Posts By: Gene Osofsky

Q: My husband just passed away. He did not have a Will or Trust, and our home was his separate property from his prior marriage. His son is now anxious to sell the home in order to receive his inheritance share, but that would force me out of the home with nowhere to go. Do I have any rights?

A.  Yes, you do! There are two important rights of which you should be aware: the Probate Homestead and the Probate Family Allowance. These key provisions of probate are designed to safeguard the interests of surviving family members, and together they play an important role in providing financial protection and stability to them during this time of transition.

Probate Homestead

The probate homestead provides a valuable shield for you and any minor children by allowing you to claim your husband’s home as your “homestead”, with the right to continue to reside in the home. This right is liberally construed and favored by the law. In ruling on the request for a Probate Homestead, the court has discretion to determine the proper conditions and appropriate duration of this homestead. Such conditions can include the assignment of other property owned by your husband to his son or other heirs or devisees, i.e. as a kind of “ trade – off” so, as here, the son might receive other items of value from his father’s estate while you continue to reside in the home. The court will also set the duration of the Probate Homestead in its order, and this can be as long as your own lifetime if the court determines that your financial and shelter needs so require. However, if you later remarry, it is likely that the homestead would then dissolve.

Probate Family Allowance

Another feature of the probate process is your right to request a probate family allowance, a feature designed to provide immediate financial assistance to you and surviving family members during the administration of your husband’s estates. This provision can ensure that you, as the surviving spouse, will have access to a reasonable allowance from your husband’s estate to support yourself during administration. This allowance can help cover essential expenses such as expenses related to the home, utilities, food, and other necessities during the probate process.

If your husband’s estate is solvent, the court has wide discretion in determining the duration of a family allowance, but it must terminate no later than the entry of the final order for distribution of his estate, which could very well be a year or more from the beginning of the probate process.

Some local court rules, however, require that it be of limited duration, and require additional petitions in order to extend the duration of this allowance. These are all matters that you should discuss with your attorney.

In conclusion, the Probate Homestead and the Probate Family Allowance serve as essential safeguards for surviving spouses and minor children, providing a place for them to continue to live, and for immediate financial assistance in their time of need. These provisions can play an important role in ensuring your own well-being during and even beyond the probate process. Be sure to discuss these matters with your attorney as soon as possible.

Posts By: Gene Osofsky

Q. My mother just died, and her will leaves her estate equally to us three children. I am fairly well-off, but my two brothers are not quite as fortunate. Is there a way that I can redirect some or all of my share to them in a tax efficient way?

A. The answer may very well be “yes.” One way to accomplish this is by the use of a disclaimer. A disclaimer is a renunciation of one’s right to receive a gift or bequest, whether the gift is left in a will, trust, or by beneficiary designation.

However, whether it will accomplish your purpose in routing your share to your siblings depends upon how your mother structured her will. Here is why: in order for a disclaimer to be effective, it must pass to the next person in line without any direction on your part. In other words, it must pass to the successors whom your mother, herself, has chosen to take in the event you predeceased her. A couple of examples will help illustrate the matter:

Example #1: let us suppose your mother’s will recites as follows:

“ I leave everything to my three children, equally, but if any of my children predecease me, then I leave that deceased child’s share to my other surviving children, equally.”

Example #2: now, let us suppose your mother’s will, instead, recites as follows:

“ I leave everything to my three children, equally, but if any of my children predecease me, then I leave that deceased child’s share to his own surviving children”.

In example #1, your mother provides that the share of any predeceased child would go sideways to your siblings, while in example #2, she provides that it would go downward to your own children. In example #1, a disclaimer by you would accomplish your purpose, but a disclaimer by you in example # 2 would not.

A disclaimer is treated as if the target beneficiary had predeceased the decedent. So, before exercising a disclaimer, it is very important to first determine whom the decedent, herself, has selected as the successors. If the decedent died without a will, then the successors would be determined by state law.

