What is ElderLaw?
Elder law is a specialized area of law that involves counseling and assisting seniors, individuals with disabilities and their families in connection with a variety of legal issues from Estate Planning to Long Term Care planning to coordination of government benefits and insurance.
A large part of Elder Law involves Medicaid Planning. With proper Medicaid Planning you can save your assets from the costs of long-term care. Most people are shocked to learn that the average cost for a nursing home resident in Pennsylvania is about $10,000.00 per month! They are also shocked to learn that Medicare and private health insurance do not cover this cost. At that price, long-term care costs can be devasting financially even for those with significant resources. As an Elder Law Lawyer who provides Medicaid Planning, I strive to educate individuals about two things:
- You do not have to spend all of your money on nursing home care.
- An Elder Law Attorney can help you protect your assets whether you need care right now or if you wish to plan for it in the future.
In fact, I offer a free half hour webinar on just this topic.
How to Protect your Home and Savings from Nursing Home Costs.
Simply click below to watch:
What is Medicaid?
Medicaid is a Federal program administered by the State of Pennsylvania. Medicaid provides health coverage to over 72.5 million Americans including children, pregnant women, parents, seniors, and individuals with disabilities. Medicaid is the single largest source of health coverage in the United States. This coverage includes residential nursing home long-term care as well as home-based care services to enable individuals to remain in their homes rather than a nursing home.
How do I qualify for Medicaid?
To qualify for Medicaid benefits, one must meet certain eligibility requirements. There is both a financial and medical qualification. Medically, you must be “nursing home clinically eligible”. To meet this standard, your needs must be greater than just room and board and basic assistance. Those living in assisted living or personal care homes, for example, are not eligible for Medicaid long term care benefits.
The financial qualifications are also quite strict. You may only have a maximum of $8,000.00 in your own name. Not all assets that you own, however, are countable for Medicaid purposes. For example, you may still own a car, a home, a burial trust and personal items among other assets. In fact, many are surprised to learn that you may be eligible for Medicaid despite owning fairly substantial assets.
Qualifying for Medicaid and applying for benefits is a complex and confusing task. One must complete a specific application and supply what are usually voluminous records in support of the application. Despite supplying all necessary information and records, however, time consuming appeals are often necessary to secure benefits.
At Pecori & Pecori, we strive to make the Medicaid Application process as smooth as possible to get you the benefits that you need.
Injury settlement protection
For those individuals receiving government benefits such as from the Veterans Administration, Medicaid, SSI and/or HUD there are restrictions on the amount of income and assets they may own to remain eligible. The receipt of additional income or assets such as from an inheritance or injury settlement may disqualify recipients from their benefits. While the receipt of such funds may be a good thing, it can upset what is often a happy, independent, stable and safe living environment. To enable recipients to continue to receive their benefits and utilize additional income or assets, Special Needs planning is required.
Special needs planning usually involves the use of Special Needs Trust, discussed in more detail on our Estate Planning page. In short, a Special Needs Trust can be created to hold the additional assets for the benefit of the recipient without disqualifying them from their benefits. The funds from the Trust are not directly controlled or reachable by the recipient but, through a Trustee, they are available as a supplement to existing benefits.
If you are an individual receiving government benefits and you may be the recipient of an injury settlement or award, it is advised to seek the counsel of an Elder Law Lawyer as soon as possible. Waiting until the money is received is often too late.
To protect your family and ensure your wishes are met. No one likes to think about the possibility of their disability or death. If you postpone planning for these events until it is too late, however, you run the risk that your needs will not be met or that your intended beneficiaries — those you love the most — may not receive what you would want them to receive.
This is why estate planning is so important. It allows you, while you are still living, to ensure that your needs will be met and that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes and costs and it offers the comfort that your loved ones can mourn your loss without being simultaneously burdened.
What are some of the components of an Estate Plan?
They vary according to your needs but may include some or all of the following:
A will is a legal document containing your directions as to who will receive your property at your death. If you do not have a will, there is a law that determines how your property will be distributed. In your Will, you will appoint a legal representative, called an Executor, to manage your estate and carry out your wishes. A Will is especially important if you have minor children because it allows you to name a guardian for the children. The guardian is the person who will step into a parental role in the event that you and/or your spouse predecease them. You will also name a Trustee to manage funds for minor children.
