Durable Powers of Attorney: What You Should Know

You have worked hard to grow and nurture your assets throughout your lifetime. What happens if, due to illness, hardship, or other difficulty, you are unable to continue to do so? A Durable Power of Attorney answers this question.

A Durable Power of Attorney authorizes your named agent, called an attorney-in-fact, to handle your finances. This could include paying your bills while you are in the hospital recovering from surgery, signing your income tax returns, signing health insurance documentation on your behalf, and making gifts to your family or charitable donations.

Here are some other things you should know about Durable Powers of Attorney:

  • Without a Durable Power of Attorney, if you are incapacitated and someone needs to pay your bills for you, that person may have to petition the court for a conservatorship. A conservatorship will cost time and money that you may not have to spare.
  • A Durable Power of Attorney states that it will remain in force and effect even after you become incompetent.  A general Power of Attorney, without such a statement, will actually cease to be effective if you become incompetent. All Powers of Attorney end upon your death.
  • Powers of Attorney can be written to become effective upon your incapacity. This is known as a Springing Power of Attorney. Oftentimes, though, it can be advantageous to give the attorney-in-fact authority to act for you immediately after you sign the document.
  • Most often, Durable Powers of Attorney give the attorney-in-fact authority over all financial accounts, but they can also be drafted to give limited access to specific accounts only.
  • Always be sure to give your bank or financial institution an original signed Durable Power of Attorney to scan and return the original to you for future use. Most banks will not accept a copy. 
  • Update your Durable Power of Attorney periodically. Banks often refuse to accept Durable Powers of Attorney – even though they are still valid – if they are considered “old” or “stale.”

If you are interested in discussing Durable Powers of Attorney in greater detail, please contact me at 508-929-1620 or lkofos@mirickoconnell.com.

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Do I Need a Health Care Proxy?

If you have found yourself asking this question, the answer is an emphatic yes. Health Care Proxies are one of the most important documents in your estate plan. So what is it, and why is it so important?

A Health Care Proxy is a document that allows someone to make medical decisions for you in the event that you are incapacitated. This situation could arise if you are in surgery and there are complications, if you are in a motor vehicle accident, or if your mental state is such that you cannot make medical decisions for yourself. A doctor’s job is to treat you. If you find yourself in any of these situations and do not have a Health Care Proxy, your doctors under certain circumstances may be required to take specific medical actions or provide you with a treatment that you would not have wanted.

Furthermore, if you become incapacitated (i.e. coma, Alzheimer’s, etc.) and you do not have a Health Care Proxy in place, your family may need to petition the court for a guardianship over you. In a guardianship, the court appoints someone to have the legal right to make your medical decisions for you.  A guardianship can be costly, time consuming, and extremely stressful during an otherwise emotionally taxing event.

If you have a Health Care Proxy naming a trusted adult child, parent, friend, or family member as your health care agent, you should have a conversation with that person to discuss what you would want done in different medical scenarios. A Health Care Proxy allows you to rest easy knowing that whatever the situation, someone who loves you will be looking out for your best interest.

If you are interested in discussing Health Care Proxies in greater detail, please contact me at 508-929-1620 or lkofos@mirickoconnell.com.

Posted in COVID-19, Elder Law, Estate Planning, Guardianship/Conservatorship, Home Care, Incapacity | Tagged , , | Leave a comment

Financial Planning for Seniors

This article was authored by elder law attorneys Arthur P. Bergeron and Leah Kofos.

To whom do you trust to give your financial planning advice?  Your accountant?  Your kids?  The guy you have coffee with at Dunkin Donuts?  Your lawyer?  God forbid.

The point about financial planning, like all planning, is that you can’t plan how to get where you want to go unless you know where you’re going.  As any senior will tell you, where you’re going gets harder to see every year.  You know you will die eventually, so you should plan to make it easier for your loved ones after you are gone. What you don’t know is when that will be, or what kinds of health challenges you might face along the way – challenges that can be incredibly expensive.  So here are my contributions to the advice list:

  • Since you don’t know what’s coming, it pays to stay flexible. Stay away from investments where there is a big penalty for early withdrawal.  The lure of a slightly better investment return on an annuity may be outweighed quickly by the penalty (often as high as 10%) if you need that money.  Incidentally, the only penalty for early withdrawal of a CD is the lost interest that had accrued as of the time of withdrawal.  Given today’s low interest rates, that’s insignificant.
  • Consider early withdrawals (at lower tax rates) from your tax-deferred savings. If you are married, the federal tax rate on income of less than about $80,000 is 12% or less.  By withdrawing small amounts over time, you reduce the potential big federal tax hit (22% or more) that would come if you needed to withdraw money suddenly.  If you leave it to your kids, they will often end up paying more tax that you do because of their higher incomes.
  • Keep your investment risk low. At our age, who needs to be losing sleep over tomorrow’s stock market crash when there may not be time to recover if catastrophe hits?
  • Make sure all of your advisors (your investment advisor, your lawyer, maybe not the guy at the Dunkin Donuts) talk to each other. Each one is approaching things from a different angle.  Only you know which angle is most important to you.  Get them together for a conference call or a Zoom meeting.
  • Make sure you have an updated Power of Attorney. A lot of asset restructuring may be needed after you are incapacitated, especially if you then need to qualify for MassHealth.  Someone with legal authority should be there to handle those things for you if you can’t.

The right plan is the one that helps you sleep at night.  Only you know what that is, but people around you may be able to help figure it out.

I will be discussing financial planning in more depth during this month’s elder law virtual seminar, which can be watched on Frank and Mary’s YouTube channel, http://www.youtube.com/elderlawfrankandmary, and local cable stations, along with Frank and Mary’s local cable TV shows, where my co-hosts and I address many common issues facing seniors and the resources available during the pandemic.  As always, if you have any questions or would like additional information, please contact me at (508) 860-1470 or abergeron@mirickoconnell.com.

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Extension of 2020 Massachusetts Tax Return Filing and Payment

This article was authored by Allen J. Falke, Tracy A. Craig, and Leah Kofos.

Following the recent federal extension for tax filings, Massachusetts has announced that it will extend the filing and payment deadline for individual income tax returns until May 17, 2021, due to the COVID-19 pandemic. It is unclear presently whether the Massachusetts extension will also apply to other types of tax returns due on April 15, such as fiduciary income tax returns. Similar to the federal extension, the Massachusetts extension applies to individual taxpayers and does not affect estimated tax payments that are due on April 15, 2021.

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Extension of 2020 Federal Tax Return Filing and Payment

This article was authored by Allen J. Falke, Tracy A. Craig, and Leah Kofos.

The Internal Revenue Service announced yesterday that the federal income tax filing and payment deadline for individuals will be extended until May 17, 2021. This extension is similar to the 2020 filing postponement, which was declared due to the COVID-19 pandemic.

The May 17 extension applies to individual taxpayers, including individuals who pay self-employment tax. The new May date is the deadline both to pay federal taxes and to submit tax returns. If necessary, taxpayers may apply for a further filing extension until October 15, although all federal income tax payments remain due on May 17.

Additionally, a newly-passed law exempts federal income tax for the 2020 tax year on the first $10,200 a taxpayer receives in jobless benefits. This exemption applies to households with a combined income of up to $150,000. Taxpayers who have already filed their 2020 returns without claiming the exemption may need to file an amended return. At this time, the IRS has recommended that early taxpayers should wait before filing an amended return. The agency expects to offer formal guidance to these taxpayers in the near future.

The May 17 extension does not apply to estimated tax payments that are due on April 15, 2021, and does not yet apply to fiduciary income tax returns (Form 1041). Furthermore, the federal extension has no bearing on the deadline for state income tax payments or returns. As of this date, Massachusetts has not yet extended the deadline for state income tax filing and payment, although legislation is in the works to follow the IRS’s extension and seems likely to pass. As of this writing other states have already extended their due dates to be consistent with the IRS’s extended due date.

Stay tuned for additional guidance from the IRS on the extended due date and the Massachusetts Department of Revenue for updates on the 2021 filing season.

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A Few Tips for Tax Season

This article was authored by elder law attorneys Arthur P. Bergeron and Leah A. Kofos.

I love being at Mirick O’Connell because when my elder clients inevitably call me at this time of year asking tax questions, I can always rely on the lawyers here who have focused on tax issues their entire lives instead of looking things up.  Here are a few quick tips that are especially relevant to Frank and Mary and the many seniors like them:

  • You probably have to file a federal income tax return. Under federal law, the filing requirement is not based on your income, but on the amount of your combined federal standard deduction and the deduction you get from being 65 or older.  For 2020, if you’re single, that amount is $14,050; if you’re married filing jointly, it is $27,400.
  • Up to 50% of Social Security payments are taxable if your 2020 income exceeds $25,000 if single, $32,000 if married, or up to 85% of the payments are taxable if your income exceeds $34,000 if single, $44,000 if married. In determining amount of income, add 50% of Social Security payments to your other income.
  • You must file a Massachusetts income tax return if your income exceeds $8,000.
  • If your local real estate taxes (plus 50% of your water/sewer bill) exceeds 25% of your income, or if you’re a tenant and your rent exceeds 25% of your income, you’re probably entitled to get a check back from the Commonwealth of up to $1,150 after filing state returns.
  • Certain improvements to your home, as well as payments to health care providers who helped you or your spouse, may be deductible as medical deductions. Small (grab-bars) and big (elevators) improvements you made to your home may be tax-deductible, as well as the costs of the aides that help you stay home.  You should start thinking about the home improvements you want to make this year so you can deduct them next year.  By paying for these with some of your IRA or other tax-deferred funds, you are effectively eliminating the tax on those funds.
  • If your child is paying for those improvements or for extra care at home, and if that total cost was over 50% of your annual expenses, your child may be able to claim you as a dependent and take the medical deduction. That may be useful if you have previously given away some of your assets to your child (or to an irrevocable trust for his/her benefit) since your child’s income, and therefore the effect of the tax benefit, may be much larger than it would be for you.

I will be discussing tax issues in more depth during this month’s elder law virtual seminar, ALL ABOUT TAXES, which can be watched on Frank and Mary’s YouTube channel, http://www.youtube.com/elderlawfrankandmary, and local cable stations, along with Frank and Mary’s local cable TV shows, where my co-hosts and I address many common issues facing seniors and the resources available during the pandemic.  As always, if you have any questions or would like additional information, please contact me at (508) 860-1470 or abergeron@mirickoconnell.com.

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Planning to Stay Home

Most seniors, like my friends Frank and Mary, hope they can live in their home until they die.  But hope is not a plan. Here are some tips:

  • Make your home safe. The older you get the greater the risk that you might fall or hurt yourself. This could lead to hospitalization or, worse, having to move out of your home or pay for care at home.  Many falls and injuries are preventable if you take steps to adapt your home to age safely.  Contractors and other services can come to your home to make recommendations for how to make it safer.  There is a special state-funded loan program, the Home Modification Loan Program (HMLP) that may lend you up to $50,000 (often interest-free) to make improvements that make your house safer.
  • Make sure you have the money to stay home. Take a hard look at your income and expenses to determine how you can make them last.  A couple of suggestions:
    • Depending on your income, you may be able to defer real estate taxes until you die or sell the house. Talk to your local assessors about that.  While the taxes will have to be paid eventually, and will reduce the proceeds that will go to your beneficiaries after you die, you worked hard for your home, so now you can use it to stay in it.
    • Consider a reverse mortgage, which is like a line of credit on which you owe no interest unless you use it and, even then, only after you die or sell the house. Getting that reverse mortgage in place now is a handy way to make sure you have cash for home repairs, home care, or whatever will keep you at home.
  • Learn about programs that can help you. Do this before you need them.  The first place to go is the senior center.  The next place is your Aging Services Access Point (ASAP), which are private nonprofit agencies that contract with the state. Click on 800AGEINFO.com for a listing of your local ASAP.  There are great programs available to help you exercise, eat right and stay healthy, as well as programs to help you find help with shopping, cleaning, and much more.  Many of these programs are available to all seniors, regardless of their asset situation.

It’s February.  You’re stuck inside because of COVID-19.  Now is a great time to do planning that will keep you at home.  I will be discussing staying at home in more depth during this month’s elder law virtual seminar, which can be watched on Frank and Mary’s YouTube channel, http://www.youtube.com/elderlawfrankandmary and local cable stations, along with Frank and Mary’s local cable TV shows, where my co-hosts and I address many common issues facing seniors and the resources available during the pandemic.  As always, if you have any questions or would like additional information, please contact me at (508) 860-1470 or abergeron@mirickoconnell.com.

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The Planning You Need to Qualify for MassHealth

In previous columns I have explained how, whether you are single or married, you can always qualify for MassHealth at the last minute if you need to.    Knowing that to be true, do you still need to plan ahead?  The answer is yes, however, the planning is different depending on whether you are single or married.

If you’re married, while you are both alive, either of you can qualify for MassHealth.  However, you should plan ahead if you want to make sure that if one of you dies, your assets will be protected if the survivor needs to qualify.  You can do that by:

  • Executing a will stating that any assets that would have gone to the survivor will instead be held in trust for the survivor.
  • Transferring all assets you want to protect for the survivor into the name of the spouse who is more likely to die first. Even if the assets are transferred to the first spouse to die the day before death, the assets will be protected immediately if the survivor later needs to qualify for MassHealth.

If you’re single, the only way you can protect some or all of your assets is by giving them away and waiting five years.  Remember that:

  • You don’t need to give every asset away. Keep whatever amount of assets will keep you from losing sleep at night.  The assets you keep will need to be spent down if you later need to qualify for MassHealth.  However, the rest will be safe.
  • You can transfer assets to an irrevocable trust. But alternatively, you can give assets to your children outright.  In either case you have to trust the person, since that person will not be legally obligated to use the assets for your benefit if you need them.
  • Remember, the 5-year lookback runs until the day you apply for MassHealth, even if you have been in a nursing home for a few years on private pay. So, if you need nursing home care in the interim, structure things so that your children or Trustee can pay the nursing home until the 5-year period has passed and the remaining assets are safe.

I will be discussing qualifying for MassHealth in more depth during this month’s elder law virtual seminar, which can be watched on Frank and Mary’s YouTube channel, http://www.youtube.com/elderlawfrankandmary, and local cable stations, along with Frank and Mary’s local cable TV shows, where my co-hosts and I address many common issues facing seniors and the resources available during the pandemic.  As always, if you have any questions or would like additional information, please contact me at (508) 860-1470 or abergeron@mirickoconnell.com.

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Giving it All Away (Or at Least Some of It)

Every December my clients ask whether or not it makes sense to make gifts to their loved ones.  In addition to getting to hear “thank you”, there are several advantages to giving assets away before you die, with few disadvantages. 

GIFT AND INCOME TAX IMPLICATIONS.  Despite common misconception, Massachusetts has no gift tax.  There is also a myth that a federal gift tax applies if you give someone more than $15,000 in a year; but federal gift tax only applies when you have exceeded your lifetime giving limit, which is now over $11M. However, you still are required to file a federal gift tax return to report the gift if it’s over $15,000, even though no tax is due.

MASSACHUSETTS ESTATE TAX.  The amounts you give away will be subtracted from your taxable estate for Massachusetts estate tax purposes, thereby reducing the estate tax that would otherwise be owed.  This applies even if you give assets away the day before you die, so you may want to talk with your agent named in your Power of Attorney (you must have a Durable Power of Attorney) about giving things away shortly before you die if it appears that you are failing.

HELPING TO AVOID PROBATE.  Gifting can also be a handy way to avoid probate.  Once again, talk with your agent under your Power of Attorney about giving assets away if you are failing.

THINGS TO CONSIDER BEFORE MAKING ANY GIFTS. If your health deteriorates and you need to qualify for MassHealth within the next five years, the MassHealth caseworker may require that the gift be given back before you can qualify. If you are thinking about giving away so-called “capital gains” property like real estate and stock, it may be more advantageous to the recipient if you leave it to them at death, so they can take advantage of something called the “step up in basis.”

It is important that you consult your accountant and lawyer before you make any large gifts.  I will be discussing gifting in more depth during this month’s elder law virtual seminar, which can be watched on Frank and Mary’s YouTube channel, www.youtube.com/elderlawfrankandmary and local cable stations, along with Frank and Mary’s weekly local cable TV shows, where my co-hosts and I address many common issues facing seniors and the resources available during the pandemic.  As always, if you have any questions or would like additional information, please contact me at (508) 860-1470 or abergeron@mirickoconnell.com.

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Single? Need to Qualify for MassHealth?

It is important to know your options when it comes to qualifying for MassHealth should you require home health care or nursing home care. Many seniors who are single often lose sleep worrying about this very issue. Rest assured, whether you are married or single, you can always qualify for MassHealth even if you own your home. MassHealth limits the amount of cash or cash equivalent assets you may have to $2,000 or less. Below are three ways you can meet that requirement, even at the last minute.

  • Spend the money on yourself (no gifts) by fixing up your house, pre-paying your funeral, buying some new clothes, furniture, things for the house, a new car, or maybe just throwing yourself a party.
  • Buy an annuity. As long as it calls for equal monthly payments for the rest of your life expectancy, the purchase is legitimate.
  • Put the funds into a “d4c pooled trust.”

Once you have qualified, the bed rate will decrease from the private pay rate (about $14,000 per month at many places) to the MassHealth rate (around $7,000 per month). While MassHealth will have a lien regarding its payments on your behalf after your death, the repayment amount will be vastly smaller than what you would have paid privately.

If you want to protect some or all assets completely from any MassHealth claim, you have to give those assets away five years before you apply. Many seniors keep all their cash but give away a “remainder interest” in their home (the interest that starts after they die) while keeping a “life estate” (control and use of the house while they are alive). If you were planning on giving your house to your child or children anyway, why not give him or her the “remainder interest” now, thus protecting the house from the MassHealth lien after five years?

Or how about the extra money in the bank that is really only there as a “rainy day” fund? Perhaps the best way to “save” for a rainy day is by giving it to someone you trust. If your children were going to get your assets anyway after you die, maybe you should give the money to the one you trust most, either outright or as trustee of an irrevocable trust. Once again, talk to your elder law attorney first, but if you’re losing sleep about this, you should at least find out what your options are.

If you have any questions or would like more information; please feel free to contact me at (508) 860-1470 or abergeron@mirickoconnell.com. Visit Frank and Mary’s YouTube channel, www.youtube.com/elderlawfrankandmary and your local cable station during COVID-19, for this virtual seminar, as well as, Frank and Mary’s weekly local cable TV shows, where my co-hosts and I address many common issues facing seniors and the resources available during the pandemic.

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