The nice thing about a disclaimer is that it is treated for tax purposes as if you never owned the asset; it passes to the successors without any adverse tax implications to you. As a result, a disclaimer can be a very tax efficient way of postmortem planning. By contrast, if you first accept your share and then re-gift it to your siblings, the gift tax scheme would be implicated: you would need to file a Gift Tax Return for amounts over $18,000 per recipient (in year 2024), and the gifts to your siblings would reduce your own lifetime exemption from gift and estate tax (currently $13.61 Million per person through the end of year 2024. Thus, accepting and then re-gifting the assets to your siblings would use up some of your own lifetime tax exemption, making less available for you later on to shield bequests to your own beneficiaries. Note, however, that the current very generous lifetime gift and estate tax exclusion is set to expire at the end of 2024. Thereafter, unless a new law is enacted, it is expected to reduce to approximately $7 million per person (or, $14 million for married couples). So, if it would accomplish your purposes, using a Disclaimer is a better way to go.

To be effective, a disclaimer must meet certain requirements: it must be in writing, it must be made before you accept the gift or any of its benefits, and it must be made not later than nine months after your mother’s death. Caution: a person receiving some public benefits, such as SSI, should never make a Disclaimer without getting professional guidance, as doing so would be treated as a prohibited transfer of assets and could jeopardize continued eligibility for those public benefits.

Another approach: if your mother’s bequest were made in a Trust (rather than by will), you might, instead, use a relatively new procedure in California called “Decanting”. For more on this option, check our website for articles on this topic.

Posts By: Gene Osofsky

Q. My mother will need care in a Nursing Home, but the cost is beyond our reach. I understand that Medi-Cal can help subsidize that cost if she were eligible for that financial assistance. I also heard that there are new rules now in place that may make it easier for her to qualify. Can you shed any light on this, and is there still a role for advance planning?

A. Yes, and you heard correctly! Because of legislation (AB 133) signed by Governor Newsom, and fully effective this year, Medi-Cal has abandoned its long-standing asset test for all categories of Medi-Cal.

Until this year, there were, broadly speaking, two categories of Medi-Cal: (1) Medi-Cal for those under age 65, who qualified under the Affordable Care Act by reason of having modest incomes  (where assets did not count), and (2) Medi-Cal for those over age 65 and the disabled, who qualified by reason of having “countable resources” under certain limits (that is, where assets did count, although income only counted toward their “co-pay” or “Share of Cost”). Asset resources did not count for the younger group, but did count for the older group. Now, they no longer count for either group!  With this transformative change in the law, eligibility for the older group is now in sync with the younger group. In short, the value of assets is no longer disqualifying for either group. This comes as very welcome news for many seniors.

That said, there is certainly a role for advance planning, especially for seniors, and I am glad you asked that question. Here are some bullet points:

1) Income still matters: For seniors, income is still considered for purposes of determining whether he or she will have a monthly Share of Cost for the care received. While the rules regarding income are different for care received in a nursing home, as compared with care received at home, there are still lawful planning strategies available to shelter that income. These strategies can be helpful so as to either minimize the patient’s monthly Share of Cost or eliminate it entirely. For example, in appropriate cases, certain trusts may be used to shelter income generated by income-producing assets, in full compliance with the Medi-Cal rules. Furthermore, know that some Medi-Cal options are only available when the beneficiary’s Share of Cost has been reduced to zero. One such option is the Assisted Living Waiver Program, which provides a Medi-Cal subsidy for care in assisted living facilities for those who qualify. Other programs are only helpful where the Share of Cost is substantially below the actual cost of care, such as the In Home Supportive Services (“IHSS”) Program.

2) Estate Recovery: When the Medi-Cal beneficiary dies, Medi-Cal looks to his or her estate to determine if it may recover payments made on his or her behalf. In this regard, estate recovery is now limited to cases where the patient’s estate is administered in a formal probate proceeding. Thus, in order to avoid Estate Recovery, Medi-Cal planning may include strategies to hold assets in certain trusts and/or creating financial accounts with named death beneficiaries.

3) Good Planning Documents are still essential: It is still essential to have good planning documents in place, such as a Durable Power of Attorney containing the requisite Medi-Cal planning powers: should you become incapacitated, these powers may be necessary for your designated agent to use so as to enable him or her to help you take advantage of the new rules. And these powers should always be coordinated with your trust and meet your other estate planning objectives. So, advance planning is just as essential as before.

Medi-Cal has been issuing new rules and guidance to help Medi-Cal eligibility workers comply with the new law and to assist advocates, such as myself, help their clients. So, stay tuned as the new law moves forward and good wishes to you and your mother on securing a Medi-Cal subsidy to help with the cost of her care.

