All posts by cconboy

The phrase “life estate” often comes up in discussions of estate and Medicaid planning, However, when we meet with individuals who ask us about this planning method, they are often unaware of how it works. Since there are both pros and cons in utilizing this type of planning, it is important to take a closer look at what life estates are all about!

A life estate is a form of joint ownership that allows one person to remain in a house until his or her death, when it passes to the other owner. Life estates can be used to avoid probate and to give a house to children without giving up the ability to live in it.  They also can play an important role in Medicaid planning.

In a life estate, two or more people each have an ownership interest in a property, but for different periods of time. The person holding the life estate — the life tenant — possesses the property during his or her life. The other owner — the remainderman — has a current ownership interest but cannot take possession until the death of the life estate holder. The life tenant has full control of the property during his or her lifetime and has the legal responsibility to maintain the property as well as the right to use it, rent it out, and make improvements to it.

When the life tenant dies, the house will not go through probate, since at the life tenant’s death the ownership will pass automatically to the holders of the remainder interest. Because the property is not included in the life tenant’s probate estate, it can avoid Medicaid estate recovery in states that have not expanded the definition of estate recovery to include non-probate assets. Even if the state does place a lien on the property to recoup Medicaid costs, the lien will be for the value of the life estate, not the full value of the property.

One drawback to using a life estate as a Medicaid Planning tool is that the life tenant cannot sell or mortgage the property without the agreement of the remaindermen. In addition, if the property is sold, the proceeds are divided up between the life tenant and the remaindermen. The shares are determined based on the life tenant’s age at the time — the older the life tenant, the smaller his or her share and the larger the share of the remaindermen. Lastly, and most important, you need to be aware that transferring your property and retaining a life estate can trigger a Medicaid ineligibility period if you apply for Medicaid within five years of the transfer. Purchasing a life estate should not result in a transfer penalty if you buy a life estate in someone else’s home, pay an appropriate amount for the property and live in the house for more than a year.

The rules regarding Medicaid transfer penalties and estate recovery are extremely complex, so BEFORE you consider any planning strategies, you should contact the experienced attorneys at Zacharia Brown. To find out more about Medicaid and Asset Protection Planning, and if a life estate is the right plan for you,  schedule an appointment with an attorney at Zacharia Brown by visiting our website at or by calling 724.942.6200.

This particular question is one that we hear from our clients all of the time. The short answer is, if you have it to give, you certainly can. HOWEVER, there may be consequences should you apply for Medicaid long-term care coverage within five years after each gift.

The $14,000 figure is the amount of the current gift tax exclusion (for 2017), meaning that any person who gives away $14,000 or less to any one individual does not have to report the gift to the IRS, and you can give this amount to as many people as you like.  If you give away more than $14,000 to any one person (other than your spouse), you will have to file a gift tax return.  However, this does not necessarily mean you’ll pay a gift tax.  You’ll have to pay a tax only if your reportable gifts total more than $5.49 million (2017 figure) during your lifetime.

Many people believe that if they give away an amount equal to the current $14,000 annual gift tax exclusion, this gift will be exempted from Medicaid’s five-year look-back at transfers that could trigger a waiting period for benefits.  Nothing could be further from the truth.

The gift tax exclusion is an IRS rule, and this IRS rule has nothing to do with Medicaid’s asset transfer rules. While the $14,000 that you gave to your grandchild this year will be exempt from any gift tax, Medicaid will still count it as a transfer. Furthermore, that gift could then make you ineligible for nursing home benefits for a certain amount of time should you apply for them within the next five years.  You may be able to argue that the gift was not made to qualify you for Medicaid, but proving that is an uphill battle.

If you think there is a chance you will need Medicaid coverage of long-term care in the foreseeable future, you should consult with an experienced elder law attorney at Zacharia Brown BEFORE starting a gifting plan. For more on Medicaid Planning and asset transfer rules,  or to schedule an appointment with an attorney at Zacharia Brown, please visit our website at or call 724.942.6200.

In the world of Medicaid, one of the phrases that many people are familiar with is the 5 year look-back period. Unfortunately, it is also the one area of Medicaid that causes people the greatest amount of confusion.

As discussed last week, Medicaid, unlike Medicare, is a means-based program, which means that you are only eligible for it if you have very few assets. The government does not want you to transfer all your assets on Monday in order to qualify for Medicaid on Tuesday, so it has imposed a penalty on people who transfer assets without receiving fair value in return.

