LEGAL INFORMATION - Archived

Below, you will find information on the following topics:

ESTATE PLANNING/LEGAL/MEDICAID/MEDICARE

OHIO DEATH TAX

Legal Segment Show 155

Air date: 2/3/02

You may have heard about the federal estate or death tax.  But I'll bet you don't know that Ohio is one of the few states with its own death tax.  Here, we'll tell you about the Ohio death tax and how to avoid it.

Question:  What's Ohio's death tax?

Answer: There is no tax if the estate is under $338,000.   If the estate is over $338,000, you are only taxed on amount above that.  The tax rate would typically be 5% - 7%.

Question:  Can you give us an example?

Answer: A widow with a $600,000 estate at death would pay $16,700 in Ohio estate tax.

Question: Is there a tax when one spouse dies, leaving everything to the other?

Answer: No.  There is an unlimited spousal exemption.

Question: That's good, I assume?

Answer: Not really.   Take the example of a married couple with $600,000.   If all is left to the surviving spouse, there is no tax at the first death.   But now the surviving spouse has the entire $600,000.   When she dies and leaves everything to the kids, her estate is over $338,000.    The kids will have to pay an Ohio estate tax of $16,700.

Question: Can we avoid that problem?

Answer: Yes, it’s pretty easy, with Ohio Estate Preservation Trusts.   Each spouse could create a specialized trust to avoid the Ohio Estate Tax, as well as probate.

In the example we’ve been using, where the couple had $600,000, they’d split it between them, $300,000 a piece.   With these trusts, we use both spouses $338,000 exemptions.  We can protect up to $676,000 from Ohio’s death tax.

In our example, we’d save the entire Ohio tax of $16,700.   There would be no tax.

Question:  Can a couple still use joint accounts?

Answer: You can use joint accounts for small amounts.   Maybe a joint checking account to pay bills.   But joint accounts will cost you Ohio estate tax.   POD, TOD, and beneficiary designations to a spouse also will cost you.   And if you have a joint trust, it should probably be changed.

Question: Lots of people are already using revocable living trusts.  Will these avoid Ohio's Estate Tax?

Answer: Probably not.  They’d have to be amended to protect against the Ohio death tax.

Question: So who should use the new Ohio Estate Preservation Trusts?

Answer: Any couple with an estate over $338,000 should consider these great new tools.

Question: What's the cost for these new trusts, and what's the savings?

Answer: Costs may run $2,000 - $2,500.   Savings for estate tax and probate together may be $25,000, and possibly lots more.

Death and taxes are unavoidable, but knowing Ohio’s rules can at least help you avoid taxes at death. 

---Laurie Steiner

CALCULATING THE MEDICAID INELIGIBILITY PERIOD

Legal Segment Show 156

Air date: 2/10/02

Lots of people give away assets to try to protect them from nursing home costs.  The law says you can do this, but most people make very costly mistakes.  Here are some answers to tell us the right and wrong ways to make gifts so that you can protect some of your savings.
Question: Medicaid is the only program to pay for nursing homes.  But its tough to qualify, isn't it?

Answer: Yes, you can’t have much money/property. So one legal tool to protect part of your savings is to give assets away, to bring yourself down to low limits allowed.
Question: Giving money away is risky.  You don't Have control after you've given money to your kids or others.  Can you wait until you're going to a nursing home before giving assets away?
Answer: You can’t give money away at the last minute, then expect Medicaid immediately to pay. There’s a waiting period, an ineligibility period. You can not get  Medicaid during the penalty period.
Question: How long is the ineligibility period?
Answer: Lots of people think it’s 3 or 5 years. But that’s a common misunderstanding. The length of the ineligibility period depends on the amount transferred. The larger the gift the longer you must wait. The smaller the gift, the less time to wait.
Question: How do you figure the ineligibility period?
Answer: Take the amount transferred (i.e. gifted), and divide it by $3,903. Round down. That gives you the number of months of ineligibility.
Question: How'd they get $3,903?
Answer: That is supposedly the average cost of care in a nursing home. Ridiculous.
Question: Can you give us an example?
Answer: If you transfer $4,000, and divide that by $3,903, it gives us a one month ineligibility.  If $40,000 you transfer, and divide that by $3,903, it gives us 10 months ineligibility.

Question: Is there a maximum penalty?
Answer: For transfers less than about $140,000, the ineligibility period will be 36 months or less. For transfers over about $140,000, the transfer won’t count against you after 3 years. So if you understand the rules, 3 years should be the maximum penalty period.

Question: But you shouldn't wait 3 years to apply for Medicaid after a transfer?

Answer: No, because the ineligibility might be lots less than 3 years.
Question: Can you avoid the ineligibility by selling something, lie a home, for $1?
Answer: Not unless the home is worth $1. A gift is a gift. You can’t dress it up like a sale and expect it to fly. If it quacks like a duck, . . . . . . 

---Laurie Steiner    

GIFTING RULES

Legal Segment Show 157

Air date: 2/17/02

     Remember the old saying: “It’s better to give than to receive?” There are lots of wonderful reasons to make gifts to family members and others important to you.  But if you make gifts to your family, will Uncle Sam be the big winner? Does the law limit the amount you can give to loved ones?  Today I want to tell you the truth, and dispel the myths about the gift tax rules.

     Let’s start with all the great reasons to give away some of your hard-earned money. First, children or others may have a serious need for money. Maybe your grandkids won’t be able to go to college without your help. Perhaps your daughter needs the funds for a down payment to buy her first house. Maybe your son was just laid off and needs help getting through a difficult period. If your children need money, you may want to provide some financial aid. 

     A second reason to make lifetime gifts is to cut estate taxes. At death, the inheritance you leave may be taxed by both Uncle Sam and the State of Ohio. And estate taxes can be a killer, starting at about 40%.  By giving away funds now, you can avoid hefty estate taxes later.

     A third reason for gifting is to shift income to family members in a lower tax bracket. For example, if you have a $50,000 CD, you may pay $1,500 income tax on that each year. Giving the CD to kids or grandkids may cut that income tax in half. 

     And fourth, giving away assets today may be the best way to protect them from future nursing home costs.  This is one of the most common reasons that people turn over money and property to their children.  But aren’t there taxes on gifts you make to kids or others? There’s never a tax to the recipient of a gift. You can give your son or daughter $200,000, and they’ll pay no tax.  And here’s the big surprise - - in most cases the giver pays no tax either.  Now wait a minute. At this point you’re thinking you must not have heard me right. Isn’t there a $10,000 limit? If you give your home or $200,000 of mutual funds to one child, at one time, won’t there be a huge gift tax?  There answer is no. This is one of the biggest myths around. You can give away up to a million dollars with no tax. Let me explain.

     There are two rules that come into play. First, there’s one rule that says you can give up to $10,000 per year to as many people as you wish, with no tax. No tax to you, no tax to the recipient. You don’t even have to report the gift to anyone.  But there’s a second rule that allows gifts over $10,000 with no tax. You could give away up to one million dollars in your lifetime with no tax.  A million dollar gift with no tax - - is there a catch? There is, but only if you’re a millionaire.  When you gift more than $10,000 in a year to one person, you must file a federal gift tax return and reduce your exemption from future estate taxes.     

     Here’s how it works. Let’s say you give your daughter your life savings of $410,000, to protect it from nursing home costs.  There’s never any tax on the first $10,000. The next $400,000 won’t be taxed either, though it’ll reduce your $1 million death tax exemption, down to $600,000. But that reduction has no effect at all, since you won’t have more than $600,000 left at your death. 

     So what’s the bottom line? If your estate is under a million dollars, you can forget the $10,000 limit. You can give it all away at one time to one person, and no one pays any gift tax. If your kids are watching the show today, don’t be surprised if your telephone has just started to ring. Now that they know you can give your savings away without any limit, you’ll probably be hearing a whole lot more from them.

---Armond Budish

THE HOUSE IN THE SHELL GAME

Legal Segment Show 158

Air date: 2/24/02

     Could you afford $50,000 or $60,000 per year for nursing home costs? For most middle class folks, the answer is no.  Medicaid will help cover the costs, but the State is constantly looking for ways to tighten the screws. Many people, even people who should be able to qualify for Medicaid nursing home coverage, are wrongfully denied their benefits.  Today I’m here to give you some good news about a new technique to help you protect a portion of your hard-earned life savings from the nursing home. It came out of a failed effort by State Medicaid officials to improperly take people’s homes. I’ll warn you that it may sound really strange. But it works, and it can work for you.

     Let’s start first with a little background. You can’t keep much money or property to qualify for Medicaid benefits.  A single person keeps only $1,500.  For a married couple, the State looks at how much they have on the date one enters a nursing home. Then they’re permitted to keep half that amount, up to $87,000.  So if they have $80,000 of CDs when one is institutionalized, they have to “spend down” half to $40,000, before they can get Medicaid. But that’s not all. The home is also protected as long as one spouse lives there. This is very important, since the home is most people’s major asset.

     Many people put their home into a Revocable Living Trust to avoid probate. It’s not for Medicaid benefits, just for probate avoidance at death. In a standard trust, the house is still yours. You can live in the home, sell it, do anything you want with it - - it’s yours. Under mortgage law, it’s your home and you can take out a mortgage even though the house is in the trust. Under tax law, it’s your home - - you can sell the house and avoid paying capital gains tax. The house in a trust is your house under every American law, mortgage law, tax law, contract law - - but now in Ohio there’s one exception - - Medicaid.

     About a year ago, the Ohio Medicaid folks ruled that a house in a standard Revocable Living Trust is not your house - - and so it loses it’s Medicaid protection. In other words, if the house is in a trust, the state says it can take it.  The State Medicaid officials are clearly wrong. In a trust or not, the house should maintain its protection. But the State of Ohio has violated federal Medicaid law by stripping your house of its protection.   

     Now here’s the good news. We’ve turned the tables on the State Medicaid officials. By its meanness, the State has inadvertently created a wonderful new Medicaid planning strategy. I think an example will help show what we now can do.  Remember my last example. A married couple with $80,000 in CDs normally could keep half the CDs, $40,000, plus their home. They’d have to spend the other $40,000 to get Medicaid.  Here’s the new plan.  Put the house into a trust before either spouse enters a nursing home. Let’s say it’s worth $80,000. Since it supposedly is no longer protected, you now have $160,000 of unprotected assets (the house for $80,000 and the CDs for 80,000). After one goes to a nursing home, you must now get down to $80,000, which is half the total, to get Medicaid.  The next day, you take the house out of the trust. A simple deed will do that. Now the house has regained its Medicaid protection. You’ve gone from $160,000 of non-protected assets to $80,000 - - so you get Medicaid immediately. 

     I know this sounds confusing. But the bottom line is that you can get Medicaid immediately, without spending any of your money. You can use this tool to protect thousands of dollars from Medicaid. To be honest, this is really a ridiculous result. But it’s all because our State Medicaid office tried to get too, too nasty. It’s not often that we can stop Medicaid’s unjust actions and turn the tables on them. But it sure feels nice when we can.  

---Armond Budish  

TITLING YOUR HOUSE

Legal Segment Show 159

Air date: 3/3/02

     Do you know how your house is titled? No, I mean do you really know? Not just guessing.  How your house is titled is very important. If it’s wrong, it can cost you and your family a lot! 

     There are actually five main ways to own a home. The home may be in your name alone, tenants in common, joint and survivorship, transfer on death, or in a trust. Picking right can avoid hassles and costs. Pick wrong, and you’ll pay extra probate and tax costs, you’ll create a mess for your heirs, and you may even lose the house to your child’s spouse or creditors.  Don’t worry, we’re not going to leave you in the lurch. We’ll go through each one and tell you what’s best for you.

     Let’s start with the simplest - - owning the house just in your name only. At your death, a house in your name alone will go through probate. That’ll take at least nine months, sometimes longer; there will be lots of paperwork; and it’ll cost thousands of dollars.  Lots of people think that making a will avoids probate. But it’s just the opposite. If you own the home in your name, and your will passes it to a spouse, children, or others, it’ll go right into probate when you die. So most people should not keep the house in their name alone.

     The second and third ways to own a home are tenants in common and joint with rights of survivorship. Lots of married folks own a home together, in both names. You might own your house like that right now. Most people assume that it will automatically pass to the other co-owner at death, with no tax or probate.  But that’s only if the house is joint and survivorship. Many couples have deeds that are tenants in common. And tenants in common deeds mean double trouble. One spouse dies, half the house goes through probate. Then the other spouse dies, and the house goes through probate again.  The difference between tenants in common deeds and joint and survivor deeds is one magic word - - survivor or survivorship. The deed has to say survivor or survivorship, or its a tenants in common deed which goes through double probate.  So if you want to avoid probate, you don’t want a tenants in common deed.

     Is there anything wrong with a joint and survivor deed?  Between husband and wife, joint and survivor deeds are usually okay - - depending on the relationship between the husband and wife.  But this deed can be very dangerous when we’re talking parent and child.  If you put your child on your house deed, the child becomes an owner right now. Equal to you. And if the child is married, his or her spouse becomes an owner too. It’s called dower rights.  Think about it. If you want to sell the house, you’ll have to get your child’s and his spouse’s approvals. If they want to sell the home or throw you out, they can go to court and do that.  And that’s not all.  If your child is sued, maybe due to an auto accident, the injured party can grab your child’s half of the house, force a sale, and throw you out.  And there’s still more problems. If your child gets a divorce, your home could get entangled in your child’s divorce case.

     Okay, where’s that leave us? The house in your name alone or tenants in common goes through probate. Joint and survivorship avoids probate, but creates lots of other problems. So what’s better?  The answer is Transfer on Death Deeds and deeds in trust. The good news is that these can help save you lots of money and hassles. The bad news is that I’m out of time now, and you’ll have to come back next week to hear about these wonderful options. Hey, that’s television.

---Armond Budish

TOD Deeds and Trusts

Legal Segment Show 160

Air date: 3/10/02

     Nobody wants to suffer through the costs and hassles of probate. Avoiding probate on bank accounts, stocks, mutual funds and CDs - - that’s really pretty easy. Just make them joint or payable on death, and you’re done.  But your house, your house, that’s a lot tougher.

     If you name your child as a joint owner on your house deed, you do avoid probate. But you’re asking for trouble. You’re begging for problems.  Naming your child on your house deed makes your child an owner. And his or her spouse becomes an owner too. They own the house with you the moment you put your child on the deed. They could throw you out onto the street. If your child gets a divorce, your home’s going to get tangled in the divorce proceedings. And if your child is sued for any reason, you could lose the house. 

     So is there a better way to title your house, and avoid probate? The answer is yes. There are actually two good ways: one is a Transfer on Death or TOD deed, and the other is to put the house into a trust.

     Let’s start with a TOD deed.  Here you name a beneficiary. You can say right on the deed that your children get the house when you die. No fuss, no muss, no probate.  This is a lot better than a joint and survivor deed.  With a TOD deed, your kids and their spouses own nothing until you die. You do whatever you want with the house, and your kids have no say. If your child gets a divorce or is sued by a creditor, they can’t touch your house. 

     TOD deeds are good, real good, but they’re not perfect. Let me give you an example of one problem.  You leave the home TOD to your 3 kids. Immediately at your death, they own the property. And their spouses own it at your death too.  So 3 kids, 3 spouses, 6 owners. All 6 must agree on everything. Should they fix it up and sell it? How much should they ask? Should they accept or counter an offer? They have to agree on everything. If they don’t - - and they won’t - - they’ll have a huge mess.

     There’s another way to avoid probate on the house. [STILL #4] Put it into a Revocable Living Trust. In a standard trust, you own the house during your life. It only goes to your kids or other heirs when you die. No probate. This is better than a joint and survivor deed, because while you’re alive, your kids have no ownership, no control. And it’s better than a TOD deed because there won’t be six kids and their spouses all in charge at your death. You name one trustee to handle the house, fix it, and sell it after you die. 

     Trusts can do lots of other things that TOD and joint and survivor deeds can’t do.  Do you want to protect your kids inheritance from their spouses if your kids get a divorce, you’ll need a trust. Want to leave assets to grandkids? A trust is best. Avoid estate tax? Again, you’ll need a trust. How about keep your estate private, away from prying eyes? You guessed it - - use a trust. 

     Unfortunately, a trust isn’t perfect. There are two major negatives. First, you’ll have to change titles on your house and other assets to the name of the trust. A bigger problem is the cost. A simple trust may cost $1,500 to $2,500. That’s a lot of dough. Compare that to a joint and survivor deed or a TOD deed which may only cost $100 or $200.

     So what’s the best and worst way to title your house? Last week I explained that most times titling a home in your name alone is the worst thing you can do. Joint ownership with others is very dangerous. TOD deeds are good, but they carry some risks. Best, but most expensive, is a trust.  When you talk to your lawyer about estate planning, don’t stop with a will. Ask about how best to title the house. Many people, too many people, make mistakes. Bad mistakes. Costly mistakes. Don’t let that happen to you.

---Armond Budish

THREE PLACES NOT TO GET MEDICAID ADVICE

Legal Segment Show 161

Air date: 3/17/02

     Medicaid is a critical safety net to help pay for the catastrophic costs of nursing homes. But it’s very complicated. I mean, it makes the United States Tax Code look simple.  First, the federal government adopts Medicaid laws. Then each state sets its own rules to meet the federal requirements. Then each county in each state interprets the law differently. And often caseworkers within a county, sitting right next to each other, will apply different standards.  Because the rules are so complicated, and so obscure, lots of people make mistakes. Costly mistakes. There’s just so much bad information out there.  To help, I’ve made a list of the three worst places to get your Medicaid advice. With apologies to David Letterman, here we go.

     Number 3:  The third worst place to get advice about long term care and Medicaid is a nursing home. The social workers there are well intentioned, and they try to be helpful. But Medicaid eligibility isn’t their expertise. Elder law attorneys spend hours and hours just trying to keep up with the rule changes. Nursing home social workers don’t have the time or training.

     In one true case, a woman followed the advice of a nursing home to file a Medicaid application for her husband. Unfortunately, the application was filed too early, within three years of the couple’s gift to their children. The nursing home’s bad advice led to financial disaster for the family - - it caused them to become ineligible for Medicaid for about eight years. The couple lost everything.

     Number 2: The second worst source for Medicaid information, believe it or not, is the Department of Jobs and Family Services, the Medicaid office. They make no effort to help you understand the rules.  Compare the much maligned IRS. The IRS puts out hundreds of brochures explaining the tax rules. They have an educational website. And they offer a toll free number for your questions.  Medicaid offers nothing. No brochures, no website, no telephone information service. There’s a reason - - they don’t want you to know or understand the rules. And calling the Medicaid office for help is a little like the hidden ball game. You know the advice you need is there, but you’ll never find it.

     Number 1: The worst place to get your Medicaid advice? Neighbors and friends. This is the most common source of information too. Aunt Shirley said her friend Iris told her about her brother-in-law’s uncle that gave away his money and got Medicaid. Time after time information “on the street” is wrong. Sometimes it’s part right, and that can be worse. 

   I recall one situation - - a woman gave away her life savings of $100,000 to her daughter because her neighbor told her to do it. A month later Mom went to a nursing home. Her gift made her ineligible for Medicaid for about 2 ½ years. During that time, her daughter had to use the gifted funds to pay her mother’s expenses. At the end of the 2 ½ years, Mom got Medicaid, but the gifted funds had been exhausted. Mom’s savings was gone - - she protected nothing.  Mom had received bad advice. If she had understood the Medicaid rules, based on good information, she might have given away $50,000, half of her savings, and kept the other $50,000 to pay the nursing home herself for about the next year. When her $50,000 ran out, she would have gone on Medicaid. And the $50,000 given to her daughter would have been protected. Giving away less would have protected more. But she got bad advice.  Too many people get bad advice. And bad advice can be costly.

     So where do you get good information, that you can trust?  For your individualized planning, call an experienced elder law attorney, one that specializes in Medicaid. And for general information, you can always get the best tips and advice right here on Golden Opportunities.

---Armond Budish

MEDICAID APPLICATIONS

Legal Segment Show 162

Air date: 3/24/02

Have you ever been through an IRS audit? It’s no picnic. But compared to filing a Medicaid application, a tax audit seems like a party. Today I want to tell you how to make it through the Medicaid application process with your sanity. 

     As we’ve talked before, Medicaid covers nursing home costs for poor or middle class folks, and it may also cover limited care at home. For people with very low income, Medicaid also covers standard medical costs and prescription drugs.  A Medicaid application requires that you provide a list of things a mile long.  Let’s say you’re filing for your mom. You’ll need a picture ID, like a driver’s license. But what if she’s 90 years old and hasn’t driven for ten years?  You’ll need her birth certificate. But what if you can’t find it, and she was born 85 years ago in a small town in Europe? And then there’s the detailed financial records. Medicaid will want you to provide every bank and brokerage statement, even closed accounts, every CD, and her tax returns for the last three years. And they’ll go over each and every entry and interrogate you mercilessly. “Your mom gave $5,000 to John Smith in 1999. Who’s John Smith and what’s that for?” How are you supposed to know? You mom handled her own finances back then. Even money coming into her account will be questioned. And you’d better have an answer.  The county’s computers can pick up accounts you never even knew existed. Accounts that may have been closed years ago. You’ll have to figure out what happened to these accounts, or else.

     If you don’t have all the answers, God help you. The application can be denied for “lack of cooperation.  But tracking down your mom’s picture ID and her birth certificate, and figuring out her finances, that’s not the worst of it. What really makes the Medicaid application process so miserable is attitude.  Every Medicaid application requires a face to face interview downtown at the Medicaid office. In many large counties around the state, applicants are made to feel like criminals.  “You cheated, and we’re going to figure out how!” That seems to be the assumption. In criminal court, the killers and thieves get a presumption of innocence. Not at the Medicaid office. You’re presumed guilty of trying to scam the system. In many situations, you’re not even treated with common courtesy and respect.  Compare the IRS. They at least try to be neutral and civil. They don’t care if you take deductions and cut your taxes, as long as its legal. But with Medicaid, it’s very different - - very antagonistic.