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Note: Be mindful that the new rules for Medi-Cal do not change the rules for other public benefit programs, such as the Supplemental Security Income (“SSI”) program. Indeed, the SSI program still has an asset cap of only $2,000 for a single individual and $3,000 for a married couple. So, persons who rely upon other public benefit programs, such as SSI, must be sure to take this into account. Also, know that California is unique among the states; no other state has thus far eliminated its asset cap for what is called “Medicaid” in the rest of the country. So, if one plans on relocating to another state, be sure to take this fact into account, as well.

Posts By: Gene Osofsky

Q.  My wife and I have high prescription drugs costs. I hear that there may be changes to the Medicare Drug program that may make them more affordable for us. Is that correct and can you provide any more information?

A. Yes, indeed. As part of the Inflation Reduction Act (“IRA”) passed by Congress and signed by President Biden in August 2022, good news is here for seniors with high cost medications, and even more good news is coming in 2025.  In short, in 2024 and 2025, the prescription drug benefits available to enrollees under Medicare Part D will undergo dramatic changes, the thrust of which is to curb the exorbitant cost of medications, thereby making prescription drugs more affordable to seniors and to the disabled on Medicare.

Background: Under Medicare Part D as it existed through 2023, enrollees would typically pay for drugs based upon their accumulated Out of Pocket Costs (“OOP”) during the plan year.

Notably, when “OOP” exceeded $7,400, he or she would thereafter be obliged to pay a 5% co-insurance cost for medications. For those seniors with high drug costs, this arrangement posed a real economic burden. Under the IRA, this is now changing for the better.

Here are some bullet point summaries of the changes:

1) Catastrophic Phase: the 5% Co-Payment Eliminated: For those with very high drug costs which  exceed the Catastrophic Phase ($7,400 threshold in 2023 and $8,000 in 2024), the new rule for 2024 eliminates the 5% co-payment entirely for the cost of drugs above that Catastrophic Phase cap. This change, alone, will result in significant savings to enrollees who use expensive drugs, such as drugs for cancer treatment.

2) Insulin Price Cap: the law now provides a $35 cap on a 30 day supply of any insulin that Medicare covers, whether the drug coverage is under a Medicare Part D Plan, or under a Medicare Advantage Plan;

3) Vaccines Without Cost: Vaccines recommended by the Centers for Disease Control continue to be covered without cost to Part D enrollees. Included are vaccines for shingles and RSV, flu, COVID-19, pneumonia, hepatitis A, rabies and tetanus.

4) Drug Prices Inflation Controlled:  Drug makers who increase pricing more than the rate of inflation must pay a rebate to Medicare, thus effectively discouraging excessive price increases on drugs subject to this rule. There are currently 64 drugs earmarked for this rebate requirement.

5) Drug Price Negotiation Now Authorized:  Under the new drug law, Medicare – for the first time – is now permitted to negotiate with manufacturers over the price of drugs. Currently, 10 drugs have been selected for this process, and CMS will publish in September, 2024, a list of what the maximum prices will be for these drugs.

6) ‘OOP’ Drug Costs Payable In Monthly Installments: Beginning in 2025, Part D enrollees will have the option of paying Out-Of-Pocket (“OOP”) drug costs in monthly payments spread over the calendar year, rather than all at once at the pharmacy. This is an Opt-In program called the “Medicare Prescription Payment Plan”. Program participants will pay zero to their pharmacy for covered drugs. Their Part D plans will then bill the participants monthly for any cost sharing.  The Part D plans will be required to notify the pharmacy to provide information to participants when their “OOP” is $600 or more for a single prescription at the point of sale.

7) Extra Help Program Requirements Relaxed: As of 2024, the IRA made it easier to qualify for this Low Income Subsidy Program (aka, LIS or “Extra Help”), by increasing the qualifying income threshold. Now, individuals with annual incomes up to $21,870 per year can qualify.

8) Donut Hole To Be Eliminated: In 2024, you enter the so-called “Donut Hole” when you and your Part D Plan spend a total of $5,030. In the Donut Hole, enrollees pay up to 25% OOP for covered medications, and leave the Donut Hole when they have spent $8,000 in OOP costs for covered medications. The good news:  Year 2024 will be the last year for the Donut Hole!.

