Estate Planning Isn’t Just For The Elderly

Happy, smiling couple in their sixties.

2019 Elder Law and Trusts & Estates Update

By: Anthony J. Enea, Esq.

As we rang in 2019, some important changes took effect that are of particular importance to seniors and their health care, elder law, and estate planning needs. Some of the most notable are as follows:

New rules affecting the Medicare Advantage Health Plan

This year, the Trump administration issued new rules affecting more than 21 million seniors enrolled in the Medicare Advantage (MA) Health Plan. The changes result in plan participants (approximately 36 percent of the total Medicare population) receiving new and more flexible supplemental benefits.

Medicare Advantage (MA) is an available option for seniors eligible for Medicare that allows them to choose private health coverage that purportedly helps promote innovative treatment options. The new rules permit the expansion of MA plans and the tailoring of the available coverage to the specific needs of the patient, especially those with chronic illnesses.

The new MA rules addressed two significant problems with the plans. Prior to the new rules being implemented, an overly restricted “uniformity” requirement limited a plan’s ability to target benefits and cost sharing for beneficiaries with specific medical conditions. Additionally, a restricted definition and application of the “primarily health related standard” limited the scope of benefits the MA plan could offer.

The old rules were originally intended to foster uniformity of the benefits available so as to help ensure all participants would be treated the same by providing the same supplemental benefits at the same cost level. Thus, when offering a special benefit, the plan had to offer it to all individuals enrolled at the same level of cost sharing. Unfortunately, this undermined innovation in care delivery and discouraged patient centered care.

For example, if a patient needed a grab bar in the shower because of a physical infirmity or chronic illness, such as diabetes, under the old rules he or she would not be able to receive said benefit due to the “uniformity” requirement and “primarily health related” standard.

Under the new rules, a class of persons who all experience a certain disease may be offered a benefit specific to that disease, so long as all other persons in the same class receive the benefit at the same level of cost sharing. Benefits can now be targeted to a patient’s health status or disease state and applied to services that are medically related to each disease.

Increase in the Federal Estate and Gift Tax Exemption

Effective January 1, 2019, the Federal Tax Act increased the federal estate and gift tax exemption from $11.18 million dollars per person to $11.4 million dollars per person ($22.8 million dollars per couple). This federal exemption sunsets on December 31, 2025, returning the exemption to $5.6 million per person with adjustments for inflation after 2018.

Since the federal exemption is portable between spouses, on the death of the first spouse the surviving spouse can elect portability and preserve the exemption available to the deceased spouse, irrespective of whether or not he or she had assets in their name alone or with another at the time of their death.

The New York estate tax exemption increased to $5.74 million per person for 2019. There is no portability available in New York, thus, it is important for married couples with a taxable or potentially taxable estate to have assets in his or her name alone on the date of death so that part or all of their New York exemptions can be utilized on the death of the first spouse – otherwise it will unfortunately be otherwise forever lost.

New York has also enacted N.Y. Tax Law § 945 (a) (3), which, for decedents dying on or after January 1, 2019, removes from inclusion in the decedent’s gross taxable estate, gifts made by the decedent within three years of his or her death, even if the gift was made before January 1, 2019. With the size of the current federal tax exemption, utilizing one’s credit to make gifts should be strongly considered.

Importance of a Durable Power of Attorney

It is now more important than ever before to have a general durable power of attorney that gives the agent greater powers, including the power to create and fund a pooled income trust.

If an individual applies for Medicaid home care, there is the ability to protect and utilize his or her income above $879 per month (the maximum amount that may be kept while remaining eligible for home care Medicaid), by enrolling in a pooled community trust. However, if one is utilizing a power of attorney to enroll the applicant into the pooled community trust, Medicaid now requires that the power of attorney specifically authorize the agent to create and fund the pooled trust.

Thus, reviewing one’s power of attorney to ensure said language is contained therein is of significant importance so as avoid the need to have a guardian appointed to enroll in and fund the trust, which is both an expensive and time-consuming proposition.

Enea, Scanlan & Sirignano, LLP