Posts By: Gene Osofsky

If you are the child of parents who are currently over the age of 65 you’ve probably given a little bit of thought to the day when one (or both) of your parents may need Long Term Care. Understandably, most adult children prefer not to think about the day when their parents may not be able to care for themselves, but in some cases it simply cannot be avoided, especially if your parent is already showing early signs of Alzheimer’s or dementia. If you are concerned about your parent’s future, there are steps you can take now to make the transition to giving and receiving care later easier on both you and your parents:

1. Talk to your parents. Find out if your parents have already thought about the topic, if they’ve made provisions for it, or if they have any specific wishes. Furthermore, opening the lines of communication lays the groundwork for trust and cooperation in the future.

2. Encourage your parents to create an Estate Plan if they don’t have one already. An Estate Plan will be important in expressing your parents’ wishes on necessary issues such as preferred agents in case of incapacity, financial power of attorney, and health care decisions. These essential documents will not only let you and others know their wishes, it will also prevent many expensive delays and frustrating red tape in the future. 

3. Make sure that long-term care planning is a part of their estate plan.   When most persons prepare an estate plan, they usually think only about passing assets to loved ones upon  death, avoiding probate and taxes.  Often overlooked is long term care planning.  Such planning should consider the need for a Medi-Cal subsidy should either parent ever need care in a nursing facility.   Many middle income individuals are surprised to learn that they may qualify for a Medi-Cal subsidy in the event of need.  However, this ability to qualify may depend upon whether proper planning documents are in place ahead of time.

4. Talk to trusted advisors about how to prepare for the financial burden of Long Term Care—because there will be a financial burden. Our firm can help you consider options for Medi-Cal and Long Term Care Insurance, as well as some lesser known options such as a Dependent Care Account or a Care Contract with a care-giver child.

As you think and talk about these issues with your parents, siblings, and other trusted advisors, remember that you don’t have to go through this alone. Elder Law and Long Term Care are intricate and convoluted subjects, but there are caring professionals out there whose business it is to guide you through the intricacies of Elder Care. Let us help you look into the future with confidence and clear eyes.

Posts By: Gene Osofsky

Caring for an aging relative is difficult—and often underappreciated—work. Many people who serve as caregivers often feel as if they have two jobs—their full-time day job at the office and the part-to-full-time job of caregiver at home. As their parents age and decline, most of these caregivers end up not only giving up more and more of their time, but also, eventually, their own opportunity for more income. Caregivers need to know that it doesn’t have to be this way; that if their elderly loved one (and perhaps the rest of the family) agree, the caregiver can be compensated according to mutually agreed upon terms of a Caregiver Agreement, also known as a Personal-Care Contract.

Elder law attorneys have known about Caregiver Agreements for a long time, but very few caregivers themselves are aware of this useful contract. A Caregiver (or Employment) Agreement serves to document a caregiver’s responsibilities and hours, and to set a rate of pay that’s in line with local practices and incomes. The contract would then be signed by both the caregiver and care recipient, and eventually shared with the rest of the family.

An agreement of this sort can be useful not only for the care-giver and the one cared-for; it also comes in handy if you think you may need to rely on Medi-Cal to cover nursing home costs sometime in the  future. Payments voluntarily made to a family care-giver without a written contract would likely be viewed as gifts, potentially disqualifying the parent from a later Medi-Cal subsidy should he or she later need care in a nursing home. However, if payments to relatives are made under the terms of a written employment agreement which complies with Medi-Cal rules, the risk of disqualification from a later Medi-Cal subsidy is reduced dramatically. 

Caregiver Agreements are also useful in Veterans Pension planning:  qualifying payments made pursuant to a legitimate care contract may count as an Unreimbursed Medical Expense, potentially qualifying the Veteran for a monthly pension to help pay for care expenses. 

It is important to remember, however, that in order for government programs to recognize an employment agreement between family members the contract must already be in place before services are rendered.

This is why it is so important to have such an agreement prepared by an Elder Law attorney knowledgeable regarding Medi-Cal rules and Veterans Pension Planning before any money changes hands.  If you believe that a Personal Care Contract may be a useful tool  to provide for the care of your loved one, we invite you to contact us to arrange a consultation.

Posts By: Gene Osofsky

When legislation in 2010 raised the lifetime gift tax exclusion amount from $1 million to $5 million many wealthy families rejoiced, expecting that they would now be able to give large gifts to children or grandchildren and be able to save millions in taxes at the same time. But for all the rejoicing, the unsteady economy has made many people cautious, and has parents and grandparents thinking twice before giving away wealth that they may need themselves in later years.