9)”OOP” Cap of $2,000 in 2025: Perhaps most importantly, as of January 1, 2025, the maximum Out-Of-Pocket payment for drugs will be capped at a flat $2,000 per person, resulting in very significant savings for most seniors and the disabled, especially those with high “OOP” prescription drug costs.

The whole thrust of the changes made by the IRA is to make it significantly easier for Seniors and the disabled on Medicare to purchase necessary medications to maintain their health.

Posts By: Gene Osofsky

Q. Mother recently died after spending two years in a nursing home on Medi-Cal. Medi-Cal just sent us a bill for about $150,000 and says it will file a claim against her home.  Yikes!  We thought her home was an exempt asset.  What do we do about the bill?

A. Your situation is all too common: families often confuse the Medi-Cal “eligibility” rules with the “recovery” rules. Her home was, indeed, exempt for eligibility purposes, but that exemption expired upon your mother’s death.  Her home and most other exempt assets then became exposed to a Medi-Cal “payback” claim. This is called “estate recovery”.  Let’s review the basic rules to see if any might give you some relief:

1) Your Own Assets Are Not at Risk. First, know that you and your siblings do not have a personal obligation to pay back Medi-Cal from your own assets.  Only your mother’s assets, including her home, are subject to recovery.

2) If No Probate, then No Recovery:  If her home and other assets do not go through probate, then under current law they will not be subject to recovery. Thus, assets held in a “Living Trust” or in financial accounts with a beneficiary designation will not be subject to recovery. This exclusion is, by far, the most popular exemption from recovery. It also underscores the need for lifetime planning using a “Living Trust” to hold assets and/or naming beneficiaries on bank and financial accounts.

3) If Survived by Spouse or RDP:  If your mother were survived by a spouse, or a Registered Domestic Partner, then there would be no recovery as to those Medi-Cal beneficiaries who died after January 1, 2017, when the law on this point became effective.

4) If Survived by Blind or Disabled Child:  Medi-Cal will withdraw its claim entirely upon proof that your mother is survived by a blind, minor or disabled child, usually established by proof that the child is receiving Social Security disability benefits.  Here, it does not matter whether the disabled child is an adult, nor whether he/she lived in your mother’s home or even relied upon her for support.

5) If Prove “Hardship”, No Recovery:  Medi-Cal will waive its claim if the surviving family members can prove “hardship”, based on one or more of six specific factors.  One factor is a showing that a child lived in the parent’s home and provided care for the parent for at least two years, thereby delaying the parent’s entry into a nursing home.  Another is a showing that allowing the surviving child or other beneficiary to receive his/her full inheritance would enable him/her to go off public benefits and be self-supporting.

6) Home of “Modest Value”:  Medi-Cal will waive its claim as to the home if it is determined to be of one of “modest value”, i.e. valued at less than 50% of the average value of homes in your mother’s county of residence as of her date of death. One can secure this information on the internet, e.g. from the website of “Realtor.com”, or another reliable site.

(7) Offer Voluntary Lien:  If there is no basis to seek waiver or deferment of the claim, you might seek a “Voluntary Post-Death Lien” to defer payment.  This lien allows the survivors to continue to reside in the home while paying an agreed monthly installment against the amount of the Medi-Cal claim, which claim does accrue modest interest.  The balance of the claim would be paid when the home is sold or transferred.  To qualify, the survivors must be residing in the home, be unable to pay the claim in full, and be unable to obtain financing to do so.

For families with a loved one currently on Medi-Cal, we urge seeking the advice of an elder law attorney to determine whether steps can be taken now to avoid a later Medi-Cal recovery claim and thereby preserve assets for the benefit of surviving family members.  We also suggest planning during your loved one’s lifetime to avoid probate, such as by creating a Living Trust to hold assets. Remember the wise adage: ‘An ounce of prevention is worth a pound of cure’