     Why? I really can’t say for sure. But it seems to come from the top. All the way from the head of the Ohio Department of Jobs and Family Services - - the State Medicaid office.  By making the application process so miserable, many people are denied Medicaid benefits incorrectly. People who should be eligible are told they’re not. They’re told they can’t protect any assets, when the law says they can. They’re given wrong information which costs them lots of their hard-earned money.

     Let me give you two suggestions. First, until the process changes, don’t go through the Medicaid application process alone.  In all but the very simplest cases, you should have an advocate, an elder law attorney, who knows the rules, who can deal with the Medicaid bureaucrats and fight for your legal rights.  And second, let’s try to change the system. Contact the Governor and urge him to make Medicaid more user friendly.  Or at least to give Medicaid applicants some common courtesy and respect. The Department of Jobs and Family Services needs to be changed, at the top, now!

---Armond Budish

ROTH CONVERSIONS

Legal Segment Show 163

Air date: 3/31/02

Nobody likes the dark clouds hovering over the stock market.  Here, we'll show you that there is a silver lining.  Now may be an ideal time to change your regular IRA or 401(k) to a Roth IRA.
Question: What's a Roth IRA?

Answer: A great savings tool. Money’s invested, just like in a regular IRA, but it grows tax-free. With a regular IRA, you pay tax when you take money out. No tax with a Roth.
Question: Can you convert your regular IRA to a Roth?

Answer: Yes. If your income is below $100,000, you can make the change to a tax-free fund. You don’t have to be working.
Question: What's the hitch?

Answer: You must pay income tax on the entire non-taxed amount in the IRA
Question: If you pay a big tax on the conversion, where's the benefit?

Answer: Example:

• $100,000 in IRA, Convert to Roth, Pay $25,000 tax (pay from other source)

• In 25 years, Roth is $425,000 (Assuming 6% growth), All Tax Free

• For $25,000 up-front, turned $425,000 from taxable to tax free

Question: Why is this a good time to roll to a Roth?
Answer: The value of IRAs is down, so it costs less in tax to roll over. When it goes back up, it’ll go up in the Roth, tax-free.
Question: How long do you have to leave it in a Roth to make this worthwhile?

Answer: Usually 4 -5 years is good. But the longer the better.
Question: Does this make sense for an 80 year old?
Answer: Absolutely. You can set it up so that the Roth continues not just for your lifetime, but for the entire lives of children or grandchildren.

---Armond Budish

USING FAMILY LIMITED PARTNERSHIPS TO CUT TAX

Legal Segment Show 164

Air date: 4/7/02

Estate taxes at death can be a killer.  It's a good thing you'll be dead, because it would kill you to see the tax bill.  Here, we'll explain how a family limited partnership will help cut estate tax.

Question:  I thought they repealed the death tax?  

Answer: Only for the year 2010.   If you know you’re going to die in 2010, you don’t have to worry about the estate tax.    For everyone else, you’d better watch out.

Question:  How bad are the estate tax rates?

Answer: Real bad:   Typically 40 to 50% of everything you leave to heirs, including IRAs, your home, and your life insurance.

Question:  Can you help us cut the tax?

Answer: Yes.  There’s a little know but very good tool available called a Family Limited Partnership.

Question:  What's a Family Limited Partnership?

Answer: It's like turning yourself and your family into a little business or company.  Let’s say you have stocks, bonds, CDs, or real estate.   You can form a little family company and put those into the name of the company.  You create shares in the company and you own all the shares but one.   You give one share to your child.    You and your child together will run the company, handle the investments, and make distributions.  You’re giving up some control over your assets, sharing decisions with a child.   But you still own 99% of the company.

Question:  What's the advantage? 

Answer: This is great, as long as you get along with your child.   During your lifetime you can take anything you want, money or property, from the company, as long as your child goes along.   When you die, you can use a much lower estate value, which cuts your estate tax.

For example, if you put a million dollars into a Family Partnership, you may save $200,000 in estate tax at your death.

Question:  What if you want money, but your child says no?

Answer: That could be a problem.    But it doesn’t come up much, because you have the ultimate control.   You still own 99% of the assets.   You can leave that to anyone you choose at your death.   If your child doesn’t play ball with you, you cut him out of your will and estate.

Question:  Does this cause income tax problems while I'm alive?

Answer: No.  The income will go on your personal tax return, and you’ll pay the same taxes you do now.

---Mike Solomon

USING FAMILY LIMITED PARTNERSHIPS FOR

GIFTS TO KIDS

Legal Segment Show 165

Air date: 4/14/02

There are lots of good reasons to make gifts to kids or grandkids: to cut death or income taxes, or maybe to pay for college.  But you don't want them to blow the money when they're too young.  How can you give them money but keep control?

Question:  Why would we want to give money to children or grandchildren?

Answer:

* Reduce estate to cut tax

* Shift income to youngsters in lower brackets to cut income tax

* Put aside a fund for college, a first home, or to start a business

Question:  Most people use gifts to minors ACT accounts or custodial accounts.  Are those okay? 

Answer: They’re okay, not great.   You can manage and control the gifted funds until the kids reach 21.    But that’s it.   At 21, the money is theirs.  They can buy a sports car, go to the Bahamas, or invest in the slots in Vegas.   They may regret it when they’re older, but then it’s too late.

Question: So what's better? 

Answer: Set up a Family Limited Partnership, and give away shares.   This is like a little company for money.   Let’s say you put $100,000 into a FLP.   Each year you give away up to $10,000 worth of shares.   The kids get shares, not cash.

The shares they get are non-voting.   You keep control.   You decide how the money is invested, and you decide when the shares turn into cash.   You can keep control until the kids are more mature, maybe 25, 35, or even their whole lives.

Question:  Who pays tax on the gifted shares? 

Answer: There’s no tax on the gifts.   But the kids pay tax on the income from the investments, once they get the gifts.   And they pay at their rates, hopefully lower than your rates.  You can give them the money to pay the tax.

Question:  Are there other benefits of a Family Limited Partnership?

Answer: Yes.  If you or the kids are sued, the FLP protects the money.  You can also set it up to keep the money in the family in case a child divorces or dies.

Question:  Is this complicated?

Answer: Not too bad.   There’s an extra income tax return, but its’ very simple.   As long as it’s set up right - - and that’s very important  - - it works easily and nicely.

--- Mike Solomon

OHIO CLASS ACTION

Legal Segment Show 166

Air date: 4/21/02

There's a new Medicaid development that could help protect the financial security of on e spouse when the other enters a nursing home.  And, if you previously had a spouse in a nursing home, even years ago, the state may owe you thousands of dollars. 

Question: First, give us a little background.  How much of their savings can one spouse keep when the other spouse enters a nursing home?

Answer: With Medicaid, a married couple can keep ½ of their estate, up to $89,280. With a $100,000 estate, they would have to spend down to $50,000. If the estate is worth $200,000, they could only keep $100,000.

Question: That doesn't leave the healthy spouse with much, does it?

Answer: No. Often it's not enough to live on. If they cut assets, there is less investment income to live off of.  The healthy spouse may not be able to pay utilities, real estate taxes - - they could lose the home & the rest of the savings.

Question: Is there any way a spouse at home can keep more?

Answer: Yes. There are two options.  First, the spouse at home may get some of the nursing home spouse’s income (Social Security), instead of seeing it all go to the nursing home.
Second, the spouse at home may be permitted to keep more assets to generate more income. This is the better option.

Question: What's the new development?

Answer: The state now has to inform you of these options. From 1990 to 1995, they failed to. Lots of folks could have kept more of their savings, but the state never told them of that option.
There’s now a class action lawsuit, and the state will have to reimburse folks who needlessly spent their savings from 1990 to 1995.

Question: For our viewers who applied for Medicaid between 1990 and 1995, what should they do?

Answer: Call our office, or an attorney familiar with estate planning in Ohio.

Question: How much money are we talking about?

Answer: Many folks will be entitled to $20,000 or $30,000, some much more.

---Armond Budish

NEW MEDICAID RULES

Legal Segment Show 167

Air date: 5/12/02

     Nursing homes are expensive. At $50,000 or $60,000 per year, sometimes even more, the costs are out of sight, and beyond the budgets of poor and middle class folks.  There’s one government program that helps out.  Medicaid.  Medicaid’s the safety net.  Under the Medicaid program, you can take steps to protect a portion of your life savings.  The Medicaid rules are complicated. They’re written in legalese, which is always hard to understand. But then to make matters worse, many of the rules are poorly drafted, inconsistent, and contradictory. And Ohio’s regulations sometimes violate federal laws. 

     As bad as things have been with Medicaid, they’re about to get worse. The Ohio Department of Jobs and Family Services, which handles the Medicaid program, has just come out with all new regulations. Not just one, or even five or ten. There’s a hundred pages of new rules, single spaced. A hundred pages. And they’ll affect just about everyone.  A few of the rule changes are actually good. Maybe most important are the Medicaid annuities. Ohio is one of only three states that has not been allowing married couples to protect a portion of their savings by using something called a Medicaid annuity. But the new regulations bring back Medicaid annuities from the scrap heap. 

     Unfortunately, most of the changes will make it harder than ever for Ohioans to qualify for Medicaid coverage.  It will be harder than ever to protect a portion of your life savings from nursing home costs. For example, the new Medicaid rules will make it harder to protect the family home for a spouse, harder to protect your IRAs and 401ks, and harder to avoid probate. 

     Ohio’s now in the midst of a budget crisis. For the last few years, we’ve had record surpluses. But our leaders wasted the opportunity to invest in Ohio and protect our older citizens when they had the chance. Now the state government’s running short of cash, and it seems that our worst fears are being realized. Our politicians are trying to balance the budget on the backs of our most needy and frail citizens - - nursing home patients and their families. 

     How can you find out about the Medicaid rules and the new proposed regulations? Unfortunately, there’s no easy way.  It seems that our state officials don’t want you to know about the nasty changes they’re making. So they’ve put out no public explanations, no brochures, no informational website.  Nothing.  I guess they figure the less people know, the less likely they’ll get angry and vote them out of office.  Our government leaders are making extensive changes in one of the most important programs in the state.  Many thousands of people will be affected. These are the most far-reaching revisions in a decade. If they were proud of their work, don’t you think your government officials would have announced these new Medicaid rules?  There have been no press releases, no speeches, no press conferences. Nothing, except silence. In an election year, when politicians try to get as much press coverage as possible, they haven’t mentioned a word about these new Medicaid regulations.  Our politicians’ silence speaks volumes.

     Over the course of the coming weeks, we’ll go through some of the most important changes. We’ll tell you about how the new regulations will affect you and your family. Even though the politicians are afraid to tell you about what they’re doing to you. We’re not. Just keep watching.

---Armond Budish

MEDICAID ANNUITIES

Legal Segment Show 168

Air date: 5/19/02

     If your parent or spouse has to go to a nursing home, watch out. The costs will be sky-high.  Often, the other spouse, the one that’s still at home, the one who’s healthy, won’t be left with enough money to live on. I’ve seen plenty of situations where the healthy spouse ends up on Food Stamps.   If your husband or wife goes to a nursing home, you may end up in the poor house.

     Congress recognized that this is a terrible situation. So years ago our federal legislators passed a law allowing the use of something called Medicaid annuities.  For married couples, the Medicaid annuity is a lifesaver.  Medicaid annuities are very specialized annuities sold by insurance companies. They are not your standard kind of annuities that many folks buy as an investment. They are specially designed to protect money for the healthy spouse.  The critical point here is that a Medicaid annuity can protect the financial security of the healthy spouse. Instead of spending everything on the nursing home, the annuity is protected for the spouse at home.   It’s a wonderful planning tool, and it has helped thousands of people throughout the country.

     But Ohio has not been allowing its citizens to use the Medicaid annuities. A couple of years ago, Ohio became the first state in the country to outlaw Medicaid annuities. Ohio’s rule violated Congressional mandates, and we took them to court.  Now, in a surprising reversal, Ohio’s new Medicaid regulations say you can use a Medicaid annuity. The rule still is overly restrictive, and it still violates federal law, but at least it’s a big step in the right direction.

     Let’s look at an example to see how the new rules work.  Say that you and your husband have $100,000. Normally, you’d have to spend at least half of that on the nursing home, leaving you without enough to pay your ongoing bills.  But instead of paying the nursing home, you go out and buy a Medicaid annuity.  If you are 80 years old, you might take your $100,000 and buy a five-year annuity. That will pay you a little over $20,000 per year for the next five years.  Here’s the beauty. Your husband gets Medicaid immediately. There’s no waiting period or ineligibility period. You get enough to live on, and after five years, you can have all your money back in the bank.    

     The new rules impose four critical requirements: First, the annuity must be purchased before your spouse goes to a nursing home, not after. Second, it must be purchased from an insurance company, not an individual. Third, the annuity cannot guarantee payments for a period longer than your life expectancy. The state has life expectancy tables that must be used. And fourth, the payments back to you should be the same each month, including interest and principal, with no big balloon at the end. 

     As long as these four requirements are strictly met, the new rules will let you use a Medicaid annuity to protect your savings and ensure your financial stability.  Medicaid annuities are great. This new rule should help a lot of people. But the new Medicaid rules make lots of changes, and most are real bad, making it harder to get benefits, especially if you’re single.  Stay tuned. In coming weeks we’ll tell you more about the new Medicaid rules, and what they mean to you.  

---Armond Budish

HOW TO PROTECT YOUR IRA FROM LAWSUITS AND CREDITORS

Legal Segment Show 169

Air date: 5/26/02

You’ve worked, and saved, and put together a nest egg for your golden years. But one lawsuit could take it all. You could go for a drive after our show, get in an accident, and be sued for millions. A recent court case makes it harder than ever to protect yourself, by stripping away legal protections for IRAs. Here, we'll give you the bad news, and then help you protect your retirement savings.

Question:   Are lawsuits protected from creditors?

Answer:  They were protected.  Ohio adopted legislation to protect IRAs because it's important to protect older persons' retirement savings.  But now Ohio's law protecting IRAs has been thrown out by a federal court of appeals, so IRAs are no longer protected.

Question: Is there any way to protect IRAs from lawsuits?

Answer: There is no easy way, but there are possible techniques.

First, take your IRA investments and put them in a Limited Liability Company or a Family Limited Partnership within the IRA.  Let's say you have CDs and mutual funds in your IRA.  You create a little company for those CDs and mutual funds and put those investments into the LLC.  The LLC would be owned by the IRA.

LLC and FLPs provide protection from lawsuits.  We use them for regular assets not in IRAs.  We believe this should also work to protect assets within IRAs, but it has not yet been decided for sure.

Question:   What is the second way to protect an IRA?

Answer: If you go back to work, try to put it back into that company's plan.  Company 401s, pension and profit sharing plans are protected.

Question:   What's the third way to protect an IRA?

Answer: This is also not clear, but the third tool that may work is to buy an annuity within the IRA.  We generally don't recommend annuities in IRAs because you are paying extra for income tax deferral by buying the annuity even though any assets in IRAs get income tax deferral.  But annuities are protected from lawsuits and creditors.  If the annuity is inside an IRA, it may protect the funds from lawsuits.

Question: Are 401(k)s and other pension/profit sharing plans exposed to lawsuits too?

Answer: No.  Those are protected by federal law.  Just IRAs are exposed.  So think twice before rolling a 401(k) into an IRA.

Question: Can I give the IRA away or put it into a trust to protect it?

Answer: No.  Not if you're going to keep it as a tax-deferred IRA.  You can't give away an IRA without paying tax, and you can't put it into a trust without paying tax.

You can protect your IRAs, though the government’s just made it harder.

--- Mike Solomon

A NEW ESTATE LAW THAT MAKES IT HARDER TO AVOID PROBATE

Legal Segment Show 166

Air date: 4/21/02

Most middle class folks have two important estate planning goals: avoid probate at death, and protect their home from nursing home costs.  Sadly, the state of Ohio has just made it harder for you to accomplish either of these goals.  Here, we'll tell you about this new ruling.

Question: Tell us about the terrible new ruling by our state officials.

Answer: Most people today take various steps to try to avoid probate at death. Steps include:

a) Making accounts joint with spouse or kids
b) Making spouse or kids as beneficiary payable on death or transfer on death.
c) Creating a revocable living trust
Now, if you take steps to avoid probate, and either you or your spouse ever go into a nursing home, the state will punish you by taking your house.

Question: That seems terribly harsh.  Can you give us an example?

Answer: This is a real case. The husband went to a nursing home, and the wife stayed home. They spent down their savings, then the husband went on to Medicaid.  They were allowed to keep their home, but not much else.  They put the house into the wife’s name, and she made a Transfer on Death Deed to pass house to their children at her death without probate.  At her death, the house passed to the kids without probate. The state Medicaid bureaucrats didn’t like that, so they punished them by throwing the husband off Medicaid until the house was sold and the proceeds turned over to the nursing home.

Question:   Is this new?

Answer: Yes.  Couples have done exactly what this couple did thousands of times over the years.  All of a sudden, the Medicaid Department has changed the rules.

Question:   Was this change made by the legislature?

Answer: No, that’s what’s so insidious.  The change was made quietly, without any notice, hearings or vote, in the backrooms of the Ohio Department of Job and Family Services that administers Medicaid.  Most state legislators probably don’t even know about it.

Question:   Is this rule common in other states?

Answer: No. There is no problem with passing the house to heirs without probate in every other state.  To my knowledge, only Ohio has adopted this punitive rule.

Question:   What can we do to try to get this rule changed?

Answer: Contact your state representatives and state senators and tell them what’s been done behind their backs, and contact the Governor’s office. The Medicaid Department is under his control, and he could change this terrible rule overnight if he wanted to.  The Governor's telephone number in Columbus is (614) 466-3555
Don’t let them tell you that any change is only for the state legislature. Governor Taft could make the change himself, without legislation, since his Medicaid Department adopted this terrible rule itself, without legislation.

If you live in New York, Florida, California, any other state, you can pass your home to your heirs without punishment.  But not in Ohio.  We need your help to get this rule changed.  Call the Governor at (614) 466-3555.

--- Laurie Steiner

NEW RULES FOR

MEDICAID MISTAKES

Legal Segment Show 171

Air date: 6/16/02

The Medicaid application process has always been difficult. Caseworkers require all sorts of information which is often hard to get. And now Medicaid’s new regulations will make it tougher than ever. Here, we'll explain how an innocent mistake could get you into big trouble.

Question: Medicaid applications are not an easy process, are they?

Answer:  No. It’s worse than an IRS audit. You must provide detailed personal and financial information that often is not readily available.
For example, you’ll have to provide a birth certificate and a driver’s license or other identification card with a picture. Many of our clients haven’t driven in 10 years, some have never driven, and a license just isn’t available. And try to get a birth certificate for a person born in a small European town 90 years ago.

Question: Gathering all this required personal material is bad, but the detailed financial information is even worse.
 

Answer: That’s for sure.  Medicaid will ask for every bank statement, passbook, and check for one to three years back, tax returns for three to five years, and evidence of every other asset, including life insurance, savings bonds, and stocks.

Question: How do Medicaid's new rules penalize innocent mistakes?

Answer: Let’s say you file a Medicaid application for a parent, listing every asset that you know about. But six months later, Medicaid finds something you never knew existed, despite your best efforts. That does happen...Medicaid has a computer system that can find all sorts of bank accounts and other assets.
Or maybe you find something that you didn’t know existed at the time of the application, like an old life insurance policy. Your parent may have received thousands of dollars of benefits by mistake.
The new rules are very harsh.  You generally must prove to Medicaid that your failure to include the newly discovered item like insurance was an innocent mistake.
And your word alone is not enough. You must provide other evidence to support your claim. That may be impossible...what kind of other evidence will show that you made an innocent mistake?

Question: What's the penalty?

Answer: If you can prove your mistake was innocent, there is no penalty. But if you can’t, then you’re looking at big trouble. Any pending Medicaid application will be denied. And if the person in the nursing home received Medicaid benefits, they may go after the person who applied—the spouse or child—to pay back the benefits. And they may even refer the case to the county prosecutor for Medicaid fraud.

You try to be honest and present all requested information to Medicaid. But if you make an innocent mistake, you could pay a very stiff penalty. Because of the risks, you should not file an application without the help of a lawyer. And you should contact your state legislators and urge them to stop penalizing innocent mistakes.

---Laurie Steiner

LOWERING PRESCRIPTION DRUG COSTS

Legal Segment Show 172

Air date: 6/30/02

     The cost of prescription drugs, and even over-the-counter medications, is out of sight.   And going up.   I had a client come in to my office last week, and his prescriptions were costing more than $1,000 a month.   A thousand dollars a month!   That was more than he was getting in Social Security benefits.

     More and more, people can’t afford to pay for their basic medicines.   The President and Congress promised to create a new prescription drug benefit, but that was before they turned the surpluses into deficits.  Right now, I wouldn’t count on those people in Washington adopting any new prescription drug coverage.

     But today I don’t want to be downbeat and just criticize our elected officials.   I want to tell you about a little-known program already available to Veterans.   If you served in the military, maybe in World War II or the Korean War, Uncle Sam has a great benefit for you.  Seven dollar prescriptions.

     Seven dollars.   That’s right.   For your medicines that now might cost you $500 or a thousand dollars a month, you can get them for just seven dollars.   And that’s for prescriptions or regular over the counter medicines.

     To get this wonderful benefit, you must sign up with the Veterans Administration.   Fill out Form 10-10-EZ.   You can obtain this form by visiting, calling or writing any VA health facility or benefits office.   Or you can call toll-free 1-877-222-VETS.   Or if you’re computer literate, go to www.1010ez.med.va.gov/sec/vha/1010ez/

     Once enrolled, you become eligible for Veterans medical benefits.   Generally, you’ll pay seven dollars for a thirty day supply of medicine.   But if your income is less than $9,556 a year (or $12,516 for a couple), you don’t pay anything.   Not even seven dollars.   Your prescriptions are completely free.   And even with a higher income, your medications will still be free if you are a Veteran of World War One, or if you are housebound.

     There’s only one catch, and it’s really not a big one.  You’ll have to get your medications from a Veterans Administration facility.   While you may have to take a little drive to get to one, there are 1100 VA health facilities in the country, and there’s surely one you can get to.   Or if it’s easier, you can use the VA mail order pharmacy.

