FAQ

Q: If I need nursing home care, won't Medicare pay for it?

A: Medicare, the federally funded health insurance you receive at 65, will only pay for skilled nursing care under certain circumstances and only for a limited period of time. Unless all of the requirements are met, Medicare will not pay. First, you must have a hospital stay of at least three days and be discharged to a Medicare-approved skilled nursing facility. Second, you must need "skilled" care for treatment of the illness or injury for which you were hospitalized. "Skilled" nursing care is care under the daily supervision of a doctor, registered nurse, physical therapist or other licensed professional. Third, the skilled care must be restorative in nature, such as physical therapy to get you walking after a stroke.

If all of these requirements are met, Medicare will pay 100% of the cost of care for up to twenty days. From the twenty-first day through the one hundredth day, Medicare will pay any amount due over $119.50 per day in 2006. Medigap insurance (supplemental health insurance coverage) may cover the $119.50.

Medicare only pays as long as you require "skilled" nursing care. After the one hundred days or once you no longer require skilled care, Medicare pays nothing towards cost of the nursing home. Because of these limitations, Medicare only pays about 2% of the cost of care for nursing home residents.

It can be helpful to consult with an Elder Law attorney to make sure that appropriate planning is done to determine how to pay for nursing facility care if Medicare will not pay or for when Medicare payments stop. Long term care planning can protect assets and can help a family understand how to deal with the situation when a loved one entering a nursing home.

Q: If my spouse goes into a nursing home, will we have to sell our cemetery plots and our car to be eligible for Medicaid?

A: You and your spouse may own as many burial plots as you wish and still qualify for Medicaid to pay for a nursing home. Burial plots are considered to be "exempt resources" and are not counted with regard to eligibility for benefits by the Department of Public Welfare.

A single car is also considered an "exempt resource" and is not counted in determining eligibility for Medicaid. If possible, it is a good idea to put the car into the name of the spouse living at home, rather than leaving it in the name of the spouse in the nursing home.

It can be helpful to consult with an Elder Law attorney to make sure that appropriate planning is done with regard to long term care and with regard to your estate.

Q: If my spouse or I need nursing home care, what should we do to be sure that we have enough money to pay for our funerals?

A: If there is a possibility that you or your spouse may need long term care, it is a good idea to pre-arrange or pre-pay for the funerals as soon as possible. There are several ways to do this.

One way is for each of you to open an irrevocable (which means it cannot be changed) burial reserve account at a bank. If one person passes away, the funeral director can withdraw the money by presenting the bank with a death certificate and a funeral bill. If the funeral costs less than the amount in the account, the funeral director will return the extra money to the family or to the decedent's estate. Since the burial reserve account is irrevocable, it is not counted as a resource in determining Medicaid eligibility.

A second way to pre-arrange a funeral is to pre-pay for the funeral at a funeral home. You and your spouse would select the type of funeral you want and pay that amount. You can use cash to pre-pay the funeral home or transfer life insurance policies to a funeral home as the source of payment.

It can be helpful to consult with an Elder Law attorney to make sure that appropriate planning is done with regard to pre-arranging or pre-paying for a funeral as well as to help deal with other long term care planning issues.

Q: Should I put my child's name on my bank accounts so that he or she can have access to my funds if I become disabled?

A: Rather than making a child a joint owner of your bank accounts, it is better to have a child listed as your Agent or Power of Attorney on the accounts so that your child can make deposits or write checks for you if you became disabled.

There are several reasons why you may not want to list your child as a joint owner. First, if your child predeceases you and is a joint owner, you can end up paying Pennsylvania inheritance taxes on your own money. Second, if your child gets divorced, the joint account may be considered an asset to be divided in the property settlement. Third, if your child has a lot of debts, creditors may try to go after the money in joint accounts to pay bills. These are just a few reasons why it may not be a good idea to make a child a joint owner of your bank accounts.

It can be helpful to consult with an Elder Law attorney to make sure bank accounts and other assets are appropriately titled as well as set up a Durable Power of Attorney to enable your child to help you if you become disabled.

Q: Can I make tax-free gifts to members of my family?