Posts By: Gene Osofsky

Q.  I hear that the IRS may offer free tax preparation services.  Do you know anything about this?
A.  Yes. The IRS offers free tax preparation software, fillable forms, and free taxpayer assistance, all available in an effort to make tax compliance easier, especially for seniors, those with a disability and those whose primary language is not English.
The free tax software is actually available from private vendors, but studies find that the availability of the free software is not well known and, in fact, is not easy to find on an Internet Search. It seems that, some years back, in an effort to increase the number of electronically filed returns, the IRS decided to encourage the use of tax preparation software.  In aid of that goal, the IRS entered into an agreement with private software vendors whereby the latter agreed to make their software available for free to low-income persons, especially seniors, and in exchange the IRS agreed not to design its own free software to compete with those private companies.
Unfortunately, it seems that some of these companies have initiated computer code so that their free software is not easily “findable” on an internet search. As a result, the number of taxpayers actually using the free software is tiny.
That said, seniors, retirees and persons with a disability should know that they can take advantage of free help to file their tax returns.  There are basically two (2) categories of free assistance, depending upon income, age, disability and facility with English, as noted below. In each case, seniors can go to the IRS website [IRS.gov] and type in the following words in the search bar: “Free File: Do Your Federal Taxes for Free”.  A screen will then pop up to give you choices, as follows:
Option 1: Guided Tax Preparation Software:  This option is for seniors whose Adjusted Gross Income (“AGI”) is less than $79,000.  Seniors who qualify can peruse the IRS site, choose their favorite vendor, and download free federal and state tax preparation software from vendors with such familiar names as Turbo Tax and H&R Block.
Option 2: Free Fillable Forms:  Available for any income level, Seniors can opt for Free Fillable Forms, but must have a basic understanding as to how to do their own taxes.
The IRS.gov site also shows how to seek help, pursuant to the Volunteer Income Tax Assistance (“VITA”) program, which offers free tax help to people who earn $64,000 or less, persons with disabilities and taxpayers with limited English speaking skills. IRS-certified volunteers provide free basic tax return preparation with electronic filing for qualified individuals.
Another program of note is the Tax Counseling for the Elderly (“TCE”) program:  The TCE offers free tax help for all taxpayers, particularly those who are 60 years of age and older, and specialize in dealing with pensions and retirement-related issues unique to seniors. The IRS-certified volunteers are often retired individuals associated with non-profit organizations.
You can find a location near you to obtain free assistance in any one of the following ways:
a) Call the VITA locator phone number at 1-800-906-9887; b) Call the AARP Foundation’s Tax Aid Program at 1-888-227-7669; or, c) Go to the IRS.gov web page, type the following into the search bar: “Free Tax Return Preparation for Qualifying Taxpayers”. Then Click on one of the two Locator Tools.
b)Alternatively, you can just call one of these nearby locations for on site assistance: Hayward Area Seniors Center, Hayward: (510-881-6766); Eden Social Services Agency, Hayward: (510)271-9141; Alameda County Social Services: (510)670-6000; or, Hayward Library (510)293-8685.
Of note, also, is that the IRS now offers a simplified two page form designed especially for seniors. It is called the Form 1040-SR “US Tax Return For Seniors” and is designed to simplify the process for retirees. Good wishes on filing your taxes!

Posts By: Gene Osofsky

Q. I am in my 70’s and receiving Social Security and Medicare. I am considering selling my home and moving into a Senior Living facility. I heard that the sale might affect my Medicare premium and Social Security benefits. Can you shed any light on this?

A. I believe so, and you heard correctly if you anticipate capital gain from the sale. Your Medicare premiums now adjust based upon your income, so if your income goes up, so does your Medicare premium. Medicare calls this the “Income-Related Monthly Adjustment Amount” and often refers to this by the acronym “IRMAA”. The relevant income is called Modified Gross Income (“MAGI”) on your tax return, and includes capital gain. As you may know, capital gain on the sale of your home is the difference between your net sales price and the following: your original cost plus improvements, less the$250K per person exemption (assuming that you qualify for the exemption by having lived in the home at least 2 of the 5 years before sale). By way of example: If you purchased your home many years ago for, say, $125K, put in $200K in improvements, and your net proceeds from sale are $1.4 million, here is a rough estimate of your capital gain:

$1,400,000 Net sales price after selling expenses
< 125,000 Original Cost
< 200,000 Improvements
< 250,000 Tax Exemption

$ 825,000 Capital Gain

That gain would be included in your MAGI and reported on your tax return. Two years later, the Medicare folks would use that increased income and adjust your Medicare premium upward for one year. See the chart below. Since your Medicare premiums are deducted from your Social Security benefit, this adjustment would result in your receiving a reduced Social Security benefit each month.

