Archive for “Estates”

Financial Planning for a Life with MS: Slides from the Rhode Island Spring Education Conference

It was my pleasure and privilege to participate recently as a presenter at the Rhode Island Spring Education Conference of the Greater New England Chapter of the National Multiple Sclerosis Society. My topic was entitled Adapting: Financial Planning for a Life with MS. You can view the slides from my presentation here:

The conference included valuable information for those with MS and their caregivers, including nutrition and MS; preparing for MS doctor visits; managing fatigue and bladder/bowel symptoms related to MS; and moving forward after an MS diagnosis.

Particular thanks and kudos to Meredith Sheehan, Program Manager – Community Programs, and her staff for an excellent program.

For more information on local programming for people living with MS, along with the latest MS research findings, first-person stories, advocacy updates, upcoming events, and fundraisers, you can subscribe to the MSConnection quarterly newsletter.

Categories: Estates, Medicaid & Medicare, Trusts

Estate and Medicaid Planning for Individuals with Alzheimer’s Disease: Slides from a Presentation at the Caregiver’s Journey Conference

Last week, the Rhode Island’s Alzheimer’s Association did another terrific job with its annual Caregiver’s Journey Conference, a day-long conference for Alzheimer’s caregivers and care professionals. I was privileged to present on the topic of “Estate and Medicaid Planning for Individuals with Alzheimer’s Disease”.

I’m posting the slides from my presentation here. Whether or not you attended the program, if you have questions about financial or legal planning for a loved one with dementia or Alzheimer’s, please feel free to contact me.

Categories: Estates, Medicaid & Medicare

President Obama to take on “trust-fund loophole”

In his State of the Union address, President Obama will, according to a report in the New York Times, propose what his advisors are calling the “trust-fund loophole”, in order to help finance tax cuts for the middle class.

Very interesting. My practice does not involve “trust fund babies” but rather the same middle-class people the President is seeking to benefit. And it is often middle-class people who are the direct beneficiaries of this “trust-fund loophole”.

Let’s first look at what this “loophole” is and and how it works. Suppose a parent gave an adult child the home which the parent purchased in the 1960s for $10,000. Further suppose that when that parent dies that same house is worth $150,000.

When the adult child sells the parent’s home, she will realize capital gain in the amount of $140,000. This amount is the difference between the price at which she sells it – $150,000 – and the parent’s “tax basis” of $10,000. Because the parent gave the property outright during the parent’s life, the adult child received this “carry-over basis” of $10,000.

Now imagine same parent, adult child and house in a different example. Instead of giving the property to the adult child outright during the parent’s lifetime, the parent instead gives the property to the adult child following the parent’s death through a will, trust, life estate deed or other device through which the parent retained certain rights over the house. In that case, the child would receive a “stepped –up basis”–meaning a cost basis equal to the value of the house at the time of the parent’s death.

So we have a very different result. In this case the child’s gain on the sale of the property would be equal to the $150,000 sales price, minus the $150,000 “stepped-up basis” or zero. Zero as in zero capital gains tax to the adult child. Versus $140,000 in capital gains tax in the “carry-over basis” example.

This is the “trust fund loophole” that President Obama seeks to close. The New York Times story quotes administration officials as stating that the tax “would fall almost entirely on the top 1 percent of taxpayers” and “would apply to capital gains of $200,000 or more per couple”.

We’ll see. In the meantime, it’s interesting to see how the term “loophole” can mean different things to different people.

Categories: Estates

Stealth Capital Gains

Many elderly (as well as non-elderly) clients have brokerage accounts which include mutual funds.  Many of my clients who have these funds (like perhaps the most of the rest of us) may do nothing more than open the monthly statement from the brokerage firm and glance at the results.  Though there are exceptions, most clients whom I have encountered are not active traders of these mutual funds.

Nevertheless, as Jason Zweig points out in a recent Wall Street Journal article, some of those people will be receiving IRS Form 1099s later this month showing capital gains distributions from the mutual fund which they held. How can this be when the investor did not sell any portion of the fund during the year?

