1. Asset Protection
9/25/2017
Fanwood-Scotch Plains YMCA ________________________________________________ Estate and Disability Planning Presented by Donald D. Vanarelli, Esq. Certified Elder Law Attorney Accredited Veterans Attorney Founding Member, Assn. of Special Needs Planners

2. Seminar Topics Planning for Disability Estate Planning
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9/25/2017
Seminar Topics
Planning for Disability
Estate Planning
Planning for Long-Term Care
Government Sources for Payment of Long Term Care: Medicare, Medicaid and VA Benefits

3. Planning for Disability
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9/25/2017
Planning for Disability

4. Planning for Substitute Decision-Making
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9/25/2017
Planning for Substitute Decision-Making
I. Capacity - A critical threshold issue.
II. Legal devices for substitute decision-making:
1. Court-supervised
2. Voluntary

5. Court-Imposed Substitute Decision-Making
Asset Protection
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Court-Imposed Substitute Decision-Making
Guardianships
Conservatorships

6. Nature and Use of Guardianships
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9/25/2017
Nature and Use of Guardianships
A guardianship is a legal mechanism designed to provide surrogate decision-making and financial management for a person who is no longer able to govern him/herself and who has not made alternate voluntary arrangements.

7. Characteristics of Guardianships
Asset Protection
9/25/2017
Characteristics of Guardianships
Involuntary.
Imposed by Court.
Only for persons who are legally incompetent - medical evidence needed.
Alternate voluntary arrangements - either not made or ineffective.

8. Voluntary Substitute Decision-Making
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9/25/2017
Voluntary Substitute Decision-Making
Representative Payeeships (SSA, SSI)
Joint Tenancies (Inc. joint bank accts.)
Powers of Attorney
Advance Medical Directives (Living Wills)
Do Not Resuscitate (DNR) Orders
Revocable and Irrevocable Trusts
Family Limited Partnerships and Limited Liability Companies

9. Asset Protection
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Powers of Attorney
The most important, simplest and least expensive estate document.
A mechanism by which the principal authorizes an agent to manage the principal’s financial affairs if the principal becomes incapacitated.

10. Characteristics of Powers of Attorney
Asset Protection
9/25/2017
Characteristics of Powers of Attorney
Creates Fiduciary Relationship
General vs. Special
Durable vs. Springing
Sole Agent vs. Joint Agents
Termination- death, revocation or expiration

11. Powers Conferred in Powers of Attorney
Asset Protection
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Powers Conferred in Powers of Attorney
Flexibility is the goal:
banking transactions
to make gifts, including gifts to the agent
prepare and sign tax returns
to create, amend and fund trusts
change beneficiaries
to execute contracts, leases and deeds
to loan or borrow money
to engage in long-term care planning

12. Advance Medical Directives (“Living Wills”)
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9/25/2017
Advance Medical Directives (“Living Wills”)
The right to make decisions about medical treatment is a fundamental right protected under the federal and state constitutions.

13. Living Wills In New Jersey
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9/25/2017
Living Wills In New Jersey
N.J. law recognizes 3 planning devices:
1. Instruction Directive
2. Proxy Directive - POA for Health Care
3. Combined Directive
Religious preferences may be presented.

14. Asset Protection
9/25/2017
DNR Orders
Do Not Resuscitate (DNR) orders prohibit cardiopulmonary resuscitation when the lungs or heart stop working.
DNR orders are normally applicable only in hospitals, nursing homes and other facilities. EMS personnel are generally required to attempt resuscitation.

15. Practitioner Orders for Life Sustaining Treatment (POLST)
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9/25/2017
Practitioner Orders for Life Sustaining Treatment (POLST)
Medical orders that help give seriously ill or
frail patients more control over end-of-life care.
Signed by both the doctor and patient/surrogate.
Can prevent unwanted or ineffective treatment,
reduce patient and family suffering and ensure
patient wishes are honored.