In order to identify who has transferred assets, states require a person applying for Medicaid to disclose all financial transactions he or she was involved in during the five years before the Medicaid application. This five-year period is known as the “look-back period.” The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during this period.

Any transfer can be scrutinized, no matter how small. There is no exception for charitable giving or gifts to grandchildren. Even informal payments to a caregiver may be considered a transfer for less than fair market value if there is no written agreement. Similarly, loans to family members can trigger a penalty period if there is no written documentation. The burden of proof is on the Medicaid applicant to prove that the transfer was not made in order to qualify for Medicaid.

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility even if the transfers occurred during the look-back period. These exempt recipients include the following: a spouse (or a transfer to anyone else as long as it is for the spouse’s benefit); a blind or disabled child; a trust for the benefit of a blind or disabled child; and/or a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty: the applicant’s spouse; a child who is under age 21 or who is blind or disabled; into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances); a sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home; or a “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

If the state Medicaid agency determines that a Medicaid applicant made a transfer for less than fair market value, it will impose a penalty period. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average monthly cost of a nursing home in your state.

If you have transferred assets within the past five years and are planning on applying for Medicaid, you should first consult with an experienced attorney at Zacharia Brown to find out if there are any steps you can take to prevent incurring a penalty.  The attorneys at Zacharia Brown can help you navigate the complex area of Medicaid and advise you on other Elder Law and Estate Planning issues.  Call 724.942.6200 or visit us at  to schedule an appointment today.

 Although their names are confusingly alike, Medicaid and Medicare are quite different programs. Both programs provide health coverage, but Medicare is an “entitlement” program, meaning that everyone who reaches age 65 and is entitled to receive Social Security benefits also receives Medicare. (Medicare also covers people of any age who are permanently disabled or who have end-stage renal disease.)

Medicaid, on the other hand, is a public assistance program that helps pay medical costs for individuals with limited income and assets. To be eligible for Medicaid coverage, you must meet the program’s strict income and asset guidelines. Also, unlike Medicare, which is entirely federal, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, however this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state’s Medicaid costs. The state then picks up the rest of the tab.

The most significant difference between Medicare and Medicaid is in the realm of long-term care planning. Medicaid covers nursing home care, while Medicare, for the most part, does not.  Medicare Part A covers only up to 100 days of care in a “skilled nursing” facility per incident of illness. The care in the skilled nursing facility must follow a stay of at least three days in a hospital. For days 21 through 100, you will have a copayment of $164.50 a day in 2017. (This co-pay is generally covered by Medigap insurance). In addition, the definition of “skilled nursing” and the other conditions for obtaining this coverage are quite stringent, meaning that few nursing home residents receive the full 100 days of coverage. As a result, Medicare pays for less than a quarter of long-term care costs in the U.S.

In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a long-term care insurance policy, most people believe that they need pay out of their own pockets for long-term care until they become eligible for Medicaid. While that may be the case in some situations, there are also a number of planning strategies that can preserve assets for a healthy spouse while still adhering to Medicaid rules.

The fact that Medicaid is a joint state-federal program further complicates matters. This is due to the fact that Medicaid eligibility rules vary from state to state, and in addition, these rules keep changing. Both the federal government and most state governments seem to be continually tinkering with the eligibility requirements and restrictions. That is why consulting with an knowledgeable attorney at Zacharia Brown is so important.

With regard to care for individuals who remain at home, more and more states are recognizing that home care costs are far less than nursing home care. In Pennsylvania, there are various programs that can provide Medicaid-covered services to those who choose to remain at home.

Medicaid is a complex program with many restrictions and rules that are hard to decipher if you are not familiar with the system. In order to ensure that you are making wise planning decisions, please contact the attorneys at Zacharia Brown who can advise you about Medicaid, along with many other Elder Law and Estate Planning issues.  Call 724.942.6200 or visit us at  to schedule an appointment today.

This week, we kick-off a month long discussion about Medicaid Benefits and Planning. Medicaid, also known as Medical Assistance or MA in Pennsylvania, is a federal program administered by the State to provide medical care for those who cannot afford the care. It is a vast, far reaching program. Medicaid is the largest payer to nursing homes across the state of Pennsylvania (and country), by far.