The answer is that is while the account holder himself may not have sold any portion of his fund, the manager of the mutual fund did.  For example, managers of mutual funds who invest in stocks may have concluded that, as a result of the gains in the stock market in 2014, it was a good time to sell certain individual stocks within the mutual fund.  Because the stock was purchased by the manager at a lower price than at which it was sold–generally a good thing–this will result in capital gains to the fund. And as Jason Zweig points out:

“Mutual funds are generally required by tax law to pay out all profits they realize on the sale of their holdings.  An investor outside a retirement account is typically liable for taxes on any gains the fund distributed during the tax year – even if he or she never sold a share of the fund.”

The last part – outside of a retirement fund – means outside of a so-called qualified retirement account such as an IRA, 401k or other tax-deferred account. Investors in these types of accounts will generally not be liable for the capital gains of the fund in the year in which they were incurred.

For those holding mutual funds outside of these tax-deferred accounts, however, the end of January may contain in the mail a notice that such gains were incurred and need to be accounted for in determining potential 2014 income tax liability.

This post first appeared on the Long Term Care Planning Blog on January 5, 2015.

Categories: Estates

Announcing the Long Term Care Planning Blog

Counseling clients facing the prospect of $10,000 per month nursing home costs and other costs of long term care is perhaps the most challenging aspect of the practice of Elder Law. For in addition to knowing substantive law in areas ranging from public benefits to tax planning, the Elder Law practitioner must be aware of community resources such as geriatric care managers, client-centered financial advisors, and excellent providers of long term care services.

That is why I am delighted to announce the launch of a new blog devoted to long term care planning,  The Long Term Care Planning Blog is hosted on the Law Professor Blogs Network. As an adjunct law professor at Roger Williams University Law School and a certified elder law attorney (CELA) I will be serving as the blog’s editor. The best part is that nationally known practitioners and other professionals whom I am known or admired for decades have agree to serve as contributing editors, including:

Some of the topics we’ve covered since our launch include end of life discussions, preparing for the high cost of nursing home stays, the special training and skills required to properly help veterans, benefits for permanently disabled adult children, and what is Elder Law?.

We look forward to covering many more issues related to long term care planning over the coming weeks and months, and invite you to leave feedback and questions using the blog’s comment system, or directly to me or any of our authors via email, which you will find beside our pictures at the bottom of the blog homepage.

You can also sign up to receive new blog posts by email by clicking on “Subscribe” at the top of the blog homepage.

Categories: Estates, Long Term Care Insurance, Medicaid & Medicare, Nursing Homes, Trusts

Hospice Care, Funeral Planning, and Learning from Others

I was privileged to participate recently in a program entitled Planning for the Future: Stewardship, Finances, and End-of-Life Decisions sponsored by St. David’s on-the-Hill in Cranston. The program, moderated by St. David’s pastor, Father Peter Lane, was a full afternoon of programming, the final session of which I co-presented with Donna Palumbo and Mary Biello of the VNA of Rhode Island and Craig W. Carpenter of Carpenter-Jencks Funeral Home.

In his remarks, Craig Carpenter noted that Father Lane and the vestry at St. David’s performed a substantial service to its congregation and to the community (to whom the program was also open) by discussing topics which, in Craig’s apt term, take courage for people to discuss. In my presentation, I provided an overview of advanced directives and particularly the importance of having in place durable powers of attorney for healthcare. I stressed the equal importance of selecting the correct agent and successor agent to act as decision-makers in the event one is unable to make healthcare decisions due to incapacity.

I am always delighted to meet people and share information at gatherings such as this. With the St. David’s on-the-Hill program, I also had the added bonus of learning more about two topics of importance to my clients—hospice care and funeral planning—from highly experienced experts.

Donna and Mary, for example, pointed out that much hospice care is delivered in the home. This is in contrast to the perception which many people have who may be familiar with hospice care which a loved one or friend experienced by the extraordinary professionals at the Philip Hulitar Inpatient Center.

Donna and Mary also pointed out a result of hospice care which I have seen with my clients on a number of occasions. That is, when provided with hospice care at home or in a nursing home, the patient’s condition can improve to a point at which he or she is no longer qualifies for hospice care. This, of course, does not mean that the patient is “cured” of the condition that qualified him or her from hospice care initially. Rather, the intervention of the additional care has prolonged the length and most importantly the quality of the patient’s life. More about the services which Donna, Mary and their team at the VNA offer in hospice and palliative care can be found at

As to Craig Carpenter’s portion of the program, if you don’t think that hearing about funeral planning and what occurs at funerals is a riveting topic, you haven’t heard Craig speak. Craig, for example, related the story of discussing with his own father—himself a funeral planner for over a half-century—his father’s desires for his own funeral. It was fascinating to hear Craig talk about assumptions that he had understandably made about certain things his father would want which proved to be incorrect.

