Many seniors and their families don't use a lawyer to plan for long-term care or MassHealth, often because they're afraid of the cost. But an attorney can help you save money in the long run as well as make sure you are getting the best care for your loved one.

Instead of taking steps based on what you've heard from others, doing nothing, or enlisting a non-lawyer referred by a nursing home, you can hire an elder law attorney. Here are a few reasons why you should at least consider this option:

• No conflict of interest. When nursing homes refer the families of residents to non-lawyers to assist in preparing the MassHealth application, the preparer has dual loyalties, both to the facility that provides the referrals and to the client applying for benefits. To the extent everyone wants the MassHealth application to be successful, there's no conflict of interest. But it's in the nursing home's interest that the resident pay privately for as long as possible before going on MassHealth, while it's in the nursing home resident's interest to protect assets for the resident's care or for the resident's spouse or family. An attorney hired to assist with MassHealth planning and the application has a duty of loyalty only to the client and will do his best to achieve the client's goals.
• Saving money.  We're seeing nursing homes costing as much as $16,000 to $17,000 a month, so it is unusual for legal fees to equal the cost of even one month in the facility. It is not difficult to save this much in long-term care and probate costs. We also offer complimentary initial consults to determine what might be achieved before the client pays a larger fee.
• Deep knowledge and experience. Professionals who work in any field on a daily basis over many years develop both the depth and breadth of experience and expertise to advise clients on how they might achieve their goals, whether those are maintaining independence and dignity, preserving funds for children and grandchildren, or staying home rather than moving to assisted living or a nursing home. Less experienced advisers, however well intentioned, can't know what they don't know.
• Peace of mind. While it's possible that when you consult with an elder law attorney, the attorney will advise you that in your situation there is not much you can do to preserve assets or achieve MassHealth eligibility more quickly, the consultation will provide peace of mind that you have not missed an important opportunity. In addition, if obstacles arise during the process, the attorney will be there to work with you to find the optimal solution.

MassHealth rules provide multiple opportunities for nursing home residents to preserve assets for themselves, their spouses and children and grandchildren, especially those with special needs. There are more opportunities for those who plan ahead, but even at the last minute there are almost always still steps available to preserve some assets. It's always worth checking out whether these are steps you would like to take.  Contact us today to schedule a complimentary initial consult.

​What happens if you are a high-income Medicare beneficiary who is paying a surcharge on your premiums and then your income changes? If your circumstances change, you can reverse those surcharges.

Higher-income Medicare beneficiaries (individuals who earn more than $85,000) pay higher Part B and prescription drug benefit premiums than lower-income Medicare beneficiaries. The extra amount the beneficiary owes increases as the beneficiary's income increases. The Social Security Administration uses income reported two years ago to determine a beneficiary's premiums. So the income reported on a beneficiary's 2015 tax return is used to determine whether the beneficiary must pay a higher monthly premium in 2017.

A lot can happen in two years. If your income decreases significantly due to certain circumstances, you can request that the Social Security Administration recalculate your benefits. For example, if you earned $90,000 in 2015 but your income dropped to $50,000 in 2016, you can request an income review and your premium surcharges for 2017 could be eliminated. 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.

You can request a review of your income if any of the following circumstances occurred:

You married, divorced, or became widowed
You or your spouse stopped working or reduced your work hours
You or your spouse lost income-producing property because of a disaster or other event beyond your control
You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer's pension plan
You or your spouse received a settlement from an employer or former employer because of the employer's closure, bankruptcy, or reorganization
If your income changes due to any of the above reasons, you can submit documentation verifying the change in income -- including tax documents, letter from employer, or death certificate -- to the Social Security Administration. If the change is approved, it will be retroactive to January of the year you made the request.

​The Social Security Administration has a helpful guide on this topic as well.

​You may be afraid of losing your home if you have to enter a nursing home and apply for MassHealth. While this fear is well-founded, transferring the home to your children is usually not the best way to protect it.  

