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Long Island's Elder Law, Special Needs & Estate Planning Firm

Wednesday, December 20, 2006

FDIC Misconceptions: A Top 10 List (Part I)

FDIC Insurance
To help depositors avoid repeating the mistakes of others, FDIC Consumer News has compiled this “Top 10" list of misconceptions that some people have about FDIC Insurance. This list is based on discussions with FDIC deposit insurance specialists, including representatives at our toll-free Call Center, which handles hundreds of calls a month from consumers asking about their deposit insurance.

1. The most a consumer can have insured is $100,000.
Too many people assume - often incorrectly - that if their bank fails their share all their accounts would be added together and insured up to a combined total of $100,000. Others have notions even further from the truth, such as the idea that the FDIC knows how much each customer has in every bank in the United States (rest assured, we don’t) and that the grand total of all those accounts is insured to no more than $100,000. The reality is that your accounts at different FDIC insured institutions are separately insured, not added together, and you may qualify for more than $1000,000 in coverage at each insured bank if you own deposit accounts in different “ownership categories.”

Suppose you have a variety of accounts at one bank. The funds you have in various checking and savings accounts (other than retirement accounts) in your name alone are insured up to $100,000. Your portion of joint accounts - those with other people - is also separately insured to $100,000. If you also have “revocable trust accounts” at the bank, the total can be separately insured up to $100,0000 for each beneficiary if certain conditions are met. And, under new rules, certain retirement accounts are insured up to $250,000, up from $100,000 previously.

“Depending on the circumstances, a family of four could have well over $1 million in deposit insurance coverage at the same bank,” said James Williams, an FDIC Consumer Affairs Specialist. “And that coverage is separate from what is protected at any other FDIC-insured institution.”

2. Changing the order of names or Social Security Numbers can increase the coverage for joint accounts.
Many depositors mistakenly believe that by changing the order of Social Security Numbers, rearranging the names listed on joint accounts, or substituting “and” for “or” in account titles, they can increase their insurance coverage.

“Consumers are always telling us that they thought they could get more coverage if they did something like title one account for ‘Mary and John Smith’ and another account for “Mary or John Smith,” said Kathleen Nagle, chief of the Deposit Insurance Section in the FDIC’s Division of Supervision and Consumer Protection. “These moves will have no impact on joint account coverage. The FDIC will simply add each person’s share of all the joint accounts at the same institution and insure the total up to $100,000.” (Note: Each person’s share is presumed to be equal unless stated otherwise in the deposit account records.)

3. If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.
This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.

The truth is that federal law requires the FDIC to pay the insured deposits “as soon as possible: after an insured bank fails.” Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.

4. The FDIC only pays failed-bank depositors a percentage of their insured funds.
All too often we receive questions similar to this one: “Is it true that if my FDIC-insured bank fails, I would only get $1.31 for every $100 in my checking account?” As with “misconception number 3, “ this misinformation appears to be spread by some financial advisors and sales people.

Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest. If your bank fails and you have deposits over the limit, you may be able to recover some or , in rare cases, all of your uninsured funds. However, the overwhelming majority of depositors at failed institutions are within the insurance limit, and insured funds are always paid in full.

5. Deposits in different branches of the same bank are separately insured.
FDIC insurance is based on how much money is in various ownership categories (single, joint, retirement, and so on) at the same insured institution. It doesn’t matter if the accounts were opened at different branches - they are considered the same bank for insurance purposes.

Distinguishing one bank from another isn’t easy these days. Some banks have similar names but they’re not the same institution. And then there are banks that use different “trade” names in different parts of the country or use a different name for their online banking activities or Internet divisions, but they’re all the same bank for FDIC insurance purposes. The FDIC and other federal regulators have advised banks to clearly identify their legal names in advertisements and on Web sites.

When in doubt, you may contact the FDIC. “One way to be extra sure you are depositing money in different banks is to ask the FDIC for each bank’s insurance ‘certificate number’,” noted Williams. “If the FDIC certificate numbers are different, the banks are different.”
Source: www.emaxhealth.com

Friday, December 8, 2006

8 Steps for Mangaing Parents' Finances

So, the event you’ve worried about much of your adult life has finally happened: You need to take over Mom’s or Dad’s financial affairs.

In addition to the stress and sadness over what’s happened, you immediately have to deal with practical matters: Will Mom be able to live in her home again? Can she afford a nursing home? Will insurance cover all of Dad’s medical bills?

And, speaking of bills, you’ve got to start paying them–everything from utilities to credit cards.

Even if you’re not at this point with your parents yet, this list can help you decide what to do now–before anything happens.

8-Step Plan
The need to take over your parents’ financial life, especially if it happens suddenly, can be extremely stressful. However, if you approach it one step at a time, you’ll get a handle on what needs to be done.

1. Find all financial accounts and documents.
2. Collect and start paying bills.
3. Locate power of attorney or living trust.
4. Open your parents’ safe-deposit box - with a witness.
5. Become your parents’ guardian.
6. Document everything you do.
7. Consider hiring a financial planning team.
8. Consider updating investments.

Advance planning tip: There are three important documents you can help your parents prepare before they become ill.
1. A power of attorney form, which allows you to take care of their finances.
2. A health care proxy, which allows you to make life-and-death medical decisions.
3. A will, which determines how their assets will be divided when they're gone.
Source: Written by Teri Cettina, Bankrate.com.

Wednesday, November 22, 2006

Seniors Can Change Medicare Prescription Drug Plans Beginning November 15th

Medicare recipients with changes in their drug needs, who want to explore less costly drug plans, or for other reasons desire to change their last year’s plan, now have the chance to choose a new drug plan that better fits their needs.

Beginning November 15th, the Medicaid Part D enrollment window will re-open for seniors and other Medicare recipients. The window will close December 31st. However, the Centers for Medicare and Medicaid Services state that seniors need to enroll in a new plan by December 8, to ensure their new prescription drug card in early January 2007.