According to this article in Bloomberg Business Week, however, the time has come for families to take a careful look at their finances and decide if they want to take advantage of the $5 Million gift tax exclusion before it expires. “Legislation enacted in 2010, which raised the lifetime gift-tax exclusion to $5 million from $1 million for each person starting last year, is set to expire. For 2012, the inflation- adjusted figure is $5.12 million for each person. It will drop to $1 million on Jan. 1 unless Congress acts.”

Parents who want to take advantage of the gift tax exclusion, but who worry that their children may not yet be ready to handle such a large financial gift, do have options. As the article points out, “Many [families] are setting up irrevocable trusts for children or grandchildren and transferring assets such as second homes that have the potential to appreciate.” This not only allows the assets to appreciate, but also allows parents and grandparents to breathe easy while young children or grandchildren have time to mature before receiving a gift or inheritance.

If you think your family may benefit from taking advantage of the gift tax exclusion before the end of the year, the time to act is now.

Posts By: Gene Osofsky

Q.  My parents are aging and I find that they are in greater need of assistance for care, paying bills, shopping, and the like. The problem is that there are four of us children and we do not always agree on what is best for mom and dad. I am concerned that, as my parents’ needs increase, the potential for family conflict will likewise increase. Do you have any suggestions as to how we might head off family conflict and do what is best for our parents?

A. Yours sounds like the ideal situation for family mediation.  Mediation is a voluntary process whereby an experienced mediator helps the parties identify issues, communicate with one another in a respectful manner, develop creative solutions to their concerns and negotiate a lasting agreement that works for everyone.  The mediator does not decide who is right or wrong, but is there to help the parties communicate meaningfully with one another.

The mediator may be a person trained in social work, psychology, or law.  The mediator’s role is to make sure that everyone’s views are put forward and considered, including the views of your parents, and to facilitate respectful discussion to resolve a common problem.

Traditionally, mediation has seen its greatest use in the context of divorce settlements and business disputes, but its application in the elder care context is growing and it has achieved notable success in helping families resolve difficult issues amicably.

Sometimes the issues that are mediated concern suitable living arrangements for parents, allocating responsibility for care, financial and healthcare decisions, the need to make sure that the parents’ bills are paid, a parent’s unwillingness to surrender the keys to the car, and other practical problems of aging. Without a facilitator, anger and resentment may prevent resolution, and old sibling rivalries might surface in a way that is counterproductive to the parents’ best interests. Mediation can help resolve these issues in a manner that preserves the parents’ dignity and family harmony.

The process might take place in one session or, perhaps, over a number of sessions. The hoped-for result is that the parties, with the aid of the mediator, can arrive at an agreement which everyone feels is fair and appropriate. Compliance is voluntary, but a mutually agreed upon solution enjoys a high rate of success. Indeed, the process is often a “win win” for everyone, and can be a great tool in forging family consensus. As we approach the holiday season and a time when families will be together, it might be a great time to begin the process.

To learn more or to search for a trained private mediator visit: www.mediate.com or www.eldercaremediators.com.  Alternatively, to search for a free or low cost community-based mediation program contact the Seeds Community Resolution Center in Berkeley at (510) 548-2377 or visit its website at www.SeedsCRC.org.

Posts By: Gene Osofsky

California has moved one step closer in treating same-sex couples and Registered Domestic Partners (“RDP’s”) the same as married couples in the context of Medi-Cal eligibility. The Medi-Cal Eligibility Division recently released a draft of instructions to California counties on how to implement legislation signed last year by Gov. Brown (AB 641, Feuer).  This legislation proposes new rules allowing same-sex couples and RDP’s to retain assets and incomes similar to that allowed opposite sex spouses when one of them enters a long-term care facility and applies for Medi-Cal.  The instruction is presently in draft form, but we anticipate that it will soon be finalized and disseminated to county welfare directors for implementation.  The authorizing legislation was written to take effect retroactively back to January 1, 2012, subject to confirmation from the federal government that it will provide federal matching funds. We will post more information when the same is available.  Thanks to California Advocates for Nursing Home Reform for bringing this ot our attention.

Posts By: Gene Osofsky

Q.  My wife and I have owned our home, and a rental duplex, for approximately 20 years and have a low assessed value on each. We would like to preserve the low property tax rate for our son. If we pass it to him by gift or by inheritance, would either transfer trigger reassessment and a higher property tax rate?

