning distinct and apart from someone who specializes in estate planning. Although some—like our firm—do both, many do not.
Historically, some planners have advised giving assets away to children as the best way to preserve assets. With the increase in divorces, lawsuits and bankruptcies, this approach is fraught with peril. Current planning uses trusts to safely transfer these assets for the benefit of family members without exposing them to creditors or predators. Numerous advertisements profess that trusts are the way to go, but fail to draw the distinction between revocable and irrevocable trusts. As a result, many people mistakenly believe that revocable trusts protect assets from nursing home expenses. Our blogs this month will draw the distinctions between revocable and irrevocable trusts in order to provide some clarity.
Another issue that arises when speaking about elder law is the so-called “5 year lookback” period. We will define the 5 year lookback and explore possible solutions if someone has to go into the nursing home prior to the expiration of any 5 year lookback period.
We will also address the income, capital gain, estate, and gift tax consequences of nursing home Medicaid planning. Some of the basic techniques often recommended by attorneys not specializing in elder law may result in adverse tax consequences for the client and his or her heirs. It is essential to understand the tax ramifications before making any asset transfer.
Several recent cases have dramatically affected the way trusts can be used to protect the home and other assets. The Department of Medicaid and some courts have become very aggressive in interpreting both the federal and state rules regarding Medicaid benefits for the elderly. Some of these cases, as well as a brand new appellate court decision (Heyn v. Director of the Office of Medicaid) provide insight into how both the local courts and appeals courts will look at trusts in Medicaid planning.
Since the law continues to change, we urge you to work with an experienced elder law attorney if any of these issues are relevant for your family. For more information, explore our website and contact us to schedule your consultation today!