16. POLST (cont’d) Information included on POLST form:
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POLST (cont’d)
9/25/2017
Information included on POLST form:
Goals of care for the patient
Preferences regarding resuscitation attempts
Preferences regarding intubation and mechanical
ventilation for respiratory failure.
Preferences for artificially administered nutrition
and hydration
Other preferences regarding medical preferences

17. Psychiatric Advance Directive (PAD)
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Psychiatric Advance Directive (PAD)
Psychiatric Advance Directive: Allows a person to specify important information for caregivers in the event of a mental health crisis.

18. Psychiatric Advance Directive (cont’d)
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Psychiatric Advance Directive (cont’d)
As important as a medical directive
Helps make decision-making easier at time of
crisis
Improves communication between the individual
and family
Provides option to appoint representative
Personal preferences documented.

19. Trusts A trust is one of the most important estate planning tools.
Asset Protection
9/25/2017
Trusts
A trust is one of the most important estate planning tools.
A trust is a legal relationship in which a person transfers property to one or more trustees who own the property as fiduciaries. The trustees must use the property only as set forth in the trust agreement, or as provided by law.

20. Providing for Persons with Disabilities: Special Needs Trusts
Asset Protection
9/25/2017
Providing for Persons with Disabilities: Special Needs Trusts
Purpose - To preserve the disabled person’s eligibility for needs-based governmental benefits (SSI, Medicaid, DDD services) while providing a vehicle to hold funds owned by disabled person, or funds contributed by the parents or other third parties, to supplement public benefits.

21. SNT May Supplement Public Benefits
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SNT May Supplement Public Benefits
The trust assets can be used solely as a supplement to any public benefits received. The funds must be used to improve the beneficiary’s quality of life.

22. Asset Protection
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Estate Planning

23. Asset Protection
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Intestacy
Property not disposed of prior to death or by will passes in accordance with the laws of intestacy.
NJ Intestacy Statute, N.J.S.A. 3B:5-1, et. seq. - turns on identity of persons living at the time of decedent’s death and relationship to the decedent.

24. Last Will and Testament
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Last Will and Testament
The basic document for directing the distribution of your property at death.

25. Your Will Allows You To:
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Your Will Allows You To:
1. Determine who will receive your assets when you die (spouse, children, friends, etc.) and in what manner (outright, in trust, to guardian, etc.).
2. Name the executor of your estate.
3. Appoint a guardian for your minor children.
4. Provide for disabled children.
5. Delay distribution of assets to your heirs until they reach a certain age.
6. Provide for the continued operation of your business.
7. Enjoy significant estate tax savings.

26. Probate vs. Non-Probate Estate
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Probate vs. Non-Probate Estate
There may be 3 types of property in any decedent’s estate:
1. Probate Estate.
2. Contract Estate. (Non-Probate)
3. Joint Ownership Estate. (Non-Probate)
Your will disposes of assets in the probate estate only.

27. Federal Estate Taxes Maximum Year Exempt Amount Estate Tax Rate
Asset Protection
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Federal Estate Taxes
Maximum
Year Exempt Amount Estate Tax Rate
2001 $675, %
2002 $1.0 Million 50%
2003 $1.0 Million 49%
2004 $1.5 Million 48%
2005 $1.5 Million 47%
2006 $2.0 Million 46%
2007 $2.0 Million 45%
2008 $2.0 Million 45%
2009 $3.5 Million 45%
2010 Repealed Repealed (Gift tax-35%)
$5.0 Million 35%
$5.12 Million 35%
2013 $5.25 Million 40%
2014 $5.34 Million 40%

28. New Jersey “Death” Taxes
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New Jersey “Death” Taxes
New Jersey Estate Tax
For estates exceeding $675,000, tax rate is roughly 10%. For example, for a $1M estate, the taxable amount is $325,000, and the NJ estate tax is approx. $33,000.
New Jersey Inheritance Tax
Spouse, Descendants and Ancestors 0%
Brothers and Sisters 11%
Everyone Else:
First $700, %
Over $700, %