A. Here’s how it works: Generally speaking, anytime there is a sale or transfer of real property, the transfer would be considered a change in ownership which would trigger a reassessment of the property tax based upon its fair market value at transfer. However, there are two key exemptions to this general rule which would come to your rescue:

Home: A transfer of a principal residence between parent and child, whether by gift or inheritance, would not be considered a change of ownership, providing that the exemption is actually claimed by filing a form in connection with the transfer called  “Claim for Reassessment Exclusion for Transfer between Parent and Child” . This is a simple form available on the county assessor’s website.  This exemption from reassessment would apply no matter how much your home is worth. However, if your child chose not to actually live in the home as his principal residence, he would only lose the rather modest $7,000 Homeowner’s Exemption, but the home would not be reassessed upon transfer and your son would take your low property tax rate.

Non-Residential Property:  With respect to your rental property, there would be another exclusion from reassessment, but only up to $1 million of its current fair market value. Again, however, the “Claim for Reassessment Exclusion” must be timely filed in connection with the transfer.

So, it really makes no difference in terms of the California property tax whether you pass your real property to your children by gift during lifetime, or by inheritance upon your demise. However, in either case the exemption appropriate to the particular property must be actually claimed by timely filing the “Claim for Reassessment Exclusion” form.

However, if you left any portion of your home or rental property to a recipient who is not your  child, such as a grandchild, neither of the exemptions would apply to that portion given to the grandchild. But even here there is an exception: in the event that the grandchild’s own parent (your child) were deceased at the time of transfer, then your grandchild would move up a generation and the exemption would then be available to your grandchild.

Two Cautions: (1) In the current “down” real estate market, some real properties are actually worth less now than their current assessed value.  If that were your situation, you might then wish to forego filing the Claim for Exclusion, as the assessor would then assess the property at the lower market value upon transfer.   (2)  This article addresses only the property tax. In considering a transfer of appreciated real property to your children or others, you should also take into account the other taxes that may apply, i.e. capital gains tax, estate and gift tax.  Recommendation: consult with your tax advisor or an estate planning or elder law attorney.

For more information on the property tax, visit the Alameda County Assessor’s website at www.acgov.org/assessor  or telephone his office at 510-272-3787.

CAUTION:  Consider the effect of Proposition 19, passed by the electorate on November 3, 2020. Provisions concerning the change to the Parent–Child Exclusion become effective February 16, 2021. See the following article on topic: “Preservation of Parent’s Low Property Tax Rate Soon To Be More Difficult For Children”.

Posts By: Gene Osofsky

Curiosity and excitement are always to be expected in an election year—especially curiosity about taxes. We all know that each presidential candidate has very different philosophies about where the tax burden lies, how much should be paid, and by whom; but all most of us really want to know is how the implementation of each philosophy might affect us personally.

CNN Money recently published an article which attempts to explain just this: each candidate’s position on various tax policies and how it might carry over to our own wallets. The entire article is very informative, but of course the section that will be of most interest to our office and our clients is what the candidates have to say about the Estate tax. Here’s the scoop:

Estate tax: Until the end of this year, estates valued at more than $5.12 million are subject to an estate tax up to a top rate of 35%.  Unless Congress acts to change this before January 1, 2013, the exemption from estate tax will then drop to $1 million and be subject to a top rate of 55%.

“Obama: Would reinstate the estate tax at 2009 levels — meaning estates worth more than $3.5 million would be subject to the tax and face a top rate of 45%.

“Romney: Would repeal the estate tax but preserve the gift tax rate at 35%.”

The thing to keep in mind when reading this is that the tax cuts from a few years ago are set to expire at the end of this year. This means that no matter who gets elected, estate tax laws will likely be changing on January 1st, 2013.  As of January 1,  everyone should probably review/update their estate plan, especially if you believe you may have an estate large enough to be subject to the estate tax.

Posts By: Gene Osofsky

If you’re nearing retirement and looking forward to living off the interest of your retirement savings you may have to consider staying in the job market for another year or so. Interest rates have hit record lows recently; a turn of events which is good for homeowners and borrowers, but very bad for seniors hoping to make the most of their retirement savings.

An article in the USA Today Money section reports that “The bellwether 10-year Treasury note yielded 1.46% Monday and went as low as 1.44% in intraday trading… Rates on 30-year fixed mortgages closely follow the 10-year T-note yield. On Thursday, the average mortgage rate fell to a record low of 3.56%.” This isn’t all; currently “Money funds yield an average 0.03% [and] the highest-yielding one-year bank CD, from CIT bank, yields 1.1%.”