But, it would likely only be for one year, starting two years after the year in which you report the gain on your tax return, and should therefor adjust back to your “true” income every year thereafter. Here is a chart showing how MAGI income affects the Medicare Part B and Part D premiums for a single individual in 2024, and for married persons filing a joint return.

                                                                                                                  FOR SINGLE PERSONS

MAGI (in 2022)                                                               Part B Premium                                               Part D Premium

$103K- $129K                                                                 $244.60                                                             $12.90 + Plan Premium
$129K–$161K                                                                 $349.40                                                             $33.30 + Plan Premium
$161K–193K                                                                   $454.20                                                             $53.80 + Plan Premium
$193K-$500K                                                                  $559.00                                                             $74.20 + Plan Premium
$500K or more                                                                $594.00                                                             $81.00 + Plan Premium

                                                                                                               FOR MARRIED COUPLES

MAGI (in 2022)                                                            Part B Premium                                                Part D Premium

$206K – $258K                                                            $244.60                                                             $12.90 + Plan Premium
$258K– $322K                                                             $349.40                                                             $33.30 + Plan Premium
$322K– $386K                                                             $454.20                                                             $53.80 + Plan Premium
$386K–$750K                                                              $559.00                                                             $74.20 + Plan Premium
$750K or more                                                             $594.00                                                             $81.00 + Plan Premium
______

Also note that switching from original Medicare to a Medicare Advantage Plan may lower your part B Premium, and therefore what you pay each month due to IRMAA, but switching means giving up certain benefits of Original Medicare, so consider this trade-off carefully before making the switch. Further, if you believe that Medicare has made a mistake in adjusting your premium, you can appeal based upon a significant Life Changing Event (such as death of a spouse). Search the social security website (SSA.Gov) for Form SSA-44 for more detail.

Before you list your home for sale, you might also review this issue with a financial planner to see whether other options may present in your situation. Good wishes.

Reference:  Social Security Program Operations Manual System (POMS) HI 01101.020 IRMAA Sliding Scale Tables.

Posts By: Gene Osofsky

Q. Our 91 year-old mother is frail but wishes to remain at home. She has limited financial resources, so my sister is living with her and providing care without pay.  Are there any government programs that might help us hire a caregiver and give my sister some relief?

A.  Yes. There are a number of programs, but one that may be of special interest is the In-Home Supportive Services Program (“IHSS”). It is designed for persons of limited income who are blind, disabled or over age 65, and who are unable to live safely at home without assistance.  For qualifying individuals, it provides nonmedical services such as meal preparation, cleaning, laundry, bathing, feeding, dressing, grooming, toileting, and monitoring for persons with cognitive impairments who are at risk of injury at home.

It works like this: following an application, an in-home assessment is made by a social worker to determine the number of hours of care needed. This can be up to 195 hours per month for a non-severely impaired applicant and up to 283 hours per month for one who is severely impaired.  Upon approval, the beneficiary then selects and hires a caregiver and the IHSS program pays the worker for the number of approved hours per month, currently at the rate of $19.05 per hour in Alameda County (in 2024).

Resource Limits:  The program is designed for persons who are eligible for Medi-Cal or Supplemental Security Income (“SSI”).  With the recent lifting of the Medi-Cal resource caps (as of 01/01/2024), many more folks will now qualify for Medi-Cal, thereby making themselves eligible for IHSS upon a showing of need for care. Note: SSI still retains the very modest resource caps of no more than $2,000 in savings for a single individual or $3,000 for a couple. However, the Medi-Cal door has now swung widely open in 2024, and will be the easier route to eligibility.

Income Limits:  For persons with low monthly incomes, the benefit is available without a share of cost (“co-pay”).  However, for persons whose monthly income is above certain levels (currently, above $1,677 for a single person and $2,269 for a married couple, in 2023), the applicant will have a share of cost that must be paid to the worker before the IHSS program pays the balance.  Thus, the program only works well for persons with low incomes, or persons with great need who are awarded many hours of care.

In many cases, the caregiver may hire a family member, whether a spouse or an adult child.  Also, for the caregiver who works at least 80 hours per month, the program in Alameda County makes healthcare available at a nominal monthly premium, a valuable benefit to the worker.

If your mother qualifies for IHSS, she could hire your sister, so that your sister could then receive both a salary and health insurance.  Also, to give your sister some relief each month, your mother could split care hours, hiring your sister for some of the hours, and another caregiver for the balance of approved hours.