29. Asset Protection
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Gift Taxes
1. Federal-
a. Annual Gift Tax Exclusion-$14, per person, per year, in 2014
b. Unified Estate and Gift Tax System
2. State-
No Gift Tax in New Jersey

30. Estate tax planning is still useful in NJ.
Asset Protection
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Portability
There is often no need for tax planners to reduce or eliminate federal estate taxes because married couples are permitted to add any unused portion of their estate tax exemption of the first spouse to die to the surviving spouse’s estate exemption. This allows married couples to pass $10.68 M (in 2014) to heirs free from federal estate taxes with absolutely no planning at all. However, they must file a federal estate tax return on the death of the first spouse.
Estate tax planning is still useful in NJ.

31. Asset Protection
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Life Insurance 1. Can provide an instant estate upon death. 2. Can provide needed estate liquidity. 3. Proceeds can be used to pay estate taxes. 4. Life insurance proceeds are included in your estate for federal estate tax purposes unless a life insurance trust is established, the policy is transferred and the owner survives the transfer by 3 years (or trustee purchases the policy).

32. Asset Protection
9/25/2017
Generation-Skipping Trusts (Dynasty Trusts) 1. Leave exempt amount in trust for future generations Avoid estate taxes on spouse’s death No distribution to children or grandchildren so no estate taxes due on their deaths.

33. Planning for Long Term Care Needs
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Planning for Long Term Care Needs

34. Asset Protection
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Long Term Care
Long Term Care refers to the kind of care a person needs when he or she is unable to care for himself or herself due to disability, frailty or cognitive impairment.
Long Term Care is sometimes called Custodial Care - assistance with activities of daily living (ADLs) - bathing, eating, dressing, toileting, continence and transferring - or supervision made necessary because of severe cognitive impairment.

35. The Cost of Long Term Care
Asset Protection
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The Cost of Long Term Care
Average cost of 24 hour Home Health Aides provided by an agency - $5,500 per month, or $66,000 per year.
Range of costs charged by Assisted Living facilities - $5,500 - $7,500 per month, or $66,000 - $90,000 per year.
Typical cost of Nursing Home care in New Jersey - $9,000 per month, or $108,000 per year.

36. Who Pays For Long Term Care?
Asset Protection
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Who Pays For Long Term Care?
1. Private Pay %
2. Medicaid %
3. VA Benefits 4%
4. Medicare 2%
5. Long Term Care Insurance 1%

37. Overview of Government Sources for the Payment of Long Term Care Costs
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Overview of Government Sources for the Payment of Long Term Care Costs

38. Long Term Care Costs Covered by Medicare
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Long Term Care Costs Covered by Medicare
1. Home Health Care
2. Nursing Home Care

39. Medicare - Home Health Aides
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Medicare - Home Health Aides
Covers up to 100 home visits per “spell of illness”.
Preconditions to payment: prior hospital stay of at least 3 days and home health care initiated within 14 days of discharge.
Beneficiary must be homebound and need skilled nursing care, physical or speech therapy, NOT custodial care.

40. Medicare Payment of Nursing Home Care
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Medicare Payment of Nursing Home Care
Immediate prior hospital stay of 3 days
Admitted to NH within 30 days of hospital discharge
Covers skilled nursing care or rehabilitation only, NOT custodial care.

41. How Much Does NH Medicare Pay?
Asset Protection
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How Much Does NH Medicare Pay?
Maximum Coverage days
Day Medicare pays 100% of covered charges
Day Medicare pays all covered charges, except coinsurance amount. Year 2014 coinsurance payment = $152/day, or about $4,623/month
Day on your own

42. Asset Protection
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Medicaid
Joint Federal and State Program
Provides medical assistance for financially eligible persons who are aged, blind or disabled.

43. Asset Protection
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Income Limits
Income - all income is counted in determining eligibility.
Income cap - Community Medicaid programs which pay for home health aides and care in assisted living facilities have an income cap. In 2014, the cap is $2,163/month. No cap for Nursing Home Medicaid.

