Do you Have a Plan for your Digital Assets? You should.

By | Estate Planning, Food for thought

Digital Assets

Digital assets – are they covered in your current Will?

According to various surveys more than half of all American adults don’t even have a Will. So by default, most people haven’t planned for their digital assets.

If you have a Will, you need it to specify that your executor can control your digital assets. It means accessing, managing, storing and retrieving them.

We usually think of digital assets in terms of email and social media accounts. Those are important, but it also pertains to cryptocurrency.

If you have any Cryptocurrency, (think Bitcoin or Ethereum, or any of the many others), you need someone to be able to access those accounts when you die. You need your Executor to be able to do that, or you could just lose those investments, and that would be terrible. Also, your Executor needs to be able to access your other digital assets and those might include other types of currencies.

Again, make sure that you have a Will in the first place, and that when you have a Will, you give your Executor power over your digital assets so they can do what they need to. Everything is digital these days, you can’t die without it.

My name is Mike Garry, and my company is Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. (That’s in Bucks County). Our law firm is Yardley Estate Planning, LLC and is in the same place. We only do Estate Planning work and I am licensed in Pennsylvania and New Jersey.

If you’d like to talk about this or anything else, please reach out: 267-573-1019, or @michaeljgarry

Click on the hyperlinks for the: Yardley Wealth Management and Yardley Estate Planning YouTube channels.

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2019 Estate and Gift Tax Update

By | Estate Planning, Food for thought

2019 Estate and Gift Tax Update

For 2019, the Federal Estate and Gift Tax exemption amount has been raised to $11,400,000, from $11,200,000 due to an inflation adjustment.

This is the amount each person can pass before owing any federal estate taxes. If you are married, you and your spouse can each claim the exemption for a total of $22,800,000. It means that very few people need fear the estate tax.

In 2018, of the many millions of people who died, there were about 1,890 taxable estates according to the Tax Policy Center.

By comparison, in 2013 the exemption amount was $5,000,000 per person and there were about 4,687 taxable estates.

In the year 2000 the estate exemption was only $675,000 and there were about 52,000 taxable estates that year.


Do You Know What a QCD is? Should You?

By | Estate Planning

Do you know what a QCD is? It’s a Qualified Charitable Distribution.

It is taking your Required Minimum Distribution from your IRA if you’re over 70 1/2 and having the money sent directly to a charity or charities of your choice.

When you do that, you don’t get taxed on that money coming out because it’s a charitable distribution. It does not increase your adjusted gross income like a regular IRA distribution would.

You have to be 70 1/2 and the money has to go directly from your IRA to the charity, so the custodian of your account has to send it via the instructions you make to the custodian on its form.

It’s a little complicated. You can’t go above your RMD for it. You need to use it for your RMD. The limit is $100,000 per person per year and it’s not per IRA. So, if you have multiple IRAs you could do some from different IRAs. Finally, it can only come from an IRA or an inherited IRA, not a 401K or a 403B.

Again, QCD, Qualified Charitable Distribution may come in handy this year now that there are higher amounts of standard deductions on taxes and it’s a little bit harder to itemize or less likely that people would itemize. If you make a QCD it will reduce your taxes even if you don’t itemize because it never counts as income in the first place.

Mike Garry, Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. That’s in Bucks County. If you’d like to talk about this or anything else, please reach out: 267-573-1019, or @michaeljgarry

Should I use Software for my Estate Planning Needs?

By | Estate Planning, Food for thought, Wills

Something that we’ve seen in the last couple of months that I’d like to point out, is that we’ve had three different set of married clients come in, having had done their prior Wills using software. They all used different packages, but they used software.

While it’s tempting to do that because the price tag is pretty cheap (I think they paid like fifty or seventy-five dollars each) and it’s tempting to do it in a pinch, I would be cautious. The software doesn’t know your entire situation within the context of the estate planning landscape and it doesn’t know the practical realities of the decisions you are making.

A lot of the decisions that clients need to make, it’s hard for clients to know what the repercussions are when they are going through the workflow of the software program.

