Estate and Disability Planning

Fanwood-Scotch Plains YMCAFanwood-Scotch Plains YMCA
________________________________________________________________________________________________
Estate and DisabilityEstate and Disability
PlanningPlanning
Presented byPresented by
Donald D. Vanarelli, Esq. Certified Elder Law AttorneyDonald D. Vanarelli, Esq. Certified Elder Law Attorney
Accredited Veterans AttorneyAccredited Veterans Attorney
Founding Member, Assn. of Special Needs PlannersFounding Member, Assn. of Special Needs Planners

Seminar TopicsSeminar Topics
1. Planning for Disability
2. Estate Planning
3. Planning for Long-Term Care
4. Government Sources for Payment of
Long Term Care: Medicare, Medicaid
and VA Benefits

Planning for DisabilityPlanning for Disability

Planning for SubstitutePlanning for Substitute
Decision-MakingDecision-Making
I. Capacity - A critical threshold issue.
II. Legal devices for substitute decision-
making:
1. Court-supervised
2. Voluntary

Court-Imposed SubstituteCourt-Imposed Substitute
Decision-MakingDecision-Making
GuardianshipsGuardianships
ConservatorshipsConservatorships

Nature and Use ofNature and Use of
A guardianship is a legal mechanismA guardianship is a legal mechanism
designed to provide surrogatedesigned to provide surrogate
decision-making and financialdecision-making and financial
management for a person who is nomanagement for a person who is no
longer able to govern him/herself andlonger able to govern him/herself and
who has not made alternate voluntarywho has not made alternate voluntary
arrangements.arrangements.

Characteristics ofCharacteristics of
Involuntary.Involuntary.
Imposed by Court.Imposed by Court.
Only for persons who are legallyOnly for persons who are legally
incompetent - medical evidenceincompetent - medical evidence
needed.needed.
Alternate voluntary arrangements -Alternate voluntary arrangements -
either not made or ineffective.either not made or ineffective.

Voluntary Substitute Decision-MakingVoluntary Substitute Decision-Making
Representative Payeeships (SSA, SSI)Representative Payeeships (SSA, SSI)
Joint Tenancies (Inc. joint bank accts.)Joint Tenancies (Inc. joint bank accts.)
Powers of AttorneyPowers of Attorney
Advance Medical Directives (Living Wills)Advance Medical Directives (Living Wills)
Do Not Resuscitate (DNR) OrdersDo Not Resuscitate (DNR) Orders
Revocable and Irrevocable TrustsRevocable and Irrevocable Trusts
Family Limited Partnerships and Limited LiabilityFamily Limited Partnerships and Limited Liability
CompaniesCompanies

The most important, simplest and leastThe most important, simplest and least
expensive estate document.expensive estate document.
A mechanism by which the principalA mechanism by which the principal
authorizes an agent to manage theauthorizes an agent to manage the
principal’s financial affairs if theprincipal’s financial affairs if the
principal becomes incapacitated.principal becomes incapacitated.

Characteristics ofCharacteristics of
Creates Fiduciary RelationshipCreates Fiduciary Relationship
General vs. SpecialGeneral vs. Special
Durable vs. SpringingDurable vs. Springing
Sole Agent vs. Joint AgentsSole Agent vs. Joint Agents
Termination- death, revocation orTermination- death, revocation or
expirationexpiration

Powers ConferredPowers Conferred
in Powers of Attorneyin Powers of Attorney
Flexibility is the goal:Flexibility is the goal:
– banking transactionsbanking transactions
– to make gifts, including gifts to the agentto make gifts, including gifts to the agent
– prepare and sign tax returnsprepare and sign tax returns
– to create, amend and fund truststo create, amend and fund trusts
– change beneficiarieschange beneficiaries
– to execute contracts, leases and deedsto execute contracts, leases and deeds
– to loan or borrow moneyto loan or borrow money
– to engage in long-term care planningto engage in long-term care planning

Advance Medical DirectivesAdvance Medical Directives
(“Living Wills”)(“Living Wills”)
The right to make decisions aboutThe right to make decisions about
medical treatment is a fundamentalmedical treatment is a fundamental
right protected under the federal andright protected under the federal and
state constitutions.state constitutions.

Living Wills In New JerseyLiving Wills In New Jersey
N.J. law recognizes 3 planning devices:N.J. law recognizes 3 planning devices:
1.1. Instruction DirectiveInstruction Directive
2.2. Proxy Directive - POA for Health CareProxy Directive - POA for Health Care
3.3. Combined DirectiveCombined Directive
Religious preferences may be presented.Religious preferences may be presented.

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

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

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

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

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

TrustsTrusts
• A trust is one of the most important estateA trust is one of the most important estate
planning tools.planning tools.
• A trust is a legal relationship in which aA trust is a legal relationship in which a
person transfers property to one or moreperson transfers property to one or more
trustees who own the property as fiduciaries.trustees who own the property as fiduciaries.
The trustees must use the property only asThe trustees must use the property only as
set forth in the trust agreement, or asset forth in the trust agreement, or as
provided by law.provided by law.