New plans will go into effect January 1, 2007, and remain in place for another year. Alternatively, a recipient satisfied with their current Part D plan does not have to re-enroll. For more information contact 1-800-MEDICARE. Or visit the website: www.medicare.gov for the available Medicare D plans.

Friday, November 3, 2006

Friends of Karen

From time to time we are lucky enough to come in contact with a very special organization filled with very special people and a very worthwhile cause. The attached message is from such an organization and we're proud to share it with you.


For over twenty-eight years, Friends of Karen has provided financial, emotional and advocacy support to families with children from birth to 21 years of age with cancer and other life-threatening illnesses and living in the tri-state area. Friends of Karen’s goal is to help maintain the highest quality of life and prevent the financial and emotional collapse of the family, as they go through this most difficult time.

Last year, Friends of Karen helped 577 families with children with life-threatening illnesses. Additionally, we helped 805 of their siblings.


They Pay -
• Basic living expenses, such as rent and mortgage, utilities, car payments, etc. that
become unmanageable due to lost wages and the high cost of medical care.
• Medical co-payments, hospital bills including television and telephone
• Transportation to/from medical treatment
• Childcare for siblings
• Health insurance payments
• Special home care needs and food
• Funerals
• Counseling

Friends of Karen’s Back to School program provides much needed school supplies to our Friends of Karen children and their brothers and sisters. Holiday Adopt-A-Family program, which begins in the Fall, assures festive holidays for those unable to provide for themselves because of the cost of their child’s illness, and Children Helping Children programs collaborating with schools and service clubs gives children the opportunity to help other children in their community.

Please visit their website at: www.friendsofkaren.org or call them at 631-473-1768 for more information about their services and their up-coming Open House scheduled for late November.

Friends of Karen, 21 Perry Street, Port Jefferson, NY 11777

“When the parents of a terminally or catastrophically ill child receive financial and emotional help, they then have more time to love.”—Sheila Petersen, Founder, 1978.

Friday, October 27, 2006

The Pension Protection Act of 2006

The Pension Protection Act of 2006 was signed into law by President Bush on August 17, 2006. It is the most significant pension legislation since the Employee Retirement Income Security Act of 1974 (ERISA). Among other things, the new law makes a number of retirement savings incentives permanent, toughens the funding rules that govern traditional pension plans, and authorizes 401(k) plans to provide investment advice and automatic enrollment of participants. These changes should help promote retirement income security.

First, the Pension Protection Act permanently extends a variety of pension and savings incentives that were scheduled to sunset in 2011. The annual limit on Individual Retirement Account (IRA) contributions will increase from $4,000 this year to $5,000 in 2008, and it will be indexed for inflation thereafter. The provision that allows individuals who are at least 50 years old to make an additional "catch-up" contribution of $1,000 a year is also made permanent. Also, starting in 2007, taxpayers will be able to have a portion of their income tax refunds directly deposited into their IRAs.

Similarly, the annual limit on 401(k) plan contributions has increased to $15,000 in 2006 (plus another $5,000 for those over age 50), and these amounts are indexed for future inflation.

The Act also expands the saver's tax credit for low- and moderate-income workers. The credit is equal to a percentage-50, 20, or 10 percent, depending on income level-of up to $2,000 of qualified retirement savings contributions ($1,000 maximum credit in 2006). The credit was scheduled to expire at the end of 2006, but the Act makes it permanent and indexes the income and rate levels for inflation.

Second, the Pension Protection Act toughens the funding rules that govern traditional "defined benefit" pension plans. One provision generally requires employers to fix any funding shortfall within seven years, and new disclosure rules give workers more information about the financial status of their pension plans. Moreover, poorly funded plans will be subject to limitations on benefit increases, lump sum payments, and shutdown benefits. Employers will, however, be able to deduct more in the years in which they can afford to make larger contributions.

The Act also makes it easier for employers to utilize cash balance and other innovative pension plan designs, and it allows employers to set up Roth 401(k) plans, under which employees will be able to designate their salary deferral contributions as after-tax Roth contributions.

Third, the Pension Protection Act encourages employers to automatically enroll employees in their 401(k) plans. Starting in 2008, employers will be able to satisfy the IRS's so-called "nondiscrimination" test if they automatically enroll each employee in the 401(k) plan, withhold and contribute a few percent of compensation on behalf of those employees, and make small matching contributions. These 401(k) plans will qualify for favorable tax treatment, even if many employees instead elect to contribute at less than the target levels, or not at all.

Also, starting in 2007, employers will have an easier time providing investment advice to help their employees manage their 401(k) accounts. Employers will be able to provide investment advice through computer models that take into account the employee's age, expected retirement age, income, risk tolerance, and other variables. Alternatively, investment advice could be provided by certain third-party experts on an individual basis, but only if that advice is based on a flat fee charged to each employee, regardless of the investments selected or amounts involved. Another provision protects plans that use a diversified stock and bond fund as the default investment, rather than an ultra-safe but low-yield, money market fund. The Act also requires plans that invest in publicly traded employer stock to allow employees to diversify their individual account holdings. In general, employees must have the right to diversify their own contributions immediately and must be allowed to diversify most employer contributions after three years of service. Together, these investment provisions should help employees get better rates of return on their retirement savings.

The Pension Protection Act also accelerates the vesting of employer contributions to 401(k) and similar plans. Starting next year, employer contributions need to be either 100 percent vested after three years of service (down from five years) or 20 percent vested after two years with an additional 20 percent vesting each year thereafter until 100 percent is vested after six years of service (down from three-to-seven-year graduated vesting).

Another provision facilitates phased retirement by allowing workers over the age of 62 to take in-service distributions from their traditional pensions. Eligible workers will be able to go from full-time to part-time work and receive pension benefits to maintain their current income levels. Also, 401(k) plans will be allowed to let participants make hardship withdrawals to help parents or other beneficiaries, even if those beneficiaries are not dependents or spouses.

