APRIL 2014

CURRENT ISSUES IN THE AREAS OF ESTATE, TAX

AND PERSONAL AND BUSINESS PLANNING

The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.

Medicaid Changes Revisited. The March 2014 issue of this newsletter summarized briefly some of the changes being made in the Indiana Medicaid Program beginning June 1, 2014. Many readers who are Medicaid eligible, or whose parents are eligible, are receiving generic notices at this time. If you receive such a notice, and in particular if you receive a notice which is identified to the particular Medicaid case, be sure to make an inquiry if necessary. For Medicaid recipients in nursing homes or receiving waiver coverage, if their gross income exceeds the so-called Special Income Limit (“SIL”) which is currently $2,163, a “Miller Trust” (also called a “Qualified Income Trust” or “QIT”) will be required. Income will include long term care payments and annuity payments from a Medicaid-exempt annuity in the case of a single Medicaid recipient who is under a penalty for a period of time due to the transfer of resources. We are in the process of contacting our known clients to apprise them of what needs to be done, but there may be others whom we are unable to identify. Readers are encouraged to obtain additional information by accessing www.in.gov/fssa and to review the heading “2014 Medicaid disability eligibility changes.”

The Judiciary Is A Bargain. The judicial branches of our state and federal governments are vastly important to commerce and to the protection of our citizens and business enterprises. It has been said that the Rule of Law is the most important contributor to the uniqueness and success of the United States and our capitalist economy. Readers are encouraged to peruse the article in the January/February 2014 issue of Res Gestae titled “What We Can Accomplish Together.” Our legal system is vastly superior to every other, and there are some interesting facts and observations quoted in that article. One very interesting fact is that the Judicial Branch of Indiana’s government, one of three co-equal branches, expends only 9/10 of one percent of the total spending by all Hoosier government units (state, county, local, city, town and township combined). In other words, for every ten dollars spent by all Indiana governmental units in 2013, only nine cents went to the judiciary. The comparable amount spent on the federal judicial branch compared to the total federal budget is even less than that, only approximately 8/10 of one percent. For all of the constant bashing of our legal system that takes place, people need to be mindful that true facts belie the vast majority of the pejoratives that are hurled against our legal system and the judicial branch of our federal and state governments. Remember, the only thing that stands between you and a malevolent government or a rapacious corporate interest is our legal system, and when those on either side of the aisle attempt to undermine it, arm yourself with knowledge and do not fall prey to their calumnies and canards.

Importance Of Long Term Care Planning. The principal goal of long term care planning is to obtain the care you want at a price you can afford. Long term care comes at a tremendous price of $80,000 a year or more in the Evansville area. Few people can sustain a financial drain of that magnitude. When considering issues relating to long term care, obviously long term care insurance should be evaluated. We typically advise our clients to obtain at least three different quotes from at least three different vendors of comparable plans so that one can undertake an “apples to apples” comparison. One of the alternatives might be an Indiana Long Term Care Partnership Program policy, which will allow a person to retain a part or all of their assets and become eligible for Medicaid after the long term care insurance has been exhausted. However, many people find that such policies are too expensive for them. Nevertheless, they should be considered. People should also consider dedicating a significant portion or all of their income to paying for long term care, and then purchasing insurance to protect their principal resources and investment assets. In other words, one alternative is to purchase insurance to cover a part but not all of the cost of long term care. The Medicaid Program is available and with proper planning can also be utilized in order to preserve a portion of the person’s resources. There are many alternatives to nursing home care, including home care (only a small portion of which will be covered by Medicare or Medicaid) and paying home health care providers. Of course alternative living arrangements are available as well, such as assisted living facilities. In the final analysis, people should be prepared to expend a significant amount of money during the latter years of their lives because of the need for long term care. People often wait to get appropriate legal and financial advice until a crisis is looming, when a little advance planning can avoid a significant problem later.

Fiduciary Conflicts Of Interest. Many folks, if not most, include in their wills and trusts provisions that a member of the family will act in a fiduciary capacity, such as the personal representative of the estate or the trustee of a trust. Family members are almost always named as an attorney-in-fact under a power of attorney. It is important in those instances to include in the document an acknowledgment that the person who may be serving from time to time may exercise powers in which they will be individually interested or that they may benefit directly or indirectly from the exercise of those powers. In most instances, the person should be specifically authorized to act in spite of any self-dealing, as long as the person is not acting in bad faith and is otherwise acting in accordance with the wishes of the person who granted the authority and in the manner spelled out in the particular document. That person should also be exonerated from any liability for his actions as long as the person has acted in good faith. There are strict statutory prohibitions against certain conflicts of interest. For example, if a person is a trustee of a trust as well as a beneficiary, and exercises a power which benefits himself, even though it may be contemplated by the document and even though it might be appropriate in the context of the family, another trust beneficiary could take legal action against that person to reverse that transaction or to require that the person reconstitute the trust for the action taken which involved a conflict of interest. In many instances the question is not whether the action was right or wrong, or good or bad, but simply whether there was a conflict of interest and the individual benefitted while serving in a representative capacity. Issues of that kind must be built into the document. “Generic” documents from trust mills and online services will do nothing but create future legal entanglements for the family. Remember, it is not what you know, but what you do not know, and that which you do not understand, that may ultimately cause you and your family significant harm.

Additional Information. Future issues of this Newsletter will address other issues of current interest. Please contact my office with any questions that you might have.