What all of this means is that the percentage of income workers have been putting away for retirement all these years isn’t giving them much of a return right now—if it’s giving them any return at all. Seniors who were planning to live for a certain number of years off the income of their investments are finding themselves having to work longer than they had planned, or they find themselves dipping into the principal of their investment—a move which could leave them scrambling for living funds a few years down the road.

Some seniors are choosing a different kind of risk. “To get more income, some elderly have been pushed into riskier investments, such as stocks, to get higher yields.” Unfortunately, these higher yield stocks can be very unstable and end up tanking, losing both the potential income as well as the initial investment.

There are no easy solutions to this problem, especially if you’re already in retirement or nearing retirement age. The best thing you can do is be careful with your money, give yourself room to work a few more years than you may have initially planned, and above all, keep the lines of communication open with your experienced and trusted advisors.

Posts By: Gene Osofsky

The recent Supreme Court ruling of the constitutionality of the new health care reforms has many seniors breathing a sigh of relief. The ruling has ensured that, at least for the time being, senior citizens will continue to receive their currently existing benefits from programs such as Medicaid and Medicare; but the ruling also paves the way for changes—some good and some not so good—in the way various home-based and long term care services are paid for and provided.

This article in Forbes explains some of the ways that the ruling on the Affordable Care Act will impact senior citizens or adults with disabilities:

According to the article, Medicaid (called Medi-Cal in California) “currently funds nearly half of all paid long-term care services.” This current coverage will continue under the 2010 health law, but states can refuse to provide new coverage to individuals if they choose.

The Medicare program is currently under some considerable financial strain, and the Affordable Care Act “includes a small increase in the payroll tax that is aimed at increasing revenues for Medicare.” This should be a great help to the program, and a relief to seniors who receive benefits from Medicare.

For seniors and adults who require long-term care services and have been frustrated by numerous roadblocks to getting that care at home instead of in a nursing facility, good news is on the horizon; the ACA “includes important new incentives for states to expand Medicaid long-term care services for people living at home.” However, it remains to be seen whether the states will accept these incentives and expand coverage. As of this writing, Republican Governors in a number of states have announced that they do NOT intend to accept the incentives and expand coverage.  We find such positions to be unfortunate for the many seniors and uninsured persons who would thereby lose the opportunity for health care coverage.

And finally, the law is giving more attention to seniors and adults with chronic and long-term illnesses. The ACA “creates a new office to coordinate the health and long-term care of people who receive both Medicare and Medicaid. . . It also includes important incentives to encourage hospitals, nursing homes, doctors, and other providers to work together to improve care for people with chronic disease.”

Posts By: Gene Osofsky

Q:  In connection with creating our estate planning documents, my husband and I would like to leave our children and grandchildren something more than just our money and assets. We would like to leave them a sense of our values. A friend mentioned something to us about an “Ethical Will”. Can you tell us anything about them? 

A. Yes. An Ethical Will is a statement in your own words expressing your values, hopes for the future, family history, emotions, and anything else that you would like to pass on to your loved ones. It deals with values, rather than with assets. It’s really a very old concept: one of the earliest references is found in the Book of Genesis, chapter 49, where Jacob gathers his 12 children around him and gives them his charge for their futures. Initially, Ethical Wills were transmitted orally, but eventually they were written down. Although an ethical will is not a legal document, it can be a valuable complement to legal documents. It can be an expression of love, a statement of personal or family history, a statement of lessons learned in life, a wish for the future of your loved ones, or anything else that you would like to pass on down as a personal legacy.

An Ethical Will is really a personal statement that carries your “voice” to future generations. It can be as simple as a one-page letter of love to a novella length memoir detailing your life experiences. In our family, we actually went a step further and videotaped my grandmother over a number of sittings, a project that ultimately took approximately 2 years to complete. We began with her earliest memories of growing up in Europe and covered all the history forward, all in her own voice. At times she broke into song, especially when our young children toddled into the room. That videotape, since turned into a DVD for preservation, is now a cherished family heirloom and each member of the family has a copy. We view it from time to time at family gatherings.

If you wish, your “Ethical Will” can be shared with your loved ones during your lifetime, and it can be added to from time to time. It is your spiritual legacy which can live on long after your will or trust has been permanently filed away.