Providing for PersonsProviding for Persons
with Disabilities:with Disabilities:
Special Needs TrustsSpecial Needs Trusts
Purpose - To preserve the disabled person’sPurpose - To preserve the disabled person’s
eligibility for needs-based governmentaleligibility for needs-based governmental
benefits (SSI, Medicaid, DDD services) whilebenefits (SSI, Medicaid, DDD services) while
providing a vehicle to hold funds owned byproviding a vehicle to hold funds owned by
disabled person, or funds contributed by thedisabled person, or funds contributed by the
parents or other third parties, to supplementparents or other third parties, to supplement
public benefits.public benefits.

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

Estate PlanningEstate Planning

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

Last Will and TestamentLast Will and Testament
TheThe basic document for directing thebasic document for directing the
distribution of your property at death.distribution of your property at death.

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

Probate vs. Non-Probate EstateProbate vs. Non-Probate Estate
There may be 3 types of property in anyThere may be 3 types of property in any
decedent’s estate:decedent’s estate:
1.1. Probate Estate.Probate Estate.
2.2. Contract Estate.Contract Estate. (Non-Probate)(Non-Probate)
3.3. Joint Ownership Estate.Joint Ownership Estate. (Non-Probate)(Non-Probate)
Your will disposes of assets in the probateYour will disposes of assets in the probate
estateestate onlyonly..

Federal Estate TaxesFederal Estate Taxes
MaximumMaximum
YearYear Exempt AmountExempt Amount Estate Tax RateEstate Tax Rate
20012001 $675,000$675,000 55%55%
20022002 $1.0 Million$1.0 Million 50%50%
20032003 $1.0 Million$1.0 Million 49%49%
20042004 $1.5 Million$1.5 Million 48%48%
20052005 $1.5 Million$1.5 Million 47%47%
20062006 $2.0 Million$2.0 Million 46%46%
20072007 $2.0 Million$2.0 Million 45%45%
20082008 $2.0 Million$2.0 Million 45%45%
20092009 $3.5 Million$3.5 Million 45%45%
20102010 RepealedRepealed Repealed (Gift tax-35%)Repealed (Gift tax-35%)
2011 $5.0 Million2011 $5.0 Million 35%35%
2012 $5.12 Million2012 $5.12 Million 35%35%
20132013 $5.25 Million$5.25 Million 40%40%
20142014 $5.34 Million$5.34 Million 40%40%

New Jersey “Death” TaxesNew Jersey “Death” Taxes
New Jersey Estate TaxNew Jersey Estate Tax
For estates exceeding $675,000, tax rate is roughlyFor estates exceeding $675,000, tax rate is roughly
10%. For example, for a $1M estate, the taxable amount10%. For example, for a $1M estate, the taxable amount
is $325,000, and the NJ estate tax is approx. $33,000.is $325,000, and the NJ estate tax is approx. $33,000.
New Jersey Inheritance TaxNew Jersey Inheritance Tax
Spouse, Descendants and AncestorsSpouse, Descendants and Ancestors 0%0%
Brothers and SistersBrothers and Sisters 11%11%
Everyone Else:Everyone Else:
First $700,000First $700,000 15%15%
Over $700,000Over $700,000 16%16%

Gift TaxesGift Taxes
1. Federal-
a. Annual Gift Tax Exclusion-$14,000
per person, per year, in 2014
b. Unified Estate and Gift Tax System
2. State-
No Gift Tax in New Jersey

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

Life InsuranceLife Insurance
1. Can provide an instant estate upon death.1. Can provide an instant estate upon death.
2. Can provide needed estate liquidity.2. Can provide needed estate liquidity.
3. Proceeds can be used to pay estate taxes.3. Proceeds can be used to pay estate taxes.
4. Life insurance proceeds are included in your4. Life insurance proceeds are included in your
estate for federal estate tax purposes unless aestate for federal estate tax purposes unless a
life insurance trust is established, the policy islife insurance trust is established, the policy is
transferred and the owner survives the transfertransferred and the owner survives the transfer
by 3 years (or trustee purchases the policy).by 3 years (or trustee purchases the policy).

Generation-Skipping Trusts (DynastyGeneration-Skipping Trusts (Dynasty
Trusts)Trusts)
1. Leave exempt amount in trust for future1. Leave exempt amount in trust for future
generations.generations.
2. Avoid estate taxes on spouse’s death.2. Avoid estate taxes on spouse’s death.
3. No distribution to children or3. No distribution to children or
grandchildren so no estate taxes due ongrandchildren so no estate taxes due on
their deaths.their deaths.

Planning forPlanning for
Long Term Care NeedsLong Term Care Needs

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

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

Who Pays For Long Term Care?Who Pays For Long Term Care?
1. Private Pay 49%
2. Medicaid 44%
3. VA Benefits 4%
4. Medicare 2%
5. Long Term Care Insurance 1%

Overview of GovernmentOverview of Government
Sources for the Payment ofSources for the Payment of
Long Term Care CostsLong Term Care Costs

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

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

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

How Much DoesHow Much Does
NH Medicare Pay?NH Medicare Pay?
• Maximum Coverage - 100 days
• Day 1-20 - Medicare pays 100% of covered
charges
• Day 21-100 - Medicare pays all covered
charges, except coinsurance amount. Year
2014 coinsurance payment = $152/day, or
about $4,623/month
• Day 101 - on your own

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

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

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

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

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

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

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

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

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

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

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

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

Thank YouThank You
For Your AttentionFor Your Attention
Questions or Comments?Questions or Comments?

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