The Act also includes a number of provisions that make it easier to fund health care and long-term care costs. For example, one provision makes it easier for pension plans to use excess assets to fund retiree health care, and another provision allows long-term care insurance to be offered as part of an annuity or life insurance contract.

Finally, the Act also includes a package of charitable giving incentives and loophole closers. For example, one provision allows tax-free distributions from IRAs for charities. Otherwise taxable distributions of up to $100,000 a year will be excluded from the IRA owner's taxable income as long as the distribution is made after the owner has reached age 70½ and is made payable to the charity.

Another provision makes it harder to take a current deduction for contributions of a future interest in paintings and other collectibles. A charity receiving a fractional interest in tangible personal property must take complete ownership of the property within 10 years or the death of the donor, whichever is first. In addition, the charity must take possession of the property and use it at least once during the 10-year period as long as the donor remains alive.

The Act also increases the penalties on taxpayers and charities that abuse the charitable contribution rules. Also, one provision denies the deduction for contributions of clothing and household items unless the items are in good condition, and another provision requires that donors have a receipt or cancelled check for all cash donations.

Source: NAELA E-Bulletin, October 3, 2006; written by Jon Forman.

Friday, October 6, 2006

What is Special Needs Law?

What is Special Needs Law?
Special Needs Law is the practice of law dedicated to helping persons with disabilities (“special needs”) and their families by navigating their government benefits and estate planning options.

What is a “special needs” trust?
“Special Needs” is just a term to describe any trust intended to provide benefits without causing the beneficiary to lose public benefits he or she is entitled to receive.

What kinds of public benefits do special needs trust beneficiaries receive?
Each special needs trust can be intended to protect different public benefits. Most commonly, special needs trusts are intended to permit Supplemental Security Income (SSI) and Medicaid recipients to receive some additional services or goods.

Does the existence of a special needs trust qualify the beneficiary for public benefits?
No. The existence of a special needs trust does not itself make public benefits available; the beneficiary must qualify for the benefits program already, or qualify after the trust is established. If properly established, the special needs trust will not cause of loss of benefits (although in some circumstances the level of benefits may be reduced), but the trust does not make it easier to qualify.

What is a “supplemental benefits” trust?
Some lawyers prefer to use the term “supplemental benefits” rather than “special needs.” Occasionally, the term “supplemental needs” is used. All are interchangeable, and describe the purpose of the trust rather than being a limited legal term.

Who can establish a special needs trust?
Anyone can establish a special needs trust, but there are two general categories of such trusts: self-settled and third-party trusts, which we will go into in detail in the next newsletter.

Lawrence Eric Davidow is a founding memeber and the Treasurer of the Special Needs Alliance (www.specialneedsalliance.com) which is a premier alliance of leading law firms throughout the country who are dedicated to the area of planning for those with special needs. These hand-picked law firms have the resources to devise solutions and insure financial security for special needs clients nationwide.

Wednesday, September 27, 2006

No Will? State may decide

The problem: My father is 86, my mother, 84. My father doesn't think he needs a will because my mother will inherit everything when he dies. We're concerned that he does need a will to ensure that everything goes smoothly upon his passing. Is there a way to spell out what will happen when he dies?
The rules: Everyone should have a will - regardless of age, health or wealth - as a part of a comprehensive estate plan. Without an appropriate plan, a person's estate could pass through "intestacy," which means New York state law would determine how the estate is distributed.
Strategy: Your parents should create a comprehensive estate plan, which may include joint ownership, beneficiary designations and wills.
How it works: It may be true that your father's assets will pass to your mother immediately upon his death. But that depends on how he owns his assets. For instance, if your parents own their assets together as "joint tenants with right of survivorship," those assets will go directly to the surviving spouse automatically when one of them dies. This also is true if your parents have named each other as beneficiaries on their "in trust for" accounts, retirement accounts, annuities and life insurance policies.
However, if your father owns any assets in his name alone, without a designated beneficiary, those accounts and assets will need to pass through probate via the instructions in his will. A will controls the disposition of probate assets upon death.
In their wills, your parents can name their beneficiaries, appoint an executor to administer their estate and provide for the payment of funeral expenses and/or taxes. If any of their children have disabilities, their wills also could create a special needs trust for that child's benefit.
Result: With proper planning, your father can dictate how his assets will be distributed after he dies, and his family can have certainty in knowing how his estate will be distributed.
Written by Karen E. Klein, Newsday, 9/23/06.

Thursday, August 3, 2006

Senate OKs plans to allow prescription drug imports from Canada

WASHINGTON (AP) — The Senate opened the way Tuesday to let Americans import prescription drugs into the United States from Canada, seeking to ease a regulatory ban on cheaper medicine crossing the border.
The proposal, which was approved 68-32, would create a Canadian loophole on a Food and Drug Administration ban on importing prescription medicine into the United States. It was offered as part of a $31.7 billion Homeland Security Department spending blueprint for the fiscal year that begins Oct. 1.

The department's Customs and Border Protection bureau began aggressively seizing Tamiflu, Viagra and other incoming prescription medications at borders in November. Prescription drugs — even those manufactured in the United States — are generally sold at cheaper prices in Canada.

"We should demand that (Customs and Border Protection) focus on the true priority that we face on the war on terror," said Sen. David Vitter, R-La., of efforts to secure U.S. borders. "Stripping small amounts of prescription drugs from the hands of seniors .... that should not be a priority."

Vitter's plan, which was embraced by Democrats, specifically would prohibit Customs and Border Protection from stopping people with doctors' prescriptions for FDA-approved drugs from bringing the medicine into this country from Canada.

But Republican leaders vociferously opposed the plan for fear, they said, the drugs could be unsafe for consumers — or even present a terror risk.

