Questions the Executor should ask the Estate’s Accountant

The house is sold, the estate’s debts and bills have all been paid, the accounting has been presented to the beneficiaries, they have signed off on the Release & Refunding Bonds, and now it’s time for the estate’s Executor or Administrator to distribute the estate to the beneficiaries according to the Will or according to the requirements of the law. The estate may have acquired dividends or interest or rents on which income tax must be paid. An income tax return has to be filed for the Estate if more than $600 in gross income was received, and in fulfilling his/her fiduciary duty, the Executor/ Administrator wants to be sure to investigate all available income-tax saving opportunities.

Here are a few of the questions to ask when you call the estate’s accountant: :

  1. What is the estate’s expected marginal tax bracket?
  2. Is it beneficial to pass the estate’s income and losses (if there is a loss on sale of assets such as stock or real property) through to the beneficiaries?
  3. Can income or loss be passed through in a year that the property isn’t actually distributed?
  4. If assets have to be distributed out in order to pass thru the tax liability, which plan saves the most taxes — distributing or holding?
  5. Is there any limit on the amount of losses that can be passed through to the beneficiaries?

Serving as Executor or Administrator is a job with many responsibilities. It’s vital that the fiduciary get advice on all of the steps required so that the interests of the beneficiaries are protected, and so that the fiduciary can be protected as well.

Call us for complete advice “A to Z” about the estate administration for decedents’ estates … 732-382-6070

CMS confirms that transfer penalty for Medicaid home care applicants starts to run at time of application

Followers of this blog know that when a person applies for Medicaid under the New Jersey MLTSS program or other state programs that pay for nursing homes, assisted living or home health care services, there is a 5-year look-back that is done by the agency to determine if a transfer penalty should be imposed for gifts made during the 5 years preceding the application. The penalty is a period of time in which the State won’t pay for the care. The greater the amount that was gifted, the longer the penalty period.

There has been a problem for years that was inadvertently created when the Medicaid law was amended by the Deficit Reduction Act of 2005 (“the DRA”). The problem was caused by an interpretive guidance memo called State Medicaid Director Letter (SMDL #06-018) published on July 27, 2006 by CMS. The DRA itself specified that the start date of the penalty was to be “the later of (1) the month during or after which a transfer is made or (2) the date on which the individual is eligible for medical assistance under the State plan and would otherwise be receiving institutional level care services.” See Secn. 1917(c)(1)(D) of the Act. However, the 2006 explanatory SMDL stated that the start date was “…the date on which the individual is eligible for Medicaid and is receiving institutional level of care services.” (emphasis added). The problem was obvious — it created a catch-22 in which the penalty wouldn’t start to run until the individual was receiving services, yet no services could be provided until a penalty period had ended! Also, the memo was at odds with prior positions that applied resource rules and transfer penalty rules uniformly to people applying for Medicaid in different settings.

Well it only took 12 years, but the good news is that CMS has just published SMD # 18-004 which clarifies the point once and for all: the start date for applicants for home and community services is the date on which they’d be receiving services were it not for the penalty period. Here it is: CMS SMD # 18-004

Asset protection is feasible even when a person is right on the verge of applying for Medicaid. Houses and other assets can be protected with proper senior care planning. Call us first, to advise you and prepare your Medicaid application…. 732-382-6070

Trustee of Special Needs Trust must be cautious in making reimbursements

A person who is receiving Supplemental Security Income (SSI) from the Social Security Administration must report changes in his income or resources (assets) to SSI, because this can affect his eligibility or the amount of benefits. If countable resources exceed $2,000 on the first of a month, eligibility can be lost. If the issue is detected after the fact, there can be a resulting overpayment than can take months to straighten out. If assets are placed into, or are being held in, a Trust, there might be an impact on eligibility depending on the terms of the Trust, how those assets are distributed by the Trustee, and how much control the SSI recipient has (if any) over the assets in the trust.

A Trust established with assets of the SSI recipient or applicant might be excluded from the $2,000 resource limit if it meets the many requirements  for a Special Needs Trust. Particular problems come up when somebody has been spending money on the beneficiary and needs to be reimbursed by the Trustee. The payments out of the Trust to that third party may be viewed by the Agency as improper disbursements that violate this “sole benefit” requirement if the trustee can’t produce satisfactory proof to justify the reimbursement. If the payments are made out of a first party trust, the entire corpus (principal; value) of the Trust may be treated as an available resource because the payments to the third party are “not for sole benefit” of the Trust beneficiary. If cash is just transferred out of the Trust to the third party’s account to use for the beneficiary, this can create problems as well.  The standards are explained by the Social Security Administration in this section 01120.201.2.b of of the procedure manual called the “POMS,”  where it says, ” …do not consider a trust that provides for the trust corpus or income to be paid to or for a beneficiary other than the SSI applicant/recipient to be established for the sole benefit of the individual.” The POMS continues:

. ” Exceptions to the sole benefit rule for third party payments

“Consider the following disbursements or distributions to be for the sole benefit of the trust beneficiary:

  • Payments to a third party that result in the receipt of goods or services by the trust beneficiary;
  • Payment of third party travel expenses which are necessary in order for the trust beneficiary to obtain medical treatment; and
  • Payment of third party travel expenses to visit a trust beneficiary who resides in an institution, nursing home, or other long-term care facility (e.g., group homes and assisted living facilities) or other supported living arrangement in which a non-family member or entity is being paid to provide or oversee the individual’s living arrangement. The travel must be for the purpose of ensuring the safety and/or medical well-being of the individual.”