I’m not bashing software, because we actually use software to create and draft our documents. We also have over 20 years of practical experience, so we know what will happen with the different choices clients make. We can talk to clients and guide them as they make some difficult decisions and let them know things that they’re not thinking about, the practical realities of administering their Wills or dealing with their advanced directives or any of the other documents. I’m not bashing software, but I’d be wary about using it for documents like these.

Don’t Die Without a Will

By | Estate Planning, Wills

The other night I was out, and I heard people talking about the fact that, the Queen of Soul, Aretha Franklin died without a Will; and they thought that that meant that her money went to the state. It does not.

I think that the problem is that the term for it is really an unusual term. What happens if you die without a Will is that your stuff goes by intestate succession. So each state lays out its own rules for how your stuff would be divided if you died without a Will, and it typically goes to family members like spouses and children and parents.

It’s a little bit different in the different states, but it doesn’t go to the state. Even though it doesn’t, you should still have a Will, because what if you don’t want your spouse, your kids, or your parents or whoever to get your stuff?

You need to take the time to figure out and settle your affairs. You need to figure out what you want to happen and make it happen. Don’t be like the Queen of Soul and countless other celebrities, that didn’t plan; it’s really a shame.

Fully Fund or Even Over Fund a #529 Plan Account?

By | Estate Planning, Food for thought, Wills

If you have the means, and want to support your kids’ or grandkids’ educational efforts, I would consider funding or even overfunding 529s for them.

If you use a 529 plan, and you use the Pennsylvania plan, it escapes inheritance taxes and grows tax free if the money is used for education for as long as the money is in the plan. Now that means, you might want to consider funding it more fully than it might have been in the past or fully funding it if you can keep it in the plan for a long time.

It’s tricky with education because you don’t know how much they’re going to need because few pay the sticker price for private schools, and you don’t want to overfund it because it is stuck with education; but if you think about it, if you do have the means, and you have enough for your own retirement and are otherwise secure, if there’s more in the child’s plan then they need and there’s money left over, that money can stay in that plan and then you can change it to another beneficiary, like say their children, and grow tax free and compounding for a generation.

That can really have a nice snowball effect, it might even be able to keep up with the cost of college inflation! Anyway, it’s not something that a lot of people can think about or do, but it’s something that I’ve been thinking a lot about the past couple months and I think for some, it’s something to consider. Think about full funding your 529 fully or even putting in more than you necessarily need. Again, if your retirement is secure and you don’t otherwise need the money. You could get some great tax and investment gains out of that.

You do Estate Planning for Your Loved Ones

By | Estate Planning, Food for thought

Recently I was talking to a friend of mine who lost his dad and we talked for a while, as I had known his dad and we shared some stories.

He then started talking about all the stuff he must go through to settle his dad’s estate and finish up his affairs. It really struck me then, more so than any other time, that you do your Estate Planning because it’s something you’re supposed to do sure, but you really do it for your loved ones, your heirs, the people who are going to be left behind putting your affairs in order and transferring them to your beneficiaries.

Keep that in mind when you update your Wills and other documents and when you update everything that you have for them, like the organization of all your stuff.

Make sure your heirs know where they can find your things, make sure they know where to find passwords or they know where everything is.

You don’t necessarily have to tell them everything, although that might be really helpful, but make a nice list and make it easy for them to find and tell them where to find it. It’ll make things much much easier, and they’ll be going through something that is very hard when you pass, and if you can make it a little bit easier and do this, then it’s a great service you can do for them.

Blog Series Part 7: Medicaid Application Denials

By | Elder Law, Estate Planning

The complex nature of the Medicaid application process can lead to more “denials” than one would expect.  The obvious assumption is that most applications are denied because the applicant is financially ineligible or improperly gifted assets.  However, there are a number of other reasons why an application may be denied.  This post will discuss some of the potential (and easily avoidable) causes of denial and what to do if it happens to you.

Missing Information – One of the most common reasons for the flat-out denial of a Medicaid application is the applicant simply failing to send in the supplementary documentation requested by the assigned caseworker.  Over my years working as a nursing home administrator and then later in my elder law practice, I saw countless deserving, otherwise eligible Medicaid applicants receive denial notices because they failed to respond in a timely fashion to requests for copies of additional documentation.  The easiest way to ensure your application is properly processed by your local Department of Public Welfare County Assistance Office (“CAO”) office is simply to give them WHAT they ask for, WHEN they want it.