Craig’s point was that planning in advance removes those uncertainties (to say nothing of potential conflicts among family members) and makes the entire process what it should be – i.e. in keeping with the desires of the individual who has passed away.

Congratulations to Father Lane and the vestry of St David’s on-the-Hill for a terrific program.

Categories: Estates

Legal and Financial Considerations of Alzheimer’s Disease – Presentation Slides from the Getting Started Education Series

It’s my privilege to be a regular presenter for the Alzheimer’s Association’s Getting Started education series, a set of free workshops held regularly throughout Rhode Island. Over the years I’ve presented Part 3, “Legal and Financial Considerations of Alzheimer’s Disease“, several times, and I thought readers might find my slides useful.

The presentation slides are embedded below. If you have more specific questions about financial or legal planning for a loved one with dementia or Alzheimer’s, or are in need of legal help, please don’t hesitate to contact our offices.

Categories: Estates, Medicaid & Medicare

ALS Research Symposium – Presentation on Estate Planning & Public Benefits for Individuals with ALS

Last Sunday, October 19th I was pleased to present at the ALS Research Symposium of the ALS Association, Rhode Island Chapter. The topic of this presentation was Estate Planning & Public Benefits for Individuals with ALS.

As promised on that day, I am now sharing my presentation slides (embedded below). If you have more specific questions on the issues discussed, or are in need of legal help, please don’t hesitate to contact our offices.


Categories: Estates, Medicaid & Medicare

Providence Retired Teachers Association Presentation

On October 15th I was privileged to present to a meeting of Providence Retired Teachers Association on the topic of Estate and Medicaid Planning.  As Tony Mancini, the long-time President of the Association noted in his introduction, this was my fifth appearance before the PRTA, the first of which was in 2003. As promised during the event, I am now posting a copy of my presentation slides (below).

If you have more specific questions, or are in need of legal help, please don’t hesitate to contact our offices.

Categories: Estates, Medicaid & Medicare

The Lady-Bird deed flies away, not to be missed by most Medicaid planning clients.

In the all the breathless hype over the past weeks regarding the demise of enhanced life estate—or so-called “Lady Bird”—deeds was lost a critical fact—that this technique was rarely the best option in Medicaid planning anyway.

First, the story known to some readers. After an unsuccessful attempt last year, this year the State agency which administers the Medicaid program was able to have legislation enacted which banned the future use of enhanced life estate deeds. Specifically, the legislation disallows an exemption of the home of a Medicaid recipient if it is titled to such an enhanced life estate deed recorded after June 30, 2014.

This pending date caused some attorneys to send mailings suggesting that action be taken before this “deadline” came and went.

I met with several of clients who had received these mailings. In each of these instances, I recommended that the clients not execute an enhanced life estate deed, but instead utilize a “traditional” life estate deed.

But how can this be? By definition, if the State is no longer allowing this technique, it must be most desirable, right?

Not necessarily. To understand why, the brief story not known to most readers—that of the approximately fourteen year life cycle of the enhanced life estate deed-will be helpful.

In August, 2000, the Rhode Island Department of Human Services (DHS), the State agency that administers the Medicaid program in Rhode Island, announced its intention to issue regulations which would prohibit the use of revocable living trusts holding title to a principal residence for Medicaid purposes. This was bad news, though expected, as DHS had been considering this for many years.

The reason: holding a principal residence in a revocable trust was a nearly ideal scenario. Since the trust was revocable, and the “settlors” of the trust (the property owners) were the only beneficiaries and were often trustees of the trust during their lifetimes, they essentially lost no control over their principal residence during their lifetimes.

Then why do it? Because it created, through the nomination of successor trustees, a smooth asset management technique in the event that one or both of the settlors/trustees became incapacitated. Even more importantly to clients, assuming proper titling of the property to the trust, it avoided the need for probate administration of the property upon the second of the settlors to die.

