 Elder Law Update
North Carolina Edition |
Vol 2 Issue Two
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July 2008
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PLEASE VISIT MASON LAW
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I WANT TO KNOW
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Greetings!
238 years
into the Great American Experiment and counting. Saturday evening the Masons
began watching the HBO series John Adams.
So far, after Episodes I and II we are impressed.
For those
of you who haven't seen it, the first episode centers on attorney John Adams'
successful defense of the British soldiers accused of murder in the Boston
Massacre case. You can imagine his popularity after that decision. Yet the
locals respected his integrity and courage enough to send him to the first
Continental Congress.
Episode
II covers the lead-up events to the Declaration of Independence. Lack of
cohesion, argumentation, entreaties to bargain with the King. Yet sudden
cohesion when the King wrote back that treason would be met with a noose.
Two
things struck me. One was the incredible courage and integrity of the leading
figures. The other was the rather shallow, self-serving and mundane view of
many of the lesser politicos and the mindless behavior of the lawless mob.
Some
things change . . . others never do.
Update on Vet Benefits
Since
publishing my Missing Puzzle Piece
brochure on veterans' benefits (view by clicking HERE). I have had enough
further questions that I wish to clarify two related points.
If income
exceeds the benefit threshold (say, for example $1,842) you may still qualify for benefits. Remember,
the VA looks at income after a
downward adjustment for certain medical expenses (including the cost of
sitters, assisted living facilities, or nursing homes). On a second look many,
many who believed they did not qualify do
qualify.
The other
point is that while there is an informal asset limit of around $80,000, a
variety of techniques can be used to qualify . . . and often they aren't too
painful. So don't give up simply because you believe you are over the VA asset
level.
Again,
for more info look at Veterans Benefits:The Missing Puzzle Piece. By the way, if you need some hard copies you may
download the online version or shoot me an email and I'll send some to you.
Gift Tax Repeal
As you
may know the North Carolina
general assembly is on the verge of repealing the gift tax. While that is great
news (the tax has been more of a nuisance than a revenue generator), it does
not alter the essential advice I will give clients regarding transfers of assets.
Read
below for my summary of why a direct transfer to others (notably children) is
not a good idea and what I propose as a much better idea.
Accompanying Mom or Dad to the
Doc's
Dr.
Shevlin is back this month with a great article. Here's the article setup: Many
older parents have a child (even an in-law) accompany them on visits to the
doctor to listen in, take notes, and weigh in with commentary. That is going on
in both sides of my family as I write.
Dr.
Shevlin concludes with a resolution to herself on how she intends to handle
such situations as a physician. Nevertheless, children-caregivers should take
much of what she says to heart. Don't let your own agenda cloud your thinking,
and listen to what Mom wants.
Preparing for the Emergency
For many
readers (along both the North Carolina and Georgia coasts)
summer fun may include more than broiling under the sun - it may involve
dodging hurricanes. Geriatric Care Manager Barbara Dunn continues her three
part series on hurricane (and other emergency) planning for seniors with
episode 2. Barbara has a wealth of knowledge in this area and, in addition to
running her own practice, is Chair of the Disaster Services Committee for the
Savannah Chapter of the Red Cross.
Have a
great 4th of July . . . and give thanks for the courage, character
and intellect of John Adams, Thomas Jefferson, Ben Franklin and their
colleagues.
Bob Mason
Certified Elder Law Attorney
Certified by the
National Elder Law Foundation, recognized by the American Bar Association as
the certifying entity for specialization in Elder Law.
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TRANSFERRING PROPERTY: THE WRONG WAY AND THE RIGHT WAY
Bob Mason
My
clients understand that I am rarely in favor of outright transfers of property
(especially real property) for asset protection purposes. One of the reasons I
have not favored direct transfers is the possibility of North Carolina gift taxation.
In
response to the ALERT! of June 27
describing a likely repeal of the North
Carolina gift tax (which would be effective January
1, 2008, by the way) a number of clients emailed me and asked if my position regarding
direct transfers had changed.
