December 21

How to Choose a Trustee

If you create a trust, you will need a separate person or institution, called a “trustee,” to manage the trust either now or in the future, depending on the type of trust.  Choosing the right trustee is crucial to making sure your wishes are carried out. The choice is important because being a trustee can be a difficult job, with a trustee’s duties including making proper investments, paying bills, keeping accounts, and preparing tax returns.

A trust is a legal arrangement through which a trustee holds legal title to property for another person, called a “beneficiary.” The trust document will name the trustee, although there are several different types of trusts. The simplest one is a revocable living trust in which the person who creates the trust maintains control of the trust while he or she is alive. In this situation, the trust document will name a successor trustee to take over after the original trustee dies or becomes incapacitated. Other trusts — such as an irrevocable trust or special needs trust — may have a separate trustee from the start.

The law isn’t very strict about who may serve as your trustee, as long as the person is legally competent, meaning he or she is over 18 years of age and is capable of managing his or her own affairs. The main consideration when selecting a trustee is picking someone who is trustworthy. The trustee has a duty to manage the trust in the beneficiary’s best interest. The trustee does not need legal or financial expertise, but he or she must have good judgment. In the case of a special needs trust, the trustee should have knowledge of federal benefits programs.

Another consideration is that the trustee be able to manage the trust for an extended period of time. Your choice of trustee should be someone who will likely be around for a long time and who has the time to devote to trustee duties. It is important that the trustee be of sound mind and body.

If you don’t know anyone who meets these qualifications, you can look into hiring an independent trustee. This can be an individual or an institution with no beneficial interest in the trust. Some examples include: a bank or trust company, a professional trustee, an investment advisor or manager, an investment banker, an accountant or a lawyer. In addition to being independent, a professional trustee will usually have experience and expertise in managing trusts. If you aren’t comfortable with having a stranger manage the trust, it may be possible to choose a family member and a professional trustee as co-trustees. The downside to hiring an independent trustee is that the trustee will charge a fee, which is usually a percentage of the trust.

Whomever you choose as trustee, it is important to revaluate your choice every few years. The person who is right today may not be right tomorrow. Your attorney can help you determine who is the best trustee for you. 

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December 17

No Penalty Period for Medicaid Applicant Who Sold House for Far Less Than Tax Assessment Value

A New York appeals court rules that the state should not impose a penalty period on a Medicaid applicant who sold her house for less than one-fifth of its tax assessed value because the price was fair market value based on the property’s condition. Matter of Whittier Health Services, Inc. v. Pospesel (N.Y. App. Div., 3rd Dept., No. 520890, Nov. 25, 2015).

A nursing home applied for Medicaid on behalf of a resident. The state determined that the applicant sold her home for less than market value within the look-back period and assessed a penalty period. Tax assessment records showed the property was valued at $143,511, but the applicant sold the home for $23,122.

The nursing home appealed, arguing that the house was sold for fair market value because it needed significant repairs and was sold to someone who was not related to the applicant. After a hearing, the state affirmed the penalty, and the nursing home appealed to court.

The New York Supreme Court annuls the penalty period based on the sale of the house. According to the court, the evidence shows the sale was an arms-length transaction and “a recent arm’s length sale is a more accurate indicator of actual market value of the [applicant’s] property than the tax assessment records relied upon by” the state.

For the full text of this decision, go to: http://www.nycourts.gov/reporter/3dseries/2015/2015_08690.htm. 

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December 14

Son Must Pay for Mother’s Care Under Filial Responsibility Law Despite Abusive Childhood

A Pennsylvania appeals court holds that a son is required to pay for his mother’s care under the state’s filial responsibility law even though the mother does not have outstanding medical bills and the son claims he had an abusive childhood. Eori v. Eori (Pa. Super. Ct., No. 1342 WDA 2014, Aug. 7, 2015).

Joseph Eori is attorney-in-fact for his mother, Dolly Eori, who requires 24-hour care.  Ms. Eori lives with Mr. Eori, and her medical and caregiving expenses exceed her income.

Mr. Eori filed a complaint on behalf of his mother seeking filial support from his brother, Joshua Ryan. Mr. Ryan objected, arguing, among other things, that his mother was not indigent because she did not have outstanding medical bills and that he had an abusive childhood. Pennsylvania’s filial responsibility law negates the support obligation if the parent abandoned the child for a 10-year period. The trial court granted the petition for support, and Mr. Ryan appealed.

The Pennsylvania Superior Court affirms, holding that Mr. Ryan is required to provide support to his mother. The court agrees with the trial court’s decision that the filial responsibility law doesn’t require a showing of unpaid bills or liabilities to justify a claim. In addition, the court affirms the trial court’s ruling that while Mr. Ryan may not have had an ideal childhood, there was no evidence that his mother abandoned him.

For the full text of this decision, click here.  