Minor children can own property, but they cannot control it until they reach at least age 18. Most parents, however, are of the opinion that even if you raise a very mature and level- headed child, it is probably not a good idea for them to have access to large sums of money at that age. One way to avoid this issue to is to direct in the Will that money is to be held in trust for the benefit of the child. This is called a Testamentary Trust. In a Testamentary Trust, you pick a specific age, 25 for instance, at which time the child’s interest in the estate would vest, entitling them to all of the proceeds of the estate. Often parents stagger the ages at which the child may access principal of the monies held in trust. An example would be language that would allow the child access to 5% of the principal at age 18, 10% of the principal at age 21 and the balance at age 25.
While the funds are held in trust, they are managed by the Trustee that you name. The Trustee’s job is to protect the funds for the beneficiary and distribute it when needed according to a standard which is health, education, maintenance and support. This is a broad standard that would cover most needs of the child. For example, if the child has a medical bill, tuition bill, car expense, or rent due, the Trustee has the ability to pay the expense directly without just giving the money to the child. The Trustee also has the ability to say “no” to the child if the request is unreasonable. This is sometimes a key characteristic for a Trustee to have and should be considered in deciding who will hold this role.
Revocable Living Trust: This Trust enables you to avoid probate, maintain the privacy of your estate and save your heirs administrative time and expense upon your death. Similar to a Will, this type of trust directs how your assets will be distributed upon your death, who will serve in the role of Trustee and Guardian and what restrictions you may wish to place on the distributions. As above in the Testamentary Trust, you may direct that funds be held for the benefit of another for a period of time, including a lifetime, and at what age(s) funds may be dispersed.
As with all Trusts, it must be funded to properly function. In a Revocable Living Trust, you transfer your “probate” assets into the Trust while you are alive. This would include assets such as real estate, stocks, bank accounts and personal property. While you are alive, you are the Trustee with full access to all of the assets. In the event of your incapacity, a back-up Trustee is named to manage the Trust. Upon your death, your Trustee will see that your wishes are followed, and your assets are distributed accordingly. Because you have already transferred your probate assets to the Trust, there is no need for the probate process. Thus, your assets will be distributed more easily, faster and with less restriction than they would be within the probate process. As this Trust is “revocable” you may decide at any time to revoke it and remove your assets from it.
Asset Protection Trust: This is a Trust that is built to protect your assets from creditors as well as from Long Term Care costs such as nursing home expense. This trust is typically funded with assets that you specifically wish to protect to ensure that they will be preserved for your heirs. While this Trust is irrevocable and cannot be revoked and may only be amended under certain circumstances, you may still access any income that the trust assets produce. Also, while you may not access the principal of the Trust directly, you may access it with the assistance of a trusted heir.
The restrictions on this type Trust are necessary for a number of reasons. One may be to become eligible for certain benefits such as Medicaid or Veteran’s benefit assistance to pay for long term care. Another reason may be to protect assets from creditors, especially if you or a loved one is in a profession with a high risk of liability.
An Asset Protection Trust is often funded with assets such as real estate, gas and oil leases, brokerage accounts and cash. You may function as your own Trustee while you are alive. Upon your death, a successor Trustee steps in to assume management of the Trust and ensure ultimate distribution of assets according to your wishes.
Retirement Plan Trust or IRA Beneficiary Trust: This Trust enables you to transfer your retirement savings to your heirs while protecting the funds from threats in their lives such as bankruptcy and divorce. It also enables your heirs to “stretch” the income taxes due on the funds over a period of time rather than all at once. Rather than the funds flowing directly to your heirs, they flow to a Trust for their benefit. They are managed by a Trustee according to restrictions built to emphasize protection of the funds and maximization of tax savings.
These Trusts are helpful for a number of scenarios but here are a few where they can be particularly beneficial:
- You are an excellent saver and have amassed a large sum in your 401K/IRA that you likely will not extinguish in your retirement. You have a loving spouse and/or child that you wish to provide for, but they do not have your financial acumen or responsibility.
