Important Notice

To ensure compliance with the requirements imposed on us by IRS Circular 230 (31 C.F.R. 10.33 – 10.37, et. Seq.), we inform you that to the extent the information on this page mentions any federal tax matter, it is not intended or written and cannot be used, for the purpose of avoiding Federal Tax penalties.

The information contained in this website is for informational purposes only and is not and does not constitute legal advice on any subject. Receipt of this information does not create an attorney-client relationship. Do not act or refrain from acting based upon this information without seeking your own professional legal counsel.

Wednesday, September 11, 2013

Proactive Asset Protection for Safeguarding Assets from Nursing Home Costs

The cost of care in an assisted living facility or nursing home is staggering. Even though a personal residence is not counted as an "available" asset for medicaid applications (as long as there is an "intent to return"), the State of Illinois may place a lien on the property and collect after death for all the benefits provided under the Medicaid program.

For clients that are entering their later years, why not consider creating an irrevocable trust and funding it with your residence?

There are certain conditions and limitations to this strategy, but it may be a very smart option. Give me a call to discuss further.

Tuesday, August 13, 2013

An Overview of the Defense of Marriage Act Ruling

The U.S. Supreme Court delivered a historic decision in U.S. v. Windsor1 that could have far-reaching effects on seniors, persons with disabilities, and veterans who are married to, or plan to marry, a person of the same gender.  This post will provide an overview of the decision and how it may affect Medicaid recipients in a same-sex marriage.

Overview of U.S. v. Windsor:

An historical decision by the U.S. Supreme Court came down on June 26, 2013, declaring unconstitutional a portion of the Federal law commonly known as the Defense of Marriage Act (“DOMA”).  In this case, Edith Windsor, the New York resident and Canadian married spouse of Thea Spyer, sought relief from the Court system when she was denied a $363,053 refund for estate taxes she paid when Spyer died.  In denying her request, the IRS relied on Section 3 of DOMA, which defined marriage as a union between a man and a woman.  Because Windsor and Spyer were a same-sex couple, albeit validly recognized under the laws of New York, the Federal law disallowed benefits to them which are available to heterosexual married couples.  Here, the benefit disallowed came in the form of estate tax relief to a surviving spouse.

In the written opinion of the Court, Justice Kennedy focused on the long-established right of the states to determine the laws regarding domestic relations.  The Court pointed out that New York, at the time Windsor and Spyer were married in Canada, may not have allowed same-sex marriage within the state, but its laws protected those who were legally married elsewhere by applying its laws equally to all married people.  It was also pointed out that New York eventually expanded its laws to include same-sex marriage.

In addition to the fact that states have traditionally had the role of determining what the domestic relations laws should be within their own territories, the Court looked at the purpose and impact of DOMA itself.  The Court came to the conclusion that because of the purpose written into the law itself along with the impact of the law, that DOMA has the purpose “to discourage enactment of state same-sex marriage laws and to restrict the freedom and choice of couples married under those laws if they are enacted.”1  The Court concluded that this historical balance between state and Federal law had been negatively impacted when DOMA, Section 3, was enacted.

The Court ruled in this case that DOMA violated the 5th Amendment of the U.S. Constitution because its “demonstrated purpose is to ensure that if any State decides to recognize same-sex marriages, those unions will be treated as second-class marriages for purposes of federal law.”1  This obviously deprives “some couples married under the laws of their State, but not other couples, of both rights and responsibilities.”1

Effect on Medicaid

Section 3 of DOMA, which defined marriage as only a union between a man and a woman, applied to over 1000 federal laws, including benefits such as Medicaid, Social Security, housing, food stamps, tax laws, benefits due to federal employees, and veterans benefits.  In some cases the application of DOMA took away rights of same-sex married couples and, in others, it relieved them of certain responsibilities.

It is important to know how the overturning of this portion of the law will affect seniors.  The answer is it will vary depending on what state the couple was married in, and what state they currently reside in.  While the result of overturning Section 3 of the DOMA is far-reaching, it does not completely equalize the playing field. 

With regard to Medicaid, whether a couple may be impacted depends on whether they are: 1) validly married; 2) living in a state that recognizes their marriage; and/or 3) In a civil union or registered domestic partnership and the state recognizes the relationship.

Currently 12 states and the District of Columbia recognize same-sex marriages.  In these states, Medicaid will also recognize the marriage.  This means that the Medicaid rules will change for same-sex married elders.  The positive changes for these elders could include an increased allowance as currently allowed for married couples.  Another advantage will be the ability of the ill spouse to transfer assets to the well spouse without penalty and the ability to receive some of the income of the ill spouse once qualified for Medicaid under the Spousal Impoverishment Act provisions. 

In a state that does not recognize an otherwise valid same-sex marriage, Medicaid will also likely not recognize the union.  However, some states do provide hardship protections to a partner of a person in long term care.2

Finally, in a state that recognizes civil unions (like Illinois) or registered domestic partnerships, a couple so joined may be treated as married by Medicaid.  This is a situation which will vary based on several factors and the tax treatment of these couples by the IRS may determine the answer.

Impact on Other Government Benefits

This decision will likely impact Social Security Income (SSI) recipients, as well as veterans receiving either pension or compensation benefits.  It will likely take months before we fully understand the impact of the Court’s decision in these areas, as each agency determines how best to apply the decision.

Medicaid alone is a complex program, even for single individuals.  With the new opportunities that have opened up for married couples of the same sex, the need for the assistance of an Elder Law attorney is even greater.  If we can help someone you know, please don’t hesitate to contact us. 