Although you generally do not have to sell your home in order to qualify for MassHealth coverage of nursing home care (subject to certain home equity limits), MassHealth could file a claim against the house after you die or if your spouse moves out of the property. If you get help from MassHealth to pay for the nursing home, MassHealth must attempt to recoup from your estate whatever benefits it paid for your care. This is called "estate recovery." If you want to protect your home from this recovery, you may be tempted to give it to your children. Here are four reasons not to:

1. MassHealth Ineligibility. Transferring your house to your children (or someone else) may make you ineligible for MassHealth for a period of time. MassHealth looks at any transfers made within five years of the MassHealth application. If you made a transfer for less than market value within that time period, MassHealth will impose a penalty period during which you will not be eligible for benefits. Depending on the house’s value, the period of MassHealth ineligibility could stretch on for years, and it would not start until the MassHealth applicant is almost completely out of money.

There are circumstances under which you can transfer a home without penalty and each must be explored as part of any planning.

And no, "selling" your home for $1.00 to your children doesn't change a gift into a sale.  MassHealth will simply calculate the difference between the value of the home on the date of the sale and the $1.00 paid and treat that as a disqualifying transfer.

2. Loss of control. By transferring your house to your children, you will no longer own the house, which means you will not have control of it. Your children can do what they want with it.  Even if you are confident your children will always honor their moral obligation to let you live in the property, this moral obligation will not hold against third parties: if your children are sued or get divorced, the house will be vulnerable to their creditors.

3. Adverse tax consequences. Inherited property receives a "step up" in basis when you die, which means the basis is the current value of the property. However, when you give property to a child, you transfer your tax basis to the child and they lose any future step up. If your child sells the house after you die, he or she would have to pay capital gains taxes on the difference between the tax basis and the selling price. In addition, if during your lifetime after the gift to a child you decide to sell the house your children will recognize any gain on the sale of the property and won't be able to shield it using your primary residence capital gains exclusion (currently at $250,000 ($500,000 for a couple)).

4. Negative Impact of Child as Owner:  Once the transfer is made your children are the owners.  I've seen this negatively impact children in a variety of ways, including negatively impacting the amount of financial aide their grandchildren are eligible for because the house was listed on a FAFSA, and children not being eligible for first time home buyer loan programs (since they were already the owner of a home).

There are other ways to protect a house from MassHealth estate recovery, including putting the home in a trust. Contact us to find out the best option in your circumstances. 

• After staying the same for five years, the amount you can give away to any one individual in a particular year without reporting the gift will increase in 2018. 

The annual gift tax exclusion for 2018 is rising from $14,000 to $15,000. This means that any person who gives away $15,000 or less to any one individual (anyone other than their spouse) does not have to report the gift or gifts to the IRS.  Client's often refer to this as the $10,000 annual gift but in fact this threshold is adjusted for inflation which is how it is now fixed at $15,000.

If you give away more than $15,000, you do not necessary have to pay taxes, but you will have to file a gift tax return (Form 709) and it may impact the threshold for the Massachusetts Estate Tax. The IRS allows individuals to give away a total of $11.2 million and couples $22.4 million (in 2018) during their lifetimes before a gift tax is owed. This $11.2 million exclusion means that even if you have to file a gift tax return (Form 709) because you gave away more than $15,000 to any one person in a particular year, you will owe taxes only if you have given away more than a total of $11.2 million (or $22.4 million) in the past. As a result, the filing of a gift tax return is merely a formality for nearly everyone.

The gift tax also applies to property other than money, such as stock. If you give away property that is worth more than $15,000 you have to report that on your gift return.

Note that gifts to a spouse are usually not subject to any federal gift taxes as long as the spouse is a U.S. citizen. If your spouse is not a U.S. citizen, you can give only $152,000 without reporting the gift (in 2018). Anything over that amount has to be reported on the gift tax return. Also, you do not need to report tax deductible gifts made to charities on a gift tax return unless you retain some interest in the gifted property.