The Medicaid application process is a complicated maze with plenty of traps for those who are inexperienced in navigating the system. Additionally, the amount of misinformation that is proffered by supposedly “reliable” sources causes many individuals to make costly planning mistakes at an already stressful time in their lives. Consequently, it is essential that you seek out guidance from an experienced Elder Law Attorney at the outset of any Long Term Care planning.

In recent years, a number of non-lawyers have started businesses offering Medicaid planning services to seniors. Additionally, many social workers who assist individuals with the Medicaid application process are offering advice, even though they are unfamiliar with the complex planning options that may be available. While using one of these services or relying on “unpaid” advice may be much cheaper than hiring an attorney, the overall cost may end up being far greater.

If you use a non-lawyer to do Medicaid planning, the person offering services may not have any legal knowledge or training. Bad advice can lead seniors to purchase products or take actions that won’t help them qualify for Medicaid and may actually make it more difficult. The consequences of taking bad advice can include the denial of benefits, a Medicaid penalty period, or tax liability.

As a result of problems that have arisen from non-lawyers offering Medicaid planning services, a few states (Florida, Ohio, New Jersey, and Tennessee) have issued regulations or guidelines providing that Medicaid planning by non-lawyers will be considered the unauthorized practice of law. For example, in Florida, a non-lawyer may not render legal advice regarding qualifying for Medicaid benefits, draft a personal service contract, determine the need for or execute an income trust, or sell income trust kits. In Florida, the unlicensed practice of law is a felony that is punishable by up to five years in prison, while in Ohio, practicing law without a license is subject to civil injunction, civil contempt, and civil fine

Applying for Medicaid is a highly technical and complex process. Experienced lawyers who are familiar with Medicaid law in the applicant’s state are best able to help navigate this process. The attorneys at Zacharia Brown are knowledgeable in helping clients to plan and find significant financial savings and/or better care for themselves or their loved one. This detailed planning may involve the use of trusts, transfers of assets, purchase of annuities or increased income and resource allowances for the healthy spouse.

The attorneys at Zacharia Brown can advise you about Elder Law Issues, Estate Planning and Medicaid Benefits and ensure that you are properly informed when making important decisions.  Please contact us at 724.942.6200 or visit us at  to schedule an appointment today.

Over the past month, we have examined the uses of and differences between Revocable Trusts, Living Trusts, Testamentary Trusts, and Special Needs/Supplemental Needs Trusts.  This week, we will discuss the Irrevocable Trust and how it might be utilized when discussing your Estate Plan and/or Long Term Care.

An Irrevocable Trust, which may also be called an Asset Protection Trust, can be used for both Estate Planning and Medicaid Planning purposes.  This particular trust is one that cannot be changed after it has been created.  We often compare irrevocable trusts to a treasure chest when explaining to clients how they are used, Once property and assets are transferred into the chest, it is closed and locked and the contents cannot be touched by the creator of the trust. However, if the irrevocable trust is properly designed by an experienced elder law attorney, it can still allow the creator to maintain some control over, and in some instances even use of, the assets transferred into the trust (including their home).

In most cases, an irrevocable trust is drafted so that the income is payable to the person establishing the trust (called the “Grantor”) for life.  However, the principal of the trust cannot be applied to benefit the grantor or the grantor’s spouse. Upon the grantor’s death, the “principal” or “corpus” of the trust is paid to his or her children, grandchildren and/or other loved ones who are named as beneficiaries of the trust. This way, the funds in the trust are protected. One caveat to keep in mind when creating an irrevocable trust is that once property is transferred into the trust, legal title to the assets cannot be transferred back to the grantor, and the principal of the trust cannot be given to the grantor under any circumstances. The reason for this is that if the grantor is able to get the assets back, those assets will be considered available for nursing home purposes.

When utilized correctly, the principal of an irrevocable or asset protection trust will not be counted as a resource for Medicaid Planning purposes, provided that the trustee cannot pay it to you or your spouse for either of your benefits. Because of the protection that this type of trust offers, you also need to be aware of the drawbacks to such an arrangement. Since the trust requirements are very rigid, you will not be able to gain access to the trust funds, even if you need them for some other purpose. Consequently, before drafting these type of trusts, the attorneys at Zacharia Brown spend a great deal of time with our clients to determine their financial picture, as well as their family dynamics and relationships. These details play an important role when drafting the trust, deciding who will serve as trustee, and ensuring that the appropriate amount of funds and property are transferred into the trust and also reserved outside of the trust to serve as a “cushion” for any financial needs that may arise in the future.