- You are an excellent saver and have amassed a large sum in your 401K/IRA that you likely will not extinguish in your retirement. You have a loving child who:
- does not have a high paying job and you fear they will not be able to accumulate much of their own retirement funds.
- Has chosen a spouse that you do not approve of and you fear a divorce
- Is financially irresponsible and will spend any and all inheritance upon receipt.
- Is financially irresponsible and you fear a future bankruptcy.
- Is chronically ill or disabled and may now or in the future be receiving government benefits such as Social Security Disability or Medicaid.
- Is in a profession with a high risk of liability.
In all of the above scenarios, you fear and there is risk that your hard-earned funds may be squandered. With a Retirement Plan Trust you can have peace of mind that your assets will survive and provide security for the next generation.
Special Needs Trusts (SNT): These Trusts are created to protect assets that may be passing to a loved one with special needs who may be receiving necessary government benefits such as Social Security Disability (SSI), Medicaid or housing support (HUD). These types of benefits are needs based which means that the recipient only qualifies when they have very limited assets. If such a person would receive an inheritance, it would disqualify them from continued receipt of the benefits.
Funds in a Special Needs Trust are managed by a Trustee to provide for the beneficiary. They are provided to supplement but not supplant any benefits already being received. These funds may pay for things such as an excess medical bill not paid by insurance, medical devices and comfort needs (a better mattress, clothing, a vacation).
There are basically two types of Special Needs Trust created by Elder Law Lawyers, 1st party and 3rd party. A 1st party SNT is created with the beneficiary’s own funds. These funds may come from sources such as a law-suit settlement, a gift or an inheritance. They are held and managed by a Trustee as above but upon the death of the beneficiary, remaining funds must be paid back to the State of Pennsylvania as reimbursement for benefits received.
A 3rd party SNT is created with funds of someone other than the beneficiary. These Trusts are managed as above but the main difference between them and the 1st party SNT is that there is no need for pay-back provisions. Funds remaining upon the death of the beneficiary may be paid to whomever the creator of the Trust has directed.
Pet Trusts: These Trusts enable you to preserve assets to ensure the care of your pet. As with other Trusts, the funds left to a Pet Trust are managed by a Trustee for the benefit of your pet(s). Our furry friends are quite special to us and some may not have available a proper caretaker when we die. With a Pet Trust you may name not only the Trustee of the funds but also the guardian of the animal, whether a person or an organization. If there are funds remaining upon the death of your pet, you may name the successor beneficiary.
Power of Attorney
A power of attorney allows a person you appoint, your agent or “attorney-in-fact”, to act in your place when you are unable. The agent you name has the authority to manage your financial affairs and property. There are two types of financial power of attorneys, Durable General and Springing.
A Durable General Power of Attorney is valid upon your signature and you do not have to be incapacitated for your agent to be able to act. This is often preferred as it is ready and waiting in the event that it is needed.
A Springing Power of Attorney is only valid when a physician certifies that you are incapacitated. This is less favored because of the extra bureaucracy involved but for certain client it may be necessary.
Without a Financial Power of Attorney, no one can manage your affairs without Court approval. The Court process, called a Guardianship proceeding, takes time, is expensive, and the Judge may not choose the person you would prefer. In addition, under a Guardianship your representative may have to seek court permission to take planning steps that they could implement immediately under a simple Durable Power of Attorney.
Living Wills and Health Care Power of Attorney
A Healthcare Power of Attorney allows you to designate someone of your choice to make health care decisions for you if you are unable to do so yourself. It is specifically related to health care decisions and does not include any of the powers granted in a financial power of attorney. Without a health care power of attorney, you may be subject to a Guardianship proceeding, which, as we discussed above, is not ideal
A living will or an Advanced Directive, instructs your health care providers what treatment you may want or not want when faced with an end of life situation. It is important to note the words “end of life” as this does not arise in every health care situation. For example, if you are in a car accident and have life threatening injuries, you will receive all possible life sustaining care at the hospital if you are otherwise healthy. If you are suffering from a terminal disease in this scenario and you have chosen not to have any life prolonging measure, you will not receive them. End of life care is very personal with people often feeling strongly one way or another. The important thing is to make your wishes known so as to avoid any potential conflicts that may arise among family members in the absence of the document.