44. Asset Protection
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Resource Limits
Countable resources - all assets in the sole name of applicant, in the sole name of spouse, or in joint names, either with the spouse or another person. Includes pension and retirement assets of BOTH the applicant and spouse.
Resource Limits - $2,000 for an individual and $3,000 for a couple.
Excess resources - must be spent down.

45. Transfer of Resource Rules
Asset Protection
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Transfer of Resource Rules
To prevent gifting of assets, Medicaid imposes a “penalty period”, or period of ineligibility for Medicaid, for all gifts made within the “lookback period”.

46. Comparing Medicare and Medicaid Coverage for Long-Term Care Costs
Asset Protection
9/25/2017
Comparing Medicare and Medicaid Coverage for Long-Term Care Costs
Medicare: covers costs of home health aides and nursing homes for those who need skilled nursing care or therapy, but for a limited time only. No financial limits.
Medicaid: covers home health aides, assisted living facilities and nursing homes, but only for the aged, blind and disabled who need custodial care and who meet strict financial limits.

47. Overview of Major VA Benefit Programs
Asset Protection
9/25/2017
Overview of Major VA Benefit Programs
Service-Connected Compensation
Disability compensation is a monetary benefit for veterans who are disabled by an injury or disease that was incurred or aggravated during active service.
Needs-Based Pension
Pension is a monetary benefit for veterans who (1) are disabled (not service-connected) (2) have low income and resources, and (3) served during a period of wartime.

48. Basic Eligibility Criteria for VA Improved Pension Program
Asset Protection
Basic Eligibility Criteria for VA Improved Pension Program
9/25/2017
All of the following criteria must be met before a veteran or widow(er) of a veteran can receive Improved Pension benefits:
a. The veteran must have served at least 90 days of active duty service, one day of which must have been during a wartime period;
In general, wartime is:
World War I
World War II – Dec. 7, 1941 – Dec. 31, 1946
Korean War – June 27, 1950 – Jan. 31, 1955
Vietnam War – Aug. 5, 1964 – May 7, 1975
Gulf War – August 2, 1990 through date to be set by
law by Presidential Proclamation

49. Basic Eligibility Criteria for VA Improved Pension Program (cont’d.)
Asset Protection
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Basic Eligibility Criteria for VA Improved Pension Program (cont’d.)
b. The veteran must have received a discharge other than
dishonorable;
c. The claimant must have limited income and assets; and,
d. The claimant must be permanently and totally disabled,
or be over age 65.

50. VA Improved Pension Program: Three Tiers of Benefits
Asset Protection
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VA Improved Pension Program: Three Tiers of Benefits
1. Low Income Pension
2. Housebound Benefits
Aid and Attendance Benefits
Housebound benefits and Aid and Attendance benefits are supplements paid in addition to the basic Low Income Pension to certain veterans to cover the additional costs of care for their added disabilities.

51. Asset Protection
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Net Worth: Standard
The VA considers the net worth of the individual seeking benefits, excluding the value of the person’s home, furnishings, and car. The standard as to whether a person will be eligible for benefits is whether the person has “sufficient means” to pay for his or her care.
Assets that are counted toward the “sufficient means” analysis include bank accounts, certificates of deposit, money market accounts, investment accounts, annuities, retirement accounts, life insurance cash surrender values, etc.

52. Net Worth Test STANDARD: Sufficient Means to Self-Pay
Asset Protection
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Net Worth Test
STANDARD: Sufficient Means to Self-Pay
Sufficient Means: A commonly used measure is $80,000 or less for a married couple, $50,000 or less for a single veteran.
Age Analysis: Age vs. Asset test

53. VA Transfer of Resources Rules
Asset Protection
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VA Transfer of Resources Rules
No look-back period
Compare Medicaid with VA Pension rules regarding transfers of resources. But, note difference in VA Nursing Home Rules.

54. Thank You For Your Attention
Asset Protection
9/25/2017
Thank You For Your Attention
Questions or Comments?