These are limited exceptions. If the Trustee is issuing payments to individuals under the guise that it is a reimbursement for expenditures that aren’t within these narrow categories, there will be a presumption that the trust is giving out money to third parties unless the Trustee can prove otherwise. The Trustee of any Trust for benefit of a person on SSI needs to assume that s/he will have to provide accountings and receipts in exquisite detail for scrutiny by the Social Security Administration. Great care should be exercised once a trustee takes on this major responsibility.

For advice on establishing and administering Special Needs Trusts, call ….. 732-382-6070

WW II Crew memoirs available for interested readers

I have a group of books about  World War II bombers that I would love to give to any of my readers who are interested in these subjects. Some of the books are crew memoirs with photos and mission descriptions from the  Air Force campaigns in Foggia, Italy and North Africa, others are about related incidents in the Italian and eastern European Campaigns. Why do I have these? My late father  Walter (“Wally”) Ershow was a B-17 bombardier on the 15th Air Force, 2nd Bomb Group, 20th squadron, crew # 7619 based at Amendola in the Apuglia region of southeastern Italy. In his later years he started collecting books about the bombadiers and their crews. I have the books, and if you or anyone you know is interested in reading any of these, I will be glad to send the book to you. Please get the word out to anyone who’s potentially interested. Send me an email at linda@FinkRosnerErshow-Levenberg.com or call my office 732-382-6070 and leave me a voicemail.

Here’s what I can offer you:

Wrong Place, Wrong Time! The 305th Bomb Group & the 2nd Schweinfurt Raid by George C. Kuhl (8th Air Force);

Crew Umbriago (Third Air Force; 463rd Bomb Group) original copy, crew memoirs  compiled by Maj. Daniel P. Carroll USAF;

Chick’s Crew: A Tale of the Eighth Air Force by Ben Smith, Jr. (303rd Bomb Group under Lt. Anthony J. Cecchini)

Those Brave Crews by Ray Ward (signed by the author 12/23/1991)(B-24 heavy bombers; Ploesti Romania raid);

Nightmare in Bari – the WW II Liberty Ship Poison Gas Disaster and Cover Up by Gerald Reminick;

Bombing Iron – Airworthy bombers of WW2 and Korea by Michael O’Leary;

The War Between the Generals – Inside the Allied High Command by David Irving, and

Guidebook of the Unites States Air Force Museum (Photos of the planes)

Call us for advice on legal issues in New Jersey concerning aging and disability, nursing home care and family protection planning ….. 732-382-6070

State efforts to impose work requirements for Medicaid benefits is subject of lawsuit

Under the federal Medicaid statute 42 USC 1396__ there is a provision called “Section 1115 waiver” which is designed to enable States to try out variations on their Medicaid programs to reach broader segments of the population. The pertinent section of the Waiver is:  QUOTE HERE

In mid-January this year, CMS announced a policy in which it authorized States to develop programs that would require certain Medicaid-eligible persons (non-elderly, non-disabled, non-pregnant adults) to be employed or to participate in ‘community engagement activities” such as skills training, education, volunteering, job-searching or caregiving, as a condition for ongoing receipt of Medicaid insurance benefits. Ten states have responded to date. The first such waiver request that was approved is Kentucky’s. Poor adults must be work or person community engagement activity  20 hours a week to retain their health insurance under Medicaid. Kentucky is also imposing cash premium obligations on these Medicaid recipients, copayments for non-emergency use of an emergency room, and elimination of payment for non-emergency medical transportation. No doubt a significant increase in the State’s Medicaid bureaucracy will be required to create or implement all of these community engagement programs and to monitor the participation and prevent erroneous terminations of benefits. I wonder if the cost of all that has been compared to the cost of the lost Medicaid benefits.

The Kentucky waiver has been challenged in federal district court. There are 15 individual plaintiffs who are adversely affected by the new requirements. Click HERE for discussion and details. A major basis for the challenge is that the CMS invited and approved waiver requests that violate the purpose and objectives of the Medicaid Act that were articulated by Congress. The critical requirements for Medicaid eligibility have been resources, income limits, settings for delivery of services, and in many cases, transfer penalties. Under the existing statute, which is part of the Social Security Act, the Secretary of CMS can waive a state’s compliance with certain Medicaid requirements when a State proposes an “experimental, pilot, or demonstration project which, in the judgment of the Secretary is likely to assist in promoting the objectives of” the medicaid program. Stated another way, a Waiver needs to further the objectives of the Act, not reduce the availability of services to otherwise-eligible individuals. NAME OF SUPREME COURT CASE?? So, for example, States have implemented Home and Community-based Services or Assisted Living services under the Medicaid waiver, or have enabled people whose income exceeded three times the federal poverty limit (the “income cap”) to receive Medicaid services.

The new process appears to be encouraging States to come up with ways to restrict the number of needy people who can receive Medicaid health care benefits. The obligations will be onerous or impossible for some people. A person may have no control over his/her ability to secure 21+ hours of employment. A person with a poor employment history and limited skills may find it impossible to find community volunteer work.

There’s no indication that New Jersey is pursuing any of these onerous obligations. We shall see what emerges on the national front.