With the increase in the gift tax, the amount you can give to an ABLE account is also increasing to $15,000. ABLE accounts allow people with disabilities and their families to save up to $100,000 in accounts for disability related expenses without jeopardizing their eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits.

While there can be many tax saving benefits from utilizing annual gifting options each year, its important to factor in the consequences gifting will have on future MassHealth eligibility (MassHealth doesn't recognize a non-gift threshold of $15,000 like the IRS does) and the fact that gifts of assets result in a potentially lost opportunity to get a stepped up basis in those assets on death potentially increasing future income tax costs.

The big headline from the Tax Cuts and Jobs Act signed into law in December of 2017 has to do with reducing the corporate tax rate from 35 percent to 21 percent.  However some provisions relate to individual taxpayers. Before we get into the details, be aware that almost everything listed below sunsets after 2025, with the tax structure reverting to its current form in 2026 unless Congress acts between now and then. The corporate tax rate cut, however, does not sunset. Here are the highlights for individuals:

Estate Taxes. If you weren't worried about federal estate taxes before, you really don't need to worry now. With the federal exemption already scheduled to increase in 2018 to $5.6 million for individuals and $11.2 million for couples, the federal exemption has now nearly doubled this to $11.18 million (estimate) and $22.36 million (estimate), respectively, indexed for inflation. The tax rate for those few estates subject to taxation remains at 40 percent.  Two important reminders: (1) the Massachusetts Estate Tax remains in place and impacts estates with assets in excess of $1 million so this will continue to necessitate estate planning; and (2) because of the sunset of the federal exemption in 2025, individuals with assets between $5.6 million and $11.2 million, and married couples with assets between $11.2 million and $22.36 million should consider using this exemption through gifting (weighing of course, the negative consequences of such gifting including the loss of basis adjustments for income tax purposes).

Exemption Planning:  Because of the 2025 sunset, married couples will continue to need to plan on using the exemption on the death of the first spouse.  For example, if a married couple with $10 million in assets experiences the death of one spouse in 2020 planning measures should still be taken so that if the surviving spouse passes away in 2026, after the sunset and when the exemption could drop from $11.2 million back to the $5.6 million (both numbers possibly being adjusted for inflation) an estate tax of 40% on the excess isn't incurred.
 
Tax Rates. These are slightly reduced and the brackets adjusted, with the top bracket dropping from 39.6 percent to 37 percent.

Standard Deduction and Personal Exemption. The standard deduction increases to $12,000 for individuals, $18,000 for heads of household and $24,000 for joint filers, all adjusted for inflation. Personal exemptions largely disappear.

State and Local Tax Deduction. Now referred to as "SALT," this is now subject to a cap of $10,000,  In Massachusetts, this will impact taxpayers whose property taxes, state income taxes, and even vehicle excise taxes exceed the $10,000 threshold as the amount in excess is essentially wasted.

Home Mortgage Interest Deduction. The limit on deducting interest on up to $1 million of mortgage interest stays in effect for existing mortgages. New mortgages taken on after December 15, 2017, are subject to a $750,000 limit. The deduction for interest on home equity loans disappears.

Medical Expense Deduction. After much outcry in response to the House version of the tax bill, which would have eliminated the medical expense deduction, it survived. And, in fact, it was enhanced by permitting medical expenses in excess of 7.5 percent of adjusted gross income to be deducted in 2017 and 2018, after which it reverts to the 10 percent under existing law.

529 Plans. These accounts permitting tax-free accumulation of capital gains and dividends to pay college expenses can now be used for private school tuition of up to $10,000 a year.  529 Plans can be a great usage of annual exclusion gifts to lower your taxable estate.

Depending on your income and the amount of state and local taxes you have been paying, you may get a small tax cut. The bigger question is how the projected reduction in tax revenues of $1.5 trillion over the next 10 years will be paid for. This amount may simply be added to the deficit, or it may be used as a justification for “entitlement reform,” i.e., cutting Medicare, MassHealth or Social Security.