Annapolis, Maryland Wills, Trusts & Estate Planning

What Should a Financial Plan Include? – Annapolis Estate Planning

Hit a spring pothole and you can lose a tire. But hit a pothole with your financial plan, and you may be in for a bigger problem than replacing a tire.

Do you have an up-to-date roadmap to your retirement? Keeping your finances, investments and retirement plan on a smooth road has become more and more challenging. Every day seems to bring a new regulation, investment product, or app that claims to offer the best route. You may need a guide—but how do you know who to choose?

Kiplinger’s recent article, “5 Bases You Need Covered With Your Retirement Plan,” says there are plenty of financial professionals today who can get you started down the right path with investment advice. However, a professional who limits his or her professional life solely to investing advice, isn’t going to get you comfortably and confidently to your retirement goals. Be sure you have someone who will concentrate on these five key areas of your financial life:

Income Planning. Your retirement could last for decades. You must be certain that you’ll have reliable income streams to pay your monthly expenses. This area typically should cover things like Social Security maximization, income and expense analysis, inflation, a plan for the surviving spouse, longevity protection and investment planning. Once your income plan has been created, you need to analyze your remaining assets (those that you won’t have to draw from every month). This should cover your risk tolerance, adjusting your portfolio to reduce fees, volatility control, ways to reduce risk while still working toward your goals and comprehensive institutional money management.

Tax Planning. Your comprehensive retirement plan should include strategies to decrease tax liabilities, such as determining the taxable nature of your current portfolio, possible IRA planning, looking at ways to include tax-deferred or tax-free money in your plan, prioritizing tax categories from which to draw income initially to potentially reduce your tax burden and considering ways to leverage your qualified money to leave tax-free dollars to your beneficiaries.

Health Care Planning. Retirees today must have a plan to address rising health care costs with little expense. Strategies should include examining Medicare Parts A, B, and D, reviewing options for a long-term care plan and legacy planning.

It’s critical that your hard-earned assets go to heirs and loved ones in the most tax-efficient manner possible. Your financial adviser should work collaboratively with a qualified estate planning attorney to help with these tasks:

• Maximize estate and income tax planning opportunities;
• Protect any assets in trust and ensure that they’re distributed probate-free to beneficiaries and
• Prevent your IRA and other qualified accounts from becoming fully taxable to beneficiaries upon death.

Your estate planning attorney should be able to give you some recommendations for trustworthy and respected professionals. You’ll also need to do your homework, and interview more than two or three to make sure that it’s a good fit. Ideally, this person will work with you, your estate planning attorney and your CPA, as part of a team, for many decades.

Reference: Kiplinger (May 4, 2018) “5 Bases You Need Covered With Your Retirement Plan”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Sensible Planning for Long Term Care Costs – Annapolis Estate Planning

Most think of long-term care as taking place in nursing homes.  However, in actuality, most long term care takes place at home. Changes in the insurance industry might lead to cost-effective ways to address this expense.

If you ask the average senior about long-term care (LTC), they are just as likely to throw up their hands and say that both nursing home care and LTC policies are just too expensive. If they haven’t already got a plan in place, they aren’t likely to start investigating one at this stage of their lives.

But that could change. If the long-term care insurance industry focuses more on helping people cover home-based services, policies would be more affordable and more appealing, says Kaiser Health News in its recent article, “How To Get Long-Term Care At Home Without Busting The Bank.” Most people see long-term care as a home care problem, and they can see a benefit to insuring people for the likelihood of where care is going to be needed first: at home.

However, people are using home care, and a smaller percentage are using nursing home care. People think they may begin needing care at home but eventually will need care in a facility. Research shows that is not true. People are usually able to stay at home for the entire time.

 There are currently more than 6 million older Americans who have a “high need” for long-term care, according to the U.S. Department of Health and Human Services. That’s defined as requiring daily assistance with at least two activities (eating, bathing, toileting, dressing, continence or transferring from a bed to a chair) that lasts at least 90 days or a need for substantial assistance due to severe cognitive impairment.