Good
question. The answer is: No.
I believe
this is a good opportunity to revisit why I rarely advise direct transfers of
property (often to adult children) to protect those assets. Quite often clients
see me years after a valuable piece of property has been transferred (perhaps a
farm or a home) to children . . . and if there is a current crisis (perhaps Mom
has gone into a nursing home) the earlier transfer worked well because the
asset is gone . . . and "protected".
The
problem with direct transfers, however, is that there are better ways of
handling the situation. Further, even if the long-ago transferred asset is out
of Mom's name it may not be "protected".
First,
avoiding North Carolina
gift tax is usually but one of a number of factors advising against such a
transfer. Even after the likely repeal of the gift tax, the other factors
remain.
Trading Mom's and Dad's Risks for the Kid's Risks
Second,
when an asset is transferred by parents to children in order to avoid the
parents' future risks (often the fear of paying for nursing home care), the
transferred asset is subject to a new set of risks: the children's risks. Adult
children divorce, get sued, get in trouble with the IRS or are financially
careless. The property transferred by Mom and Dad is subject to all of those
risks.
A Sound 'Basis' Saves Tax Dollars
Third, if
there is any possibility that the children may someday need or want to sell the
property, a direct life time transfer may not make sense, especially if the
property is highly appreciated. Here's why.
"Basis"
is a technical term that refers to either what you paid for property or what
the property was worth when you received the property as a gift or an
inheritance. There are adjustments made to basis, but I won't go into those
here.
The
amount someone receives on the sale of property is called the "amount realized"
on the sale.
If
someone sells property, the amount realized minus the basis in the property
represents what you make think of as "profit" but what the tax code calls
"gain" . . . as in capital gain . . . as in capital gain tax.
Now for the
important part. If a gift of property
is made, the person making the gift also transfers her basis with the gifted
property. If Mom inherited the property in 1960 when the land was worth $100 an
acre, that is Mom's basis, and after the transfer it is also the children's
basis. If the children sell the property for $1,500 an acre, the taxable gain
will be $1,400 an acre to the children.
On the
other hand, if the children do not receive the gift until (and triggered by)
Mom's death, the fair market value of the property on Mom's death will become
the children's basis. In this case if the children receive the property when it
is worth $1,500 an acre and sell the property for $1,500 an acre, their taxable
gain will be zero (nothing!).
A Better Way
So, what
is the better way? Mom could transfer the property to a properly drafted trust
(a plain revocable or living trust will not do), retain use of the property
and provide in the trust that the property will pass to the children on her
death.
After 5 years the trust
should be irrelevant for Medicaid purposes (Mom no longer owns the
property, after all . . . the trust does).
While Mom is alive, the
financial mischief of the children is also irrelevant (remember, the trust
owns the property).
If the trust has been drafted
correctly and if it contains Mom's residence, the trust may sell Mom's
residence and still qualify for the tax exclusion on the sale of a home
that Mom would have enjoyed.
When Mom dies, the property
will pass to the children, and because it was Mom's death that triggered
the transfer, the children will receive "stepped-up basis" to the value of
the property on the date of Mom's death.
That's
not too shabby!
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VISITING THE DOCTOR WITH MOM
Patricia Shevlin, MD
As a
family member, I have occasionally accompanied a relative to a physician's
office. I have been in the exam room at times also. I have served as driver, as
informant and as organizer of information, prescriptions, and follow-up
appointments. I don't have this role often.
I hope, however, that some of my recent experiences as a physician will
make me more aware of the dynamics in the room the next time I am in that role.
In my
practice, I have many patients who bring a family member to the office visit.
Mrs. Smith (not her real name) is an example of the complexity of the
encounter. Mrs. Smith has several children, one of whom is usually with her.
The patient is fairly quiet in general, but more so when compared to her
children.
Although
I address the patient first, I usually get a list of complaints from the family
member. I try to watch Mrs. Smith's expression as her symptoms are described.