     While I’ve been focusing on medication coverage, the VA program offers lots of other health care benefits as well.  These include regular doctor visits for $15 dollars and visits to a specialist for $50 dollars.    And again, with lower income, these visits are free.

     Let me again give you the number to call in order to get signed up for these wonderful benefits.  Call the VA at 1-877-222-VETS, or go to their website at www.1010ez.med.va.gov/sec/vha/1010ez/

     If you’re a Veteran, don’t miss out.   Congress enacted these benefits as a “thank you” for those men and women who served our country.    But the government has done outrageously little to get the word out.   So that’s where we come in.   Every week, we’ll find and tell you about those little known tips and benefits that can truly provide you with Golden Opportunities.

---Armond Budish

WHEN YOUR LOVED ONE MAY NEED A GUARDIAN

Legal Segment Show 173

Air date: 6/23/02

Today, it seems like everyone is trying to avoid probate court. The probate judge must feel like the Maytag repairman – lonely.
 

But there’s one category of situations when probate may be very important. A real lifesaver. It’s called guardianship.
 

A guardian is appointed by the local probate court for a person who’s incompetent. The person, called a ward, generally must not be able to care for him or herself, and must not understand what’s going on.
 

A guardian, once appointed, has a lot of power. And I do mean a lot. If you become a guardian over your parent, the standard roles are reversed—you effectively become the parent and the parent becomes the child.
 

As a guardian, you can take away your parent or spouse’s rights. You can prevent them from writing checks or driving a car, you can force them to see a doctor or move to assisted living.
 

When is a guardianship needed? Let me give you two real cases I’ve had to deal with in my office.
 

In one, an elderly woman was living at home in absolute filth. We’re not talking about some dust n the windowsills or even everyday messy. There were tons of old magazines and newspapers strewn everywhere, half-empty food containers on the floor, and cat and dog excrement throughout the house. The smell alone could knock you out. The woman had no food or clean clothes. And she didn’t think anything was wrong. This woman clearly needed a guardian.
 

The second case was tougher. A woman, who seemed to understand what was what, was being mentally, emotionally and physically abused by her daughter. Her daughter was a ne’er do well who married a bum. The two of them moved in with mom and literally took over. They cut off the mother from her friends, told her she couldn’t drive, yelled at her constantly, locked her in her bedroom and told her that if they didn’t do what they said they would put her away in a nursing home. They took over the mother’s money and sponged off her. In this case, the mother needed a guardian to protect the mother from her daughter.
 

What are some common tip-offs that maybe you spouse or parent may need a guardianship?

Maybe your dad’s forgetting to pay the bills. Or your mom has been writing checks to every telemarketer and salesman that calls. Sometimes big checks. Perhaps your parent isn’t taking his medications. Or maybe your spouse is wandering outside and getting lost.
A guardianship protects your loved ones because the guardian’s every step is watched by the probate judge. No one can take advantage of your parent; no one can abuse the parent. The probate court provides close supervision, and in northeast Ohio this really works.
 

We’ve talked on the show about Durable Powers of Attorney for Finances and Health Care, and these documents can be very helpful. With these documents, your spouse or parent can give you the authority to help with their banking, financial management, and health care decisions. But even with these documents, there may come a time when a parent or spouse needs the help and protection of a guardian and the probate court.

---Armond Budish

HOW TO CONTEST A WILL OR TRUST

Legal Segment Show 174

Air date: 7/14/02

Picture this situation: Your mother died, and left everything to your brother, nothing to you. You know that wasn’t your mom’s real wishes. But during her last months, when your mom was terribly ill, your brother convinced her to cut you out. In a situation like this, can you challenge and overturn a will or trust? To answer this tough question, we brought in a tough lawyer, my law partner, Jennifer Peck.
 

Question: Are there times when a will or trust should be challenged?

Answer: Yes. I’ve seen on too many occasions situations where one person took advantage of a situation to grab a larger inheritance. I had one case, for example, where a daughter moved in with her sick mother and told the mother that if she didn’t change the will to leave everything to her, the daughter would put her mother into a nursing home. It’s real sad what some people do.

Question: Can you challenge and overturn a will?

Answer: Yes. Generally in any one of four situations.

• First, you can overturn a will or trust if the person making it was not of sound mind and memory. That generally means the person didn’t understand what he was doing at the time he did it. If a person can’t understand the nature and amount of his estate, or who his closest family members are, he’s probably not competent to make a will.

• Second, you can overturn a will if you can prove the maker was under undue influence. This is influence so great it over powers the real wishes and desires of the person making the will. For example, if your brother threatens that he’ll put your mom in a nursing home unless she leaves everything to him, that may be undue influence.

• Third is fraud. If a person is led into making a will by lies and deception, the will should be invalid. For example, you may be able to overturn a will if your sister makes up lies about you to get you cut out.

• Fourth is a mistake. For example, if your brother hands your mom a revised will while she’s lying in the hospital, and she doesn’t realize she’s signing a new will, it should be invalid.

Question: Can you challenge a will when the maker has dementia?

Answer: Sometimes. Dementia comes in varying degrees. Depends if the person making the will understood what she was doing at the time.

Question: Can a person under lots of medications make a valid will? 

Answer: Sometimes. Again, depends on the person’s ability to understand at the time. Lots of medication is certainly a factor to consider.
 

Question: Is it hard to challenge a will?

Answer: Yes. Very. The burden is on you to prove incapacity, under influence, fraud, or mistake. You have to go back in time and show the person’s state of mind through hard evidence: medical records, witnesses, and any other evidence you can pull together.

Question: Do you need a lawyer?

Answer: Absolutely. This is not a do-it-yourself area.

If your mother, father, or other loved one has been tricked, deceived or coerced into making a will or trust that really doesn’t heed their wishes, you do have rights. You can overturn a will or trust. It’s not easy, but as Jennifer has explained, it can be done.

---Jennifer Peck

THE STATE IS TAKING

 AWAY THE MEDICAID

 HOUSE PROTECTION

Legal Segment Show 175

Air date: 7/21/02

While you’re alive, you want to protect your home from nursing home costs. At death, you want to pass your estate to your heirs without the hassles, costs and delays of probate. Protecting your home and avoiding probate - - two important goals. Two goals that, with a little planning, we’ve been able to accomplish. For years and years.
 

But today, I’m sorry to say, the State of Ohio has just made it much tougher to protect your home and to avoid probate. I want to tell you what’s going on.

First, though, a little history, a tale of two laws. The first law says that you can avoid probate at death pretty easily by making assets joint with others, or naming beneficiaries, or setting up a trust.  A second law protects your home in many cases from nursing home costs. The home is sheltered, protected, when one spouse enters a nursing home.
 

Now, in a shocking move, the State has undercut both of these longstanding protections. Now if you take steps to avoid probate, and either you or your spouse must ever enter a nursing home, the State will punish you by taking your home.
 

I call this new rule the Bellfy rule. That’s because it came from a case involving William and Mary Bellfy. When William had to go to a nursing home, Mary was allowed to keep the house. They had to spend most all their funds, but the house was protected.
Several months later, Mary suddenly died. Sometimes that happens, the healthy spouse dies first. When Mary died, she passed the house to the children with a transfer on death deed to avoid probate.

But the State didn’t like that. Even though state law had always protected the house for the spouse and then the kids, the Ohio Department of Job and Family Services changed the rules and grabbed the Bellfy’s home.
 

The new rule now says that if you try to avoid probate, and you go to a nursing home, the State will punish you and take your home.
 

Now you may be wondering who voted for this law change, and how come you haven’t heard about it before. The answer is: you didn’t hear anything because the change was made in secret. It was not made by the legislature, no vote even took place. No, the change was made administratively and quietly by the Ohio Department of Job and Family Services. That Department is under the direct control of our governor.
 

We are now the only state in the country that penalizes people who avoid probate. We are one of the worst states in the country for people who get sick and need long term care.

I’ll be honest. I don’t know if we can change it. But we need to try. So please - - contact your state representative and state senator and tell them we need legislation to reverse the Bellfy rule. And contact the Governor’s office at (614) 466-3555. Tell him the Bellfy rule is unfair and must be changed. Ohioans should be allowed to avoid probate and protect their homes.

---Armond Budish

ESTATE TAX

Legal Segment Show 176

Air date: 7/28/02

The death tax lives. In fact, two different death taxes threaten your hard-earned life savings. Here to tell us about the death taxes, and how to make sure your estate survives, is a man whose advice is as sure as death and taxes, Mike Solomon.

Question: Didn't Congress kill the death tax?

Answer: No. In fact abut 2 months ago Congress made sure the federal death tax will live on.
President Bush during his campaign promised to repeal the federal death tax. And he did, for 1 year.
The federal estate tax is repealed only for the year 2010. If you die that year, there’s no estate tax. But before 2010 and after 2010, there’s still a federal estate tax.
Two months ago, the U. S. House of Representatives tried to permanently repeal the federal death tax. But the attempt failed.

Question: Why did it fail?

Answer: Those who voted against did so because federal budget deficits are back.

Question: What is the Federal Estate Tax?

Answer: Right now, only folks with more than $1 million pay any federal estate tax. And that exemption amount goes up to $3.5 million in 2009. But in 2011, the exemption goes back down to $1 million dollars. If you do have to pay tax, the rates are high - - from 37% to 50%.

Question: Is there a second death tax?

Answer: Yes. Ohio has its own estate tax. The rates are much lower, 5% to 7%. But many Ohioans will pay this tax, because the exempt amount is only $338,333.

Question: Are there ways to cut or eliminate these taxes?

Answer: Yes. There are dozens of excellent planning tools.
The top three ways are: (1) specialized trusts, called Credit Shelter Trusts, for married couples.
(2) Gifts to children or others to reduce the estate, up to $11,000 per person per year.
(3) Directly pay tuition and medical expenses for children and grandchildren.
Also, - - the charitable trusts that Larry Kurlander discussed can be useful. These are complicated and you’ll need a lawyer’s help.

The death tax lives. Both the federal and Ohio governments impose taxes at your death. But with some planning, you can cut or even eliminate them. Talk to your lawyer, and take action now.
I also want to remind you about our free seminars this coming week. We’ll discuss how you can save at least a portion of your life savings from nursing home costs. Call our office to reserve your spot. I’ll look forward to seeing you there.

---Mike Solomon

A LANDLORD'S RESPONSIBILITY TO PROTECT THE TENANT'S SAFETY

Legal Segment Show 177

Air date: 8/4/02

Are you living in an apartment? Or are you thinking about selling your home and renting instead?
Renting may be right for you, especially if you can no longer negotiate stairs, or handle the regular cleaning and maintenance. And renting may be right for you if real estate taxes, homeowner’s insurance, and other ownership costs are beyond your budget.
If you’re renting, or thinking about renting, I want to talk to you about one important consideration - - safety. In an apartment building, you’re in close proximity to lots of people you hardly know. Just how safe is apartment living?
You may have seen on the news earlier this year - - an 84 year old Mayfield Heights woman was killed at her apartment building. Her body was found stuffed in the trunk of a car in the garage.
This tragic case raises the legal Question: what duty do landlords have to protect tenants from criminal attacks? How far does a building owner or manager have to go to provide security?
Ohio courts have said that landlords do have some responsibility to safeguard renters. But that responsibility is limited. The landlord only must take reasonable precautions to prevent reasonably foreseeable criminal activity. Reasonably foreseeable criminal activity. Not all criminal activity. What’s reasonably foreseeable? In a high crime area, future crimes are more foreseeable. So landlords have more responsibility to take safety measures. In low crime areas, like Bay Village, Fairlawn or Solon, landlords have less responsibility.
What are reasonable precautions for a landlord to take?  There’s no absolute answer that applies in every case. In some situations, good lighting might be enough; in other cases, an intercom/buzzer system might be required; and in still other situations, a fence, gatehouse, and guard might be needed.
The bottom line is that you need to protect yourself. Most people pick an apartment based on the size of the rooms, the proximity to shopping and other amenities, and the rental price. But don’t ignore safety.

Ask the landlord about criminal incidents. Then confirm the answer with the local police department. And ask current renters if they feel safe.
Once you’re in an apartment building, be vigilant. If you see problems around the building that may create an opportunity for criminal activity, notify your landlord promptly. For example, if lights are out in stairwells, tell the landlord. If other tenants are propping open the security doors, tell the landlord.
And talk to other renters in the building. Some security measures cost money, but others are free. Some apartment communities for example have organized volunteer safety patrols which have reduced crime.
As you get older, renting an apartment may be the right step to take. But watch out for your own safety. Don’t rely only on the landlord.

---Armond Budish

ESTATE PLANNING FOR SINGLES

Legal Segment Show 178

Air date: 8/11/02

If you are single, widowed, divorced, or never married, it’s very important to make sure your estate is in order. But planning is much tougher for a single person. MUCH TOUGHER. Here with her top planning tips for singles is a lawyer whose advice is singularly outstanding, my law partner Laurie Steiner.

Question: Planning is so difficult for single people. You've listed three reasons.  I want you to go through these.

Answer:

1. YOU MAKE DECISIONS ALONE. Planning involves lots of difficult decisions. Who should receive your personal property, your jewelry, the house? Should you leave anything to grandchildren? Should you leave more to the one child or niece that’s been especially good to You?
   These are tough. It’s nice to have a spouse to discuss these with. It’s harder for single people.

2. NO SPOUSE TO HANDLE YOUR AFFAIRS. If a married person becomes incapacitated, the spouse can easily take over. A single person doesn’t have that option. You can name a child, nephew, niece or friend, for example, but that’s often a less attractive option.

3. THE LAWS TREAT SINGLE PEOPLE LESS FAVORABLY. Many rules are much better for married couples; single people are discriminated against. For example, a married couple can avoid Ohio estate tax on $676,000 at their deaths, while a single person can only leave $338,000 to kids or other heirs with no Ohio tax. Another good example is Medicaid. If you’re married and you have to go to a nursing home, you can protect your home and up to $89,000. A single person cannot protect the home, cannot protect $89,000, but can only salvage $1,500.

Question: You made a list of three planning tips.  Let's go through them.

Answer:

1. First, put together a good, honest, trustworthy team of advisors. This may include a child or a friend, and it should include an honest lawyer, financial advisor and tax consultant. You can choose to follow their advice or not, but at least you’ll have the benefit of a reliable second opinion.

2. Second, decide who should handle your affairs if you can’t. If you really, really trust the person, name them in a durable power of attorney. If you’re not 110% comfortable with them, them name then in a guardian nomination form. A power of attorney is unsupervised, but simpler. A guardian is supervised by the probate court, so it’s safer, but it’s also more hassles and expense.

3. Third, make and follow through on plans to protect your money and estate. Your plans should be specially designed for you as a single person. Let’s take Medicaid planning for example. A married couple might buy or fix-up a home to shelter funds, because a home is protected for a couple. But that won’t help a single person. Your best planning tools might be to make a significant gift to kids or other family members, or to set up a specialized Medicaid trust. There are planning tools that are especially well suited for single people.

If you are divorced, widowed, or never married, your planning will be especially tough. The laws favor married couples - - single people are discriminated against. It’s all the more important for you to make and implement plans that fit your needs. Laurie gave us some real good tips, but those are just the tips of the iceberg. You can learn lots more.

---Laurie Steiner

WHAT PAPERS CAN YOU PITCH AND WHEN?

Legal Segment Show 179

Air date: 8/18/02

Today I’m gonna come clean. I’m a keeper, a packrat, I keep papers way too long. My wife warns that I won’t need a funeral, because I’ll be buried under an avalanche of papers.
But today I want to help you make some extra room in your home, by telling you what documents you should keep, and which can be pitched.
Let’s start with your income tax returns, and all those attachments. How long do you have to keep them?  In most cases, any IRS audit will occur within three years. So three years should be long enough in most cases. The IRS may audit a tax return within six years if you failed to report 25% or more of your income, but that would be pretty rare. Three years is usually enough.
What about bank and brokerage statements, and cancelled checks? If they’re not needed to support tax deductions, they’ll probably never be needed. But on the off-chance that you paid a bill, and then the creditor comes back and says he never received your payment, I recommend keeping bank statements and cancelled checks for three years.
Your current wills, trusts, financial and health care powers of attorney, and living wills should be kept, even if they’re old.  But once they’ve been replaced by newer versions, throw them in the trash. And get rid of all those receipts for gasoline, restaurants, and other expenses that are not used to support entries on your tax returns. That should save you a lot of space in your file cabinets.
Keep life insurance policies that have not been cancelled. Otherwise, your family probably won’t reap the benefit of your payments.  But get rid of any life insurance policies that have lapsed, so your heirs won’t waste time trying to collect on outdated policies.
Retain the deed to your home, any records or receipts for permanent home improvements, and the title insurance policies. These should be kept for as long as you own the home. But you can get rid of the mortgage papers after it’s been paid.
You should always keep your birth certificate, Social Security card, Medicare card, marriage certificate (even if you are no longer married), military discharge papers, spouse’s death certificate, and divorce decree. You should also keep a driver’s license, even if it’s out of date and you’re no longer driving, and your passport, even if you no longer intend to travel overseas.

Why keep these? Some or all may be needed if you ever apply for a government program, like Medicaid. Getting copies of these if you don’t have them can be a real problem.
So now, are you ready to tackle all those piles? Pretty soon, you’ll be able to see your desk top again. As for me, maybe I’ll just go buy another file cabinet.

---Armond Budish

HOW MUCH DO YOUR KIDS NEED TO KNOW ABOUT YOUR ESTATE AND FINANCES?

Legal Segment Show 180

Air date: 8/25/02

How much should you tell your children about your financial and legal affairs? Should you tell them the amount of your estate? Or will they immediately start asking for money if you do? Should you tell them about your wills or trusts? Or will that just start intra-family feuds? Here to tell us about how much to tell your family is a member of our Golden Opportunities family, my law partner Laurie Steiner.

Question: Let's start with finances.  Should you tell your children what you have?
 

Answer: No single answer fits everyone. It’s real helpful for children to know something about your finances in case you become ill and they need to step in to help. But I don’t like telling them too much. I’ve seen situations where children start to ask for, even demand, money from the parents once they find out what’s there. And in some cases they get bossy, telling the parents how to handle their finances.

Question: So what do you recomend?

Answer: Make a detailed list of your assets. Bank and broker accounts, bonds, real estate. Put it all down. Attach copies of the latest statements, deeds to properties, life insurance policies, other evidence of ownership. This is important so your kids will know what you have and where it is, if you become incapacitated or die.

Question: Should you give the list to your kids?

Answer: No. I prefer you keep the list in a safe place, at home or in your lawyer’s office. Tell the kids you’ve made a list, and where it is, so they can get it if you become incapacitated or die. But this way they don’t have to know your financial business while you’re still in charge.

Question: What about legal documents - should you give them to your kids?

Answer: Some you should give to children, others are best kept private. For example, if you name your son to make decisions under your health care durable power of attorney, then give it to him so he can use it. If he doesn’t have it, and can’t get it quickly, it may not be useful.
Your will and trust is different. Why tell children how you’ve left your estate at death? They’ll find out soon enough. Especially if you’ve treated children differently, unequally, telling them now may just lead to fights. Once you’re gone, it won’t matter if they get mad at you - - you’re gone!

Question: If you're treating kids differently, leaving more to one than another, shouldn't you explain why?

Answer: You can, but you’re opening the door to possible disputes. Maybe you gave more to your son during life, so you want to leave more to your daughter at death. Telling your son now might lead to problems.
If you want to give him an explanation, it might be better to write him a note, or even explain on a videotape. Leave the letter or videotape to him to get it after you die. Keep it with your will. That way, he’ll get an explanation, and if he’s angry, it won’t upset you.

Question: Where should you keep your legal documents that you don't give to your kids?

Answer: Again, keep them in a safe place, at home or in the lawyer’s office. They can be kept in the same place as your financial list. Tell the children where they are, so they can get them when necessary.

When we go to law school, they teach us how to handle the tax rules and legal issues. But they don’t teach how to deal with family concerns, like how much to tell your kids. And those family matters are just as important as the legal technicalities. My thanks to Laurie Steiner for teaching us what they never taught in law school.

---Laurie Steiner

SPRINGING DURABLE POWERS OF ATTORNEY

Legal Segment Show 181

Air date: 9/1/02

Even though it’s not quite fall, it may be time to bring a little spring into your life. I’m talking about a Springing Durable Power of Attorney. This simple paper may be the most important legal document you ever sign. Here to explain Springing Durable Powers of Attorney is a lawyer who is always ready to spring into action, my law partner Jennifer Peck.

Question: Let's first start with a regular, old Durable Power of Attorney.  What's that?

Answer: A Durable Power of Attorney is a very important legal document.  Let’s say you become incapacitated, incompetent, can’t handle your affairs. At that point, you can’t sign checks, pay bills, sell stocks, cash CDs, sell your home. And your spouse or kids can’t do these things for you just because they’re related.
That’s where the DPA comes in. You give your spouse or child a DPA, they can cash checks, take money from the IRA or bank, sell stocks, pay your bills, do whatever’s necessary.

Question; If you don't have a Durable Power of Attorney, You could be in for a disaster.

Answer: Absolutely.  I’ve seen situations where one spouse has a stroke or an accident, and now they can’t take money from the IRA that they need to live on. A simple Durable Power of Attorney would have avoided this disaster.

Question: What's a Springing Durable Power of Attorney?

Answer: This is a Durable Power of Attorney with built in protections against abuse.
A regular Durable Power of Attorney can be used anytime. You make it and give it to your son, he can use it immediately, even while you’re perfectly healthy. That’s dangerous. He can go to the bank to take out money, sell your stock, sell the house - - while you’re perfectly fine.
A Springing Durable Power of Attorney can’t be used unless and until you’ve become incompetent. That’s a protection.

Question: Are there any reasons why you'd want a regular Durable Power of Attorney instead of a Springing one?

