Nov 27, 2016

What can clients expect following the 2016 election?

The most contentious election in recent memory is over. Whatever your opinion of the results (and I'd venture to say you probably have a very strong opinion), my job is to analyze the impact of the election on the issues that concern my clients, and to recommend steps they may take.

Specific predictions are impossible, of course. However, we can make some educated guesses about what a Trump presidency would look like based on (1) what was said on the campaign trail; and (2) the GOP platform, since it now controls both houses of Congress. Here are some possible scenarios that could impact clients:

Changes to Florida Medicaid Benefits for Long-Term Care?

During the campaign, Trump did not mention the growing long-term care crisis that is bringing more and more middle class families to financial ruin. Clients who do not have long-term care insurance to cover nursing home expenses often turn to Florida Medicaid long-term care benefits, and, with our help, can preserve a significant portion of their assets without going broke. 

Currently, the Centers for Medicare and Medicaid Services set the basic ground rules for Medicaid, with the states having some leeway to fine-tune the rules. Republicans have long advocated replacing this system with "block grants," whereby each state would get a chunk of money, most likely a smaller chunk than they receive now. Each state would then have the freedom to formulate its own eligibility standards and other rules. If this occurs, the potential negative implications for clients could be profound. For example, as a cost-cutting measure, Florida or any state could extend the look-back period beyond the current five years, and/or well spouses of nursing home residents could lose their current financial protections.


If you believe you have inadequate protection from long-term care costs, take action without delay.
  • Look into long-term care insurance. Many types of policies are now available, other than traditional policies. Read my prior post on these new types of hybrid policies. Call our office and we can put you in touch with someone who can help you select a policy. 
  • In the alternative, start doing Medicaid planning, taking the steps necessary to protect your assets. Call my office for assistance.

Medicare to be Reconfigured?

Currently, 57 million seniors receive Medicare benefits. In the months leading up to the election, Trump said little about the program. However, his website now mentions "modernizing" Medicare, with the help of Congress. We do not know what "modernizing" means, but we do know that House Speaker Paul Ryan has long supported dismantling Medicare's current configuration and replacing it with a voucher system. Under that system, seniors would get a subsidy to be used to purchase private health insurance. The new system would apply only to future beneficiaries, not to those already receiving benefits. 

The GOP has also expressed a desire to increase the age of eligibility from 65, to 66 or 67. Rep. Tom Price (R-GA), House Budget Committee chair, recently told reporters that the GOP will likely begin pushing for major cuts to Medicare within the coming months. 

Some experts also expect dismantling of other programs benefiting seniors that were put in place by the Great Society program and by the New Deal. We'll have to wait and see.

Scrap the New Fiduciary Rule for Retirement Accounts?

As I reported in a prior post, beginning in April 2017 a new Department of Labor rule requires those providing financial advice on tax-advantaged retirement accounts such as IRA's and 401k's to adhere to a "fiduciary" standard. Under that standard, the advisor's recommendations must be based solely on the client's best interest. If a more expensive or riskier investment is suggested, the advisor must explain the reasons for the recommendation. This differs from the current rule, whereby an advisor is legally obligated only to steer clients into "suitable" investments - even when the suitable investment is more advantageous for the advisor than for the person being advised. It is precisely such conflicts of interest that the new rule was designed to eliminate. 

The new rule was applauded by consumer advocates, and generally opposed by the financial industry. Trump has made no specific mention of it, but CNBC in October 2016 reported that a key Trump advisor said that the President-elect will likely push for its repeal.

  • If you are receiving advice on your retirement accounts from a broker-dealer, be sure to ask the rationale for any recommendations. Ask if there are other options available that may be better. Do not make hasty decisions.
  • Whether or not the fiduciary rule stands, note that a Registered Investment Advisor, unlike a broker-dealer, is legally obligated as a fiduciary and must act in accordance with your best interest. If you would like to consult with one of Karp Financial Services' Registered Investment Advisors, please call 561-626-1130. 

Estate Tax to be Eliminated?

The estate tax put $18 billion in federal coffers in 2015, but affected only about 5,000 estates, according to the Tax Policy Center. Beginning January 1, 2017, an individual may pass $5.49 million tax-free (up from $5.45 million in 2016); a married couple can double that amount. The excess is taxed at 40%. Obviously, only the very wealthiest Americans are impacted by the estate tax. Proponents of the estate tax point to its role in mitigating the accumulation of dynastic wealth. Critics view it as an inherently unfair form of double taxation. Trump falls into the latter group and has specifically called for its elimination.