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December 7

Medicare Announces Parts A and B Premiums and Deductibles for 2016

The Centers for Medicare and Medicaid has announced the Medicare premiums, deductibles, and coinsurances for 2016. As expected, for the third year in a row the standard Medicare Part B premium that most recipients pay will hold steady at $104.90 a month.  However, about 30 percent of beneficiaries will see their Part B premium rise to $121.80 a month.  Meanwhile, the Part B deductible will increase for all beneficiaries from the current $147 to $166 in 2016.

The Part B rise was supposed to be much steeper for the 30 percent of beneficiaries who are not “held harmless” from any increase in premiums when Social Security benefits remain stagnant, as will be the case for 2016.  But the premium rise was blunted by the Bipartisan Budget Act signed into law by President Obama November 2.  Medicare beneficiaries who are unprotected from a premium increase include those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who receive both Medicare and Medicaid benefits.

For beneficiaries receiving skilled care in a nursing home, Medicare’s coinsurance for days 21-100 will go up from $157.50 to $161.  Medicare coverage ends after day 100.  (For more on Medicare’s nursing home coverage, click here.)

Here are all the new Medicare figures:

  • Basic Part B premium: $104.90/month (unchanged)
  • Part B premium for those not “held harmless”: $121.80
  • Part B deductible: $166 (was $147)
  • Part A deductible: $1,288 (was $1,260)
  • Co-payment for hospital stay days 61-90: $322/day (was $315)
  • Co-payment for hospital stay days 91 and beyond: $644/day (was $630)
  • Skilled nursing facility co-payment, days 21-100: $161/day (was $157.50)

Higher-income beneficiaries will pay higher Part B premiums:

  • Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $170.50 (was $146.90).
  • Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $243.60 (was $209.80).
  • Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 will pay a monthly premium of $316.70 (was $272.70).
  • Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more will pay a monthly premium of $389.80 (was $335.70).

Rates differ for beneficiaries who are married but file a separate tax return from their spouse:

  • Those with incomes between $85,000 and $129,000 will pay a monthly premium of $316.70 (was $272.70).
  • Those with incomes greater than $129,000 will pay a monthly premium of $389.80 (was $335.70).

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary’s premiums. So the income reported on a beneficiary’s 2014 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2016. Income is calculated by taking a beneficiary’s adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary’s MAGI decreased significantly in the past two years, she may request that information from more recent years be used to calculate the premium.

Those who enroll in Medicare Advantage plans may have different cost-sharing arrangements.  The average Medicare Advantage premium is expected to decrease slightly, from $32.91 on average in 2015 to $32.60 in 2016. 

For Medicare’s press release announcing the new  figures, click here. 

For Medicare’s “Medicare costs at a glance,” click here.

For more about Medicare, click here.

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December 3

New Federal Budget Ends Two Spousal Social Security Claiming Strategies

The federal budget agreement that President Obama signed into law November 2, 2015, spells the end to two Social Security strategies that some spouses have used to maximize benefits. The strategies were worth tens of thousands of dollars over a lifetime for some couples and their impending demise may require beneficiaries to take action before the changes take effect or reconsider their retirement plans.

According to Social Security’s rules, the spouse of a worker cannot claim a spousal benefit unless the worker has applied for Social Security benefits. Currently, a worker is able to file for Social Security benefits at full retirement age, which is now 66, and then suspend benefits. This strategy — called “File and Suspend”  — allows the worker’s spouse to begin receiving spousal benefits while the worker postpones receiving benefits. The longer the worker delays retirement, the more delayed retirement credits he or she will accumulate (up to age 70), resulting in a larger Social Security check. 

Under the new law, a spouse cannot begin receiving benefits until the worker is actually receiving benefits, too. Workers can still file and suspend, but spouses (or other dependents, including minor and disabled children) cannot receive benefits during the suspension. The law will take effect on April 30, 2016, but it does not affect workers who have already filed and suspended benefits. Workers who are at least 66 or will turn 66 before the effective date of the law may still file and suspend in order to trigger benefits for their spouse.

The law also changes another rule that allows a spouse who takes benefits at full retirement age to choose whether to take spousal benefits or benefits on his or her own record. This strategy – commonly known as “Claim Now, Claim More Later”  — allows a higher-earning spouse to claim a spousal benefit at full retirement age. Then at 70, the higher-earning spouse would claim the maximum amount of his or her retirement benefit and stop receiving the spousal benefit.

If you are 62 or older by the end of 2015, you will still be able to choose which benefit you want at your full retirement age. Under the new law, when workers who are not 62 by the end of 2015 apply for spousal benefits, Social Security will assume it is also an application for benefits on the worker’s record. The worker is eligible for the higher benefit, but he or she can’t choose to take just the spousal benefits and allow his or her own benefits to keep increasing until age 70. This new rule does not apply to survivor’s benefits. A surviving spouse will still be able to choose to take survivor’s benefits first and then switch to retirement benefits later if the retirement benefit is larger.  

Contact your elder law attorney or financial advisor to determine if you should take any action before the new rules become law. 

For more information on who is affected by the rules, click here.

For questions and answers on the changes, click here.

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