Answer: Yes. For a Springing Durable Power of Attorney to be usable, usually there must be one or two doctors who state in writing that you’ve become incapable of handling your own affairs. While that conceptually makes sense, it can be a difficult burden in practice. For example, if you’ve become irrational, you may refuse to see a doctor. The person you’ve named as your agent may have a real tough time getting it to work.
If you do a regular Durable Power of Attorney, it’s always usable. There’s no burdens or hassles, you don’t have to get doctors statements. As long as you give it to someone who is really trustworthy, and won’t steal from you or harm you, it may be better than a Springing Durable Power of Attorney.

Question: How much do these cost?

Answer: Generally $100 or less, for either one. Simple document, low cost (for legal documents), and very important.

Question: Can you make it yourself?

Answer:  You can, you also can take out your own appendix. But I don’t recommend it. It’s so important, and if you don’t do it right, it’s the same as if you don’t have it. It’s not that expensive to have a lawyer do.

Question: Who should you authorize to handle your affairs?

Answer:  Usually spouse or children. The person can be in town or out of town, though it’s usually more convenient if the person’s nearby.

Question: How do you handle multiple children?

Answer:  You can name one, with others as alternates. Or you can name all your children to act together. But obviously that’s more burdensome.

Question: If you made a Durable Power of Attorney, regular or springing,  10 years ago, is it still good?

Answer: Yes, but lots of financial institutions will give you a hard time. So renew.

Take Jennifer’s advice, spring into action, make a Durable Power of Attorney, and do it now, while you’re competent and capable. If you have someone you trust, really trust, make a regular Durable Power of Attorney. If you’re not so sure, use a springing one.

---Jennifer Peck

NEW TAX ON TRUSTS

Legal Segment Show 182

Air date: 9/7/02

The state of Ohio has huge budget problems. Part of the Governor’s solution was to impose a new tax on trusts. Will this affect you? Will it cost more to avoid probate? Here with the answer is a lawyer who never taxes our patience, my law partner Laurie Steiner.

Question: Many people today are using revocable living trusts to avoid probate.  Does this new tax mean we pay more?

Answer: In most cases, no. It maybe helpful to clarify how a typical revocable living trust works. When you create a trust, in most cases it’s you. You are the trustee, you’re in charge, you can take money out of the trust anytime, put money in, change investments, sell stocks, buy CDs, sell CDs, buy bonds. You can do anything. You can even change or revoke the entire trust. The trust is yours. It’s in your Social Security number. Income from the trust goes on your regular income tax return. There’s no special tax return.
You already pay regular income tax on income from a typical trust, whether you take and spend the income or reinvest it.
This new tax won’t affect you one bit, it won’t add a penny to your taxes.
 

Question: The state says it's going to raise millions of dollars in new revenues.  Who's going to be paying more taxes?

Answer: I think the government may over-estimate the revenue that it will get from this tax. The new tax applies only to IRREVOCABLE TRUSTS. Most people don’t have irrevocable trusts.
And not even all irrevocable trusts are covered. This new tax only applies to trusts where the income from trust assets stays in the trust and is not distributed within the year.

Question: Would you give us an example of when we might use an irrevocable trust?

Answer: Sure. For estate tax reasons, many couples create two revocable living trusts, one for each spouse. When the first spouse dies, that spouse’s trust becomes irrevocable. And typically it will remain in place for as long as the surviving spouse lives.
But those trusts usually pay the interest and dividends to the surviving spouse. That spouse has always paid tax on the income and the new law will not cause any additional tax.
 

Question: When would the new law cause a new tax to be paid?

Answer:  Let’s say your mom died and had her money and property in a living trust to avoid probate. She died in 2002, and at that point her trust became irrevocable. If the income was not paid out in 2002, but just accumulated, under the old law that income would have avoided any Ohio income tax. There would have been a federal income tax, but not an Ohio tax. Now, under the new law, the income would be taxed.

Question: What if the beneficiary of the trust is not an Ohio resident?

Answer: In that case, the new tax law may not apply. If no beneficiary is an Ohio resident, the trust is likely to escape Ohio income tax.
This may offer planning opportunities. For example, a surviving spouse may make Florida her residence to avoid the income tax on the trust income.

Question: Do other states tax trust income?

Answer: Yes. Ohio was one of only a few states that did not tax income of irrevocable trusts.

Taxes are always something to worry about. But he new tax on trusts probably won’t affect you. Don’t worry, even if this tax doesn’t catch you, some other one will.

---Laurie Steiner

MEDICAID RULE CHANGES AND YOUR POCKETBOOK

Legal Segment Show 183

Air date: 9/14/02

Over the last several months, the state has made more changes in Medicaid than in the last ten years. And most are bad, real bad, for older Ohioans. But here and there you can find a diamond in the rough, a new rule to help people qualify for nursing home benefits without having to spend an entire life’s savings. Here to tell us about one of those rare gems is my law partner, Laurie Steiner.

Question: Medicaid pays for nursing homes if you qualify.  But you can't have much money or property, can you?

Answer: No. Generally no more than $89,280 if you’re married, and only $1,500 if you’re single. That’s not a lot.

Question; Are there some types of assets that people can own that the state won't take?

Answer: Yes. There are a few exempt assets. These include the family home if one spouse is living there. Your household items, clothing, furniture, the state lets you keep those items. And prepaid funerals and burial plots are protected as exempt assets.

Question: Now I understand there's a new protected resource?

Answer: Yes, at least it’s been proposed under the new Medicaid regulations. Over the years, the state of Ohio said that IRAs, 401(k)s, and other pension and profit sharing plans must be spent, used up, before you could get Medicaid. These retirement funds had no special protection. But Medicaid has now proposed new regulations which would give special protections to these retirement assets.

Question: How would it work?

Answer:  The rules are not final yet, so it’s not entirely clear. But it looks like IRAs, 401(k)s and other retirement funds will not be counted against you for eligibility for Medicaid if you put the fund into pay status.

Question: What's that mean?

Answer: You would have to take money from your IRA or retirement funds each year based on your life expectancy. Let’s say you are 73. Ohio says you have a 10 year life expectancy. With a $100,000 IRA, you’d have to take abut $10,000 per year. If you do that, the IRA balance would be exempt and protected.

Question: Who does this help?

Answer:  It may help anyone, but the best protection will be for married couples with one spouse in the nursing home and the stay-at-home spouse has the IRA. That’s because the money taken out of the IRA each year becomes income. If the person with the IRA is in the nursing home, that income would have to be paid to the nursing home. But if the IRA belongs to a spouse who’s at home, the spouse can keep the IRA payments.

---Laurie Steiner

The State's continuing effort to take family homes and punish people who try to avoid probate

Legal Segment Show 184

Air date:9/21/02

First we had a President who argued about the meaning of the word “is”. Now we have a governor who twists the meaning of the word “take”. Let’s take a look at this new word game.

A few months ago, on Golden Opportunities, I exposed how the Ohio Department of Job and Family Services had made extensive, secretive changes to the Medicaid program. This department is directly under the governor’s control.  One of the worst changes penalizes married couples who try to avoid probate and who wish to protect their homes from nursing home costs. I say that I exposed these changes because the State avoided making public announcements about its intentions.  It’s astounding that the most far reaching changes in the last 15 years to one of the largest state programs, had no hearings, no public debate, no vote by the legislature, no press conferences, no notice to the public. Why? My guess, it’s because state officials didn’t want you to know that they were balancing Ohio’s bleeding budget on the backs of those Ohioans least able to afford it, the frail elderly in nursing homes.

After I revealed these massive Medicaid changes, many of you contacted the Governor’s office to express your concerns. On behalf of Ohio’s seniors, I thank you for that.  Sadly, the responses many of you received from the Governor’s office were in some cases evasive and in others just outright false. Initially, some of you were told that the Governor didn’t know anything about changes in Medicaid or probate. Then the story changed. The law was revised, but they didn’t do it. Then the story became: the changes where the state would take your home related only to one couple, Mr. and Mrs. Bellfy, no one else. Finally, the Department of Job and Family Services issued a letter stating that there’s been no change in the probate or Medicaid laws. No change!

Since its very inception, the Ohio Medicaid program allowed couples to avoid probate and protect their one most precious asset, their home, for themselves and their heirs. Now in 2002, that protection was cut, and the governor’s office states there’s been no change!  And this letter goes on to say that Medicaid does not “take” people’s homes. This really makes me steamed. You used to be able to protect your residence for heirs. Now the State says you have to sell the home and give every penny to the nursing home before you can get Medicaid. The State forces the home to be sold, but that’s not taking it?

All right, let’s try to be positive. What can you do now? First, contact your state representatives, and urge them to roll back these devastating new Medicaid regulations. Most important, tell them to reverse the Bellfy rule, which is the rule we’ve been talking about.  For your state legislators, call 1-800-282-0253. Take five minutes, make that call. Again, 1-800-282-0253. Maybe we can make a difference.

Second, you need to do your own planning. Ohio has made it tougher than ever to get Medicaid benefits. But it’s not impossible. Come on out to one of our free seminars this week. We’ll try our best to help you protect your home and part of your life savings from catastrophic long term care costs. Don’t get me wrong, I am not suggesting the government should pay for every penny of every person’s nursing home costs. People should pay a fair share, but then the government should step in to preserve fairness and a family’s dignity. I’ll look forward to seeing you this week.

---Armond Budish

NEW DEVELOPMENTS IN BLOODLINE TRUSTS

Legal Segment Show 185

Air date: 10/5/02

Your son-in-law or daughter-in-law could wind up with everything you own. That’s right: the in-laws, who you never liked, may get your house, investments and savings, unless you plan ahead. Here to tell us about the latest developments in “bloodline trusts” is a lawyer we can trust, my law partner Michael Solomon.

Question: You leave everything to your child.  Maybe with a will, or joint accounts.  Can your child's spouse really wind up with everything?

Answer: Yes. And it happens more often than people think. Let’s say you leave an inheritance to your son, and he gets a divorce 10 years later. The spouse will go after half. And if your son dies 5 or 10 years after you, the spouse probably gets everything.

Question: Is that a problem?

Answer: It sure can be.  If your child gets divorced, your child loses if the spouse gets half the inheritance. And if your child divorces or dies, your grandchildren may also lose. The inheritance goes to the in-law. That person may spend the money, or leave it to a new boyfriend, girlfriend, husband, or wife, and your grandchildren never get it. The inheritance may be permanently out of your family.

Question: Don't wills protect against that?

Answer: No. Many people think they are protected. The best a will can do is to protect in case the child dies before you. In that case, you can provide that the inheritance goes to the grandchildren, not the child’s spouse. But that only helps if the child dies before you, which is rare.
When you leave assets by joint ownership, beneficiary designations, a will or standard trust, you cannot protect against in-laws getting your inheritance. The only way to protect is a bloodline trust.

Question: What's a bloodline trust?

Answer: Instead of leaving an inheritance directly to your children, the inheritance goes into a continuing trust to benefit your children. You children can be in control, so they don’t have to ask anyone else for money. They can take money out of the trust whenever they need money.

Question: So what's the advantage?

Answer: If a child gets a divorce, the trust is a separate asset, not marital. Only marital assets are split in a divorce. If your child dies, the inheritance goes to the child’s children, not the child’s spouse.

Question: Are there other benefits to a bloodline trust?

Answer: Yes. Some of these are new. You can protect the trust funds from the children’s creditors and lawsuits. You can set it up so the trust funds avoid federal and Ohio estate tax when your children die. And you can extend all of the bloodline benefits for grandchildren, great-grandchildren and down your family line forever.

Question: We've talked about bloodline, will this work for adopted children?

Answer: Yes. We use the term bloodline, but it can keep inheritances from the spouses of any beneficiaries: adopted kids, brothers, sisters, cousins, anyone. You keep the inheritance in your family.

Question: Who should be the trustee?

Answer: First, you, then your kids if they’re responsible. If not, choose a  third party (other family members or bank).

Bloodline trusts are the only way to protect your estate from your children’s spouses. And there are actually dozens of different trusts, that can provide dozens of different benefits. There are trusts to protect from your spouse in a second marriage, trusts to protect a disabled relative, trusts to protect from nursing homes, and lots more.

---Mike Solomon

THE REAL COST OF PROBATE

Legal Segment Show 186

Air date: 10/12/02

A Golden Opportunities viewer wrote in. He said that he handled a probate as executor, and the probate court only charged abut $100. So what’s all the hullabaloo about probate? To answer that question, I invited a hull of a lawyer, my partner Mike Solomon.

Question: Do probate court costs really only run around a hundred dollars?

Answer: That’s true.

Question: So what's the big seal about probate?

Answer: Fees actually paid to the probate court may run only a hundred dollars. But that’s not the real cost of probate.  The biggest costs are the fees paid to the lawyers.
Most people hire a lawyer to help them through the potential pitfalls of probate. Probate typically involves filling out and filing lots of forms. The court has lots of rules that must be exactly followed. Accountings must be prepared. Notices must be sent to family members. You must ask the court for permission to take certain needed actions, such as selling the home and paying bills.
All this takes time and usually requires the help of a lawyer.
And your viewers won’t be surprised to know that lawyers charge for their time.

Question: Are there other costs?

Answer: Often there are. An appraiser may be needed before the home or valuable items of personal property can be sold. An accountant may be needed to prepare tax returns. In some cases a bookkeeper may be required to handle some of the paperwork.

Question: What's all this cost?

Answer: The AARP did a national survey some years ago and determined that probate costs run on average 2 to 10% of a person’s estate. In this area, we have good probate judges and good lawyers, so the costs generally are at the lower end, maybe 2 to 4% as a rule of thumb. But on a $300,000 estate, that can still cost $6,000 to $12,000. And in some cases, the costs can go much higher.

Question: So two to four percent - that's the real cost of probate?

Answer: That’s the monetary costs, but that’s not the only costs. Probate generally takes at least 9 months to a year. There can be lots of hassles, lots of disappointments, lots of worry and difficulty, lots of energy.
These non-monetary costs can be high. When you combine the monetary and personal costs, that’s the real cost of probate.
 

Question: You didn't mention taxes as a cost of probate.  Was that an oversight?

Answer: No. Probate costs are primarily the lawyers’ fees. Avoiding probate avoids these fees related to taking the estate through probate court.  But taxes are completely separate. You may avoid probate and pay taxes, or go through probate but pay no taxes.

When people talk probate costs, they generally focus only on the monetary costs. But the time, paperwork, and hassles, the non-monetary costs, can really take a toll. If you have questions about probate, and the best ways to avoid probate, give Mike a call.

---Mike Solomon

SECOND MARRIAGES

Legal Segment Show 187

Air date: 10/19/02

Let’s say you’re married, for the second or third or fourth time. In a divorce, or at your death, can your spouse get his or her hands on your assets? Is there any way to protect your children’s inheritance? Here to give us her 2nd marriage tips is a lawyer who is second to no one, my partner Jennifer Peck.

Question: Can a second or third spouse get his or her hands on your money and property?

Answer: Yes, unless you take steps to protect yourself.
 

Question: If you come into a second marriage with assets and you don't add your new spouse's name to them, they're still not protected?
 

A. No. Let’s start with divorce. Keeping your assets separate without your spouse’s name on them, does help. But the longer you’re married, the more likely your spouse would get ½ in a divorce.
At death, your assets are even more likely to wind up with a spouse. Even if your will says you’re leaving everything to your kids, Ohio law overrides the will. A spouse is entitled to take from 1/3 to 1/2 of your assets, depending on how many children you have. The spouse gets his or her portion regardless of the length of the marriage. Even if you pass on after only a week of marriage, your spouse gets a large part of your estate.
 

Question: So how can we protect our assets for ourselves and our families?

Answer: Best protection is a prenuptial agreement. This is a contract made before you’re married. It protects the assets you brought into the marriage from a divorce or death.
But if you’re watching the show right now, you’re in a second marriage and you don’t have a prenuptial, it’s too late.

Question: Is there anything else we can do for protection?

Answer: Yes. Make a trust.  A standard Revocable Living Trust can be used to protect your assets in case of a divorce, or death. You put your separate assets into the name of the trust. You can be trustee, which means you’re in control. In a divorce, these should not be split with a spouse. And at death, you can leave it all to a spouse. The kids can get everything, not just 1/2.
 

Question: Can you do this after you're married?

Answer: Yes. A trust can be done anytime.

Question: Can you let your spouse use your assets after you die, but still make sure they get to your kids, not your spouse's new boyfriend or girlfriend?

Answer: Yes.  That’s often called a QTIP Trust. You can give your spouse income from investments, you can let him live in the home. But when he dies, the investments and property go to your kids.

Question: Does a prenuptial agreement take the romance out of an impending marriage?

Answer: For a 2nd marriage, it shouldn’t. It’s become commonplace and should be expected. And it’s very understandable.

Question: Can a prenup be overturned?

Answer: Not if its done right. Must have full disclosure and each person must be represented by their own attorney.

---Jennifer Peck

HOW MUCH IS YOUR PET WORTH?

Legal Segment Show 188

Air date: 10/26/02

And now for something completely different. Usually at this time we talk about wills, trusts, probate, nursing home costs, and other important estate planning issues. But today let’s talk about a pet topic of mine, cats and dogs.
 

Do you own a pet? If you do, you’ll want to perk up your ears and listen. Ohio law says your pet isn’t worth much.
Pets provide love, comfort, friendship, and even entertainment. Yet Ohio law ignores the close relationships we build with our beloved pets. If your pet is harmed or injured by someone else, your loss is measured in the same way as if someone had harmed or damaged a lamp, chair or other inanimate property.

Let’s take an example. Say an airline loses your five year old luggage. You’d be entitled to the reasonable value you’d get if you sold the item on the open market.
For a 5 year old suitcase, you might get a hundred dollars, if you’re lucky. Even if it would cost you $500 to buy the same bag new, you’ll never see $500 from the airline.  Your bag wasn’t new, and an older bag depreciates or loses value.

The same rule applies to pets. If a drunk driver hits and kills your 10 your old dog, don’t expect much compensation. Your older dog doesn’t have much market value.  Ohio law ignores the love and affection we have for our pets.

If this rule isn’t bad enough, there’s more bad news. Let’s say Fido is hit and injured by a reckless driver. He’s rushed to the vet who saves his life. But the treatment costs you $2,000. Shouldn’t the driver have to reimburse you?
Not under Ohio law. Remember, Ohio treats pets no different than inanimate objects.
 

Say your car is damaged. The insurance company will pay to fix it, as long as the cost of repairs is less than the market value.  But if the cost of repairs exceeds the value, they’ll just declare the car “totaled.” You just get the lower market value.

That’s what happens to your pet. If the cost to “repair” your pet is more than its market value, Fido is declared totaled. If you want your pet repaired, you’ll have to pay.
 

Can you imagine if we treated kids the same way? Johnny fell off his bike and fractured his leg. It’ll cost $10,000 to fix it. But you could adopt another 8-year-old for half that price. So obviously, Johnny should be totaled.

Then there’s grandma, she fell in the nursing home and broke her hip. You’re told she could be healed, but the costs will be $50,000. Too bad, since she’s 88 and hasn’t been well, the insurance company says it’s not worth it. She’s just gonna be totaled. You know, now that I think about it, our health care system already seems to be leaning in that direction. But that’s the topic for another day, and another show.

If you value your pet more than your suitcase, contact your state representatives.  Call 1-800-282-0253. Ask them to pass legislation that will recognize the real value of Ohio’s pets. Now if only our pets could vote, we’d probably have a lot more humane treatment.

--Armond Budish

A HOUSE IN A TRUST IS NOT YOURS

Legal Segment Show 189

Air date: 11/2/02

In the past, we’ve talked a lot about the hassles, costs and delays of probate. And I’ve explained how you can avoid probate by using a revocable living trust. Well guess what, it’s a whole new ball game today.

A few weeks ago, Governor Taft made a change in Ohio law. Now, if you make a trust to avoid probate, chances are good that you’ll lose your home. Yes, you heard me right. The State now may take away your home if it’s in a revocable living trust. Let me explain.

A revocable living trust looks a lot like a will. It tells where your assets go at your death.  During your life, a trust is similar to a basket. You put your money and property into the trust. It’s really pretty easy. You go to the bank, or the broker, and change the name on the account from your name, say John Smith, to the John Smith trust. That’s it.  You stay in control. You are the trustee. The trust is you.   You can take money out, put money in, sell CDs, buy stock, sell stock, buy real estate. You can change or entirely revoke the trust. The trust uses your social security number. There’s no separate tax return. You pay tax on the trust income exactly as you pay tax on any other income.
The trust is you. Assets in the trust are yours. Let’s say you put your house into a trust.  You can still have a mortgage on the home. Banks understand that the trust is you. If you’re paying mortgage interest, you can still take the deduction on your tax return. The IRS understands the trust is you. If you are sued, and you lose, the creditor is not prevented from attaching the house just because it’s in your trust. Courts recognize the trust is you.

In fact, the house and other assets in a trust are yours under every American law. But in Ohio, there’s one exception. Medicaid. The Ohio Medicaid folks, under the control of the Governor, ruled that a house in a standard revocable living trust is not your house.

This is important because the Medicaid law provides protections for your home. When one spouse goes into a nursing home, and the other spouse is at home, Medicaid says you can keep your residence. You can’t keep much, but the home is protected, if it’s your home.

But if the home is in a revocable living trust, Ohio says it’s not your home, and it’s not protected. Even though federal laws says a home in a trust is protected, and even though every other state in the country says a home in a trust is protected, Ohio has decided the home is not protected.
What’s this mean? Before you can get Medicaid, the spouse at home, your husband, wife, mom or dad, must move out, sell the home, and find a nice park bench to sleep on.

We used to be able to get the protection back for the home by taking it out of the trust. But a few weeks ago, the Governor’s Medicaid office ruled that once in the trust, the house forever loses its protection. Kiss the house goodbye.

Thousands and thousands of Ohioans have created revocable living trusts. To avoid probate. Not to protect anything from nursing homes. Just to avoid probate at death. Under the State’s new ruling, you lose your home if you or your spouse gets sick and requires long term care.
For the last two months, I’ve watched the political ads where our Governor tells us how deeply he cares about Ohio’s senior citizens. I guess the old saying is true: You always hurt the ones you love.