Sen. Judd Gregg, R-N.H., said the proposal was an attempt to push the FDA into reversing itself while "creating a massive hole on our capacity to secure our borders and protect ourselves."

"If I were a creative terrorist, I would say to myself, 'Hey, listen, all I've got to do is produce a can here that says 'Lipitor' on it, make it look like the original Lipitor bottle, which isn't too hard to do, fill it with anthrax," Gregg said.

Lipitor is a cholesterol-lowering drug.

Aides warned that the drug import plan was likely to be stripped out of the legislation — as it has been in past years — whenever it got to a conference of House and Senate lawmakers who will negotiate the final version. The administration also has opposed efforts to loosen the restrictions.

Two House spending bills this year — to fund the Homeland Security and Agriculture departments in 2007 — include the drug importation plan, said Kirstin Brost, spokeswoman for Rep. David Obey of Wisconsin, the top Democrat on the House Appropriations Committee.

The House has approved efforts to import drugs in six spending bills over the last seven years, Brost said, but the idea far has survived the conference only once. But that year, 2000, the plan was eventually dropped because it was written in a way that couldn't be carried out, Brost said.

While importing drugs into the United States is illegal, the FDA generally has not stopped small amounts purchased for personal use. Still, the FDA says it cannot guarantee the safety of imported drugs.

Customs and Border Protection began seizing controlled substances in September 2004, and expanded that operation last November to include non-controlled substances. The Bush administration has opposed efforts to loosen the restrictions.

As of March, Customs officials had seized nearly 13,000 packages of drugs coming into the country, although the medications' origins were not known, according to data provided by Sen. Bill Nelson, D-Fla.

"This is going to ensure that Americans, especially the frail, elderly, or those with debilitating conditions, are going to be able to at least have a chance of affording the medications that they need," Nelson said.

Copyright 2006 The Associated Press. All rights reserved. Updated 7/11/2006, USA TODAY

Thursday, July 13, 2006

Clues to the mind robber: Alzheimer Drug Experimentation

WALTER Skotchdopole worked for 20 years as a police officer and 20 years in the film industry before succumbing to the relentless decline of Alzheimer's disease. In his prime, he joked with everyone he met. By his early 70s, he had become a shell of his former self.

"He's there, but he's not," says his son James Skotchdopole. "There's no real interaction, no real stake in life."

Walter Skotchdopole had tried several drugs, with no noticeable improvement. But when he began experimental treatments with Enbrel (etanercept) — a drug commonly used to treat rheumatoid arthritis — it was as if someone flipped a switch.

Within minutes of his first injection, he was making jokes. Later that afternoon, he ditched his cane to dance with a worker at his assisted-living facility. After a year and a half of weekly injections, Skotchdopole still gets confused sometimes, but requires far less help than he used to.

"The results we've seen are unprecedented with any kind of treatment," says Dr. Edward Tobinick, an assistant clinical professor of medicine at UCLA who led a recent pilot study of Enbrel's effects on 15 Alzheimer's patients.

Though still preliminary, the study's findings add to a growing list of approaches that scientists are taking to uncover the biological roots of Alzheimer's and hit the disease where it hurts.

About 4.5 million Americans have Alzheimer's disease, and healthcare costs total $100 billion a year, according to estimates by the Alzheimer's Assn. and the National Institute on Aging. By 2050, there could be as many as 16 million people with the disease.

Since 1992, the Food and Drug Administration has approved five drugs for treating the forgetfulness, communication problems and other traits of Alzheimer's. All of them target one of two key brain chemicals that help brain cells communicate and facilitate learning and memory. But the drugs — Aricept (donepezil), Razadyne (galantamine), Exelon (rivastigmine) and the newest, Namenda (memantine) — treat only symptoms, not the underlying disease. They just slow the rate of decline, and only for a year or two.

Researchers think they can do better by focusing on the root causes of Alzheimer's.

Most research targets the accumulation of a sticky protein called amyloid in the brains of Alzheimer's patients. The protein forms clumps, called plaques, that damage brain tissue. Various research groups are developing drugs that might reduce this buildup, keep the amyloid from clumping together or get rid of plaques after they've have formed.

Trials of a vaccine designed to clear the brain of amyloid were halted by Elan Pharmaceuticals in 2002, because 18 of 300 participants developed serious brain inflammation. But scientists continue to work on more selective vaccines that could help the body fight amyloid without harming surrounding tissue, says Dr. John C. Morris, director of the Alzheimer's Disease Research Center at Washington University in St. Louis.

Tobinick and colleagues have focused on the inflammation that happens in the brain as a result of both amyloid buildup and the accumulation of another protein, called tau, which forms "tangles" that damage brain cells. The researchers chose to investigate Enbrel because it disables an inflammation-promoting molecule called tumor necrosis factor-alpha. TNF-alpha causes joint pain in people with autoimmune diseases such as rheumatoid arthritis. In Alzheimer's, it sparks the immune system to attack brain tissue.

When used to treat patients with arthritis, Enbrel is injected into the arms or abdomen. That doesn't work with Alzheimer's patients. Studies show that TNF-alpha is as much as 25 times more abundant than normal in the spinal fluid of people with Alzheimer's. So, with a tiny needle, Tobinick injects the drug into the back of the neck, above the spine, which is thought to improve delivery to the brain.

The procedure is simple, he says, and the preliminary results, published in April, have been both quick and long lasting. "Memory improves. People have a better grasp of language. They can do things they couldn't do before."

Attacking inflammation makes sense, says Sue Griffin, director of research at the Geriatric Research Education Clinical Center at the University of Arkansas, in Little Rock. "There is really good evidence," she says, "that quelling neuroinflammation is a very good thing for Alzheimer's disease." A population study published last year in the Journal of Geriatric Psychology and Neurology found that people who'd used anti-inflammatory drugs daily for more than two years had a 25% lower risk of developing Alzheimer's.