Non-probate property passes outside of the probate process and must be planned for separately. Jointly owned property, property in Trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and are not covered under your will. In many instances, probate property and non-probate property pass to the same person or persons, but not always. In the absence of a beneficiary, non-probate property is usually payable to your estate which can cause negative tax consequences as well as exposure to creditors. Thus, it is very important that you keep your beneficiary designations current on things like IRA and Life Insurance policies.
Probate is the process by which an “Estate” is distributed according to Will or law to heirs of a deceased.
In Pennsylvania the probate process takes about a year and can be longer depending upon the type of assets and number of beneficiaries.
What are the steps of Probate?
- Secure the Original Will and hire counsel. In most instances, only the original Will may be “probated”. The named executor has the choice of counsel to hire. A meeting is set to review the Will and ascertain the distribution language and identify all of the heirs. You may be surprised to learn that the dramatic “reading of the Will” often portrayed in movies rarely occurs. Unless there is a specific reason to do so, only the executor usually meets with the heirs initially.
- Open the Estate. The executor of the Will must be sworn in at the Department of Court Records. The original Will is presented along with a probate petition and the executor literally has to raise their right hand and swear an oath to uphold the laws of the Commonwealth. Clients are often nervous about this step, but they usually agree with me later that the drive to the courthouse is more stressful and takes longer. (When there is no Will, the person sworn in is called an administrator.) There is a fee to open the estate which depends upon a few factors. In Allegheny County for instance, this fee is usually around $200.00. For this fee, counsel receives a “Grant of Letters” which is formal acceptance of the Will with the named executor and “Short Certificates” which is evidence of the appointment of the executor. Once the executor/administrator has been formally appointed they are the person who has the authority and obligation to manage the estate.
- Notice and Advertising. Counsel is required to notify all beneficiaries of their potential interest in the estate. Counsel also advertises in two publications that the estate has been opened. The purpose of this is to notify any potential creditors of the estate.
- Inventory and protect assets. The executor must locate all assets of the estate. Some assets are quite obvious such as real estate, personal possessions and cars. Other assets can be difficult to find depending upon how organized the deceased was. Paper documents such as bank and financial records, deeds and life insurance policies are often difficult to find. Is there a safe or safety deposit box? Did you check under the mattress? Once located, the executor must secure the items and make a report to counsel. Additionally, for financial accounts, counsel will need the date of death values. Usually the bank or financial institution can calculate these amounts. Often the executor will find non-probate items such as life insurance, items the deceased owned jointly with another with right of survivorship and beneficiary designated items such as 401K/IRA accounts. While these items will not pass through probate and the executor does not have ultimate responsibility for them, they should see that the items are passed to the appropriate owner/beneficiary.
- Open an estate bank account. Most estates will need a bank account. The executor may pick the bank of their choice. With a tax identification number and a short certificate, the bank will open an account where the executor may consolidate the cash assets of the estate.
- Debts and expenses. The executor and counsel will determine what debts are valid and if and when they should be paid. When the estate is solvent bills such as funeral expenses and medical bills not paid by insurance are paid first. Other important bills are those associated with the carrying costs of real estate. Utilities, insurance and maintenance must be kept up to date to keep the property secure. Bills such as credit cards are usually paid last.
- Inheritance taxes and Inventory. Within 9 months of the date of death in Pennsylvania the inheritance tax return is due. This tax return is similar to a personal tax return in that you start by listing gross assets, then deduct debts and expenses to determine the net figure subject to taxes. In Pennsylvania the inheritance tax rates are as follows:
a. Direct heirs: Parents, children and children of children 4%
b. Siblings: 12.5%
c. Everyone else: 15%
An Inventory is a formal document required to be filed with the Department of Court Records. The Inventory lists the “probate” assets of the estate.
- Distribution. Once the tax return is approved (usually 6 months from filing) final distribution of assets can be completed. Some assets may have already been distributed by this time depending upon the type of assets and the solvency of the estate.