To find out more, call the Alameda County Area Agency on Aging at 510-639-1090, or go to www.AlamedaCountySocialServices.org. Alternatively, you may contact our firm for assistance.

Posts By: Gene Osofsky

Q.  I recently had to lay my wife to rest after almost 50 years together.  Our children keep saying that I should review our estate plan with an attorney to see if anything needs to be done and that all is in order. Do you have any suggestions as to things I should look for, or be aware of?
A.  Yes, and sorry about the passing of your wife. It is always difficult to lose a loved one, and especially so when you’ve been together so many years. Here is a short, but not necessarily a complete, list of things that you may wish to consider when doing so:
1) See If Your Existing Plan Takes Account of Your Current Family Circumstances:
Your estate plan should always be reviewed periodically, and especially so when there may have been changes in your family, such as births, deaths, marriages, divorces, new grandchildren, etc. See if your existing plan takes account of your current circumstances and, if not, consider how – and whether– those changed circumstances should now be factored into your plan. Example: Do beneficiaries need to be added or deleted? Do the gifts to beneficiaries need to be modified?
2) Review Your Financial Accounts To Check Titles
Review your bank and stock brokerage accounts to verify that the titles of same are correct and coordinate with your existing plan. If you have a Living Trust, are the account designations in the names of the Trustee(s)? If so, and if they are still in the names of yourself and your wife as trustees, you should advise each of your financial custodians of the passing of your wife, and provide them with an Amended Certificate of Trust, showing that you, alone, are now the sole trustee and sole manager of the accounts.
3) Amend Your Existing Certification of Trust & Advise Your Financial Custodians
If you have a Living Trust, it is likely that the attorney who prepared that trust also prepared something called a Certification of Trust, which is a kind of summary of the trust created for you to give to your banks and other financial custodians, and which provides them the identities of the trustees, their powers, and related information. This document should now be amended to provide that you, alone, are now the sole successor trustee. While doing so, check the further successors who would assume responsibility after you, and verify that the list, and the order of succession, still meets with your wishes and that the designated successors are willing to “step up” when the time arises.
4) Consider Time Limits to Take Certain Actions
Many estate plans permit the surviving spouse to take a “second look” at the plan of disposition, and make appropriate changes, such as in the designation of beneficiaries, the shares of beneficiaries, and the like. These provisions may include options called “Disclaimers” and/or “Powers of Appointment”, and generally permit the surviving spouse to modify the plan of disposition based upon later circumstances. A Disclaimer, for example, would permit the surviving spouse to decline all or a portion of the estate left to him or her, so as to accelerate that bequest to the next in line, typically the children, and thereby avoid a second trust administration and, in some cases involving larger estates, a second estate tax. Also, if your estate is large enough, you may need to file federal and state estate tax returns, which typically is due within 9 months of death. Even if not currently larg enough, still you may also wish to file a return just to preserve your wife’s Unused Estate Tax Exemption, for possible later use by your successors upon your own demise.
5) Possible Sale of Home to Preserve Double Tax Exemption:
If you plan on moving into a senior living facility, for example, and are considering selling your home to help finance that move, you may wish to do so within 2 years of your wife’s passing, so that you can still use her exemption and thereby take full advantage of the capital gain “double tax exemption” for sale of a personal residence. That tax exemption, available to shield capital gains tax for individuals who have lived in their home for at least 2 of the previous 5 years before sale, is $250,000 per person but is $500,000 for a married couple. For a period of 2 years after her passing, you could still claim your wife’s exemption and shield that much more of capital gain.
6) Review & Update Estate Planning Documents For Successors
In addition to reviewing your trust, you should also review your own Will, Durable Power Of Attorney, and Advance Health Care Directive, to make sure that you have someone, other than your wife, who can step up and take charge when the need arises. My suggestion is that you should name more than one successor, “just in case” the first successor is unwilling or unable to take charge. Married couples will typically name each other in the first position, and their children next, in whatever order the couple deems appropriate. If that is your plan, check with your children to make sure they are still willing and able to step up when the need arises. You should also review and update your HIPPA Medical Release form, so that your trusted family members can discuss your health situation with your doctors and access medical records as necessary.
7) Consult with an Estate Planning Professional
An estate planning attorney can help you review and understand more fully your current circumstances and advise in regard to any changes that may be appropriate. While it may be emotionally difficult to review your planning during this difficult time, consider it an act of love for your family.