Still, many researchers remain cautious. The Enbrel study was extremely small. It lacked controls — people taking a placebo to compare with patients who got the real drug. And it has not yet been replicated by other scientists.

Tobinick, who owns a patent for his treatment method as well as stock in Amgen, the company that produces Enbrel, says he is eager for other scientists to replicate his results.

James Skotchdopole, meanwhile, remains hopeful that his father will enjoy a longer life, that his 10-year-old daughter will get a chance to really know her grandfather, and is more optimistic about his own future. "I'm 42, and I see 75 as not that far away," he says. "I'm excited that there is progress. I felt my future was a fait accompli."

Source: Los Angeles Times (19 Jun 2006)

Thursday, June 22, 2006

Estate Tax Changes may be Slipped into Pension Legislation

Republican lawmakers, who so far have been unable to win Senate approval of either full estate tax repeal or a significant reduction in the tax that wealthy heirs pay, are now considering another tactic: slipping estate tax "reform" into a pension bill now in a House-Senate conference committee.
The pension legislation, H.R. 2830, which seeks to put the nation's defined benefit pension plans on a sounder footing, is being finalized by a conference committee reconciling different House and Senate versions.
The "primary advocate" for attaching estate tax reform to the pension bill, according to the National Underwriter, an insurance industry publication, is Sen. Trent Lott (R-MS). Lott said he doubts that a deal on reducing the estate tax can emerge in the Senate, and so is viewing the pension bill conference report as an alternative vehicle.
“Conference reports are not amendable, and this would be a circuitous way to move estate tax reform forward without providing opportunity for consideration of alternatives on the Senate floor,” said David Stertzer, chief executive of the Association for Advanced Life Underwriting.
But such a last-minute inclusion of estate tax provisions could doom the contentious pension bill, which has taken months to hammer out. "Adding additional controversial issues to the package could kill the chances for enactment this year,” said Kenneth Cohen, senior vice president and deputy general counsel of the Massachusetts Mutual Life Insurance Company.
The latest Republican compromise proposal on the estate tax would exempt any individual estate under $5 million from the tax ($10 million for couples) and would lower the tax rate to a sliding scale starting at 15 percent and rising to 30 percent for estates over $30 million. These changes would cost the U.S. Treasury about 80 percent as much as full repeal, or about $800 billion over the first ten years in which its budgetary effects would be fully felt, according to the Center on Budget and Policy Priorities.

Source: elderlawanswers.com

Thursday, June 8, 2006

Senate Gearing Up for Estate Tax Repeal Vote

Senate Republicans are preparing to revive the debate over permanent repeal of the estate tax on June 6, but the real action will be on the Democratic side.

Republicans concede they lack the votes for full repeal, but they are hoping they can work out a compromise that would persuade enough Democrats to exempt the families of many wealthy individuals from paying federal estate tax. Sens. John Kyl (R-AZ) and Max Baucus (D-MT), who is the senior Democrat on the Senate Finance Committee, are reportedly negotiating.

Kyl is proposing increasing the estate tax exemption to $5 million and reducing the top estate tax rate to 15 percent from its current 46 percent.

Currently, only estates worth more than $2 million are taxed by the federal government. The threshold is scheduled to rise to $3.5 million in 2009. For the year 2010, estates will be entirely free from federal taxation. However, the law that includes this provision expires at the end of 2010. Thus, unless Congress acts in the interim, the estate tax exemption will then revert to $1 million.

Baucus is under pressure from fellow Democrats who say that even a compromise would deplete federal revenue by hundreds of billions of dollars and make it more difficult to shore up social programs and balance the budget. According to the Center on Budget and Policy Priorities, reducing the top rate to 15 percent would lose nearly as much revenue as full repeal, which will cost the U.S. Treasury an estimated $1 trillion. The Republicans need Baucus to deliver about a half-dozen Democrats to reach the 60 votes required to overcome any filibuster.

Almost all Democrats support raising the exemption threshold for eligibility to $3.5 million for an individual and $7 million for a couple.

Meanwhile, House Democrats have released a report detailing the effect that a repeal of the tax would have on the estates of oil company executives and members of the Bush cabinet. According to the report, estate tax repeal would save the estate of Vice President Cheney between $13 million and $61 million, and would save the estate of Defense Secretary Donald Rumsfeld between $32 million and $101 million. The family of retired ExxonMobil chief Lee R. Raymond would receive a $164 million windfall.

Wednesday, May 17, 2006

Report: Strict asset transfer rules are not an answer to controlling Medicaid spending

A Kaiser Commission on Medicaid and the Uninsured has issued a report, Asset Transfer and Nursing Home Use: Empirical Evidence and Policy Significance, which concludes that, “Eliminating asset transfers for Medicaid nursing home coverage will not substantially alter the private market for long-term care and is not the answer for controlling growth in Medicaid spending.”

The University of Michigan’s Health and Retirement Study produced data for the study to determine the extent to which individuals needing nursing home care make asset transfers. Four categories of individuals were screened: (1)those eligible for Medicaid in the community prior to entering a nursing home; (2)those who became Medicaid eligible within a year of admission; (3)those who became eligible more than a year after admission; and (4)those who never received Medicaid coverage and resided in a nursing home for more than a year.

Forty-three percent of the approximately 2.6 million individuals entering nursing homes between 1998 and 2002 received Medicaid assistance at some point during their stay. Nearly half of these were eligible prior to entering the facility, and only 5 percent of this group transferred more than $50,000 in cash in the six years preceding their admission to the facility. When including transfers involving deeds for this group, only 20 percent made gifts of more than $50,000. For the rest of the Medicaid population, the vast majority made transfers of less than $50,000 within the same time period (including transfers involving deeds).

By contrast, individuals who never received Medicaid assistance for their nursing home care made transfers with greater frequency and higher value. Half of these individuals made gifts in the six years leading up to their institutionalization, and two-thirds of the transfers were cash transfers exceeding $5,000.