He has also proposed eliminating the step-up in basis for inherited assets over $10M. If this comes to pass, assets over this amount will be subject to capital gains tax of 20%, based on what the decedent paid for the asset, not on the day-of-death value which is the current rule. It is unclear whether the tax would be levied when the asset is inherited, or only when it is sold. Paul Ryan, however, has said he is in favor of retaining the step-up.

Income Tax Brackets Changing?

Under the President-elect's income tax plan, the current seven income tax brackets would be reduced to three, as follows: 
  • For married couples filing jointly with taxable income of up to $75,000; and for single filers with taxable income up to $37,500: 12% marginal tax rate. 
  • For married couples filing jointly with taxable income from $75,000 to $225,000; and for single filers with taxable income from $37,500 to $112,50025% marginal tax rate. 
  • For married couples filing jointly with taxable income of $225,000 or greater; and for single filers with taxable income of $112,500 or above: 33% marginal tax rate.

Contrary to popular belief, not all middle class taxpayers are expected to benefit from Trump's proposed tax plan. The non-partisan Tax Policy Center estimates that nearly 8 million middle class families would pay higher taxes under his proposals, a view shared by the conservative Tax Foundation and American Enterprise Institute.

Additionally, it is unclear as to what tax deductions would be retained or scrapped. 


At this juncture, there is little actionable information to go on. Stay alert to developments, so that you can take advantage of any possible tax benefits and avoid pitfalls. Consider using a financial advisor to help you stay current, and who can inform you of any benefits and complications of particular investments.  

We will keep our eye on all these issues and report any new developments to you. Keep up with the news by checking this blog, our website, and our Facebook page. You may also subscribe to our monthly e-newsletter here. 

Nov 15, 2016

Financial Elder Abuse: The perfect storm of Sumner Redstone

One in five Americans over age 65 has suffered financial abuse, according to the 2010 Investor Trust Elder Fraud Survey. A study from MetLife Mature Market Institute estimates that financial abuse drains $2.9 billion annually from seniors' pockets. Both numbers could well be higher, since financial abuse is frequently unreported. 

Family conflict and shifting alliances - and of course, money - provide fertile soil for financial abuse. Even when abuse occurs, it can be difficult to identify: The National Center for Biotechnology Information states that "It is difficult, even for experienced professionals, to distinguish an unwise but legitimate financial transaction from an exploitative transaction resulting from undue influence, duress, fraud, or a lack of informed consent."

All these factors came together in a perfect storm for Sumner Redstone, the frail, 93-year-old media mogul and billionaire. As I reported last May, Mr. Redstone at that  time ordered two longtime companions, Manuela Herzer and Sydney Holland, out of his Beverly Hills mansion where they had been living. It was reported that prior to his evicting them, he had come to depend on them and trust them, and believed them when they said his family hated him. Redstone also removed Herzer as his health care proxy and took her out of his will. Herzer sued, alleging that Redstone was not competent to make that decision. But after viewing Sumner's videotaped deposition, a Los Angeles judge dismissed the suit, finding that Redstone, though frail, was mentally competent.

More recently, Redstone filed a suit in Los Angeles Superior Court against Herzer and Holland, claiming that while living with him they abused him, charging thousands of dollars to his charge cards and having bags of cash, bundled in stacks of $100 bills, delivered to them daily at his mansion - all to the tune of $150 million, which he now seeks to recover. According to the suit, they "manipulated and emotionally abused Redstone to get what they wanted - jewelry, designer clothing, real estate in Beverly Hills, New York, and Paris, and money, lots of it." Redstone claims he had to borrow money from the private company that holds his voting shares of CBS and Viacom to cover the tax debt on the "gifts."

Determining whether these transactions were legitimate or exploitative is at the crux of the latest lawsuit. Did Redstone knowingly allow Herzer and Holland to spend his money and use his charge cards? Or was there fraud, duress, undue influence, lack of informed consent? Herzer's and Holland's lawyers claim that Redstone knew full well what was happening and chose not to stop it. "Mr. Redstone had many checks and balances between attorneys, doctors, and accounting staff," states Herzer's attorney, Ronald Richards. "All of the gifts Mr. Redstone made to my client and to Sydney Holland were made with his full knowledge and blessing." And Holland has noted that "Doctors have testified twice in recent months that Sumner Redstone was of sound mind and, most recently, that he was mentally competent... This is directly contradicted by the claims in this lawsuit that state that Mr. Redstone's physical and mental state were so impaired that he could be easily manipulated."