The experienced attorneys at Zacharia Brown can advise you about Elder Law and Estate Planning with trusts and ensure that you are properly informed before deciding which options are best for you.  Please contact us at 724.942.6200 or visit us at  to schedule an appointment and learn about trusts today.

In last week’s blog post, we took a closer look at the Revocable Living Trust and explored some reasons that you may want to utilize one when creating your estate plan.  As a refresher, a trust is essentially a contract between three parties.  The person who creates the trust is known as the Grantor.  Upon creation of the trust, the Grantor must then choose a person(s) or entity, called the Trustee, who will manage and distribute the assets of the trust. Finally, the person or persons who will benefit from the trust are called beneficiaries.

In addition to the Revocable Living Trust, another type of trust that is often utilized in estate planning is the Testamentary Trust.  Unlike a Living Trust, a Testamentary Trust is instead created upon the death of the grantor.  Additionally, the terms and conditions of the trust, as well as who will serve as Trustee(s) and who will be Beneficiaries of the trust are all contained in the Grantor’s Last Will and Testament.  All Testamentary Trusts are irrevocable, however, the terms of a Testamentary Trust will typically outline how the trust is to be managed and the circumstances under which the trust will terminate.

There are many reasons why an individual may want to create a Testamentary Trust.  One of the most common instances is where one or more beneficiaries are minors.  Rather than having a large amount of money or assets pass directly to a minor child under a will, a Testamentary Trust will allow a trustee to be in charge of managing and distributing the assets of the decedent as specified under the trust agreement contained in the will. These trusts may also be utilized when a person has a child with drug or alcohol problems or a child who has money management issues. Since a trust can contain very specific instructions, conditions and time frames for distributions of assets , it can allow an individual to protect his or her loved ones from “beyond the grave.”

One additional type of trust that can be created under a person’s will is a “Special Needs” or “Supplemental Needs” Trust.  This trust is specifically designed to help take care of loved ones who were born with a disability or are otherwise receiving Social Security Supplemental Security Income (SSI).  Once created, this specialized trust will allow a disabled child or adult to continue to receive government benefits that would have otherwise been lost due to excess resources.  Consequently, the trust must be carefully drafted to prevent a beneficiary from becoming over-resourced, while at the same time providing specific instructions for allowable monetary distributions for education and training, vacations, entertainment, furniture, clothing, etc.

At Zacharia Brown, when we are advising clients on a “Special Needs” or “Supplemental Needs” Trust, we stress the importance of choosing a trustee who has particular expertise in the stringent rules governing these trusts.  If the trust is not administered properly, the results can be disastrous for your loved one.  Our experienced attorneys work closely with all of our clients when creating trusts to ensure that all details are taken care of.  Contact us at 724.942.6200 or visit us at  to schedule an appointment and learn about trusts today.

As we discussed last week, there are a number of different types of trusts that can be employed when creating your estate plan and/or planning for long term care. This week we will focus on Revocable Living Trusts and why you may or may not want to use them.

A Revocable Trust is often seen as a more flexible option in that it may be changed or terminated at any time. Revocable trusts are typically employed to provide a targeted solution to specific estate planning issues.

One such purpose may be to allow for efficiency when administering one’s estate. When an individual owns property in more than one state, a revocable trust will eliminate the need to open ancillary estates during administration of the estate. Another reason for using a revocable trust can be to avoid probate. This is often due to privacy issues, especially in regard to extremely large estates where an individual may not want the full amount of his or her estate to be publicized. Finally, a revocable trust can be used to protect a trust beneficiary’s inheritance. When a Grantor is worried that a beneficiary may have marital and/or creditor issues, a revocable trust may be used to protect a beneficiary’s interest in the case of divorce proceedings, creditor claims and lawsuits. One caveat however, a revocable living trust does not provide the creator of the trust with protection of their assets during their own lifetime.

A final consideration when utilizing a revocable trust is to make sure that all designated assets are actually transferred into the trust. Since revocable trusts are established while the trust creator is still living, his or her assets will not automatically be transferred into the trust. The onus is on the trust creator and/or their attorney to transfer these assets. This can be done by preparing a new deed in the case of real estate; by retitling securities accounts in the name of the trust; and by changing the beneficiary designation of a life insurance policy to name the trust.