Within a few weeks of submitting your application, the first thing you will receive is a notice assigning a caseworker to your application and letting you know the additional information that the caseworker will need to make a determination.  The notice also provides a date by which you need to submit the documents.  Do NOT disregard this date.  As the process continues, you repeatedly may be asked to submit more clarifying documentation, with a new deadline applied each time.  Keep in touch with your caseworker and if you are having trouble getting your hands on old or lost documentation, make sure they know that and ask for an extension of time.  Failing to send in exactly what is requested basically guarantees your application will be denied.

                  Ineffective Caseworker – While pointing this out won’t earn me any bonus points with the Department, the truth is that not all CAO caseworkers are created equal.  For every caseworker who knows the rules inside and out and cares deeply about her job, there is another case worker who is just learning the rules and is completely overwhelmed by her caseload.  Unlike the customer, the caseworker is NOT always right.  If you find that your application is being unexpectedly denied and you don’t agree with the caseworker’s interpretation of the law or the facts, politely point them in the right direction.  Argue your side, ask for contact information for the supervisor and get her or him involved.  Work your way up the chain.  Elder law attorneys do this exact thing for their clients all the time and often have the direct emails and phone numbers for every supervisor at the DPW offices in their region.  Do not simply accept “No” for an answer if you feel a mistake has been made.

Lying To Your Caseworker – This will be a short one – simply don’t do it.  Don’t try to hide assets or hide transfers.  If you made a transfer within the past 5 years, before you even submit the application you should be prepared to disclose it and have a plan for handling it, including setting forth the applicable calculation of any ineligibility period. Try to make it as easy as possible for the caseworker – don’t treat it as an adversarial relationship.

The Appeals Process – When a final determination of ineligibility has been issued, the applicant has 30 days from that date to request a fair hearing to appeal the decision.  An appeal form is typically provided on the reverse side of the determination notice.  The CAO first must offer the appellant an opportunity to have an informal conference in the hopes you can resolve the issue prior to the hearing.  ALWAYS take advantage of this excellent opportunity for informal communication, if only because it gives you more information on the agency’s arguments prior to the hearing.

Should your case not be resolved prior to the hearing, you or a representative will have the opportunity to present evidence and call witnesses at the hearing arguing your case, including cross-examining the CAO’s witnesses.  Final determinations are made by Hearing Officers who are DPW officials.  Their role is to conduct the hearing in an orderly, but informal manner, obtain relevant testimony and render a decision based on facts and evidence as applied to the State’s regulations.  Federal regulations require the Department to issue a Final Administrative Action Order within 90 days of that hearing. If the final order remains unfavorable to the applicant, there is still one more chance to apply for further reconsideration by the Secretary of DPW.

The bottom line is that even if you have made some of the mistakes listed earlier in the article, the appeals process offers several opportunities, both formal and informal, to correct the situation.  One must remember that there are always opportunities to settle if you remain open to discussing your case and continue attempting to resolve the issues under appeal.

This blog post was originally created by Joellen Meckley while she served in an “Of Counsel” position in our firm. While she no longer does that, we do maintain a  professional relationship and if you have any Elder Law needs, I’d recommend you reach out to her firm Meckley Law. If you need Estate Planning, please reach out to us.


Blog Series Part 6: Community Spouse Planning

By | Elder Law, Estate Planning

Over the past few weeks this blog series has discussed many of the complex and varying rules that apply to obtaining Medicaid coverage for nursing home care.  Today’s post will hone in on one particularly complicated application scenario – when one spouse requires nursing home care, but the other spouse is healthy enough to continue living in the community.  Such situations offer several opportunities for financial planning, even after one spouse has already been admitted to the nursing home.  However, costly mistakes can occur if the financial strategies are approached without the advice of a knowledgeable elder law attorney.