All told, the report notes that $6.6 billion in liquid assets were transferred by the Medicaid population within the six years leading up to their qualification for Medicaid. Medicaid spent $100 billion in fiscal year 2004, so Medicaid would recover only six percent of its costs if it blocked all of these transfers. However, the report reviewed activity dating back six years (one year longer than the five-year- look-back period of federal law), so some of these transfers could not be blocked by Medicaid. Also, potentially inflating the amount that Medicaid could save is the evidence that individuals who never attained Medicaid eligibility after lengthy stays in institutions made the most frequent and highest value transfers. This evidence suggests that transfers made prior to entry are frequently not made for the purpose of attaining Medicaid eligibility. Federal law does not allow a penalty for a transfer not made for the purpose of establishing Medicaid eligibility, so other transfers netted in the analysis could not be restricted by Medicaid.

Source: Washington Weekly, Volume XXXII, Issue No. 16, April 28, 2006.

Thursday, May 11, 2006

Caregiving: A growing field

Usually one family member is the primary caregiver. Women make up 75% and are either a spouse or an adult daughter. Nearly two-thirds of caregivers are working full or part-time.

Spouses, on average, provide 40-60 hours of care per week and adult children provide 15-30 hours of care per week.

The Economic Value of the care provided by families is $196 billion nationwide (1997) - $13.5 billion in New York.

Caregiving costs U.S. businesses an estimated $11.4 billion per year in lost productivity by contributing to the following: replacing employees, absenteeism, partial absenteeism, workday interruption, eldercare crisis, supervisor’s time.

Caregivers adjust their work schedules due to caregiving responsibilities by incorporating the following: making phone calls at work (84%), arriving late/leaving early (69%), taking time off during the day (67%), making up work on weekends/evenings (29%), using sick days (64%), decreased hours (33%), taking a leave of absence (22%).

In 2000, New York had 3.2 million people over the age of 60. By 2010, New York will have 5.5 million people over the age of 60. Also in need of caregiver assistance are families with a disabled child or an older person with disabilities under the age of 60.

The fastest growing segment of the aging population in New York are those 75+ and those 85+. These individuals will need more supportive services, including caregiver supports if they are to remain independent.

The average monthly out-of-pocket expense for a family caregiver is $171 (food, transportation and medication expenses account for top 3 expenses). Total un-reimbursed monthly expenses for family caregivers is $1.5 billion.

Most caregivers start out providing a small amount of care, gradually taking on more responsibility. Caregivers also underestimate the number of hours that would be required and the duration of caregiving responsibilities. The average length of care provided is about 8 years.

Caregiving responsibilities take a toll on the health of the caregivers, and on employee productivity due to increases in absenteeism, early retirement and turnover. Half of surveyed caregivers made additional visits to their health care practitioners. Half reported more than 8 additional visits per year.

Source: Caregiver Fact Sheet

Thursday, April 6, 2006

Experts Disagree on Retiree Health-Cost Estimate

Fidelity Investments says that a 65-year-old couple retiring now without employer-provided health benefits will need $200,000 for out-of-pocket healthcare expenses during retirement, according to data it released this past week. Yet many financial planners and other observers think that is way too little.

“People don’t have a clue as to what they’ll need in the future,” says Ron Roge, a wealth manager in Bohemia, N.Y. “The numbers are frightening.” He has increased the life-span expectancy of his clients to 100, for retirement-planning purposes.

The Employee Benefit Research Institute (EBRI), a research organization in Washington, estimates that people could need twice as much as Fidelity predicted because it based its numbers on life expectancies of 82 years for men and 85 for women.

Financial experts are concerned not only because longer life expectancies could make healthcare costs even more burdensome for many Americans, but also because Medicare premiums are expected to rise and more workers will probably lose their company benefits.

The EBRI estimates that a couple without employer-provided retirement healthcare coverage would need $216,000 if they live to 80. That number climbs to $444,000 if they live to 90 and $778,000 if they survive to 100. Most people underestimate how long they will live, said EBRI President.

A 65-year-old man today has a 50% chance of being alive at age 85 and a 25% chance of making it to 92, according to data from the American Society of Actuaries. A 65-year-old woman has a 50% chance of being alive at 88 and a 25% chance of living to 94.

The numbers are even higher for couples. If both are 65, they have a 50% chance of one living to 92 and a 25% chance of one surviving to 97.

The Fidelity prediction, which is updated annually by the financial-services firm, includes expenses associated with Medicare premiums and co-pays for exams and prescription drugs. It doesn’t include the cost of over-the-counter medicines, most dental care or long-term care.

It also doesn’t take into account that the premiums for Medicare are expected to rise, especially for high earners. Medicare beneficiaries with an annual income under $80,000 and $100,000 will pay 35%, and those with at least $200,000 income will be responsible for 80% of premiums.

Source: The Wall Street Journal, Jilian Mincer, April 2006.

Sunday, March 26, 2006

Consumer Group Sues Over 'Law' Changing Medicaid Rules

The consumer watchdog group Public Citizen has filed suit in federal court charging that the Deficit Reduction Act of 2005 (DRA) signed by President Bush on February 8th is invalid because the president signed a version of the bill that was passed by the U.S. Senate but not the U.S. House of Representatives. Meanwhile, House Democratic Leader Nancy Pelosi and Congressman Henry Waxman, senior Democrat on the House Government Reform Committee, have sent a letter to President Bush requesting clarification on his knowledge of what he was signing.

Among various cuts in social programs, the DRA would place severe new restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care. The measure barely passed both houses of Congress. But the Constitution requires that before a bill can be enacted into law by the president, it must pass both the House and Senate in identical form. Due to a clerk’s substantive change as the legislation passed between houses, the president signed legislation that was passed by the Senate but not the House.