At Zacharia Brown, we have seen many instances where a revocable trust was created by another attorney, but the assets were never transferred into the trust. In those cases, the failure to transfer assets resulted in a defective trust that failed to carry out the trust creator’s intentions. The experienced attorneys at Zacharia Brown work closely with all of our clients when creating revocable trusts to ensure that all details are taken care of. Please contact us at 724.942.6200 or visit us at  to schedule an appointment and learn about trusts today.

In the world of Estate and Elder Law Planning, there are many reasons why we may want to utilize a Trust when formulating an estate plan for a client. Many people have come into our office with a preconceived notion that they “need” a trust in order to avoid inheritance taxes. Therefore, when we sit down with new clients to discuss different types of trusts, we make sure to explain that while trusts may serve a very important planning purpose in some instances, creating a unnecessary trust, or utilizing the incorrect kind of trust, may actually hinder your overall estate plan.

The definition of a trust, simply, is a contract between the creator of the trust (also known as the ‘grantor’) and the person to whom property is entrusted (also known as the ‘trustee’). Think of a trust as a treasure chest with the grantor transferring his or her assets into the confines of said treasure chest. The assets are no longer owned by the grantor, but instead are owned by the trust. The grantor also provides instructions to the trustee as to who will benefit from the assets contained in the trust, as well as under what circumstances they will benefit. The individuals who will benefit from the trust are called the “beneficiaries.”

Depending upon the type of trust, the grantor may still enjoy full control and access to the assets of the trust and benefit from the same (a revocable trust). Alternatively, in another type of trust, the grantor may not be permitted to have control over or access to trust assets at all (an irrevocable trust). As to the timing of when a trust may be created, some trusts are established while an individual is still living (a revocable, living trust or inter-vivos trust. ) Other trusts are instead created under an individual’s will (a testamentary trust). A testamentary trust does not take effect until the creator of the trust passes away. However, it can be a very effective way of providing asset protection to a person’s loved ones after he or she passes on.

Each of the aforementioned trusts serve a very specific purpose, and when utilized correctly, they can be extremely productive in helping a person with their overall estate and long term care planning goals. This month, we will elaborate on the specifics of particular types of trusts and how the attorneys at Zacharia Brown may be able to utilize a trust when helping you plan for your present and future estate planning and long term care needs. Please contact us at 724.942.6200 or visit us at  to schedule an appointment to talk about trusts today.

This past month, we have discussed the many considerations to be weighed when researching long term care options for your loved one. Beginning with an assessment of your loved one’s health, we also stressed the importance of discussing the logistics of care (near friends or family), care preferences (meals, social interaction, activities) and level of care required (At Home, Independent or Continuing Care Retirement Community, Assisted Living, Memory Care, or Skilled Nursing Care).

Understandably, at a time when many families are coming to terms with a loved one being ill, the amount of decisions to be made in a very short period of time can be overwhelming. Zacharia Brown is here to help. As opposed to transactional legal advisors who may only concentrate on estate, incapacity and entitlement qualifications, our integrated, holistic, elder-focused approach helps families plan, pay for, coordinate and secure quality care.

Our key to effective Life Care Planning is our Elder Care Coordinator, Heather Wagner. When your family comes in to discuss care needs for mom and/or dad, Heather will meet with you to provide guidance and assistance in helping you make an informed decision that is in the best interest of your loved one. At the same time, she will help to locate superior care in an atmosphere that will keep your loved one both comfortable and protected. The goal, when appropriate, is to avoid a nursing home and use all available resources and benefit programs to allow a person to age peacefully, preferably at home.

Heather will serve as an ongoing resource to answer questions, address care concerns, attend care meetings and check-in on your loved one as needed. She has over 15 years of experience in elder care, mental health, and managed care. She received a BS in Psychology from Carlow College and a Masters of Science in Professional Counseling from Carlow University. She is licensed by the Commonwealth of PA as a Professional Counselor and is a Nationally Certified Counselor.

Zacharia Brown’s Life Care Planning process is a complete solution that provides our clients with legal representation combined with continuing guidance from our Elder Care Coordinator as their loved one’s needs evolve and change. We continue to be at the forefront of innovation in Elder Law and Life Care Planning in order to meet the needs of our rapidly aging population. We are one of the only law firms in Western Pennsylvania that provides Life Care Planning services.  Please contact us at 724.942.6200 or visit us at  to meet Heather Wagner and the rest of our team and schedule an appointment today.