Certainly one has to feel sympathy for Redstone's emotional plight. But, abuse or no, he remains an extraordinarily wealthy man. Most people who are similarly abused tend to suffer far greater losses, relative to their resources. All of us need to be vigilant to protect ourselves, and our aging loved ones, from this kind of exploitation. For more on preventing financial elder abuse, click here

Nov 13, 2016

Please attend one of our free Florida Medicaid Planning and Estate Planning Workshops this week

Learn more about Florida estate planning, wills and trusts, Medicaid planning, veterans benefits, and long-term care planning at our free Senior Survival Workshop. These presentations are open to the public and free of charge. You don't even need a reservation - just show up! Attendees are eligible to receive a free, one-hour consultation from one of our attorneys (provided that we are the right law firm for your needs, of course).
The information you glean from the seminar will make your one-on-one consultation with us as productive as possible.  The workshop also allows you to become familiar with the members of our law firm - consider it a kind of a test drive -- with no obligation. We hope you'll join us. (We recommend that you bring a jacket or sweater, since hotel rooms can be cool.)
Palm Beach Gardens
Tuesday, Nov. 15, 2016
1:30 p.m. to 4:00 p.m.
Palm Beach Gardens Marriott
4000 RCA Blvd.
(East of I-95, south of PGA Blvd.)

Boynton Beach
Wednesday, Nov. 16, 2016
1:30 p.m. to 4:00 p.m.
Courtyard by Marriott
1601 N. Congress Avenue
(Between Boynton Beach Blvd. and Gateway Blvd.)
Port St. Lucie
Thursday, Nov. 17, 2016
1:30 p.m. t0 4:00 p.m.
Port St. Lucie Holiday Inn
10120 S. Federal Hightway
(North of Port St. Lucie Blvd.)

Nov 10, 2016

Enforcement of CMS rule prohibiting pre-dispute arbitration clauses will be delayed

A new rule barring long-term care facilities from including pre-dispute forced arbitration clauses in their admissions contracts will not go into effect on November 28, as originally anticipated. (I discussed the rule in an earlier post. )

In response to a suit filed by the American Health Care Association, an industry group, a federal district court in Mississippi has granted a temporary injunction preventing enforcement of the new rule, based on the argument that the Centers for Medicare and Medicaid Services overstepped its legal authority. You can read the judge's injunction here. The issue now undergoes further consideration by the court.

Supporters of the rule have criticized the judge's ruling. George Slover, senior policy analyst for Consumers Union, stated "Congress could not possibly have intended for the Federal Arbitration Act to override every other law and leave consumers locked out of the courthouse without legal protection... and the unfairness of that is brutally clear when you consider nursing home residents who are so dependent on their caretakers, and so vulnerable to neglect and abuse."

As we wait for this issue to get sorted out in the courts, my advice remains the same: Examine the admissions contract carefully and if you spot pre-dispute arbitration language, just cross it out and don't sign that section.

Nov 7, 2016

Florida Medicaid Myths

In Florida, the average annual cost of a private room at a long-term nursing facility now hovers upwards of $90,000 annually, with a semi-private room around $83,000. With the oldest Baby Boomers turning 70 and the escalating incidence of chronic and extraordinarily expensive diseases such as Alzheimer's, more and more families face financial disaster when a loved one needs long-term care. It is fair to say that this is a national crisis, but one our political leadership is not yet seriously addressing. For the foreseeable future, America's families are on their own.

If a family lacks the extensive financial resources necessary to cover long-term care costs, or if a person needing care has failed to obtain, or has not been able to qualify for or afford long-term care insurance, Medicaid is often a viable option. Securing Medicaid benefits for long-term care in a nursing home can preserve a good portion of a family's assets before virtually everything is lost to nursing home costs. Obviously, preserving assets is especially critical when the person needing care is married, so that there are sufficient funds left for the spouse to live on. 

With this in mind, below I address some of the most common myths about Florida Medicaid benefits for long-term care. The list is by no means exhaustive, but is a good starting point if you are concerned about how to pay for your own or a loved one's long-term care, whether you're planning in advance or facing an immediate crisis. 

MediCARE covers long-term nursing care. 
False! Medicare covers only skilled nursing care, and even then, only for a limited period of time following a three-day hospital stay. In contrast, long-term care is custodial care. It is not intended to make a person "better." Its goal is to help a person with activities of daily living such as bathing, eating, toileting. Medicare does not cover long-term care. If you or your loved ones are relying on Medicare to cover long-term care expenses, think again. 