Public Citizen’s lawsuit, filed in the U.S. District Court for the District of Columbia, “simply requests the court to uphold the Constitution,” said Adina Rosenbaum, a Public Citizen attorney. “The entire law is invalid because the law the House passed is different from the law the Senate passed and the president signed.”

The Congress and the president have to be brought to account for their rogue actions in moving to enact this very controversial legislation without complying with the Constitution,” said Joan Claybrook, president of Public Citizen. “This time, they will have to answer for their actions.”

Public Citizen attorneys said the suit has been assigned to U.S. District Court Judge John D. Bates, who was appointed by President Bush in December 2001. The consumer group said it does not expect a full hearing until late spring.

Alabama attorney Jim Zeigler earlier filed suit challenging the DRA’s constitutionality.

“I expect dozens of lawsuits against the DRA, because its constitutional flaw is clear and obvious,” Zeigler said in response to the Public Citizen suit. “Millions of citizens and thousands of businesses are adversely affected by the DRA.”

Zeigler said he expects to soon see senior citizens dependent on oxygen joining the suits as plaintiffs. “They are clearly affected,” he said. “Under the old law, they could receive Medicare oxygen for life. Under the new law, they are literally cut off after 13 months.”

Source: www.elderlawanswers.com

Thursday, March 16, 2006

Deficit Reduction Act Update: Democrats Demand Hearing, Zeigler Fights On

Continuing efforts to achieve a legislative solution to the controversy surrounding enactment of the Deficit Reduction Ace of 2005 (DRA), three Democrats on the House Administration Committee have sent a letter to Committee Vernon Ehlers requesting an oversight hearing on the constitutional and procedural problems with the measure. The letter questions the legitimacy of the bill because on February 8, the President signed a version that was passed by the Senate but was different from one passed by the House. (See past newsletters for details.)

“This incident strikes at the very core of Congress’ law-making powers and the legitimacy of our constitutional system,” according to the March 8 letter.

Democrats in the House of Representatives say the Act is invalid and are calling for a re-vote because, according to the U.S. Constitution, a law must be approved in identical form by both houses of Congress. Republicans are resisting, not wishing to open a fresh debate on the budget measure’s cutbacks on programs for the poor and middle class.

A spokesman for House minority leader Nancy Pelosi (D-CA), reported that the Republican majority is not likely to heed the request for a hearing, “but we want to at least put them on the record and then we may ratchet it up after that – get GAO [the Government Accountability Office] or somebody else to do it as well. There are different strategies.” It was also insinuated that there are other lawsuits being filed in addition to the one lodged by Alabama elder law attorney Jim Zeigler, but no specifics were given.

Meanwhile, Zeigler has announced that he is looking for “a few good plaintiffs” to join him in his suit. Zeigler says the addition of persons affected by specific changes in DRA would help his case in two ways: eliminating the possibility that his own legal standing may be challenged and opening the possibility of injunctive relief.

“An ideal plaintiff would be someone soon to be personally affected by the Feb. 8 changes, “ Zeigler said. “We could then apply for a temporary restraining order or preliminary injunction to enjoin the effective date of the Act pending the outcome of the case.”

“We have just obtained service of process on the local U.S. Attorney and are still awaiting return of service from the U.S. Attorney General,” Zeigler added. “We expect them to take the maximum time to file responsive pleadings.”

Zeigler is not raising funds for the suit on his website www.JimZeigler.com. The Alabama attorney, who was once a member of President Bush’s legal team, now estimates the cost will be $750,000; his earlier estimate of $300,000 did not reflect bond and appeals.

The controversy over the DRA’s constitutionality has caught the notice of Wall Street. The publication TheStreet.com published an article on the dispute’s possible impact on home health care providers.

Thursday, March 2, 2006

Lawsuit to Invalidate Deficit Reduction Act Pending

An Alabama lawyer has filed a lawsuit seeking to void the $39 billion budget savings act signed into law February 8 by President Bush because of a clerical error that resulted in the House and Senate passing different versions of the bill.

It is said that it is not a valid law because it was not passed in identical form by both chambers. The problem is that at this time it is difficult to represent older folks who are intending to get Medicaid nursing home eligibility because it is unclear on whether to advise them to follow the post-Feb. 8 law that is unconstitutional or the pre-Feb. 8 law that is constitutional.

No hearing date has been set and it is unclear if the case will even be awarded a hearing. Several consitutional law scholars have predicted that if given the chance, the courts could rule that the act violates the bicameral clause of the Constitution, which requires both chambers to pass identical legislation before the president signs it into law.

It is anticipated that elderly people directly affected by the new law will join the suit shortly to enhance the chances that the court will grant standing in the case. The issue arose as a result of an error by a Senate clerk that changed a portion of the bill limiting rentals of durable medical equipment other than oxygen equipment to 36 months instead of the 13 months that was in the measure passed by the Senate. The clerk then changed the number back to 13 after the House voted on the bill.

The Congressional Budget Office, in response to a request by House Democrats, has estimated the difference between a 13-month limit and a 36-month limit on the medical equipment to be $2 billion over five years.

This provisoin in the law will penalize seniors who give money to their church, to their relatives or to charity by totaling those gifts over a five-year period and penalizing them, making them ineligible for Medicaid coverage.

Source: Steven T. Dennis, CQ staff

Thursday, February 16, 2006

Update on the New Medicaid Law

A mistake on “The Deficit Reduction Act of 2005" which was purportedly signed into law by President George W. Bush on February 8, 2006, could mean that it is not technically a law. But, congressional Republicans said that they have no plans to try to fix the problem, even though a fellow NAELA (National Academy of Elder Law Attorneys) member, Jim Zeigler, has filed a lawsuit charging the $39 billion deficit-cutting legislation Bush signed is unconstitutional because the House and Senate failed to pass identical versions. House GOP leaders insist there’s no problem.