---Armond Budish

PROTECTING YOURSELF AGAINST FINANCIAL FRAUD

Legal Segment Show 190

Air date: 11/9/02

A local investment broker, Frank Gruttadauria, misappropriated millions of dollars of his client’s money. (Misappropriated is a lawyer’s fancy word for stole.) People turned over their life savings to Gruttadauria. They trusted him.

And these investors weren’t stupid. Far from it. Most were savvy business people. Yet they were taken. Anyone can be taken.

How safe are your investments? You get a statement from the broker showing how much your investments are worth. But are you sure, I mean really sure, the investments are actually there?

According to published reports Gruttadauria sent fake monthly statements to his clients. These showed their investments skyrocketing. But in reality, much of the money had been stolen.

In a case of fraud, what do you do? Let me give you two options.  First, you can sue the broker. But you’ve got to find him, and then you’ve go to hope he hasn’t spent or hidden all the money.

If your financial advisor worked for a firm, you may also have a claim against that company for failing to supervise properly. The company may have the financial where-with-all to cover your losses.

But lots of financial planners and advisors are independent or part of small offices. When they commit fraud, there’s no big company to back them up.

That gets us to your second legal protection, the Securities Investor Protection Act.  The SIPC does not directly cover you against fraud. But it does step in when a brokerage firm fails. And in lots of cases when a small brokerage office commits fraud, they do go out of business.  The SIPC insures your securities accounts up to a total of $500,000.

So there are two important protections if you become a victim of fraud, if a broker steals your money. You can sue, and the SIPC may protect you.

But you’re always better off avoiding problems in the first place. Here are my top six steps to safer savings.

• #1. Before handing over one penny to a broker, check him out.  Contact the Securities and Exchange Commission (1-800-SEC-0330) and ask about any prior complaints.

• #2. Make sure the broker is a member of the SIPC. Only members get SIPC coverage.

• #3. Make sure you receive written confirmations of all transactions in your account. This will help make sure that the broker is really doing what he says.

• #4. Any checks you write should be made payable to the brokerage firm, not the individual account executive. Never make payments to the individual broker.

• #5. Watch to be sure that your periodic statements are timely. August’s summary shouldn’t arrive in November! Delays may suggest hanky-panky.

• #6. Check the address on your statements. They should come from the brokerage company, not your individual advisor.

The economy’s gone sour. Our investments have gone south. Executives at some of our largest companies are going to jail for committing despicable acts. While you can’t avoid all of these problems completely, we must all do what we can to protect ourselves and our savings. Hopefully, my tips today will help.

---Armond Budish

THERE'S ALWAYS SOMETHING TO BE THANKFUL FOR

Legal Segment Show 192

Air date: 11/23/02

Thanksgiving is right around the corner. This holiday offers us all a golden opportunity to reflect on what we have to be thankful for. So today, let’s count the blessings of family. Now you may be thinking: your family isn’t so great, your son doesn’t call or visit enough, the in laws are no good, and your sister’s jealous of your life.
So should you really be thankful for your family? The answer is yes. I visit with families every day. They can be crazy, they can be mean.  No matter how dysfunctional your family is, it could be worse.
Maybe a few real life examples from my law practice will help illustrate. The names have been changed to protect the innocent, and the guilty. In one case, the Dad gave away about $100,000 dollars, his life savings, to his two daughters. He did it because he was concerned that he could lose it all to catastrophic nursing home costs. He trusted his daughters to give him the money back if he ever needed anything. That was his mistake.  When Dad did need money, one daughter immediately agreed. The other? She decided that she deserved the money more than her Dad and decided to keep it. The “good” daughter used her share to help her Dad, and the “bad” daughter, she came out ahead. When you think of your own family problems remember, things could be worse.
In another case, an elderly woman added her son’s name to her savings account so he could get the funds at her death.  To her surprise, the next bank statement she received showed the money had disappeared. Turns out her son had a drug problem, took the money and fled town. Again, remember, no matter how messed up you think your family is, things could be worse.
I had one case where Uncle Louis died and left his portrait to his favorite niece. Well, Uncle Louis’ daughter became angry, and jealous, and insisted that the painting should go to her. This picture was probably worth about ten dollars.  But the daughter sued Uncle Louis’ niece, and both spent thousands of dollars on legal fees. Good thing Uncle Louis was dead, because this pathetic family portrait would have killed him. Is your family picture starting to look a little better now?
Let me tell you about one more case.
Sally’s daughter was not doing well. She had alcohol and drug problems. The only time Sally heard from her daughter was when she needed money.
Soon after Sally’s husband died, Sally’s daughter showed up at her house with her boyfriend. As bad as the daughter was, the boyfriend was worse.  They talked their way into Sally’s home and never left. They abused her verbally and emotionally. They locked her in her bedroom. They cut her off from her friends. They took away her driver’s license and car keys. They threatened to put her away in a nursing home if she gave them trouble.
Sally was one of the nicest people you’d ever want to meet. But she wasn’t strong enough emotionally to handle her daughter and the boyfriend. They, literally, drove her out of her mind.

So whenever you think that your family is nuts. Or mean. Or selfish. Believe me. For most of us, it could be a lot worse. Give thanks for what you have.
I know I do. I have two loving parents. You see my mom doing the exercise segments with me in the show. My wife is the best partner in the world. She writes all the bad jokes we use on the show. And I have two wonderful, gifted sons.
And I have another great family. All of you who invite me into your homes each week. For all of you, I give thanks too.

---Armond Budish

PROTECT YOURSELF FROM LAWSUITS

Legal Segment Show 193

Air date: 11/30/02

It seems filing lawsuits has become a hobby for some folks. You can be sued for almost anything, and your home and entire life savings are at risk. Thankfully, there are some steps you can take to protect against lawsuits. Here to help us protect our hard earned nest egg is a man who never lays an egg, my partner Mike Solomon.

Question: Who's at risk of being sued?

Answer: Anyone and everyone.  Anyone can be in an auto accident. There is a special risk if you own a home or other real estate, someone could slip & fall and break their neck.
Or if you’re a doctor, broker or other professional, malpractice suits.

Question: Doesn't insurance protect us?

Answer: Yes, you should have good insurance.  But you can never have enough. If you have $300,000 in insurance, you can be sued for $1 million.  If you have $1 million in insurance, you can be sued for $5 million.
 

Question: How can we protect ourselves?

Answer: There are several planning techniques.
First is putting assets into spouse’s name.
If you are a professional, like a doctor, you can have your spouse own all the assets.  If you’re sued, generally they can’t get at the spouse’s assets.  But putting everything in a spouse’s name may hurt if you ever get divorced.

Question: What's the best way to protect yourself from lawsuits?

Answer: A Limited Liability Company.  You create this company & put asset in. There are two protections:

1. The assets in an LLC are protected from lawsuits against you personally. E.g., if you get into an auto accident, or are sued for medical malpractice, assets in your LLC are protected.

2. If you have dangerous assets, like a rental property, you may put that into an LLC. If the home burns down and the renter sues, they can grab the rental home because the problem arose from the home.
   But they can’t get your other assets, like your residence, bank accounts, etc.

Question: We hear about offshore trusts.  Do those make any sense?

Answer: They may. But they’re not protected for most people. They're very complex and expensive - fees of $50,000 or more are not unusual.  Compare that to the costs for an LLC of $1,000 - $3,000.
 

Don’t risk your life savings. It’s a fact of life: bad lawsuits happen to good people! You can protect yourself. Thanks to Mike Solomon for sharing his “unlimited” wisdom on Limited Liability Companies to safeguard our hard-earned savings.

---Mike Solomon

HOW TO PROTECT YOUR HOME FROM PROBATE UNDER A NEW OHIO RULE

Legal Segment Show 194

Air date: 12/7/02

Over the last few months I’ve described a couple of new state rules that are real bad. One penalizes folks who try to avoid probate, and one makes it much harder to protect your home from Medicaid after a long-term illness.
Today, I want to be upbeat, and hopeful, and tell you how you can still accomplish both of these worthwhile goals, avoiding probate and protecting your home. It’s harder, but you can still do it.
The first rule says that a home put into a revocable living trust must be turned over to the State if the owner or the spouse needs long-term nursing home care. Though federal law, and every other state in the country protects the home, Ohio is trying to take it away.
The second rule, called the Bellfy Rule, says that if you attempt to avoid probate, you can be punished. It doesn’t matter how you avoid probate. Naming a joint owner or beneficiary, using payable or transfer on death, or placing assets into a trust. Avoiding probate can be severely punished.
So what should you do now? Each case is different. But here’s what we’re recommending for lots of our clients.

• Number 1: Don’t put the house into a trust. If your home is in a trust, take it out. Now. Don’t cancel the trust, but take out the house.

• Number 2: If one spouse becomes ill, change the trust to bypass the ill spouse. In the trust, you can leave the assets to other heirs, but not to the ill spouse.

• Number 3: Make a new deed for the house. Change the ownership solely to the healthy spouse, take off an ill spouse. And make it transfer on death, or TOD, to the trust.

• Number 4: The healthy spouse should make a new will leaving about one-third to the spouse, and the rest to the kids or other heirs.

• And, Number 5: Include language in the will and trust allowing for something called a disclaimer. This allows the family flexibility to direct assets either to the will or to the trust.

Okay, you’ve taken these five planning steps. Now here’s an example of how they help. Let’s say your husband becomes ill and enters a nursing home, and you’re still living in the family residence. If your home was in the trust, it would lose its Medicaid protection. But because it’s not in a trust, it remains exempt and protected, and your husband can get Medicaid benefits. If you die after your husband, then the house will pass to your heirs and still avoid probate. So far, so good.
But what if you predecease your husband? If the house passed entirely to your husband, it would lose its protection. And if your home entirely bypassed your husband and passed to the kids, the state again would take the house. All of it. With the plan I outlined above, one-third of the value of the home would go to the nursing home, but two-thirds would go to your children. While it’s not a perfect solution, it’s pretty good.
Obviously, this is complicated. Very complicated. Much more confusing than it should be.

These two new rules, penalizing probate and taking the house, are bad public policy, they’re unfair to middle class Ohioans, and they should be changed.
Sadly, it doesn’t look like these rules will be changed any time soon. In the meantime, you can still protect your home, and you can still avoid probate. But only if you take steps to protect yourselves right now.

---Armond Budish

ESTATE PLANNING QUIZ

Legal Segment Show 195

Air date: 12/14/02

For four years we’ve been bringing you legal estate planning tips that help save you money and let you avoid hassles and headaches. Now it’s time to find out how well you’ve been listening.
So sharpen your #2 pencils, put on your thinking caps, and get ready for our Estate Planning Quiz.
 

Question #1: What’s the single most important legal document you can make?  Is it:

A). A Will.
B). A Financial Durable Power of Attorney.
C). A Joint Deed with Rights of Survivorship.
D). A Post-Nuptial Agreement with Your Spouse.

Got it? Okay, if you picked B, a Financial Durable Power of Attorney, you’d be right. This document protects you in case you become incapacitated during your lifetime. With a Durable Power of Attorney for Finance, you can give your spouse, child or another trusted person the power to pay your bills and handle your finances in case you cannot.
 

Question #2: The amount you can gift to one lucky child in one year, with no tax, is?
A). $1,000
B). $10,000
C). $11,000
D). $1 million and eleven thousand dollars.

The answer is D, believe it or not. You can gift $11,000 to any person each year without reporting the gift to anyone. But in addition to the $11,000, you can also gift a million dollars during your lifetime. If you got this one right, you’ve been paying attention and not taxes!

Question #3: One of your children has been pretty nasty, and you really don’t want that child to inherit from you. The best way to handle it is to:
A). Leave the child ten dollars.
B). Leave the child an equal share to your other kids.
C). Leave the child $5,000 and include an in terrorem clause.
D). Leave the country.

The best answer is C. Leave a nasty, money grubbing child a little more than a token amount, but a lot less than the other “good” kids. State in the will or trust that if the nasty child files a lawsuit against the estate to try to get more, she’ll lose the $5,000. That’ll give her something to think about.
 

Question #4: Let’s take one more question. If you make a gift or transfer to protect your home or life savings from nursing home costs, how long do you have to wait for Medicaid benefits? The possible answers are:
A). Three years.
B). Five years.
C). You can never get Medicaid after giving money away.
D). There’s no fixed penalty period.

The correct answer is D. There’s no fixed penalty period. It all depends on how much you gift. If you give $5,000 to your kids, you only have to wait one month for Medicaid, not three or five years. A $50,000 gift triggers a one year ineligibility period. The more you give away, the longer the penalty. For most gifts or transfers, the maximum ineligibility period is three years, but it can be a lot shorter.

So how’d you do with our four questions? If you got fewer than four right, you’d better keep watching Golden Opportunities, because we’ve got some work to do. If you were right on all four, well, you should keep watching Golden Opportunities. After all, look at how much you’ve learned!

---Armond Budish

RESOLUTIONS TO GET YOUR LEGAL HOUSE IN ORDER

Legal Segment Show 196

Air date: 12/28/02

The New Year is right around the corner. This is a “golden opportunity” to get your legal house in order, so that you and your loved ones will be adequately protected. To welcome in 2003, here are my top five New Year’s Resolutions.
 

Resolution Number One: Check the Beneficiary Designations on Your IRAs, 401(k)s, Annuities and Insurance. If you named your beneficiaries 10 or 20 years ago, you probably aren’t sure who’s listed. And I can’t tell you how many times the wrong people are named. Maybe only two of your three children are listed because the third wasn’t born at that time, and now he’s left out. If your beneficiary is deceased, then the IRA, annuity or insurance will have to go through probate, which can be a real mess.
 

Resolution Number Two: Find and Update Your Will. Lots of times, people don’t know where the will is. And if your will is out of date, it may be worse than not having one at all. For example, your friend who lived down the street may have been a good choice as executor 20 years ago. But today he’s not down the street, and he’s not your friend. Go find that will, then review and update it.
 

Resolution Number Three: Make Durable Powers of Attorney For Finance and Health Care. The odds are frighteningly high that you could become disabled at some point. If you’re assuming that your spouse or child will automatically be able to step in to help manage your finances and make health care decisions for you, you’re wrong, Without preauthorization, they can’t. That’s why you absolutely must make two documents now, while you’re able. Durable Powers of Attorney for Finance and for Health Care are the two most important legal documents you will ever have.

Resolution Number Four: Check Your House Deed. If it’s in your name alone, it’ll go through probate at death. If it’s in your and your spouse’s names, it may avoid probate when one of you dies, or it may not. A joint deed must have the magic word “survivor” or “survivorship” to avoid probate. If the deed is in a trust name, you could lose it to a nursing home under a new Medicaid rule that we’ve recently talked about on the show. Getting your legal house in order includes making sure your house deed is set up properly.
 

Resolution Number Five: Protect Yourself Against a Future Need For Long Term Care, Either At Home or In A Nursing Home. If you’re under about 65, and can afford the cost, get yourself a good long term care insurance policy. If you can’t afford or qualify for insurance, see an experienced elder law attorney for a long term Medicaid plan. Without getting your legal house in order, a catastrophic illness will land you in the poor house.

And since it’s holiday time, I’ll give you a bonus Resolution. Starting next week, Golden Opportunities will return to our regular time, Sunday mornings at 11:30, right after Meet The Press. We’ll have a whole new year’s worth of money saving, health preserving, life enhancing tips and advice. And we’ll have some fun too. So you’ll want to stay home and watch Golden Opportunities on Sundays at 11:30 starting next week. That’s a resolution you really have to keep.

---Armond Budish

OHIO'S NEW LIVING WILL FORM

Legal Segment Show 197

Air date: 1/4/03

Imagine this nightmarish scene. You suffer from terminal cancer and have only months to live. Suddenly you’re stricken with a heart attack. An EMS Squad rushes to your home, and immediately CPR is administered. You are revived, but you are now paralyzed and in much worse pain than before the heart attack. In this situation, some people would have preferred that no CPR be given. If that would be your wish, you’ll want to take steps now to assure your intentions are followed. Here to explain this important and valuable legal development is my important and valuable law partner, Laurie Steiner.
 

Question: What is a living will?

Answer: It is a critically important document if you don’t wish to be kept alive by artificial or heroic measures. Affirmatively states: If I am permanently unconscious or terminally ill, don’t artificially keep my heart pumping and my lungs breathing.

Question: There's been an important change?

Answer: Yes. Ohio adopted a “Do Not Resuscitate” law, and you now can incorporate your request not to be resuscitated in your Living Will.

Question: What's a "Do Not Resuscitate Order"?

Answer: A Do Not Resuscitate or DNR Order says that you do not wish to be resuscitated in the event your heart stopped beating, or a respiratory arrest, where you stopped breathing.
A DNR Order says you should not be treated by things like chest compressions, electric shock, breathing tubes, or drugs.
A DNR Order can only be written by a doctor or advanced practice nurse. You can’t do it yourself.

Question: When might a person want a DNR order?

Answer: In the cases of terminal illness or permanent unconsciousness, people with terrible illnesses may not wish to receive CPR when the time comes. Of course, if you’re thinking about this, talk it over with your physician.

Question: If we're healthy now, we wouldn't' want a DNR order now.  But we might want one if we ever become terminally ill?

Answer: Yes. That’s where the new Ohio Living Will comes in.
The new form lets you direct your physician to issue a DNR Order in the future if two physicians agree that you are terminally ill or permanently unconscious at that time.

With this directive in your Living Will, you’ll get CPR as long as you are healthy, but you are directing that no CPR should be given if two doctors determine you to be permanently unconscious or terminally ill at some point down the road.

Question: Can you give us an example of how this may work?

Answer: Sure. Let’s say you’re pretty healthy now, so you don’t want a DNR Order now. But you put a DNR direction in your Living Will. A few years later, you suffer a terrible stroke that renders you permanently unconscious. At that point, your DNR direction would kick in. If you later suffered a heart attack, no CPR should be given.

Question: If a person gets a Dnr order, or puts a directive in her living will, can she still change her mind?

Answer: Absolutely. If you get a DNR Order and later change your mind, talk to your doctor immediately to revoke it.

Question: If you have a DNR order, can your family override it?

Answer: No. You have the right to make the decision. But you might be wise to explain your views to your family.

If you’d like to learn more about Do Not Resuscitate Orders or Living Wills, give Laurie Steiner a call. Her number’s coming right up.

---Laurie Steiner

FIVE PROBATE PITFALLS

Legal Segment Show 198

Air date: 1/12/03

You’ve set up your estate to avoid the costs and hassles of probate. Yet at your death, your family is shocked to learn that probate is still required. Sadly, this happens to lots of folks. Here to tell us the five probate pitfalls and how to avoid them is my law partner, Jennifer Peck.

Question: You've made a list fo the five biggest mistakes people make thet send them through probate.  Let's take each one.  First is...

Failure to fund a trust.

Lots of people set up trusts to avoid probate. Trusts do avoid probate, but only for assets put into the trust. You have to change the name on all your assets to the name of the trust. That’s how you put something into a trust. Change your bank account from John Smith, if that’s your name, to the John Smith Trust. It’s not that hard to do, but you must do it or your assets will still go through probate.

Forgetting about the car and small accounts

Many people arrange their CDs, stocks, and brokerage accounts to avoid probate, by putting on a joint owner, naming a beneficiary, or using a trust. But lots of folks forget about their car and smaller accounts. Even if your major assets are set up properly, omitting a few items can send your heirs into probate court.

Failing to name beneficiaries
Insurance, IRAs, 401(k)s, pension and profit sharing plans pass to named beneficiaries without probate. Unfortunately, lots of people don’t name a beneficiary. With no beneficiary, the insurance, IRAs, and other retirement-type assets will go to the heirs under the Will, through probate.

Failing to update beneficiaries
This is even a larger problem. Lots of people name beneficiaries when they purchase insurance or initially set up their IRAs, 401(k)s, pension and profit sharing plans. But then they never check and update them. If the person you’ve named 20 years ago has died; and there’s no alternate, the assets will become probateable.

Completely losing track of assets
You’ve done everything right. Put everything into trust. Making sure the car and small accounts are made non-probate. You’ve named and updated beneficiaries. Everything set up perfectly. But at death, your heirs discover some old savings bonds, or a life insurance policy, or a savings account that you had totally forgotten even existed. All of a sudden, your heirs are stuck in probate.

Jennifer has alerted us to the most common mistakes people make when trying to avoid probate. Now that you know what to look out for, you should be able to protect yourself and your family, and completely avoid probate at death.
Avoiding probate is no simple task. It’s complicated. We want to help. This week we’ll be conducting free seminars explaining how best to avoid probate. Come on out and join us. Here’s the number to call to reserve your spot.

---Jennifer Peck

SHOVELING YOUR WALKWAY CAN PUT YOU ON THIN ICE

Legal Segment Show 199

Air date: 1/19/03

Each winter in Ohio, the frigid winds blow in three special legal rules. If you fail to follow these cold weather laws, you could wind up in hot water.

The first rule is pretty un-neighborly: Don’t Shovel Your Walkway. Here’s the situation. The snow is piled high on your drive and walkway. You want to be a good citizen, to make it easier for the mail carrier or other visitors to navigate. So you get out your shovel and clear the snow away.
If someone slips and falls after you’ve shoveled, you may be held liable. The law says you are responsible if your actions create a dangerous situation. A sharp lawyer could claim that you created a dangerous ice patch by clearing the snow off the walk.
If you aren’t a good citizen, and you don’t make any effort to clear a path, you’re probably in the clear. You generally cannot be held responsible for injuries from natural accumulations of ice or snow.
So Rule Number One says that if you try to be a good neighbor, and shovel your walkway, you risk a lawsuit. If you ignore the snow, and wait until it melts on its own, you avoid a legal blizzard.
 

Rule Number 2: Don’t Skid Into Another Car. This rule sounds sort of silly, but believe me, it’s not. Ohio law says that you must leave enough space between you and the car ahead to avoid an accident.
Let’s say you’re driving carefully, way below the speed limit, and a good distance behind the car ahead. The car in front of you stops, and under normal conditions you’d be able to stop in plenty of time. But you hit a hidden ice patch and skid into the car ahead. You can be held liable.
Ohio law requires you to leave an “assured clear distance” between you and the car ahead. That doesn’t mean five yards, 10 yards, or 50 yards. The law doesn’t set any particular distance. It means enough space to avoid an accident.
So the cold, hard fact is that you’d better not skid into another car. Leave yourself a lot of room ahead. Otherwise, your pocketbook could wind up “on ice.”