Once you are in a long-term care facility, it is too late to take any steps to preserve assets and obtain Florida Medicaid. 
False! While it is always better to plan in advance, that is not how things generally unfold in the real world. Most often, we assist families with crisis planning, i.e., when a loved one is already in, or about to enter, a nursing home. Even at that point, a variety of techniques can help preserve assets.

You must spend down and become totally impoverished before applying for, let alone becoming eligible for Medicaid. 
False! Spending down is just one method of becoming Medicaid eligible. Numerous other methods may be available that do not involved dissipating one's assets. In fact, many times we are able to assist families who have been privately paying a nursing home for months or longer because they did not realize there was an alternative to spending down. 

Any transfers made within five years of applying will make you ineligible for Medicaid for five years. 
False! This myth is based on an incomplete and incorrect understanding of Florida's Medicaid rules. Any uncompensated or below-market-value transfers will be considered by the Medicaid office when it examines the application. These transfers will be used to determine a waiting period during which Medicaid benefits will not be available and the applicant will have to pay privately. But that does not mean you have to wait five years to apply. More importantly, some transfers are exempt and will cause no delay in obtaining Medicaid. 

Florida's Medicaid rules are the same as the rules in other states. 
False! Medicaid is a federal program, but because each state also participates financially in Medicaid funding, there are many areas in which the rules vary from state to state. A friend's experience in another state does not necessarily apply to Florida. And even in Florida, you can't assume a rule that applied last year is true this year, because the rules change from time to time. 

Long-term care facility residents on Medicaid receive inferior care compared to private pay residents. 
False! Federal law prohibits nursing facilities from discriminating against a patient based on source of payment. In all my years working with clients who have loved ones residing in nursing homes, I have never come across a situation where this has occurred. In fact, many of my clients' families have been able to provide a greater quality of care for their loved one by using preserved assets to pay for part-time private duty care to supplement regular nursing home care, as well as other "extras." 

Medicaid rules let me give away $14,000 a year without impacting eligibility. 
False! This common misconception arises when Medicaid rules are confused with federal estate and gift tax rules. Under federal law, you can give away $14,000 per year to as many people as you like without it affecting your lifetime unified estate and gift tax exemption. However, this rule is completely unrelated to Medicaid rules. As far as Medicaid is concerned, any transfer for less than fair market value is examined when the application is submitted, and may be used to compute a penalty period during which the applicant will be ineligible for benefits. 

My spouse's assets and income won't matter if I apply for Medicaid. 
False! The assets and income of both spouses are considered. However,  there are steps that may be taken to protect the assets of the well spouse. In Florida there is currently "spousal refusal" whereby a spouse has the right to refuse to pay for a spouse's long -term care costs. My law firm has assisted numerous families with this strategy. 

If I am incapacitated, my agent under my Durable Power of Attorney can do Medicaid planning for me in order to preserve assets. 
Not necessarily!  Your Durable Power of Attorney (DPOA) would have to give the agent certain powers, including the power to make gifts. If a DPOA does not confer these powers or is not executed properly and does not meet all Florida legal standards, your agent will not be able to perform these actions. You would have to create and execute a new DPOA - which obviously would not be possible if, at that point, you lacked the requisite mental capacity. That is why it is always advisable to have a Florida Bar Certified Elder Law Attorney review your DPOA while you are competent, so that you can change it if necessary.

Assets in a living trust are protected from nursing home costs. 
False! However, there are certain kinds of trusts - for example, a Medicaid Asset Protection Trust which, if done in advance and properly structured, may preserve assets. 

I can just "hide" assets so Medicaid doesn't know they exist.  
False! This is a crime. You could be charged with fraud. Any "advisor" who suggests hiding assets is giving you bad advice. There are many perfectly legal ways to restructure and move assets that can hasten Medicaid eligibility and preserve a good portion of assets. No other approaches should be taken. 

I will lose my house if I get Medicaid benefits.  
False! Under Florida law, your homestead is a protected asset if the equity is under $552,000. It cannot be taken away during your lifetime. Nor is it subject to Medicaid recovery upon your passing, if it is left to your constitutional heirs at law. 

I don't need an attorney to help with Medicaid planning. 
False! Florida Medicaid law is complicated. Any mistakes you make with regard to transfers and assets can be costly ones. Rely on a Florida Bar Certified Elder Law Attorney such as myself to guide you through the process.
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