- Close the estate. The last step in the probate process is to formally close the estate. This is done one of two ways. A Family Agreement is a contract between the executor and the heirs. It contains a summary of the assets, debts and expenses, taxes paid and distributions made. If everyone agrees, this document is signed and filed, and the estate is complete. This is the less formal and less expensive way to close an estate. The second way is via an Accounting. This is a detailed summary of the estate transactions that must be approved by the Court. An accounting is more expensive and more time consuming. An Accounting must be used when there are disagreements among beneficiaries, claims of creditors that are disputed by the estate or when there are minor heirs. An Accounting may also be used when there is a particular reason why counsel or the executor wish to Court to review the estate transactions.
Dealing with the probate process while grieving can be a trying experience. At Pecori & Pecori we have guided thousands of estates through the probate process. It is our goal to make what can be a confusing process as simple and stress-free as possible.
Frequently Asked Questions
When Should You Update Your Estate Plan?
Once you have created an Estate Plan, it is important to keep it up to date. You need to revisit your plan after certain key life events.
- Marriage (first or subsequent)
- Birth (children or grandchildren)
- Divorce or Death of a Spouse
- Increase or Decrease in Assets
What if I die with no Will?
When a person dies without a Will, it is called Intestacy. In this case there is a law that determines how the deceased’s assets are distributed. In general, surviving spouses and direct heirs are first to inherit an intestate estate. In their absence, aunts, uncles and cousins may inherit. It is a common misconception that the State will take all of your assets if you die without a Will. It is only in the absence of any surviving heirs that the State would stand to inherit. To open an Intestate Estate, an Administrator must be appointed.
Do I have to spend all of my money to become eligible for Medicaid benefits?
No. While there are strict requirement to meet for both income and assets, with proper planning you and/or your spouse may become Medicaid eligible while maintaining assets.
Will my spouse be able to keep our home and assets if I have to go to a nursing home and apply for Medicaid?
Yes, your spouse can keep a portion of your assets, including your home, and you may still qualify for Medicaid benefits. This can be a very challenging situation but with proper advanced planning and legal counseling it can be managed.
Are there Medicaid benefits available to help me stay in my home instead of a nursing home?
Yes. Medicaid has benefits called Home and Community Based Services available to assist you in your home if you qualify. Such benefits can include nursing, personal assistance, respite care and adult day care. The goal of these services is to keep individuals in their own home as long as safely possible.
I have a special needs child and I am afraid of what may happen when I am gone. What can I do?
With proper planning you can ensure that your special needs child or loved one has proper personal supervision, money management and coordination of benefits. This can be a daunting task but the right Elderlaw lawyer can help you through it.
I have a special needs child who lives semi-independently in a group home with the assistance of government benefits. How can I leave him an inheritance without jeopardizing his benefits or situation?
With a Special Needs Trust your child can remain in his environment and eligible for all of his benefits. The inheritance you provide can supplement his needs where required.
I am on SSI, can I protect money I might receive from my car accident case?
Yes, with proper planning, your proceeds from your car accident settlement can be set up to supplement rather than supplant your SSI benefits. There are also situations where it may be advantageous to take the money and disqualify yourself from your benefits for a period of time.
My Mother passed away, what do I do now?
If your Father is still alive and he and your Mother owned their property jointly, you likely do not have to do anything. Assets owned jointly by married individuals pass by operation of law to the survivor.
If your Mother was a widow and she had a Will, the Will must be probated so the assets may be distributed accordingly.
Your first step is to seek legal counsel for assistance.
Do all “estates” have to be probated?
No. Only certain property in the name of the deceased requires Probate. Assets of a deceased such as jointly held property, property held in Trust, retirement accounts and life insurance proceeds all pass outside of the Probate process.
How long does Probate take?
The length of the Probate process depends on the complexity of the Estate and the assets included. Estates are generally open for at least a year to ensure that there are no creditors to the Estate.
Do I really need a Financial POA?
Yes! Depending on your situation, a Durable Financial Power of Attorney is arguably more important that a Will. Without a POA, your funds are essentially “locked” if you become incapacitated.