The bill, which Bush signed February 8, tightens rules for Medicaid nursing home eligibility to make it more difficult for those who have transferred their assets to their families or to charities to qualify for Medicaid.

Zeigler, who advises the elderly on eligibility for nursing home care under the Medicaid program for the poor and disabled, filed suit Monday in federal court in Mobile, Ala., naming Attorney General Alberto Gonzales as a defendant. Justice Department spokesman Charles Miller declined comment on the case.

House Democrats, accusing GOP leaders of abusing the legislative process, have asked for another vote. On the last vote February 1, the bill passed by the narrowest of margins, 216-214.

The White House and House and Senate GOP leaders say the matter is settled because the mistake was technical and that top House and Senate leaders certified the bill before transmitting it to the White House.

We urge you to seek the counsel of Davidow, Davidow, Siegel & Stern immediately as we alert you to this new law and its consequences. There is also a possibility that a window of opportunity may exist to plan under the old law before New York implements the new law. We will continue to remain dedicated to preserving the rights and the dignity of senior citizens and those with special needs. We urge you to plan now.

Monday, February 6, 2006

New Law Passed!

On Wednesday, the U.S. House of Representatives passed the Deficit Reduction Act of 2005 (S. 1932) by a vote of 216 to 214. The Senate has already passed the bill by a vote of 51 to 50, with the Vice President breaking the tie. The bill will now be sent to the President for signature.

This is a sad day for older Americans and individuals with disabilities facing long-term care crises. It is a sad day for many of our clients who will face confusing and unfair Medicaid eligibility rules. Transfers made after the date of the President’s signature (or New York State implementation) will be subject to the new law. Importantly, transfers made prior to this new law will not be effected and any advice we gave you on those transfers still holds true.

The new law extends the “look back period” to five (5) years for all transfers (to trusts or otherwise) and starts the Medicaid penalty period from the first day of the month after which you enter a nursing home and apply for Medicaid rather than the first day of the month after which you actually made a transfer. The biggest criticism of this new law is that when you apply for Medicaid, you will have no assets and no ability to pay for your care.

We urge you to seek our counsel immediately as we alert you to this new law and its consequences. There is also a possibility that a window of opportunity may exist to plan under the old law before New York implements the new law. We will continue to remain dedicated to preserving the rights and the dignity of senior citizens and those with special needs. We urge you to plan now.

Thursday, January 19, 2006

Medicaid Alert: Time is Running Out!

Dear Clients and Friends,

A new law is pending that will dramatically alter the “look-back” and “transfer of assets” provisions of the Medicaid law. If you still have assets in your name that you want to protect from a nursing home and Medicaid, it is crucial that you understand this new law and act IMMEDIATELY.

This new law will likely be effective around the beginning of February, 2006, upon the President’s signature, but could be delayed awaiting New York State implementation. This new law is contained in the Deficit Reduction Act of 2005 (“DRA) which passed the House of Representatives (“House”) and the Senate late last year, but with certain technical corrections requiring the House to pass it again (which they are expected to do on February 1, 2006). Transfers made after the date of the President’s signature (or New York State implementation) will be subject to the new law. Importantly, transfers made prior to this new law will not be effected and any advice we gave you on those transfers still holds true.

The new law extends the “look back period” to five (5) years for all transfers (to trusts or otherwise) and starts the Medicaid penalty period from the first day of the month after which you enter a nursing home and apply for Medicaid rather than the first day of the month after which you actually made a transfer.

Example of the new law: On December 31st, 2006 you transferred $30,000 to your granddaughter to help her pay for a semester of college. For Medicaid purposes you will have incurred a 3 month penalty beginning on the first month after you enter a nursing home and apply for Medicaid, if such date should occur within 5 years of the transfer. Here, if you applied for Medicaid on June 1, 2007, you still would not be eligible for 3 more months.

The biggest criticism of this new law is that when you apply for Medicaid you will have no assets and no ability to pay for your care. This law is unfair to any one who gives money to a family member to purchase a home, or an education, or to anyone who gives money to their charity of choice. Will seniors stop making these types of gifts to their family members? Will nursing homes accept you if you have no money and no Medicaid? The law is hurtful to our society and you should make your feelings known to your representatives.

This letter shall serve to alert you to this new law and encourage you to seek our counsel IMMEDIATELY. Furthermore, there is also a possibility that a window of opportunity now exists to plan under the old law before New York implements the new law. We will continue to remain dedicated to preserving the rights and the dignity of senior citizens and those with special needs. We urge you to plan now before time runs out!

Also, please log on to our website, www.Davidowlaw.com, and sign up for our weekly newsletter to obtain other information and updates on this new law as it unfolds. I am,

Very truly yours,

Lawrence Eric Davidow, Managing Partner

Thursday, January 12, 2006

Medicaid Management: 2006 Figures

The Centers for Medicare & Medicaid Services (CMS) has informed the Department that due to an increase in the consumer price index, the federal maximum community spouse resource allowance (CSRA) increases to $99,540 effective January 1, 2006. The State's minimum CSRA will remain unchanged at $74,820. Therefore, in determining the community spouse resource allowance on and after January 1, 2006, the community spouse is permitted to retain resources in an amount equal to the greater of the following amounts:
1. $74,820 (the State minimum community spouse resource allowance); or
2. the amount of the spousal share up to $99,540 (the new federal maximum).

In addition, effective January 1, 2006, the community spouse minimum monthly maintenance needs allowance (MMMNA) increases to $2,489 ($2,488.50 rounded up). The increased MMMNA, family member allowance, federal maximum CSRA, and State minimum CSRA must be used when completing an assessment of a couple's resources and income.

NOTE: For home care, the monthly Medicaid income level for one-person ($692) and two-person ($900) household will also take effect on January 1, 2006.

Any increases in the MMMNA and family member allowance and/or changes in the NAMI of the institutionalized spouse are to be made effective January 1, 2006.