One more winter rule: Thoroughly Clean Your Car Windows Before Driving. Here’s the situation, you decide if it sounds familiar. You drive to the mall to pick up some post-holiday sales. When you get back to the car, it’s covered with snow and ice. It’s too much of a pain to clear off every window in the freezing cold weather, and besides, you’re running late. So you clear off a little spot in the front, flip on the wipers, turn up the defroster, maybe even roll down a side window to see. And off you go, peeking out the open space on your window to see ahead.
Let me tell you, that’s not too smart. Of course, it’s not very safe. And if you get involved in an accident, the police will almost certainly hold you responsible. Ohio law requires you to completely clear off all your car windows before driving.
At this time of year, we winterize our cars by checking the tires and adding antifreeze. Following our three cold weather rules should help you winterize your winter driving, too.

---Armond Budish

SUDDENLY SINGLE

Legal Segment Show 200

Air date: 1/26/03

Your spouse has died or you’re now divorced. In either scenario, you’re suddenly single. A few weeks ago we talked about financial strategies to pursue if you find yourself suddenly single. Today my law partner Laurie Steiner is here to tell us about the most important legal steps to take after a divorce or the death of a spouse.

You've made a list of the five legal do's and don'ts after becoming single.  Let's start with...

Number 1: Do change your will.

After a spouse dies, you’ll want to update your will to make sure your beneficiaries are correct. This is even more important after a divorce. A divorce does not automatically remove an ex-spouse from your will. If you don’t take the ex out, he or she could inherit your estate. Probably not what you’d want.

Number 2: Don't forget to change beneficiaries on assets.

Many people overlook their beneficiary designations on IRAs, 401(k)s, life insurance and annuities, even bank accounts, CDs, stocks and savings bonds. If your spouse is the sole beneficiary on your savings account, or life insurance, and he dies before you, then when you die those assets go through probate. Even worse, if you go through a divorce, but leave your ex as beneficiary on your 401(k), he or she will reap the benefits at your death.

Number 3: Do change agents, trustees and executors.

You’ve probably named your spouse as the person to handle your decisions as agent under your Financial and Health Durable Powers of Attorney. If he or she is dead, your alternate won’t be able to step in without first showing a death certificate. That can be a hassle and cause unnecessary delays. If you’re divorced, but still name your ex to make decisions for you, that could be a disaster. He for sure will say pull the plug, even if you’re not sick! Change your Financial and Health Durable Powers of Attorney. And also change the executor of your will and trustee of your trust.
 

Number 4: Don't delay covering your divorce obligations

If you’ve taken on any continuing or future obligations under a divorce decree, make sure you take any necessary steps to fulfill them. For example, if you’ve agreed to buy a life insurance policy for your ex or your kids, do it now. If you fail to satisfy these obligations, you’ll create a real mess for your heirs.
 

Number 5: Do make sure you have adequate health care coverage
 

Perhaps the biggest unexpected strain on your budget after a divorce or death will be the costs of health care. If you’ve been covered under a spouse’s policy, you now may have to get your own. Do this quickly. You can’t afford to go uncovered if you become ill in the interim, you may never get coverage. If you find yourself having trouble qualifying for coverage, contact a professional insurance agent specializing in health coverage, and possibly a lawyer specializing in Medicare and Medicaid as well.

Most important after becoming suddenly single is don’t panic. Legal and financial decisions made without adequate thought and research can be costly. Find an experienced and trustworthy lawyer and financial consultant to help guide you through this new, uncertain period. My thanks to Laurie Steiner for her tips and advice.

---Armond Budishr

MEDICAID RULE CHANGES - THE MEDICAID ANNUITY

Legal Segment Show 201

Air date: 2/2/03

If your parent or spouse has to go to a nursing home, be prepared, the costs will be out of sight. Paying for care in a nursing facility can easily wipe out a life’s savings. I’ve seen too many situations where one spouse goes to a nursing home, and the other spouse ends up in the poor house.
Medicaid has been the one program that will help pay for long term care costs. But it’s tough to qualify. You can’t have much money or property.
Now the State of Ohio has adopted 100 pages of new regulations. And these changes make it harder than ever to protect a portion of your life savings.
But there’s one change that should help. This change enables married couples to protect more of their savings. The new tool is called a Medicaid annuity.
Medicaid annuities are very specialized annuities sold by insurance companies. They are not your standard kind of annuities that many folks buy as an investment. They are specially designed to protect money for the healthy spouse.
Let’s look at an example to see how the new rules work. Say that your husband will be going to a nursing home. The savings the two of you have accumulated totals $100,000. Normally you’d have to spend at least half of that on the nursing home over the next year or so. In the end, you may not have enough left to pay your ongoing bills at home.
But instead of paying the nursing home, you go out and buy a Medicaid annuity. If you are 80 years old, you might take your $100,000 and buy a five-year annuity. That will pay you a little over $20,000 per year for the next five years.
Here’s the beauty. Your husband gets Medicaid immediately. There’s no waiting period or ineligibility period. You get enough to live on. You can spend or save the $20,000 payments from the annuity. After five years, you can have all your original annuity money back in the bank.
In my example, I used a $100,000 annuity. But there are no set dollar limits. You could use $30,000 or $300,000 for a Medicaid annuity.
The new rules impose critical requirements:

• First, the annuity must be purchased before your spouse goes to a nursing home, not after.

• Second, you must start receiving the payments before your spouse enters a nursing home.

• Third, it must be purchased from an insurance company, not an individual.

• Fourth, the annuity cannot guarantee payments for a period longer than your life expectancy. The state has life expectancy tables that must be used.

• And fifth, the payments back to you should be the same each month, including interest and principal, with no big balloon payment at the end.

As long as these five requirements are strictly met, the new rules will let you use a Medicaid annuity to protect your savings and ensure your financial stability. Be careful. There are people out there selling annuities to folks, telling them they’ll protect money from nursing homes, when they really don’t. A Medicaid annuity must meet these requirements which I’ve just gone through. Otherwise it won’t work.
Medicaid annuities that do meet the requirements are great. This new rule should help a lot of couples. If only the same could be said for the many other new rules. Most of the changes will make it harder to get benefits, especially if you’re single.
We’ll be telling you more about the new Medicaid regulations at seminars around the area this coming week. For more information, and to reserve your spot, call the number that’s coming up next.

---Armond Budish

PRESCRIPTION DRUGS FROM CANADA - ARE THEY LEGAL?

Legal Segment Show 202

Air date: 2/9/03

Today’s skyrocketing costs for prescription drugs, and even over the counter medications, are enough to give you high blood pressure! A single prescription can run hundreds of dollars. And if you are taking five or ten different medications, we’re talking big money.
What’s a person to do? If you’re not Donald Trump, you might be foregoing needed medicines or cutting your dosages because you can’t afford the price tag for good health.
Our federal elected officials for years have been promising to add a prescription drug benefit to Medicare. So far, those promises have been as empty as Mother Hubbard’s cupboard. In the last Ohio gubernatorial race, Bob Taft promised prescription drug discounts. We’re still waiting.
You can’t wait for our elected officials to help. You can, and you must, help yourselves.
We here on Golden Opportunities recognize the seriousness of this problem and have been trying to do our part. Over the last year, we’ve told you how to obtain Medicaid and Veterans’ coverage for prescription drugs. We’ve told you about a non-profit website, www.benefitscheckup.org, that can help direct you to low or no cost medication programs. Even today we’ve told you how you can get involved in the Ohio initiative to force our state legislators to create a real prescription drug benefit.
And now I want to tell you about another avenue to cut your medication costs. This avenue leads across the border to Canada.
You’ve probably seen on the news that busloads of seniors have been traveling to our Northern neighbor because drugs there are significantly cheaper. And you don’t even have to make the day long trip. You can buy low cost Canadian medications right from home, by logging onto the Internet.
Our crack Golden Opportunities staff I recently compared prices at a local Cleveland-area CVS and an online Canadian pharmacy (canadapharmacy.com). Here’s a sampling of what we found:

• Celebrex. 100 mg, 100 pills:
  Canada: $ 70
  CVS: $175
  Savings: 60%

• Vioxx. 25 mg, 100 pills:
  Canada: $118
  CVS: $303
  Savings: 61%

• Coumadin. 5mg, 100 pills:
  Canada: $36
  CVS: $78
  Savings: 54%

• Prevacid. 15mg, 30 pills:
  Canada: $ 60
  CVS: $132
  Savings: 55%

• Glucophage. 500 mg, 90 pills:
  Canada: $32
  CVS: $70
  Savings: 54%

• Zocor. 40mg, 90 pills:
  Canada: $191
  CVS: $389
  Savings: 51%

As you can see, the savings can be tremendous. 20 to 50 percent or more is not uncommon. With this kind of savings, is there any reason not to get your medications from Canada?
I have two warnings for you. First, a federal statute makes it illegal to bring drugs into the country. But the U.S. Food and Drug Administration issued a regulation giving its field personnel discretion not to enforce the law. As long as you don’t bring in more than a three month supply of your medications, it seems that the government won’t try to stop you. There’s no guarantee, though.
The second warning is that medicines purchased in Canada don’t go through the same regulatory process and safety screenings as American drugs. But Canada’s not exactly a third world country, and to date there haven’t been any serious health problems from Canadian drugs reported.
We’ll post on our website a list of Canadian pharmacy Internet sites. In fact, we’ll link you directly to those sites. Go to www.goldenopportunities.tv , and start saving money. Until our elected officials fulfill their promises to provide prescription drug benefits, we here at Golden Opportunities will keep you alerted to the best ways to cut your medication costs.

---Armond Budish

PROTECTING A DISABLED CHILD'S INHERITANCE

Legal Segment Show 203

Air date: 2/16/03

Are you responsible for a child or other loved one with disabilities? If so, special planning is imperative. What would happen when you’re gone? Who would watch out for your child? Where would the money come from to support him or her? Could your child obtain public benefits? Here to handle these tough questions is my law partner, Laurie Steiner.

Question: Let's say you're caring for a disabled child.  Should we be planning for the day we'll be gone?

Answer: Absolutely. I work with parents of disabled children all the time, and most parents view it as a real privilege to care for them. But it’s also a tremendous burden. You have to look to the future, and figure out what should happen when you’re gone. Where will your child live? Who will watch out for him? How will the bills get paid? There’s lots of difficult questions that must be answered.
 

Question: How do you pick the person to watch out for your child?

Answer: There’s no easy answer. The first place to look would be other family members, often your other children.  But before naming another child as the caregiver, make sure they’re really willing to take on the burden. And you have to decide if you want to hand them the burden, even if they’re willing. If it’s just money management and bill paying that’s needed, you could name a non-family member trustee, such as a trusted friend or professional, or you could name a bank trustee.
There ‘s no tougher issue than deciding who should watch for your disabled child when you’re gone. But it’s a question you have to deal with.
 

Question: If your child is currently receiving public benefits, like Medicaid, or will need benefits in the future, is any special planning needed?

Answer: Yes.  If you leave an inheritance to your disabled child, he or she will lose his public benefits, that could be a disaster.
Let’s say you leave your daughter $200,000. She’ll need that money for rent, clothing, and other personal needs. But her medical bills alone are $50,000/year. If she receives $200,000, she’ll lose her medical benefits. Over a few years, she’ll go through her inheritance. At that point she’ll go back on Medicaid. But then there will be nothing left for food, rent, clothes and her other basic needs.
 

Question: Is the answer to leave her inheritance to another one of your children, with the hope that other child will spend the money on your disabled daughter as needed?

Answer: That’s one option. But it’s not usually a very good one. It leaves your disabled daughter at great risk. If her sibling gets a divorce or dies or is sued, the money for your daughter could disappear.

Question: What's a better solution?

Answer: Set up a Special Needs Trust. The funds are set to be used for your disabled child’s benefit. But they don’t throw her off public benefits, like Medicaid. Instead they just supplement her public benefits.
This is a much better way to protect your disabled child. If your other child is divorced, dies, or is sued, the money for your daughter is safe. And if there’s anything left in the trust when your daughter dies, it will pass to your other family members, not the State of Ohio.
 

Question: Has this trust been around for a while?

Answer: Yes. But there’s new regulations with lots of new requirements. If you’ve already set up a Special Needs Trust, you’d better have it reviewed by an experienced lawyer immediately, because chances are it will need to be significantly revised.

You’ve been helping your disabled child during your lifetime. When you’re gone, your child will need your help even more. Take steps now to set up a Special Needs Trust. If you already have one, get it reviewed and revised, because the rules have changed. Do it now, for your child’s sake.

---Laurie Steiner

THE RIGHT AND WRONG BENEFICIARIES FOR YOUR IRAs, 401(k)s AND ANNUITIES

Legal Segment Show 205

Air date: 3/2/03

You don’t have to be a magician to turn your IRA, 401(k) or annuity into millions of dollars for your kids or grandkids. It’s no sleight of hand. You can really do this, if you plan ahead. But without proper planning, it will be Uncle Sam, not your family, who’s thanking you for your generous gift. Here to reveal the right and wrong way to handle your retirement money is Mike Solomon, my law partner who has nothing up his sleeve but good advice.

Question: Can we really turn our kids and grandkids into millionaires?
 

Answer: With good planning, the answer may be yes. You can accomplish this by “super sizing: or “stretching” your IRA, 401(k) or annuity.

Question: How is this done?

Answer: Lets walk through an example:

• You have $100,000 in your IRA.

• Name a specialized trust for your grandchild as the beneficiary.

• At your death, your grandchild is 10.

• Your child, the grandchild’s parent, can be the trustee of the trust, to manage the funds for the grandchild.

• The trust takes minimum distributions from your IRA, based on the grandchild’s life expectancy, instead of yours.

• Assume that the IRA is invested and grows at 7% per year.

• By the time your grandchild reaches age 65, your $100,000 IRA would have generated about $2.4 million for your grandchild.

Question: Can you do this for just part of your IRA or does it have to be your whole account?

Answer: Part is okay.
 

Question: Your example involved grandchildren.  Can you set up this super or stretch IRA for kids?

Answer: Yes. The biggest bang for the buck comes with naming grandchildren because they’re younger, so have a longer life expectancy. That allows smaller distributions, which means more can stay in your IRA growing income tax deferred. The longer the tax deferral, the more the growth.
 

Question: Your example involved an IRA.  Does this work for 401(k)s and annuities?

Answer: Yes, but with some modifications. The company administering your 401(k) may not allow the super or stretch payouts.  So your best bet with a 401(k) is to roll it into an IRA, then set up the super or stretch payout plan. Annuities are even more complex, but can still be worth doing. Talk to an estate planning attorney about how to set up your annuity.
 

Question: If you're married, can you leave the IRA to your spouse?

Answer: Yes. Most folks name a spouse as the 1st beneficiary. Then the Super IRA Trust is set as the secondary beneficiary.

Question: What if you don't set up a super or stretch IRA?

Answer: Most people wind up paying too much income tax too fast. If the IRA, 401(k) or annuity is not set up properly, tax may be due on the entire amount immediately at your death, or within five years. Instead of your $100,000 IRA growing to $2.4 million dollars, it may wind up with 70% less.

There’s no magic required to use your IRAs, 401(k)s and annuities to turn your heirs into millionaires. But you must plan ahead. For more information about how to super-size or stretch your retirement funds, call Mike Solomon. The number’s coming right up.

---Mike Solomon

DO YOU NEED A TRUST

Legal Segment Show 206

Air date: 3/9/03

If you don’t already have a trust, you may be wondering whether you really need one. Do you have enough money for a trust? Are there good reasons to get a trust? And are there good reasons not to get one? Here to answer these trust questions is my trustworthy law partner, Laurie Steiner.

Question: Laurie, you've made a list of four situations when a person probably should have a trust. Let's start with the first:

NUMBER 1: YOUR NET WORTH EXCEEDS $338,000.

There’s no magic dollar amount that fits every situation. But $338,000 is a good figure to use as a rule of thumb. That’s the exemption from Ohio estate tax. If you and your spouse, if you’re married, have more than $338,000, at your deaths your heirs will have to pay Ohio’s estate tax. With trusts that we call Ohio Estate Preservation Trusts, you can reduce or eliminate that tax. In this case, trusts may save many thousands of dollars.

NUMBER 2: GET A TRUST IN A SECOND MARRIAGE.
If you’re getting remarried, a trust can be extremely valuable to protect an inheritance for your children from a prior marriage. Otherwise, at your death your new spouse will be entitled to part of your estate, generally from one-third to one-half. That’s even if your will says everything goes to your own kids. A will can’t protect your children, a trust can. And a trust may also protect you in case things don’t work out and the marriage ends in a divorce.

NUMBER 3: MAKE A TRUST TO PROTECT A DISABLED HEIR.
In most cases, the best way to leave an inheritance for an heir with a disability is to use a Special Needs Trust. Let’s say your son cannot manage his own funds. Leaving him an inheritance outright would be a bad idea. And if your child is currently eligible for any public benefits, leaving an inheritance directly could throw the child off those benefits. With a Special Needs Trust, the heir can still receive his benefits, and the inheritance in the trust can be used to supplement those benefits, to pay for things not covered by a government program, such as rent and clothing.

NUMBER 4: GET A TRUST TO PROTECT YOUR MONEY FROM THE IN-LAWS.
If you leave an inheritance to your children, they get it when you die. It’s theirs. If they later get a divorce, the ex-spouse is likely to go after half. Or if your child dies ten years later, the spouse probably gets everything of your child’s, including the inheritance you left. Do you really want to see your money end up with the in-laws? If not, you need a Bloodline Trust. With this trust, you can leave an inheritance for your family. Your children can use their inheritance for a trip, for a car, for their kids education, anything they need. But a Bloodline Trust protects your kids if they get a divorce, and at your child’s death this trust preserves the inheritance for your grandchildren, or your other children, but not for the in-laws.

Question: Any reason not to get a trust?

Answer: The primary drawback is the cost, usually between $1,500 and $2,500. So if your estate is less than $338,000, you’re not in a second marriage, you’re not leaving assets for a disabled heir, and you love your in-laws, then you may not need a trust. Also a trust may be bad if you need to apply for Medicaid to cover long term nursing home care costs.

Trusts are not for everybody. But they can be wonderful planning tools, with lost of benefits. Laurie’s given you four situations in which a trust may be right: if your worth is more than $338,000 dollars, if you are going into a second marriage, if you have a disabled family member, and if you wish to keep your inheritance from the in-laws. For lots more information about trusts, everything you ever wanted to know, we’ll be conducting seminars around the area this week. They’re free. Come on out to visit with us, and to learn more about trusts.

---Laurie Steiner

CARING FOR YOUR PET AFTER YOU'RE GONE

Legal Segment Show 207

Air date: 3/16/03

Your pet is a cherished member of the family. But who will care for Fido or Kitty after you’re gone. He may be smart, but he can’t live alone How can you make arrangements so your animal will be properly cared for? Here to answer these questions is Jennifer Peck, an expert whose pet project is estate planning for pets.
 

Question: What do people with pets usually do?

Answer: Usually, nothing. People don’t think about planning for their pets. They may leave their wedding ring to their daughter, the work tools to their son. But Fido is forgotten.
 

Question: If no provisions have been made, and Fido's left holding the bone, what happens to the pet?

Answer: Often one of the family members will take the dog or cat. But sometimes that doesn’t happen, and the pet goes to the local humane society.
 

Question: What's the best way to plan for your pet?

Answer: You would do two things: leave your pet to a particular caregiver, and set up a pet trust to pay for your pet’s care.
Let’s start with the caregiver.  You would leave your pet to a family member, a friend, or an organization who would care for your pet when you could not. Talk to the person or organization now, to make sure they’re willing.
You would also set up a pet trust, with money to care for your pet. You would need enough to pay for food, toys, medical care, and emergency care. And you probably would want to pay the caregiver for his or her work, too.

Question: How much should go into a pet trust?

Answer: There’s no magic amount or formula. You should calculate the amount that you think would be needed, keep track of your costs for a couple of months. [Then set aside enough so that the investment income is enough to cover those costs. When the pet dies, the remaining funds in the trust can go to your human beneficiaries, like children, or charitable organizations.

Question: Should the caregiver and the trustee of the pet trust be the same person?

Answer: They could be, but I usually don’t recommend it.  I like the trustee, the person managing the trust and paying the bills, to be different from the caregiver. Otherwise, there’s a chance of abuse. In one Arizona case, for example, the trustee and caregiver were the same person. The caregiver used the trust money to buy himself an expensive new car, supposedly to transport the pet. If the trustee was independent of the caregiver, this abuse would not have occurred.

Question: How about forgetting the trust and just leaving the pet and some money to a caregiver?

Answer:  You can do that, and it’s simpler. But it’s not as protective for your pet. There have been cases where the caregiver took the pet, put it into an animal shelter, and kept the money. And there’s not much that could be done!
Here’s a case where you truly do want your money to go to the dogs!

Your pet has provided you with love, comfort and attention during your lifetime. Make sure you provide for your pet’s care and comfort after you’re gone. For more information about pet care and pet trusts, call my law partner, Jennifer Pet, I mean Peck.