Posts By: Gene Osofsky

Q.  Last year around this time, you wrote an article on year-end gift planning, but I cannot find the copy I saved. My wife and I are considering making large gifts to our two children to help them remodel their homes, and we would like to do so in a way that is “tax wise”. Can you publish it again, please? A.  Sure, and I have actually updated it with the new Gift amounts for this year and next. Many people mistakenly believe that one cannot gift more than $17,000 per year / person without incurring a gift tax. Not so! In fact, an individual can currently gift more than $12 million during his or her lifetime without incurring a gift tax! Here is the way gift taxes work:
Annual Exclusion Gifts: No Gift Tax Return Required:

1) $17,000 Per Year: The federal tax law permits you to make an Annual Exclusion Gift Amount, i.e. the amount that may be gifted to any person without filing a Gift Tax Return. In 2023, it is $17,000 per recipient, and in 2024 it increases to $18,000 per recipient. Such gifts are called Annual Exclusion Amount Gifts (“AEA Gifts”) and you can make such gifts to as many persons as you wish each year, provided that you make only one such annual gift to each gift recipient. No Gift Tax Return is required for these gifts.

2) “Doubling Up”:  If you and your wife are in a position to do so, together you can actually double that amount for each gift recipient. So, together, you could gift a total of $34,000 to each child in year 2023, without the need to file a Gift Tax Return or incur any gift tax.

3) “Year End Straddle”: If you act before the end of this current year (2023), you could each gift $17,000 to each child ($17K X 2 = $34,000). Then, on or after January 1, 2024, you and your wife could do the same thing once again, albeit at the higher rate of $18,000 per child, as you would then be in a different tax year.  So, over the course of a period as short as a calendar week – provided that the week straddles both the last days of this year and the early days of next year — the two of you could, together, gift away a total of $70K ($34K in 2023), plus ($36K in 2024) without the need to file a Gift Tax Return or use any of your lifetime exemptions. I call this strategy the “Year-End Gift Straddle”.

Gifts Above the Annual Exclusion: Gift Tax Return Required

1) Lifetime Exemption: If you choose to make gifts above the Annual Exclusion Amount (“AEA”), then you can still make them gift tax free by using a portion of your Lifetime Exemption (aka, the “Unified Credit”). That Lifetime Exemption is currently $12.92 million per person for U.S. citizens in 2023, but increases to $13.61 million per person next year (2024). AEA gifts do not count against this exemption, and they can be made in addition to Lifetime Exemption gifts.  Also, by making a timely election after the death of a spouse, the surviving spouse can opt to preserve the deceased spouse’s unused Lifetime Exemption for the survivor’s own later use, thereby effectively doubling it. This is called “portability” and would allow a married couple– beginning next year (2024) — to effectively give away $27.22 Million over their two lifetimes without incurring any gift or estate tax. Caution: This generous Lifetime Exemption is set to “sunset” (end) for those persons dying after 12/31/2025, and to then return to the prior much lower exemption, unless Congress extends the current exemptions contained in the Tax Cuts and Jobs Act of 2017. That prior, lower exemption would be only $5 million per person plus an inflation add-on.

2) Gift Tax Return:  To the extent that your gifts exceed the Annual Exclusion Amount, you must file a Gift Tax Return. But no gift tax would be due so long as your cumulative gifts are less than the Lifetime Exemption. Reason for the Gift Tax Return: the IRS wants to track your use of your lifetime exemption, so that it knows how much you have left to use upon death. Example: if you used $1 million of your lifetime exemption to make gifts during your lifetime, then your remaining exemption to apply against estate taxes upon death would be $1 million less. Remember, though, that gifts within the AEA exclusion do not count against your Lifetime Exemption.

3) Rules May Be Different for Non-US Citizens: Note that the rules for persons who are not U.S. Citizens may be different. Consult your tax advisor if you are in this group.

Caution:  Before making large gifts, be sure that you can afford to do so. If there is a possibility that either of you may need to apply for a Medi-Cal subsidy for Long Term Care in the near future, you should first consult an Elder Law Attorney or other professional with special knowledge about the Medi-Cal program, as such gifts – depending upon when and how they were made– may impair your eligibility for a Medi-Cal subsidy unless they were handled in a very special manner.