Probate in Rhode Island, assuming typical assets and a relatively intact family situation, is not the nightmare that clients have heard (or occasionally experienced as beneficiaries). Nevertheless, it turned out that this use of revocable trusts for holding title to a principal residence also had benefits for Medicaid planning. This is because, in the mid-1990s, the federal government forced Rhode Island and other states to institute so-called “estate recovery” techniques to seek to recover the cost of Medicaid following a Medicaid beneficiary’s death.

Rhode Island, like the majority of other states, opted to comply with the federal government’s requirement by limiting its estate recovery efforts to the probate estate. To expand the estate recovery to non-probate assets, Rhode Island and most states reasoned (and continue to reason), would require substantially greater expenditure of personnel and other state resources for potentially uncertain gains.

Thus, after the mid-1990s in particular, avoiding probate administration for a principal residence of a Medicaid recipient became particularly important. And since the use of revocable living trusts had all these other virtues, it became one more reason to consider their use for clients.

The Rhode Island Department of Human Service, has had been (and continues to be) fair-minded when it comes to considering people who made plans under the rules then in effect. For example, in response to comments by me and others, it “grandfathered” revocable trusts created on or before December 1, 2000, the effective date of its regulation.

Seeking an alternative, a technique known as the Lady Bird deed was imported from Florida. (Ironic, isn’t it, since most Rhode Islanders mostly mitigate in the opposite direction!) It was called a Lady Bird deed because a Florida attorney describing it used Lady Bird Johnson as a character in hypothetical fact situation.

I have always preferred to describe it by its proper name—an enhanced life deed—because it is easier to explain to a client. I find that clients generally can understand the concept of a “life estate deed”—that is, when you transfer property to a third party and reserve the ability to live in, use, enjoy, rent and do pretty much whatever you want to do with the property while you are living. (I generally prefer that the third party to whom the property is transferred is an irrevocable trust, but that’s a topic for another day.)

The modifer “enhanced” means that those rights transferred—to keep a portion of the proceeds of the property if it is sold during the life estate holder’s lifetime, or even requiring the third party’s permission for such a sale—are in fact not given away.

Got it? Well, it’s more complicated and generally took longer for clients to get their minds around than a “traditional” life estate. However, in limited situations–generally crisis planning involving single people–it was an excellent tool and hence we recommended and utilized it on a number of occasions.

However, what made it work in crisis planning—that effectively no transfer for Medicaid purposes occurred—also made it generally ill-suited to non-crisis planning. Take for example a widow—let’s call her Hope–in her early 80s in relatively good health, with no near turn plans to sell her home and with a modest amount of other assets. If Hope transfers title to her home using a traditional life estate, that transfer is subject to a potential five year “lookback period” for Medicaid eligibility should she require nursing home care.

However, if Hope utilized the enhanced life estate deed, that transfer is not subject to any potential penalty period for Medicaid eligibility purposes. That’s better, right?

Well, assume that Hope three years into the five year lookback period sells her home and moves to an assisted living facility for which she is paying privately. And then two years later, Hope suffers a stroke and requires nursing home care.

Had Hope utilized the enhanced life estate deed, 100% of the proceeds of that sale would be exposed to spenddown for nursing home costs. Conversely, had she utilized a traditional life estate—one in which she transferred an interest in the property to an adult child as trustee of an irrevocable trust—a substantial portion of the sale proceeds would be protected in the irrevocable trust from exposure for nursing home costs.

I will miss reaching into my Medicaid planning toolbox and pulling out the enhanced life estate deed to solve a problem created by a single person with little or no chance of making through a five year lookback period, and with limited non-home assets capable of getting him or her through the five year period. However, in many other circumstances—for example, a married couple or a relatively healthy single person like Hope—there were always better alternatives.

Fortunately, those alternatives still exist even after the Lady Bird deed technique flies away. However, the lack of being able to pull this tool out when needed puts more of a premium on clients, particularly single persons, to initiate planning in advance in order to get a jump on the five year lookback period for Medicaid eligibility.

Categories: Estates, Medicaid & Medicare, Rhode Island Seniors, Trusts

Heffner & Associates, Elder Care Law & Estate Planning

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615 Jefferson Boulevard
Warwick, Rhode Island