A: At this time of year, it is always nice to make gifts to your family. For federal tax purposes, you can make a gift of up to $12,000.00 per person each year, whether the gift is in cash, stock, savings bonds or something else. This is known as an "annual exclusion gift". In the past, the amount of the annual exclusion gift was $11,000.00 per person per year.

The gift is not considered to be income by the person who receives it, so it does not have to be listed on a personal income tax return. However, please be aware that large monetary gifts may affect your eligibility for Medicaid for a period of time if you need nursing home care within three years of making the gift.

It can be helpful to consult with an Elder Law attorney to make sure that appropriate planning is done with regard to estate planning and making large gifts. Long term care planning can protect assets and help a family deal with the situation when a loved one enters a nursing home.

Q: What estate planning documents should be prepared as part of a long term care plan?

A: When doing a long term care plan, it is a good idea to discuss your needs with an Elder Law attorney and to prepare a Will, a Power of Attorney and a Living Will. You may also want to have a trust prepared. It might be a Revocable Living Trust or a Special Needs Trust for a disabled child. You might also want to review your insurance policies and check the beneficiary designations.

It can be helpful to consult with an Elder Law attorney to make sure that appropriate planning is done with regard to the preparation of estate planning documents, taking into account your particular family situation, your assets and your goals. Long term care planning can help to protect assets and can help your family deal with the situation should a loved one need to enter a nursing home or an assisted living facility.

Q: How important is it to have beneficiary designations on certain types of assets?

A: Certain types of assets should have specific beneficiary designations. A beneficiary designation means naming the person or persons who will receive that specific asset on the death of the owner. In addition to naming a first beneficiary, it is also a good idea to name a second, or contingent, beneficiary just in case the first beneficiary passes away first. Sometimes, a named beneficiary may be a trust for minor children or children with disabilities. It is important to properly name the beneficiaries so that the right person or persons receive the asset on the owner's death.

The types of assets that usually have beneficiary designations include life insurance policies, annuities and IRA, 401K, or other types of retirement accounts. Savings bonds may state "Payable on Death" or "POD", which is similar to naming a beneficiary.

It is most helpful to review beneficiary designations with an attorney knowledgeable in the area of estate planning to make sure that the beneficiary designations are described correctly. There may also be other estate planning issues that need to be addressed.

Q: Is there a way to pass bank accounts through to my children without probating a will? Should I make the accounts joint?

A: If you want the bank accounts to pass to your child or children after your death and do not want the accounts controlled by your Last Will and Testament, you can have the accounts titled as "in trust for" them. The "in trust for" designation is preferred to having a child listed as a joint owner.

Making a child a joint owner of an account can give them access to your money. Joint ownership may make the account available to their creditors or subject to division with a child's spouse if the child gets divorced. You may even have to pay inheritance taxes on your own money if your child predeceases you.

It can be helpful to consult with an Elder Law attorney to make sure that appropriate planning is done with regard to the titling of assets and beneficiary designations. It may also be helpful to discuss other estate planning and long term care planning issues.

Q: On what must Pennsylvania inheritance taxes be paid? When are the taxes paid?

A: Pennsylvania inheritance taxes are paid on the net assets owned solely by a decedent, after the payment of debts and expenses for the estate. Such taxes may also be due on jointly titled assets, bank accounts held in trust for another person or on assets one inherits as a beneficiary, such as an annuity contract. The tax rate is 4.5% for lineal heirs (children, grandchildren, parents, etc.), 12% for siblings and 15% for everyone else.

Inheritance taxes must be paid within nine months of the date of the decedent's death. If the inheritance taxes are paid within three (3) months of the decedent's death, there is a five (5%) percent discount on the taxes due.

It can be helpful to consult with an Elder Law attorney on a decedent's estate to make sure that inheritance taxes are paid in a timely manner and so that all appropriate tax deductions are taken so as to save taxes. It may also be helpful to discuss estate planning and long term care planning issues.

Q: When my child turns 18, should a Power of Attorney be executed by the child?

A: When a child turns 18, he or she is an adult. You, as a parent, no longer have access to your adult son or daughter's medical or financial information without his or her consent. This lack of authority can cause problems if an adult son or daughter is in college and becomes ill or suffers from disabilities.