It’s estimated that about 52% of adults reaching age 65 today will need these services, with half needing it for two years or less, 12% for two to four years and 14% for more than five years. However, fewer than 10% of older adults have purchased long-term care insurance. It’s dropped in popularity, as premiums increased and insurers left the market. No one knows if the industry can fix its major problems.

It may be your goal to cover several years of home-based care—not nursing home care. If so, you could buy a less expensive policy with fewer features. The average annual cost for care provided by a home health aide was about $46,000, compared to $82,000 for a semiprivate room in a nursing facility. That’s about six hours of care, seven days a week. Although it is not enough for seniors with serious, disabling illnesses, it could work to relieve an unpaid family caregiver who is on-call 24/7.

If you end up needing nursing home care, you could look at a “qualified long-term care partnership policy.” It’s available in every state except Alaska, Hawaii, Illinois, Massachusetts, Mississippi, New Mexico, Vermont, and Washington, D.C. These little-known insurance products are designed to help seniors preserve their assets, if they become seriously ill, require nursing home care and want to be eligible for Medicaid. That program pays for about 50% of nursing home costs in the country.

To qualify for Medicaid, most states have strict assets limitations.  However, with a partnership policy, every dollar received in long-term care benefits is exempted from Medicaid’s asset test and protected from seizure by the state.

There are a number of unknowns about partnership policies. There does not appear to be any reliable statistics on how many people who own them eventually turn to Medicaid to pay for nursing home care, nor is there information on the number of partnership programs that have been sold or the size of benefits that have been paid to policyholders.

To start preparing, seniors are advised to get a clear picture of the average home care and nursing home care costs in their state, so they have a better understanding of what kind of coverage they need. Consult with an elder law attorney to talk about options and make LTC planning part of your overall estate plan.

Reference: Kaiser Health News (July 27, 2017) “How to Get Long-Term Care at Home Without Busting the Bank”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Medicaid Lookback Rules - Annapolis Estate Planning

My mother gave me money in 2009.  Now (2013) she is in a nursing home and needs to get Medicaid.  Does that money need to go back in her account because of Medicaid's five-year lookback?

Medicaid is wound tight with very well-intentioned rules to stop people from taking advantage of or “beating the system.” These rules are meant to prevent fraud. Unfortunately, the rules intended to stop outright fraud can sometimes get in the way of those who do play by the rules.

The most common problem families run into is the so-called “lookback” period. You can easily run afoul of the 20/20 hindsight of Medicaid and thereby threaten the care your elderly loved one needs. This common conundrum of the lookback period was recently updated in a Q&A and supporting guide produced by ElderLawAnswers. In fact, the common question that sparked the post is the same as the title: “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?”

The lookback period, as some know all-too-well, is the period that Medicaid looks back through the finances and tax records of an applicant to ensure that they did not give away their assets to pass muster with the means-testing of the program. Of course, there are plenty of legitimate scenarios in which an individual would want to give away money or assets only to need Medicaid a few years thereafter.

So, what happens when the tripwire is tripped and your loved one is Medicaid ineligible due to a previous gift made during the lookback period?

This may vary from situation to situation (and state to state), but there are ways of undoing the gift and becoming Medicaid eligible. However, there are some potentially strange tax consequences. Then again, the heir who received the gift can always pay for the care until the loved one is eligible for benefits again. Right?

In either event, the best solution would be to not create the problem in the first place. For information on the lookback and other eligibility problems to Medicaid, consult the master post on the subject (see “Medicaid's Asset Transfer Rules”). As always this is yet another example of situations that require the expertise of competent counsel before making a financial or legal move now (the gift) that can have serious financial or legal consequences later.

Reference: ElderLawAnswers (mod. January 3, 2014) “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?” and ElderLawAnswers (mod. September 13, 2013) “Medicaid's Asset Transfer Rules”

                    Holden & Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys