New York Estate Planning & Elder Law Blog

In the wake of rising drug prices over years for Medicare patients, federal officials appear ready to finally take some kind of action to help with out of pocket costs many seniors and disabled persons struggle with. Recently, federal officials have begun to explore the possibility of achieving lower drug prices by getting some of the same discounts insurers and pharmacy benefit managers (PBM) that administer Medicare’s Part D drug program already get for themselves.

Supporters of the idea hope the approach could reduce the overall price tag of prescription drugs and save Medicare the cost of making up the gap. Under the plan, the Center for Medicaid and Medicare Studies (CMS) would apply those fees that PBMs and insurers pay and apply those to what enrollees pay for their prescriptions.

Unlike the health insurers and PBMs able to negotiate with manufacturers willing to pay discounts so their products land a spot on a health plan’s list of approved drugs, CMS cannot haggle on drug prices. The restrictions have long been criticized by critics and supporters of how CMS is currently administered. Advocates for the pharmacy industry have also criticized the current drug price exchange which allows PBMs and insurers to recoup their benefits from pharmacies at a later date.

Long-term medical care is expensive, and there is no indication that trend will reverse itself anytime soon. That means you need to be proactive in considering the implications of long-term medical care costs when approaching comprehensive estate planning. Many people find themselves falling short of the funds needed to pay for increasingly costly long-term care but still having too many assets to qualify for Medicaid funds to help cover those costs. A recent article from Marketwatch.com provides some information on Medicaid trusts, estate planning tools that can help you navigate the high cost of long-term care insurance while still holding onto important assets you want to pass to your heirs.

Medicaid “Look-Back” Rules

One of the reasons that you should start planning for long-term care costs as soon as possible is the existence of Medicaid “look-back” rules. These rules mean that even if you are able to prove your eligibility for Medicaid today, you will still be required to have been eligible for each of the past five (5) years, too (some states have a shorter requirement, but it is important to check with your state’s Medicaid office to find out). If you find yourself in a situation where you are facing heightened medical costs, especially from unanticipated long-term care needs, you will not simply be able to transfer assets somewhere else to qualify. The earlier you start planning, the more secure you can be in your ability to qualify for potentially necessary Medicaid funds when it comes to your long-term care plans.

Lawyers for AARP recently took the unprecedented step of filing a lawsuit against a California nursing home chain claiming the defendant violates the civil rights of patients by evicting them without due cause. The group filed their suit on behalf of an 83-year old woman with alzheimers who became separated from her 90-year old husband after the nursing home claimed they could no longer care for her needs.

According to the lawsuit, the defendant sent the plaintiff to a hospital for a psychiatric evaluation after staff claimed he became combative and threw plastic tableware. After the hospital could find nothing wrong with her apart from her preexisting condition, the nursing home refused to take the plaintiff back in. Even after the plaintiff’s daughter won a hearing in front of the California Department of Health Care Services concerning the matter, the nursing home still refused to readmit the plaintiff.

Under state and federal nursing home regulations, patients are entitled to several rights. For the most part, nursing homes need to give residents 30-days notice if they intend to evict a resident and must hold their bed for at least a week should the resident enter the hospital. According to AARP lawyers, the plaintiff was not afforded either of these protections by the nursing home.

According to the Congressional Budget Office (CBO), the proposed GOP tax bill would strip an estimated $136 billion from mandatory spending in 2018, including $25 billion in Medicare cuts if Congress does not find away to offset the cuts. Under the so-called pay-go law, Medicare can only be cut a maximum of 4 percent per year, which in this case equals the $25 billion in proposed spending reductions.

“Without enacting subsequent legislation to either offset that deficit increase, waive the recordation of the bill’s impact on the scorecard, or otherwise mitigate or eliminate the requirements of the [pay-go] law, OMB would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending in fiscal year 2018 by the resultant total of $136 billion,” the CBO recently wrote.

Republicans in both houses of Congress are working quickly to pass their budgets ahead of the new year, especially with the looming threat of sequestration and impending House and Senate races coming next year. The proposed GOP tax bill has been incredibly unpopular with Democrats who argue the mandatory budget cuts would severely harm programs like Social Security and Medicare.

According to a recent report by CNBC, Medicare Part B premiums are expected to rise for millions of seniors across the country in 2018, putting even more financial strain on elders trying to enjoy their golden years while living on fixed incomes. The increased costs means many seniors should prepare to pay more for their doctors visits and outpatient care.

An estimated 70 percent of Medicare Part B enrollees paying lower monthly premiums due to the “hold harmless” rule will likely see their monthly premiums jump from $25 to $134, over the average of $109 per month in 2017. The hold harmless provision is a legal clause that prevents an individual’s premiums from rising more than their Social Security cost of living adjustment for that year.

The extra amount enrollees pay will go towards paying the full amount of the $134 Part B premium and fortunately, for an estimated 28 percent of those individuals, they will still pay below that capped amount. Even higher income earners, those making $85,000 or more, will remain unchanged with rates varying from $187.50 to $428.60.