A durable Power of Attorney is a document in which an adult son or daughter, the Principal, can authorize a parent, the Agent, to make medical decisions for him or her, as well as to handle financial matters (such as making bank deposits or writing checks). If the Power of Attorney is durable, it will remain valid even if an adult son or daughter is, or becomes, incapacitated.

A Power of Attorney should be drafted by an attorney knowledgeable in the area of estate planning to make sure that the Power of Attorney contains all of the appropriate language, especially if an adult son or daughter suffers from any disability, as there may be other issues that also need to be addressed.

Q: Why is it important to do long term care planning?

A: It is always nice to make gifts to your family. For federal tax purposes, you can make a gift of up to $11,000.00 per person each year, whether the gift is in cash, stock, savings bonds or anything else, which is known as an "annual exclusion gift". Starting in 2006, the amount is up to $12,000.00 per person.

The gift is not considered income by recipient, so it is not listed on a personal income tax return. However, please be aware that large monetary gifts may affect eligibility for Medicaid if nursing home care is needed.

Consulting with an Elder Law attorney to be sure that appropriate long term care planning are done when considering whether to make annual exclusion gifts.

Q: What is a durable Power of Attorney and why should I have one?

A: A durable Power of Attorney is legal document in which you, the Principal, give authority to someone else, the Agent, to handle financial matters for you (such as making deposits, writing checks, selling assets) and/or to make medical decisions for you. If the Power of Attorney is durable, it will remain valid even if you become incapacitated. It is important for you to choose someone you trust as your agent.

A durable Power of Attorney should be prepared now so that if you become incapacitated, your agent can act without the need for court intervention through a guardianship. A guardianship is much more costly and time consuming as well as being much harder on your family than having a Power of Attorney prepared.

A durable Power of Attorney should be drafted by an Elder Law attorney to make sure that it contains all of the appropriate authority for the Agent to do long term care planning if you end up becoming disabled and need long term care at home or in a nursing facility.

Q: What is a Living Will and why should I have one?

A: A Living Will (also known as an "Advance Directive for Health Care Declaration") speaks when you cannot and indicates to a doctor or hospital and your family what medical treatment you want or do not want in the event that you are terminally ill and/or permanently unconscious. Having a Living Will can make it easier for your family to handle end of life decisions.

A Living Will includes choices for CPR, mechanical breathing, tube feeding and water, surgery, blood transfusions, antibiotics, etc. It allows you to name a substitute decision maker with whom your doctor may discuss your situation when you are unable to speak for yourself.

A Living Will should be drafted by an Elder Law attorney to make sure that it is individualized to meet your particular needs and goals as well to help you plan how to deal with life's other eventualities

Q: What is a Living Trust?

A: A "living trust" is a legal entity you can create to which your assets, such as bank accounts, investments, a house, etc., can be transferred. A trust is managed by a person known as a trustee. The trustee can be you, a family member or a bank or trust company. The trustee manages your assets in accordance with the written instructions contained in the trust document.

Living trusts can be revocable (easily cancelled) or irrevocable (non-cancelable). A living trust has beneficiaries - the people who receive the benefit of the income and in the assets of the trust.

Living trusts are heavily sold as substitutes for Wills. However, a living trust may or may not be right for you. A living trust is not something you buy from a salesperson at your door. The best way to determine whether or not you need a living trust is to consult with an Elder Law attorney to review your needs and your family situation.

Q: What is probate or estate administration?

A: When a person dies owning assets in his or her name alone, an estate must be opened. If he or she has a Will, it must be "probated", which means the Will must be filed at the local Register of Wills office and the person named in the Will to administer the Estate, the Executor, must be sworn in. If a person dies without a Will, estate administration must be started by swearing in a family member as the Administrator at the Register's office.

The administration of an estate consists of collecting the assets that belong to the estate and paying the debts of the decedent. PA inheritance taxes may need to be paid. Lastly, the remaining property in the estate is distributed to the heirs or beneficiaries in accordance with the terms of the Will or in accordance with state law if there was no Will.

The loss of a loved one is overwhelming. It is best to work with an Elder Law attorney to help you probate a Will or to administer the Estate to facilitate the transfer of assets and to ensure that the entire process goes as smoothly as possible.