The Basic Rules:

  • Federal and State law provides certain protections for a Medicaid applicant’s spouse who continues to live in the community (the “community spouse”). Those protections are designed to prevent the community spouse from total impoverishment.
  • The first protection is the “community spouse resource allowance” or CSRA. The State considers certain assets to be exempt from the Medicaid spend down process.  Examples of some of those assets are:  the couple’s residence, household goods and furniture, one vehicle, the community spouse’s IRA and several other items.  However, other assets are deemed NOT exempt from spend down, including checking and savings accounts, mutual funds, CD’s, and certain other financial resources.  Of the assets that are deemed “non-exempt,” the community spouse is permitted to keep ½, up to a maximum of $119,220 in 2015.  The remainder of the assets must be spent down by the institutionalized spouse before he or she can obtain Medicaid coverage.
  • The second protection afforded by law for the community spouse is something called the “monthly maintenance needs allowances” or MMNA.  As a general rule in Pennsylvania, the community spouse is permitted to retain income which is in his or her own name, instead of putting that money toward their spouse’s nursing home care.  However, in situations where the community spouse’s individual income is below a certain amount, a formula incorporating “shelter costs” such as mortgage and utilities expenses is calculated to determine an amount of additional income that will be allowed to that community spouse.  This MMNA can range from $1,992 to $2,980.50 (in 2015).  If it is determined that the community spouse’s income falls below their calculated MMNA, then income can either be shifted from the institutionalized spouse to the community spouse to bring their income up to the MMNA, or the couple’s non-exempt assets can actually be converted to an additional source of income for the community spouse.

Planning Opportunities

The most common financial planning strategy for the community spouse is to convert joint assets into a source of income.  Generally this is done by taking assets and using them to purchase a Medicaid compliant annuity in the name of the community spouse.  Bear in mind that the use of annuities in Medicaid planning is a frequently-changing area of law and should not be attempted without the advice of an elder law attorney.  Another common planning option is to use non-exempt assets to purchase exempt assets.  For example, non-exempt assets could be used to make home repairs, pay off a mortgage, purchase a new car, or create a prepaid funeral account, just to list a few examples.  Many people rush into making such purchases in anticipation of one spouse needing nursing home care thinking that it will help that spouse qualify more quickly.  What they often don’t realize is that they may be better off waiting to purchase non-exempt assets until one spouse has already been institutionalized.  The “snapshot” of assets used to determine the community spouse’s resource allowance isn’t taken until the other spouse has been admitted.  So, if assets are prematurely depleted prior to admission, it may result in the community spouse’s calculated resource allowance being lower than it would have been had the couple retained those assets up until they were actually admitted to the facility.

Proceeding with any of the above strategies can be treacherous without the advice of an elder law attorney who has specific knowledge about current Medicaid law.  The bottom line is that paying for nursing home care has become very complex, but solutions exist if you know the right questions to ask and plan accordingly.

This blog post was originally created by Joellen Meckley while she served in an “Of Counsel” position in our firm. While she no longer does that, we do maintain a  professional relationship and if you have any Elder Law needs, I’d recommend you reach out to her firm Meckley Law. If you need Estate Planning, please reach out to us.

Blog Series Part 5: Medicaid Asset Protection Strategies

By | Elder Law, Estate Planning

In Parts 1 through 4 of this blog series, I discussed the different ways of paying for long term care in Pennsylvania and how Medicaid has grown to become the most common payment method.  Medicaid functions as a government safety net for those who require 24-hour care in a nursing home and whose income and assets are insufficient to pay privately for that care.  In order to qualify for Medicaid to pay for nursing facility services, your income and assets must fall below a certain threshold established by the State’s Medicaid rule (described in detail in Part 2 of this series).

Senior citizens have many different reasons for wanting to preserve their assets instead of seeing them spent down to qualify for Medicaid.  Perhaps they are concerned about the financial resources of their spouse who remains in good health and continues to in the community.  Or, perhaps they wish to leave a modest inheritance for their children.  Whatever the reason, with proper advance planning, it is possible to protect your assets from the costs of nursing home care.  Obviously, the earlier you take steps to preserve assets, the more assets you should be able to protect.  However, even if you have already been admitted to a nursing facility, there are some limited options available which will leave you better off that you would be had you  performed no planning whatsoever.