---Jennifer Peck

WHY YOU SHOULDN'T HIDE MONEY UNDER THE MATTRESS

Legal Segment Show 209

Air date: 4/6/03

These are scary times. War abroad, terrorism at home. And the economy in shambles.
Our investments have fallen on hard times. IRAs, 401(k)s and other retirement accounts are way down. A number of major businesses have been found to have played fast and loose with their bookkeeping. And even safe investments in U.S. savings bonds and government-backed CDs are paying such low interest that it hardly seems worth it.
So in these dangerous times of low investment returns, does it make sense to hide money under the bed, in the cookie jar, or in old clothing tucked away in the attic?
While it may seem tempting, don’t do it.  Don’t hide money in the mattress. It won’t help you sleep better.
Let me tell you a true story. One of my clients had been hiding money in his house for years. He didn’t trust banks.
I advised him to take the money out of his house and put it into the bank, and for some reason, he listened. His niece helped him search through the house. There was cash hidden everywhere: in shoes, in books, in coffee pots, in the freezer, behind pictures. Everywhere. When all the cash had been collected and counted, the total came to $70,000. Seventy thousand dollars! That was most of this man’s life savings.
One week after this man put his money in the bank, his house burned down. To the ground. I’m telling you the absolute truth. This gentleman, and his money, were saved. If he hadn’t listened to me and put his money in the bank, he would have seen his financial security go up in smoke. Literally. There’s no insurance to cover burned up cash.
Fires aren’t the only threat. Theft is a serious risk. And just forgetting where you hid all the money can cost you.
I understand the fear many of you have about investments. We just had a local broker, Mr. Gruttadauria, who stole millions of dollars of his clients’ money. Clients that had trusted him.
But there are plenty of safe investments. Truly safe. Your bank deposits are insured by the federal government for up to $100,000. I know banks aren’t paying much interest, but it’s still more than your mattress pays!
And there are other safe investments that may have a higher payout.  U. S. Savings Bonds, treasury notes, and T-Bills are all backed by the full faith and credit of Uncle Sam. You can’t get any safer than that.
Now I know some of you hide cash at home because you think you’re beating the government in other ways. For example, some folks think that if they have to go to a nursing home, they can protect money by hiding it in the house. There are legitimate ways to protect some of your life savings from nursing home costs. But hiding money in the house is not one of them.
When you apply for Medicaid, the government asks you to list your assets. If you don’t tell them about your mattress money, you’re committing a crime. 

Will the government find out? The answer in many cases is yes. Medicaid does a thorough audit, and I mean thorough. They’ll look through your bank statements, for three years or more, and they’ll want to know where every penny went. They’ll look at your Social Security checks and question how you spent the money. And if they find out you lied and had some money hidden at home, you won’t have to worry about Medicaid or nursing home care, because you’ll be in jail.
I know times are rough. But hiding money under the bed won’t help. If you don’t want to put your cash in the bank, how about this, for an exotic idea. Why not spend some of it on yourself? Does Hawaii sound tempting?

---Armond Budish

PROTECTING YOURSELF AND YOUR UNMARRIED PARTNER

Legal Segment Show 212

Air date: 4/27/03

The times they are a changein’. It used to be that older folks never just “lived together”. Yet today many older people choose a committed but unmarried relationship. If you choose to go down this path, instead of the wedding aisle, you need to understand the planning challenges. Here to describe the top four legal problems for unmarried partners and the solutions that go with them, is my law partner, Jennifer Peck.
 

Problem #1: The inability to make health care decisions for an unmarried partner.

No matter how committed you are, without that wedding band you have no legal rights to make health decisions for your partner.
Let’s say your partner suffers a stroke and can no longer make his own health care decisions. The two of you have been together for years and have talked about what he’d like in this situation. You want to make sure your partner’s wishes are followed, but you have no legal say.
To make matters worse, your partner’s estranged daughter shows up. And the doctors talk to her, not you. Without the proper documents, you just don’t count.
 

Protection #1: Name your partner, and your partner should name you, in a health care durable power of attorney.
This simple document changes everything. With this piece of paper, you can make sure your partner can make your health care decisions if you can’t make your own.
 

Problem #2:  If you become incapacitated, your partner has no rights to help with your finances.

This is similar to the medical problems we just discussed. And the solution is similar, too. 

Protection #2: If you give your partner a financial durable power of attorney, then he can pay your bills, and manage your investments for you.

This is so important in the event that you can’t manage for yourself.

Question: What about just making your partner a joint owner on your accounts?

Answer: You can do that, but then the person could take all your money for himself. And at your death, he’ll get all these funds. That may not be the outcome you want. A durable financial power of attorney lets him help you manage your funds without turning them over to him.
 

Problem #3: Getting Health insurance coverage

For married couples, one spouse often gets health insurance coverage from the other spouse’s employer or former employer. But unmarried couples did not get that benefit, until recently.
 

Protection #3: Now, an increasing number of companies allow unmarried partners to obtain employee benefits including health care.

Check your partner’s benefit plan to find out if you’re eligible.

Problem #4: Splitting thing up after you split up.

Divorce laws set lots of rules when a marriage ends. But there’s no law governing a split between unmarried partners.
For example, if you and your partner own a house together, how do you get back your half of the home equity? What if your ex-partner refuses to move out of the house?
And who gets the car and household furnishings you purchased together? Who’s responsible for the debts? Maybe you signed for a home equity loan, but you can’t make the payments without your ex-partner’s contribution.
And who gets custody of kitty and Fido? All of these issues create tough legal problems which often end up in court.
 

Protection #4: Make a cohabitation agreement now, while you’re happy and have no plans to split up.

This agreement should be prepared by a lawyer and sets the rules in advance between unmarried couples. For example, you can spell out an agreement to divide up the household items, cars, even the pets.

Living together used to be something only your kids did. Now older folks are choosing this option, too. Just make sure you understand the special legal problems that come up. And give yourselves an “unwedding present” by vowing to follow Jennifer’s tips.

---Jennifer Peck

SHOULD YOU REMARRY OR STAY SINGLE?

Legal Segment Show 213

Air date: 5/4/03

From a purely legal and financial standpoint, are you better off getting married, or just living together? The answer can have a huge impact on your life and your pocketbook.
 

Let’s take a look at the most significant legal and financial advantages of marriage, and then we’ll compare the benefits of living together without tying the knot.
 

Marriage Advantage #1. If your partner has higher Social Security benefits than you, marriage may entitle you to a nice wedding gift from Uncle Sam - - an increase in your benefits. You must be married a year before the increase kicks in.
 

Marriage Advantage #2. If your partner gets health coverage through his employer or former employer, marriage might be a key to your good health. Employers occasionally will cover unmarried couples, but your partner’s employer is more likely to say “he will” provide coverage when you’ve said “I do”.
 

Marriage Advantage #3 is a Right to Your Spouse’s Pension and Real Estate. Tying the knot automatically ties you into ownership of your spouse’s home and company pension.
 

Marriage Advantage #4. Ohio’s marriage laws give you very important rights to a spouse’s assets in divorce or at death. But unmarried persons are entitled to nothing.
 

So there are some important financial and legal advantages to getting a marriage certificate. But there’s a hitch. Not everyone should get hitched. In some cases, tying the knot can cause some knotty problems. Let’s look at the top benefits of just living together.

Number 1. Depending on your income, a marriage may cause you and your spouse to pay higher income taxes. Remaining unmarried may save you money.
 

Number 2. Staying unmarried keeps your partner’s hands off your assets at your death. You may want your life savings to pass to your children or other family members, but not to your partner. A spouse would have legal rights to part of your estate at death. Staying unmarried will keep your partner’s hands off your money and property.
 

Number 3. Staying unmarried may protect Social Security benefits. If you were previously married, and your spouse died, you may be entitled to Social Security benefits based on his earnings record.
But you must be unmarried at the time you apply, or you must not have remarried until after you reach age 60. So if you are thinking of remarrying, think again. You may be a lot better off financially if you wait until after you turn 60.

Number 4. Staying unmarried may protect your savings from your partner’s debts. Whether married or not, in most cases you can’t be held liable for your partner’s unpaid credit cards or other debts. But there are two important exceptions. Married couples are responsible for one another’s medical bills. And if your spouse goes to a nursing home, your life savings will be jeopardized. Staying unmarried protects your assets from your partner’s medical and long term care costs.

So what’s all this mean to you? Should you get married or just live together? There’s no simple answer that applies to everyone. Each situation is different. Before you decide to get hitched, you should have three conversations: one with your kids, one with your clergy, and the third, with your lawyer. Yes, you’re stuck with us lawyers in almost everything you do. Even marriage.  But don't worry - you don't have to invite me to the wedding!

---Armond Budish

ARE LONG-TERM CARE COSTS DEDUCTIBLE?

Legal Segment Show 214

Air date: 5/11/03

Long Term Care is expensive. Whether you pay for care at home, assisted living, or a nursing home, the costs can be catastrophic. But Uncle Sam may lend a hand. Good tax planning can substantially reduce the cost to you. Here to explain the complex and evolving long term care tax rules is my complex and evolving long term law partner, Mike Solomon.
 

Question: Are nursing home costs tax deductible?

Answer: In most cases, yes. As long as the main reason for the nursing home stay is medical care, the entire costs are deductible.
To qualify, a person must be chronically ill, which means he’s certified by a physician, nurse or social worker as unable to perform without assistance at least 2 activities of daily living. Activities of daily living include eating, toileting, bathing, and dressing. Also Alzheimer’s disease qualifies as a chronic illness.
 

Question: Is the entire nursing home bill deductible?

Answer: As long as the person is in the nursing home under a plan or recommendation of a doctor, nurse or social worker, the entire cost plus any medical extras (like prescriptions) are deductible. Non-medical extras, such as long distance telephone calls, are not deductible.
 

Question: What about home care and assisted living?

Answer: This gets much more complicated.  Again, if the person is chronically ill, care in assisted living or at home should be deductible if provided under a plan of care presented by a licensed healthcare professional.
Many assisted living facilities can give you a breakdown of your bill, specifying how much qualifies for a medical deduction. Home care would have to be looked at on a case-by-case basis.
But lots of people are missing out on deductions they’re entitled to receive.
 

Question: Does home care have to be provided by a nurse?

Answer: No. As long as the services are the kind that would be provided by a nurse, such as giving medications, changing dressings, bathing and grooming.
 

Question: What if the home caregiver also does some general housekeeper?

Answer: If the caregiver spends 70% of her time doing nursing type care and 30% doing housekeeping, then 70% of your payments are deductible.
 

Question:  Can you deduct medical expenses paid by a child for a parent?

Answer: Yes, as long as you pay more than 50% of your parent’s support expenses. And you also may be able to cut your taxes by claiming your parent as a dependant.

Question: Where can we get more information?

Answer: IRS Publication No. 502. Go to www.irs.gov.

Long term care is expensive. Very expensive. The government doesn’t give us much, but it does give us some helpful tax breaks. Don’t miss out. Take advantage of Mike’s tax tips.

---Michael Solomon

LITTLE KNOWN TIPS TO RAISE YOUR SOCIAL SECURITY BENEFITS

Legal Segment Show 215

Air date: 6/1/03

If you’re like most people, you don’t know anything about the workings of the Social Security program. You wait until you retire, then apply for benefits. And from there you assume the government knows what it’s doing.
Now think about that. Most people blindly rely on the government to do the right thing. That’s pretty scary.
You actually have options when it comes to Social Security. The government never tells you much about these. But making the right decisions can add to your benefits; the wrong decisions can severely cut your retirement income.
Let’s take a look at a few of the decisions that can affect you.
First, when should you begin taking your Social Security benefits? Normal retirement age is age 65 and two months. At that age you will get your so-called “full” benefits. But you get higher monthly checks if you delay your start after that age, and lower payments if you start earlier, as early as 62.
So which choice is best? If you had a crystal ball and knew you’d live into your late 80s or beyond, it would be a better deal to wait until 65 to start your benefits.
But since most of us can’t see the future, it’s usually a safer bet to take your benefits as early as possible. Too many people wait to start their benefits, then die, and wind up getting little or nothing back after paying into Social Security for an entire lifetime.
My second tip applies if both you and your spouse are covered by Social Security. Here’s the situation. You retire and start taking your own Social Security benefits. Later your spouse retires and begins his higher monthly benefits.
At that point, you can switch to spouse benefits based on his earnings record. Switching may earn you a raise of hundreds of dollars a month. The government won’t tell you this. You have to take the initiative.
My next two tips involve divorce. Let’s say you’ve been married almost ten years, but it’s just not working out. So you’ve decided to file for divorce.
You may come out ahead delaying the divorce for a few more months.  With ten years of marriage, you’ll qualify for ex-spouse Social Security benefits. Anything less than 10 years of marriage, you lose out.  Divorcing a few months too early could cost you hundreds of dollars every month for the rest of your life.
Ready for the next tip? Let’s say you passed age 62 and are getting benefits based on your spouse’s record. If you divorce within ten years of marriage, you’ll lose your spouse benefits beginning with the month in which the divorce occurs. So let’s say you are getting divorced May 31st.  You’ll lose your check for the entire month of May. But if you delay the divorce one day, until June 1st, you get to keep the May check. This little tip could save you hundreds of dollars. That may be enough to pay your divorce lawyer, for about ten minutes of his time!
My last tips today could help you get Social Security benefits before you reach age 62. If your spouse has died, you can start checks coming at age 60. If you’re disabled, you can collect based on your late spouse’s record beginning as early as 50. Plus, if you worked and paid into Social Security yourself, a disability may entitle you to your own benefits at any age.
 

Are you confused yet? Social Security is complicated. Don’t just assume the government will take the initiative to make sure you’ll get all the benefits the law entitles you to receive. Because it won’t happen. Lots of folks lose out on their rightful checks.
Where can you learn more?  Your best bet is the Social Security Handbook, available at www.ssa.gov. It’s got lots of information, but it’s not easy reading.

---Armond Budish

WHERE TO LOOK FOR FREE LEGAL INFORMATION

Legal Segment Show 217

Air date: 5/25/03

In today’s world, the law affects almost everything we do.   From health insurance claims, to home remodeling, to purchasing a car or house, to getting married or divorced.   But it’s not very easy to protect your legal rights if you don’t know what they are and how to enforce them.   And just to really confuse you, the courts and legislature are constantly changing their minds and the laws.

Lawyers certainly can help.   But they, we, can be expensive.   I hope my colleagues won’t string me up for saying so, but many folks would prefer to avoid lawyers because of the steep fees.

You can, with a little research, figure out when you absolutely, positively, no doubt about it, need a lawyer and when you can survive without one.  Your best friend is the Internet.  It offers a wealth of free legal resources.  All you need is a computer, modem, and maybe a grandchild to help show you how to get started.

Here are a few of my favorite Internet addresses:

www.findlaw.com  This is a great starting point to research the law on any topic.   Public and consumer resources are the place to begin.

www.nolo.com  The Nolo Self-Help Law Center is one of the best resources for legal answers.   There are articles on lots of helpful subjects, like what to expect in divorce court, how to get bill collectors off your back, and how to handle your own court case.

www.courttv.com  You don’t have to watch the cable network to enjoy this site.   Read about noteworthy criminal cases such as the Robert Blake, Laci Peterson, and Zacarias Moussaoui cases.

www.clelaw.lib.oh.us/  This is the site for the Cleveland Law Library.   A great database allows you to research federal and Ohio laws and cases.

www.ohiobar.org  Go to the Public Area of the Ohio Bar Association’s website for good, basic information on Ohio laws that affect us all.

www.law.cornell.edu  This may be the site most used by attorneys to research the law.     If it’s good enough for us, why not take a look yourself?

http:/thomas.loc.gov  This is the best source of federal legislative information on the internet.   Find out all you need to know about pending and passed legislation.

www.firstgov.gov  This is a general website for searching all agencies of the federal government.   Do you have questions about Social Security or Medicare?   Interested in a Passport application?   Looking for a federal park to enjoy this summer?   Would you like information about your consumer rights?  It’s all available right here.

www.goldenopportunities.tv This is the website for this television program.  Each week we recap all the important tips and information provided on the show.   For example, if you want to reveal all of the websites I just provided, we’ll list them right on our website.  

Of course, we provide legal tips and advice right here at 11:30 each Sunday.   And if legal advice isn’t your cup of tea, we offer the best health, financial and lifestyle hints and information too.

And finally, I couldn’t end without mentioning another excellent source for free legal information and assistance.  It’s my “You and the Law” column in the Cleveland Plain Dealer.   For 21 years, every Sunday, I’ve been writing about current legal news you can use.  And speaking of news, this is hot off the presses.   The “You and the Law” column is moving to Fridays.   So look for my smiling face this Friday and every Friday in the Cleveland Plain Dealer.

---Armond Budish

POWER OF APPOINTMENT DEEDS

Legal Segment Show 218

Air date: 6/15/03

Lots of people give away or “quitclaim” their home to their kids. Why? There are several common reasons.

• You may give away your home while you’re alive, to avoid the hassles, delays, and costs of probate at death.

• You may give away your home while you’re alive, to cut the size of your estate, to reduce or eliminate estate or death taxes at your death.

• And the most common reason you may want to give away your home is to protect it in case you ever need nursing home care. If you own a home, and need nursing home care, chances are good that the state, not your heirs, will wind up with the house. You may protect the home by turning ownership over to your children.

But there are risks and costs if you give away your home.

• The most obvious is your loss of control. If your kids become the owner of your home, it’s theirs. They can charge you rent, or even throw you out.

• If your children are married, their spouses also become owners under Ohio law. Even if you don’t put them on the deed. When one of your kids gets divorced, or dies, the child’s spouse could force a sale of your property. And you are out on the street.

• And giving your house to your kids during your life will add to their taxes when the home is sold. If you kept the home until you died, then passed it to your children at your death, they’d pay no capital gains tax on the profits when they sell it. But if you give them the house during your life, then when they sell the home they will pay capital gains tax. Giving the home away could cost your kids thousands of dollars in extra taxes.

Now the big Question: is there any way to avoid these problems? To give your home away, but still keep some control? To protect it from a child that turns evil? Or a child’s spouse? And to avoid capital gains tax?
The answer is yes. The secret money-saving password for today is: power of appointment deed. A power of appointment deed is a powerful tool that gives you some nice protections.
Here’s how it works. You still give the house away to your kids.  But you keep a legal right to re-transfer it in the future. Let’s say you give the house to your three children. Later, you have a falling out with your son Bobby or his wife. You can take Bobby’s share of the house and re-transfer it. You cannot take it back for yourself. But you could give Bobby’s share to your other two kids, or maybe to your grandchildren. Just the threat of re-transferring Bobby’s share, taking it from him, might keep Bobby in line.
The power of appointment deed may also save thousands of dollars in capital gains tax. Let’s say you give the house to your kids with a power of appointment deed. At your death, the kids sell the house for a lot more than you originally paid. Your children pay no tax on the sale, thanks to this special deed.

So let’s review. It may make sense to give your home to the kids, to protect it from probate, death taxes and nursing homes. But it’s risky, and costly. You lose control. Your kids can throw you out. Your kids’ spouses become owners. And your children will get socked with extra capital gains taxes.
Through the magic of a power of appointment deed, you still protect the home from probate, estate taxes and nursing homes. But you keep indirect control, and you may avoid the death taxes.
Make an appointment with your lawyer to talk about the power of a power of appointment deed. You may not be able to have your cake and eat it too. But you can give away your home, and keep control too.

---Armond Budish

WHY SOME FOLKS GET DIVORCED TO PROTECT THEIR SAVINGS

Legal Segment Show 219

Air date: 6/22/03

Words that none of us want to hear: your spouse must go to a nursing home. The emotional price is high, and overwhelming, the monetary costs are fifty or sixty thousand dollars per year.
 Your spouse’s assets generally must be used to pay for his bills. But what about your assets? The money in your own separate IRA or 401(k). Maybe an inheritance you received from your parents that’s always been kept apart from your spouse.
 You may be shocked to learn that your separate assets will not be protected from your spouse’s medical or nursing home bills. If your spouse becomes ill, your savings can disappear too. Medicaid will pay for your spouse’s nursing home bills, but only after his money, and yours, is pretty well used up.
 What if you have a prenuptial agreement?  This legal document is designed to protect your separate assets from your spouse and his bills. A prenuptial agreement, if done properly, is a strong and binding legal document. It can withstand an attack by an angry spouse, disgruntled children, and even your spouse’s big time creditors. But a prenuptial agreement is no match for Ohio Medicaid.  In Ohio, Medicaid ignores prenuptial agreements.
 If your spouse requires long term care, is there anything you can do to protect your money and property? If you watch Golden Opportunities regularly, and I hope you do, you know we periodically talk about different planning strategies that you can use to safeguard your life savings. One that we haven’t talked much about is divorce.
 
 Yes, you heard me right. Divorce.  Even though our politicians proclaim that they’re pro-family and pro-marriage, they’ve actually created laws that are anti-marriage and encourage divorce.
 I had one case recently. It was really very sad. The husband was severely injured in an auto accident and he had to go to a nursing home, long term. The monthly bills were phenomenal, and their life savings was dwindling quickly. By the time Medicaid would step in, the wife would not have had enough savings to live on.
 Here was a couple married 50 years, and I had to tell them that the best strategy they had, really the only way to preserve any financial security for the wife, was to get a divorce.
 This couple, and most of the folks that I work with, they take their marriage vows seriously.  The last thing they want to do is get a divorce. Especially at a time when their spouse is sick. Yet in some tragic cases, there’s no alternative.
 We live in the best country in the world. The richest, and one which places a very high value on marriage and family. So it’s very sad that this wonderful country of ours actually forces some of its citizens into divorce.  Some of our oldest and most vulnerable citizens. But until we come up with a more rational and fair system to cover the catastrophic costs of long term care, older folks will continue to learn, the hard way, that divorce may be necessary to preserve the financial security of the stay at home spouse.
This week, Budish and Solomon will be conducting seminars throughout the area. We’ll discuss the ins and outs of the Medicaid rules, not just for married couples, but for everyone. We’ll explain how you can take steps to protect your life savings from catastrophic nursing home costs. We’ll be presenting the most up to date rules changes, including an all new gifting rule. And we’ll tell you about divorce as a planning tool. So come on out and join us.