It is difficult to turn on the news today without hearing tragic stories of how the opioid crisis that has swept the United States impacts families and communities. While many of the unfortunate effects of addiction can easily be seen, there are more unintended consequences that need to be taken into account when discussions about addiction and estate planning intersect. Often, individuals dealing with addiction have well-founded concerns that any inheritance they leave to an individual could be squandered on the addiction itself. That can be a disheartening possibility. A recent article from WealthManagement.com reminds us that there are options available to help deal with the role addiction might play in your comprehensive estate planning strategy.

Bequests

Disinheritance is a troubling option for many reasons. The prospect of completely cutting an individual out of any inheritance can difficult to consider, especially when the heir involved is already suffering from a serious condition like addiction. However, you may want to consider leaving a smaller bequest to that individual if you are concerned that they may use their inheritance to facilitate an addiction problem. You may also want to consider leaving the inheritance earmarked for the individual that is suffering from addiction to siblings or other family members that you can trust to safeguard the inheritance and work with the individual to overcome addiction. If you choose the latter, you must make sure that you have a conversation with the individual(s) you are considering for this to make sure that they are prepared and willing to undertake this kind of responsibility.

In the first part of this post, we covered the initial basics in setting up a trust. Determining your purpose for creating the trust is certainly one of the most important steps, as are determining which individuals will be involved in the trust and how you want to go about establishing the trust. However, once the initial legwork is done, you need to focus on making sure that your trust will be able to fulfill the goals you have established it for. Working with an experienced estate planning attorney is an important part of making sure your trust continues to comply with changing laws and continues to retain value so as to meet the goals you have established for it.

Funding Your Trust

Once you have created a living trust, you need to appropriately fund it. One of the basic reasons many people have for establishing a living trust is so that the assets they want to place into it can avoid probate. To that end, it is important to make sure you have properly transferred the correct assets into the trust. Real estate assets are often one of the most important assets for a trust, but you will also want to consider the benefits of transferring your personal assets into the trust as well depending on what your ultimate goals are. Transferring assets to fund the trust can be as simple as changing title to some assets while other can involve a much more complex process.

It is no secret that we live in an increasingly globalized world. That means it is becoming more and more common for individuals to find themselves abroad for any number of reasons that may include work, family, retirement, or even simply a desire to travel extensively. Whatever the reason for being abroad, United States citizens that are abroad for an extended period of time are likely to acquire some kind of property. In fact, for many individuals the affordable nature of assets abroad is one of the most appealing reasons for going abroad. But what happens to those assets when they are transferred in a comprehensive estate plan? A recent article from the New Jersey Law Journal highlights the fact that international estate planning can be difficult, but an experienced estate planning attorney can make a big difference.

The IRS and Foreign Asset Trusts

One of the most important things to ensure is that any foreign trusts established by U.S. citizens abroad have been established for purposes other than avoiding U.S. taxes. When the individual that creates the trust passes on and it is time for those assets to be distributed to heirs, the IRS will look at the trust’s structure and purpose to determine whether the trust was created for a legitimate purpose or for the sole purpose of avoiding U.S. tax penalties.

An often-overlooked part of estate planning is social security. We often hear that social security is not enough for an individual to live on during retirement, especially given that people are living longer lives and often require additional medical care when reaching an advanced age. However, social security can actually be an important part of your retirement planning – and consequently an important part of your comprehensive estate plan. That means that social security survivor benefits could play a bigger role in your retirement and estate planning than you may have thought.

How do survivor benefits work?

Credits are an important part of determining what social security benefits a person is eligible for, if any. Workers earn credits through their individual earnings each year. The maximum number of credits a worker can earn in a year is four. You must attain a certain number of these credits over your lifetime in order to qualify for certain benefits. If you take a break from working for a number of years, your credits still remain on your social security record and you can begin accumulating them again once you return to the workforce.

A recent study by the UCLA Fielding School of Public Health suggests the number of Americans suffering from Alzheimer’s or other cognitive impairments could more than double by 2060. Currently, an estimated 6 million Americans suffer from the disease and if the study holds to be true, that number could increase to a staggering 15 million over the next few decades.

Published in The Journal of the Alzheimer’s Association, the study examined some of the largest reviews on the rates and progression of Alzheimer’s disease and dementia and applied a computer model that took into account the aging U.S. population. Of the 15 million Americans expected to suffer from cognitive impairments, 5.7 million are expected to have a mild condition while the remainder will likely be diagnosed with dementia due to Alzheimer’s, with 4 million requiring nursing home care.

In a statement to the UCLA Newsroom, the author of the study Ron Brookmeyer said, “There are about 47 million people in the U.S. today who have some evidence of preclinical Alzheimer’s, which means they have either a build-up of protein fragments called beta-amyloid or neurodegeneration of the brain but don’t yet have symptoms.”