Advanced Planning Strategies

As discussed in Part 4 of this blog series, Medicaid applicants are required to disclose any gifts or transfers of assets they have made in the 5 years preceding their application and are penalized if those transfers are deemed to have been made in exchange for less than fair market value.  Thus, to best protect your assets, you need to plan at least 5 years in advance of needing long term care.

Medicaid Asset Protection Trust – This planning option requires the future Medicaid applicant to place his or her assets, including real estate and investments, into an irrevocable grantor trust.  The trust can be structured in whatever way makes the most sense give the settlor’s unique financial situation and needs.  The most important aspect of this plan is that it be designed to enable the person to pay privately for at least 5 years of nursing home care following the creation of the trust.  One benefit to such a trust is the fact that trust beneficiaries do not gain ownership over the trust assets until the trust’s settlor is deceased.  This makes it more desirable than outrights gifts to family members due to its protection from the beneficiary’s creditors.

Gifting, Coupled with Long Term Care Insurance or Retained Assets – For seniors who are fortunate enough to have enough income to live comfortably on that alone, another option is to simply gift away the bulk of their assets to their family members, providing them with an “early inheritance.”  However, the senior must still plan for the possibility that he or she may unexpectedly require long term care at some point in the 5 years immediately following the gift.  Thus, either enough assets must be retained to supplement the person’s income should they need to pay privately for long term care for some period of time, or, they also need to use some of their assets to purchase a long term care insurance policy prior to gifting the remainder of their money away. The plan would be to determine some combination of income, insurance, and assets which could cover the costs of nursing home care for at least 5 years, should the need arise.

While it may be tempting to simply gift all of your money to your children assuming that you can trust them to not spend it right away and use it to pay for your nursing home care should the need arise, this tactic is highly risky and ill-advised in nearly every situation.

Late Stage Planning Strategies

While the best way to protect significant assets from going to the nursing home is to plan well in advance, the truth is that most clients fail to do that for many different reasons.  However, reviewing your specific situation with an elder law attorney who is knowledgeable about Medicaid planning should at least help you optimize your situation.

Married Applicants – Those with spouses in the community have the most options available to them to preserve assets in late stage planning.  One option is to covert excess assets to income for the community spouse by purchasing a specific type of annuity called a “DRA compliant annuity”.    Another option is to use at-risk assets to pay down all debts, make home improvements, or purchase assets which are not counted by Medicaid, such as a more expensive home which is placed in the name of the community spouse, a new car, or purchase pre-paid funeral contracts or other necessary personal items.  Money spent on disregarded assets is an easy way to decrease the assets which will be considered in determining Medicaid eligibility.

Unmarried Applicants – In the case of an unmarried Medicaid applicant, there are still a few ways to protect limited assets from going to the nursing home, even after the individual has already been admitted.  Assets can be used to purchase pre-paid funeral arrangements and other necessary personal items such as hearing aids, glasses, clothing and other items that they’ll need in the nursing facility.  While these items don’t preserve significant assets, they at least protect some money.  In the case where a single person has more assets than can be depleted quickly, but still wishes to immediately qualify for Medicaid, one way to potentially preserve some assets for family members is to convert all available assets into a DRA-compliant annuity that pays income.  That income together with Medicaid then pays for the person’s long term care.  One of many requirements for such an annuity is that the State be named the remainder beneficiary of the annuity.  In this case, after the purchaser’s death, the State will make a claim against whatever principal is left in the annuity to be reimbursed for the funds paid by the Medicaid program for the person’s nursing facility care.  If after receiving that reimbursement there are still funds remaining in the annuity, those funds can be dispersed to the purchaser’s named beneficiaries.  While it is not a guaranteed method of transferring an inheritance to your family, there is certainly no risk in trying it if you’ve missed other opportunities to conduct advanced planning.

The laws, rules, and legal cases applying to Medicaid are constantly changing.  For that reason, none of the above listed asset protection strategies should be attempted without first consulting an elder law attorney who is up-to-date and knowledgeable on such techniques and the current state of the law.

This blog post was originally created by Joellen Meckley while she served in an “Of Counsel” position in our firm. While she no longer does that, we do maintain a  professional relationship and if you have any Elder Law needs, I’d recommend you reach out to her firm Meckley Law. If you need Estate Planning, please reach out to us.