Some days she appears disinterested. Other days she will frown. She will
occasionally state, usually at the end of a visit, that a particular symptom is
not very bothersome to her at all. I find these office visits very frustrating
because I don't want to spend time on a symptom that isn't important to the
patient.
Recently,
Mrs. Smith was hospitalized. I had several opportunities to speak to Mrs. Smith
alone and several facts became clear. Like most of us, Mrs. Smith wants to
appease her family so she will allow them to address what they think is
important to her. If it appears that we are going to subject her to testing, then
she gives her opinion and puts a stop to it.
Mrs.
Smith also is very realistic about her family. She knows they would like to
help her, but due to multiple issues of their own, they are not able to do
much. She allows them control in the office because they feel better after the
visit, even if she doesn't. It's quite a generous gift she's giving them: the
feeling of being helpful. She is still in control in the exam room, but her
agenda may not be as obvious.
So how
will this information change my next encounter with a patient and family
members? I must be aware of the source of the information I am given. I need to be sure to check with the patient
to be sure he or she agrees with what's been said, and with the plan of
care. Finally, I have to remind myself
that family dynamics are complicated, even in the best of circumstances.
Patricia Shevlin, MD, is a principal in Asheboro Family Physicians, with offices in
Asheboro, North Carolina.
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Evacuation Planning for Older Adults
Barbara
J. Dunn, RN, MSN
Editor's note: This is the second in a three
part series telling you how to begin devising an emergency evacuation plan for
the elderly.
In the
last issue of Elder Law Update I stressed the absolute importance of starting
on a written evacuation plan for older loved ones. I also promised to discuss
some specific areas you must consider. These may seem obvious, but you must
think through and plan for each.
Mobility Needs
Label every single piece of durable medical equipment (DME)
no matter how recognizable you think it is. Walkers and canes packed into a van
or bus begin to look the same.
Is an
electric scooter needed? Be sure to plan for an extra battery. A dead battery
is useless, whether going by private or public transportation. Does the vehicle
have the means to transport the scooter? Too often families face having to
leave the scooter behind. If a wheelchair is necessary, will it fit in the
trunk or back seat and who has the upper body strength to load it?
Planning
to take mom or dad home with you? If so, are there mobility barriers where you
are going? How will your loved one bathe, negotiate the front stairs, or fit
the wheel chair through the bathroom door? Do the bathrooms have grab bars and
are there scatter rugs that need to come up?
Communication Needs
Eyeglasses
and hearing aids can be a problem during an evacuation. Be sure to plan for an
extra pair of eyeglasses along with the prescription. Even with a prescription,
replacing broken or missing glasses hundreds of miles from home is time
consuming and difficult at best. Don't forget to label the glasses in some way.
Does your loved one wear a hearing aid? Take along plenty of batteries-you
can't predict how long your loved one will be gone.
Medication Needs
Have a
current, accurate, list of all medications. Keep it updated. During a hurricane
evacuation is not a good time to be asking "Is Dad really on this medication or was it discontinued at the last
visit?"
Have a
current list of your loved one's medical providers. Even then, your loved one's
primary physician will likely evacuate too and may not be reachable for
medication issues. What plans do you have for a back up provider? Consider one
of the web based vehicles that make medical records available no matter where
you are (www.medicalsummary.com is
one example). If medications are running low, will the pharmacy plan permit an
early, emergency, refill? Some will,
some will not. Ask your pharmacy, and then put it in your plan.
Barbara Dunn, MSN, is owner of Elder Care of Coastal Georgia, as
well as Chair of the Disaster Services Committee of the Savannah Chapter of the
American Red Cross. You may email comments and questions to Barbara by clicking
HERE.
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The Usual Disclaimer: This newsletter is for general information only. Please do not rely on anything you read in this email as definitive legal advice applicable to you. All situations are different, including yours. Nothing you read in this newsletter is a suitable substitute for professional advice you may receive from your attorney, your accountant, or your tax advisor.
All contents copyrighted 2008 by Mason Law, PC. Contents may be republished with written permission of Mason Law, PC (which permission will usually be given!). |
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