Other references:
Supreme Court Boosts Gay Marriage (The Hill –

[1] U.S. v. Windsor, 570 U.S. ___ (2013)
[2] LGBT Organizations Fact Sheet Series:  After DOMA What it Means for You

Tuesday, June 25, 2013

The Staggering Costs of Dementia

Most of us know of someone who has been diagnosed with dementia. It is a costly, heart-breaking and life-altering syndrome that is nearly doubling in numbers of people affected worldwide every 20 years.* Dementia has affected the likes of Norman Rockwell, E.B. White, Rita Hayworth, Charlton Heston, Ronald Reagan, Charles Bronson, Margaret Thatcher and many other well-known people. It does not discriminate based on station in life, and its effects are widely dispersed. This post will focus on recent findings as to economic, financial and societal impacts of dementia as well as what an Elder Law attorney can do to help.

What is Dementia?
Dementia is a general term for a decline in mental ability, severe enough to interfere with daily life. Memory loss is one such example. Alzheimer’s is the most common type of dementia. Symptoms of dementia can vary greatly, but is diagnosed when at least two of the following core mental functions are significantly impaired: memory, communication and language, ability to focus and pay attention, reasoning and judgment, and visual perception.

These symptoms can be displayed when the person with dementia has problems with short-term memory, keeping track of his/her purse or wallet, paying bills, planning and preparing meals, remembering appointments, or travelling out of the neighborhood. These often progressive symptoms will likely eventually necessitate assistance with daily activities, resulting in increased expense and stress on the individual, their family members, and society at large.

The RAND Study **
The RAND Corporation recently concluded a nearly decade-long study on close to 11,000 people. The study sheds light on dementia statistics including rates of diagnosis and costs to society. The results of this study were recently published in the New England Journal of Medicine in early April 2013. The study’s reliability is significant—it was led by an independent, non-advocacy group and financed by the federal government.

The Cost of Dementia to Society
According to the RAND Corporation’s study, the cost of caring for those with dementia is projected to double by 2040 and is currently higher than caring for those with heart disease or cancer. The direct costs of dementia, including the cost of medicine and nursing homes, was $109 billion a year in 2010 compared to $102 billion for heart disease and $77 billion for cancer. This cost is pushed even higher, to $215 billion, when support from family members or other loved ones is given a cost value. This figure will rise to $511 billion by 2040. Information from the RAND study and from the Centers for Medicare & Medicaid Services indicates that, by 2020, dementia patients will account for about 10% of the elderly population while direct medical spending on them will equal about 17% of all spending projected for Medicare and Medicaid devoted to the aged. ***

The cost of dementia to society is great and is headed for a huge increase. In light of that, President Obama recently signed into law the National Alzheimer's Project Act, which calls for tracking of financial costs of dementia as well as increased efforts to find new treatments and better care for those with dementia.

The Cost of Dementia to the Family
While the cost to society is great and will likely have a substantial impact on all of us, the costs to individuals diagnosed with dementia and their loved ones is even more significant. As evidenced by the RAND study, each individual case of dementia costs between $41,000 and $56,000 a year. In addition to the financial drain on families, dementia increases the stress on the caregiver loved one. In fact, caregivers have been found to be at increased risk for depression and anxiety and long term medical problems, which impose a further financial burden on the family.

Dementia poses higher costs to society and individuals than heart disease or cancer and these costs are projected to continue rising. Most significant is the cost of care for the patient with dementia. They will progressively need more and more help with daily activities and this is the biggest cost of the debilitating syndrome. With the proper attention given to improvements in medicine with regards to dementia, society will be able to get a handle on this costly condition. And, with help from an Elder Law attorney, the family of those afflicted with dementia can obtain the support they need to care properly for their loved one.

An Elder Law attorney can help clients prepare or deal with an immediate need to find appropriate resources in dealing with dementia. We can support the loved one in making sure the dementia patient has access to the care and medical attention they need. Please contact us if you have a client or their loved one who has been diagnosed with dementia or is at risk for developing this debilitating syndrome.

***The Wall Street Journal, Dementia Will Take Toll on Health-Care Spending, April 8, 2013

Monday, May 20, 2013

Consider a Stand Alone IRA Accumulation Trust

For clients with large IRA accounts, making sure that your beneficiaries are able to "stretch-out" the recognition of taxable income for as long a period of time as possible has been a popular goal. Unfortunately, when your beneficiaries have the opportunity, many choose to withdraw the funds, thus creating a taxable event in the year of distribution. If the entire IRA is withdrawn, the tax consequences can be horrendous.

The solution: create a stand alone IRA accumulation trust to protect your beneficiaries from making that costly mistake. This trust is designed to comply with all requirements to make the trust a "qualified beneficiary" under tax laws. In addition, you may control the use of the funds by virtue of custom dispositive provisions in the trust. For more information, and to see if this strategy fits your needs, call my office at 847-955-9000.

Monday, April 22, 2013

Your Digital Legacy

Great story in today's Chicago Tribune about what happens to all of your digital accounts when you pass away.,0,274932.story

Something to think about when you do your estate planning.

Tuesday, April 16, 2013

Thanks to all of my Clients on a Successful Tax Season

Well, tax day is over and I am taking today off to recuperate. I just want to say thank you to all of my clients for making this our most successful tax season ever. As always, I appreciate your trust and your business.

Thursday, April 4, 2013

Picking up some great info at the ABA Techshow this week!

Learning some great tips and getting to see all the new law office technology this week at the ABA Techshow in Chicago.