---Armond Budish

SELLING YOUR HOME TO YOUR KIDS

Legal Segment Show 221

Air date: 7/20/03

Lots of older folks are cash poor, but house rich. You may not have enough money to pay your bills and live a decent lifestyle, but you’re not poor because you own your house.
Wouldn’t it be great to be able to tap into the value of your home without selling it and moving out? Earlier in this morning’s show, our financial expert, Larry Kurlander, spoke about one good option, a reverse mortgage. Now let’s talk about two others. Both involve selling the home to your child or children. With both of these strategies, you get cash, and your child gets a good investment.
The first strategy is called a sale of a remainder interest, keeping a life estate. Let’s say you’re 70 years old, and your home is worth $100,000.  You decide you could use $40,000, so you sell the home to your children for that amount. You get $40,000 cash, and your kids get the house.
But wait. They don’t get the house free and clear.  You keep a legal right to live in the home. It’s called a life estate. And with that, you can stay in the house as long as you want. Your kids can’t throw you out.
If you sell a $100,000 home to your kids for $40,000, aren’t you making a $60,000 gift? Won’t there be a gift tax? The answer is no. Since you are keeping a life estate, there’s no gift, and no tax.
So you get cash, which you can invest or spend. And your children get a home worth $100,000 for a cost of only $40,000. At your death, they can sell it and pocket the cash.
The second strategy is called a sale and leaseback.  In this example, you sell your $100,000 home to your son for the full amount. You get $100,000 cash, and your son gets a deed to the home. You’ll need a lawyer to handle the paperwork.
Again, you want a guaranteed right to live there, so you sign a long term lease. This can be set up in different ways. One option would be to pay your son monthly rent, plus the home-related costs for things like real estate taxes and insurance.
Your rent payments give your son a profit on his investment. If you pay him $350 a month, he’ll make a 4 percent return on his $100,000 investment. Plus he gets the benefit of any increase on the value of the home. And you have an extra $100,000 in your pocket. Everybody wins.
How do these techniques compare to a reverse mortgage? As Larry explained, a reverse mortgage is made through a commercial lender.  The lender will charge closing costs and interest. There are no direct costs if your kids buy the home.
But for your children to buy the home, they have to be able to come up with the money. If they can’t, then the reverse mortgage will be the better option.
My message to you today is that, if you own a home, you shouldn’t have to live like a pauper. Even if you’re short of cash, there are some wonderful techniques available to cash in on the equity you have in your home.
Talk with your lawyer about selling the home to kids. Pick an option that fits your needs. Get some money from your home, and enjoy yourself. A little more cash may help you take full advantage of your golden opportunities.

---Armond Budish

USING THE NEW TAX CUTS TO YOUR BENEFIT

Legal Segment Show 222

Air date: 7/27/03

Congress just cut taxes on capital gains and dividends. But what’s that really mean to you? And is there anything you should now be doing to maximize the benefits? Here to answer these questions is my law partner whose advice always pays big dividends, Mike Solomon.

Question: tell us about the tax cut on dividends and capital gains.

Answer:  Your viewers probably know what stock dividends are. Capital gains are the profits when you sell stocks, real estate, or other assets that have increased in value. Congress cut the maximum tax rate on dividends and capital gains from 20 percent to 15 percent.  And if your income is less than $56,800 (married) or $28,400 (single), the rate on capital gains is only five percent.

Question: How do these rates compare to taxes on regular income?

Answer: Always much lower. Today you’ll keep much more of your dividends and capital gains than your wages and interest income.
 

Question: Can you give an example?

Answer: If you own stocks and receive $10,000 of dividends, your maximum tax on these would be 15 percent, or $1,500. If those dividends were taxed as regular income, the tax might be as much as 35 percent or $3,500.
 

Question: How do these rates affect your IRAs, 401(K)s and annuities?

Answer: To be honest, these new tax rules make IRAs, 401(k)s, and annuities less attractive.  That’s because any amounts taken from these investments will be taxed at our regular income tax rates, which mean you’ll pay more tax.
 

Question: IRAs, 401(K)s and annuities often hold stocks.  If the stocks within these plans are sold for a profit, are you saying you'll pay more tax?

Answer: Yes, when you take out the money you’ll pay higher tax. You could buy the exact same stocks yourself, not in an IRA, 401(k), or annuity, and pay less tax.
 

Question: How will dividends from mutual funds be taxed?

Answer:  That will depend on what’s in the mutual fund.  Stocks in a mutual fund will be taxed at the lower rates. But bonds in mutual funds will be taxed at the higher rates on regular income.

Question: How about interest on savings and CDs?

Answer: Regular income tax rates. No change..
 

Question: Are these changes permanent?

Answer: No.  The lower rates last until 2009. Then in 2009, the lower rates disappear and we’re back to today’s rates.  Unless, of course, Congress changes the rules again.

Question: Does that make sense?

Answer: No. But since when should we expect Congress’ actions to make sense.

Congress has done you a favor, cutting the tax rates on stock dividends and capital gains. This means you’ll pay more taxes on annuities, IRAs, and CDs. This may be a good time to review your investments and if necessary, make changes that will take full advantage of the new tax laws. After all, wouldn’t you rather keep more of your money in your own pocket?

---Mike Solomon

NEW MEDICAID GIFTING RULE S

Legal Segment Show 224

Air date: 8/10/03

You already know that nursing homes are expensive, generally $50,000 to $70,000 dollars per year. Most middle class folks don’t have the funds to pay those bills from their income. So they have to sell assets - - stocks, CDs, IRAs, and even their homes, to make up the difference.
 Many people work a lifetime to save for their retirement and their spouse’s financial security, and they also hope to pass a little something on to their kids. Yet one catastrophic illness can quickly wipe out their entire nest egg.
 You may protect part of your savings by giving it away. Turning it over to your kids. So when the time comes to apply for Medicaid, you can show that you have little or nothing left.
 But you can’t give away your savings as you’re walking through the nursing home doors and expect to get Medicaid immediately.  Gifts trigger an ineligibility period, a penalty period. Calculating the ineligibility period has always been complicated. And now there are all new gifting rules to learn.
 That’s right, you’re hearing it here first. The State of Ohio has adopted new gifting rules.
 Here’s the nutshell version.  For every $4,512 given away, you trigger a one month Medicaid waiting period.  For example, with a $5,000 gift, you would divide $5,000 by $4,512, and that gives you 1.1 months. Ohio will round down, so you’d become ineligible for Medicaid for one month. A ten thousand dollar gift creates a two month waiting period.  A gift of $50,000 means you have to wait 11 months for Medicaid.
 In most cases, three years is the cap, the longest waiting period.  That means with a gift of about $165,000 or m ore, you generally must wait three years for Medicaid. For gifts of less than $165,000, the waiting period will be less than three years.
 There’s one major exception to the three year cap.  Gifts to or from a trust may trigger a five year wait for Medicaid benefits.
The gifting rules are designed to allow middle class folks facing huge nursing home bills to protect a portion of their life savings. The idea is, you pay a fair share during the ineligibility period, then the State assumes the catastrophic bills.
But the gifting rules are complicated, with lots of hidden traps, and the State will pounce on any mistake you make.

---Armond Budish

NEW PRESCRIPTION DRUG LEGISLATION

Legal Segment Show 225

Air date: 8/17/03

Both the U. S. House and Senate have passed a Medicare prescription drug benefit. Each bill is different. In the coming weeks, a final version will be hammered out and sent to the President.
 How good will the coverage be? The answer depends on your point of view. Some will say: “Something’s better than nothing.” Others will be extremely disappointed.
 While the House and Senate bills are quite different, there are a number of common threads.
 First, if you have low income, under about $14,000 for a single person, $19,000 for a couple, the coverage will be very good. Surprisingly good. But there’s a hitch.  You must also have very little in assets as well. And I’m very concerned that these plans now introduce into Medicare a means test for assets. One of the reasons so many people support the Medicare program is that they feel it’s fairly provided to everyone.
 Second, under both bills you’ll pay a relatively modest premium, about 35 dollars a month. And before any drug benefits start, you’ll pay an annual deductible of about $250. But you’ll pay little or no premiums and deductibles with low income and assets.
 
 Third, both bills provide excellent catastrophic coverage. Under the Senate bill, you’d pay 10 percent of costs over $5,800. And under the House version,
 you’d pay nothing for costs beyond $4,900. That is, unless your income is over 60,000 dollars a year, or 120,000 dollars for a couple.
 So far, all this sounds pretty good. But there are two big problems with both bills. First, if you don’t have high medicine bills, under about $750 a year, you’ll actually pay more, not less, after this legislation is passed. And second is the doughnut hole.  There are large gaps in the middle of the coverage.  Under the Senate bill, you’d pay all costs between 4,500 and 5,800 dollars. Under the House bill, you’d pay all costs between 2,000 and 4,900 dollars.
 U. S. Senator Barbara Boxer tried to fill the gap in coverage, so that Americans could get the help they really need. But the Boxer Amendment failed. And you might be interested in knowing that both Ohio Senators, Voinovich and DeWine, voted against the Boxer Amendment.
 So how should we evaluate the prescription drug program Congress is about to pass? Well, compared to what we have now, it’s surprisingly good.  But compared to the prescription drug benefits that Congress provides to itself, it’s sickening. Congress gets a Cadillac, yet they’re giving us a KIA.
The saddest thing about the legislation is that it will do nothing to strike at the real problem, and that’s the skyrocketing costs of prescription drugs. Until our elected officials stand up to the pharmaceutical industry and say enough is enough, there will not be a Medicare benefit that can provide true relief for our nation’s senior citizens. Ducking the cost issue is simply a prescription for disaster.

---Armond Budish

A WOMAN WHO FOUGHT THE SOCIAL SECURITY ADMINISTRATION AND WON

Legal Segment Show 227

Air date: 8/31/03

Most people get their Social Security benefits without any problems.  The system generally works pretty well.  But it’s not perfect.  Don’t assume that the Social Security Administration is always right.

Let me tell you about one nightmarish tale.

Sally retired in January 1992.  But to her surprise, she did not get a Social Security check.  When she contacted Social Security, she was told to contact the Railroad Retirement Board, because her late husband has worked for the railroad.  The Railroad Retirement Board sent her back to Social Security.  Sally made repeated calls to both offices, yet February came and she still received no check.  Only after contacting the offices of her U.S. Congressman and Senators did she start getting a monthly check from Social Security, four months late.  Her Medicare coverage didn’t begin until July, six months overdue.

Sally received a letter from the government saying she may be entitled to both Social Security and Railroad benefits, and in March 1993 she began receiving two monthly checks, one from Railroad and one from Social Security.  A month later, Sally received a second letter confirming that she was entitled to two monthly checks.

For three years, Sally received both checks without problems.  Then disaster struck.  In 1996, Social Security sent Sally a letter telling her that she was only entitled to Social Security, not Railroad, and that she had been overpaid 35 thousand dollars.  Unfortunately, Sally didn’t have that money.  She had spent it.  As a “courtesy,” Social Security decided simply to take Sally’s future monthly checks until the 35 thousand dollars had been repaid.  This would have been devastating, because Sally needed that income to live on.

Federal law would prohibit the government from taking steps against Sally if she could satisfy two tests.  First, she would have to show that she was not at fault for the overpayment. 

At Sally’s first appeal, the Judge determined that Sally was at fault.  The Judge said that Sally should have known that she was not entitled to checks from both Social Security and the Railroad.

But at her next appeal, the Federal Court reversed and found that Sally was not at fault.  Sally worked under Social Security, her late husband paid into the Railroad retirement system, and there was no reason for Sally to know that she was not entitled to two checks.

Second, Sally would also have to show that she spent the money, thinking she was entitled to it.

In this case, Sally spent the money she received on things she would not have purchased but for her understanding that the money was hers.  For example, she bought a condominium and sent money to her relatives in Europe.  The judge agreed that Sally satisfied this requirement as well.

After years of fighting with Social Security, Sally finally won.  But the experience was a nightmare.  You can imagine the anxiety when the government says you have to repay 35 thousand dollars that you don’t have.

The Social Security Administration does a pretty good job.  But it’s not perfect.  The government makes mistakes.  And when it does, it can take all the security out of Social Security.

---Armond Budish

SOCIAL SECURITY BENEFITS DON'T KEEP UP WITH INFLATION

Legal Segment Show 228

Air date: 9/7/03

No, you are not imagining it. Your Social Security benefits are not keeping up with inflation. That means they’re worth less to you each year.
 But how can this be true? Isn’t there a cost of living increase each year based on inflation?
 The answer is yes, you do get a cost of living increase, but it’s based on an unrealistic inflation calculation. Let me explain.
 In 1972, Congress provided automatic increases in Social Security so that benefits would keep up with inflation. But Congress failed to spell out how to calculate these increases. And that spells trouble.
 Right now the cost of living adjustment, the COLA, is based on the Consumer Price Index. This is a basket of about 200 goods and services people buy.  Things like food, clothing, transportation and shelter. If the price of these items goes up, your Social Security benefits go up.
 Over the last few years, the government says inflation is less than 2% annually. This year your Social Security COLA was a whopping 1.3%. And the few extra dollars you did receive were probably eaten up by the rate increase in Medicare premiums.
 The problem is that the government is putting the wrong items into the Consumer Price Index. Right now, the basket is filled with stuff purchased more by young people than seniors.  Younger kids spend more on new clothes, more on food, more on more on transportation than older folks.
 Seniors spend more on health care, and particularly medicine, along with housing and energy.  The costs for items purchased by older people are skyrocketing, yet those items aren’t counted as heavily in the Consumer Price Index basket.
 For example, while inflation was figured at 1.3%, the cost of medical care grew by 15%. Financial expert and columnist Malcolm Berko projects that the real inflation rate for retirees is 10 to 12 percent. And going up.
 Older people are getting a raw deal. What’s the answer? It’s really pretty simple.  Change the items in the basket that are used to calculate the Social Security Cost of Living Adjustment.
 A new basket that more accurately reflects seniors’ growing costs has actually been created by the Federal Bureau of Labor Statistics. It’s called the CPI-E.  If this new basket had been used since 1984, your annual benefits today would be about $400 higher.

Over the years, members of Congress who support fairness for seniors have proposed legislation to require use of this CPI-E basket. But each time, the legislation has been rejected.
It’s particularly aggravating that members of Congress themselves don’t have to depend on Social Security. They get a pension plan that is much, and I mean much more favorable.
Federal law says seniors should get a cost of living adjustment to keep pace with inflation. If you believe your costs are going up more than one or two percent a year; if you believe our government should take a more fair assessment of inflation for seniors, let your Senators and Congressman know that it’s the CPI-E that fits your market basket.

---Armond Budish

BLOODLINE TRUSTS

Legal Segment Show 229

Air date: 9/14/03

Your son-in-law or daughter-in-law could wind up with everything you own. That’s right: the in-laws, who you never liked, may get your house, investments and savings, unless you plan ahead. Here to tell us about the latest developments in “bloodline trusts” is a lawyer we can trust, my law partner Michael Solomon.
 

Question: You leave everything to your child.  Maybe with a will, or joint accounts.  Can your child's spouse really wind up with everything?

Answer: Yes. And it happens more often than people think.  Let’s say you leave an inheritance to your son, and he gets a divorce 10 years later. The spouse will go after half. And if your son dies 5 or 10 years after you, the spouse probably gets everything.
 

Question: Is that a problem?

Answer:  It sure can be.  If your child gets divorced, your child loses if the spouse gets half the inheritance. And if your child divorces or dies, your grandchildren may also lose. The inheritance goes to the in-law. That person may spend the money, or leave it to a new boyfriend, girlfriend, husband, or wife, and your grandchildren never get it. The inheritance may be permanently out of your family.

Question: Don't will protect against that?

Answer: No. Many people think they are protected.  The best a will can do is to protect in case the child dies before you. In that case, you can provide that the inheritance goes to the grandchildren, not the child’s spouse. But that only helps if the child dies before you, which is rare.
When you leave assets by joint ownership, beneficiary designations, a will or standard trust, you cannot protect against in-laws getting your inheritance. The only way to protect is a bloodline trust.

Question: What's a bloodline trust?

Answer: Instead of leaving an inheritance directly to your children, the inheritance goes into a continuing trust to benefit your children. You children can be in control, so they don’t have to ask anyone else for money. They can take money out of the trust whenever they need money.
 

Question: So what's the advantage?

Answer: If a child gets a divorce, the trust is a separate asset, not marital. Only marital assets are split in a divorce. If your child dies, the inheritance goes to the child’s children, not the child’s spouse.

Question: Are there other benefits to a bloodline trust?

Answer: Yes. Some of these are new.  You can protect the trust funds from the children’s creditors and lawsuits. You can set it up so the trust funds avoid federal and Ohio estate tax when your children die. And you can extend all of the bloodline benefits for grandchildren, great-grandchildren and down your family line forever.

Question: We've talked about bloodline.  Will this work for adopted children?

Answer: Yes. We use the term bloodline, but it can keep inheritances from the spouses of any beneficiaries: adopted kids, brothers, sisters, cousins, anyone. You keep the inheritance in your family.

Question: Who should be the trustee?
Answer: You, then kids if they’re responsible. If not, third party (other family members or bank).
 

Bloodline trusts are the only way to protect your estate from your children’s spouses. Wills won’t do it. Joint ownership with kids, or naming children as beneficiaries, won’t do it. This stuff is complicated. If you’d like to learn more, come on out to a program that our law firm will be doing this week. Mike and I will look forward to seeing you. Here’s the number to call.

---Mike Solomon

Divorce Tax Traps
Legal Segment Show 231
Air date: 11/2/03

Divorce is never easy. It’s not as simple as just split everything down the middle. Lots of people make lots of costly mistakes. Today, my law partner, Laurie Steiner, is here to reveal the top divorce tax traps, and how you can avoid them.
 
 
 1. LAURIE, WHAT’S THE NUMBER ONE DIVORCE TAX TRAP?
 
 Answer: Ignoring the future tax you’ll have to pay on an asset you receive in a divorce.
 Lets take an example. $100,000 of IRAs is not equal to $100,000 of CDs. If your spouse gets $100,000 of CDs, he can take that and spend it, with no tax. But if you take money from your IRAs, that will be taxable. After paying tax on a $100,000 IRA, you may wind up with only $75,000 or so to spend.
 So IRAs typically are not as good as CDs in a divorce.
 
 2. WHAT’S YOUR NUMBER TWO TAX TRAP?
 
 Answer: Appreciated assets are not worth as much as cash. 
For example, if you get $100,000 of stocks, and they were originally purchased for $20,000, you have an $80,000 profit or gain when you sell. At today’s tax rates, you’d pay 15% tax, or about $12,000. So if you get $100,000 of stocks, and your spouse gets $100,000 of cash, your spouse is coming out ahead. Stocks are not equal to cash.
 
 2A. BUT WHAT IF THE STOCKS ARE GOOD, HIGH QUALITY INVESTMENTS?
 
 Answer: You’re still better off with the cash. If you get $100,000 of cash, you could go out and buy the same stocks. And because they were just purchased, your “basis” is $100,000, which means you can sell them for much less or no tax.
 
 3. ARE YOU BETTER OFF GETTING THE HOME, OR OTHER ASSETS?
 
 Answer: Many people, especially women, want the home in a divorce. They are emotionally tied, and they feel more secure. But in most cases, other investments are better.
The home is illiquid, it’s hard to turn it into cash. And a home typically entails costs, like real estate taxes and upkeep.
It’s not a tax trap, but you may still be better off with other assets.
 
 4. CAN YOU TELL US ABOUT ONE MORE TAX TRAP?
 
 Answer: Sure. If you receive alimony, or spousal support, that’s taxable income. It’s tax deductible for the payer, but it’s taxable to the recipient. So if you have a choice between getting alimony, or getting more as a lump sum distribution in the division, take the lump sum–that’s not taxable to you.
 
 4A. ARE CHILD SUPPORT PAYMENTS TAXABLE, TOO?
 
 Answer: No. If you have a choice between more child support or alimony, take the child support because that’s not taxable.

In a divorce, both spouses usually see a lower standard of living. Don’t make it worse by falling into costly tax traps. My thanks to Laurie Steiner for helping us divorce ourselves from tax mistakes.

MEDICAID AND YOUR HOME

Legal Segment Show 234

Air date: 12/7/03

Your home is probably one of your biggest assets. And certainly your most precious. Most folks want to live there for life, then leave it as an inheritance for heirs.
 Those plans, those dreams, may turn into nightmares if you or your spouse must go to a nursing home. Not only are your investments at risk. You could also lose your home.
 Medicaid is the safety net. This important program will pay for nursing home costs. But you can’t have much money or property to qualify.
 If you are unmarried, the home has never received any special protection. But married couples have been treated better.
 Most important, if you’re married and your spouse has to go to a nursing home, the home is protected.  The healthy spouse can live in the home and keep it, while the spouse in the nursing home gets Medicaid.
 Until recently, the law has allowed the healthy spouse to take steps to protect the house for the children.
 This has been the rule in Ohio for years, and continues to be the rule throughout the nation. But now the state, our Governor, has changed the law in Ohio.  The new Ohio rules make it harder than ever for Ohioans to protect their homes.
 Here’s an example. Your spouse goes to a nursing home. You spend most of your savings, and then your spouse gets Medicaid coverage.
 You can live in the home, but you’d also like to leave it to your kids. So what are your options?
 If you make a will leaving it to your children, the state will intercept it at your death, and sell it to repay your spouse’s Medicaid benefits.
 What if you put it into a revocable living trust? This will avoid probate at your death. And it used to protect the home for your children at your death.  But the state is now saying the house in a trust loses its Medicaid protection. The house in a trust may have to be sold, while you’re alive, leaving you with no place to live.
 Can you transfer the home to the kids after your spouse goes on Medicaid?  Historically, the answer has been yes. Once your spouse went on Medicaid, you could transfer the home. The transfer might effect your future eligibility, but it would not cause your spouse to lose his benefits.
 The federal rules, which Ohio is supposed to follow, require this approach. Federal law says that the healthy spouse may transfer the home without losing the spouse’s Medicaid.
 Sadly, Ohio doesn’t feel compelled to follow the federal law.  And Ohio is now threatening to change the rules to say: if you transfer the home to your kids, if you try to save the home, your spouse will be thrown off Medicaid. Out of the nursing home. Onto the street.
These changes are being done administratively, by the Ohio Department of Job and Family Services. The Medicaid Office. And that’s under the direction of the Governor. But that’s not the only problem. Our state legislators sit by and watch, quietly, without a word.
We need to tell our legislators to stand up for us. To stop these attacks on the poorest and oldest folks in our state.  Here’s the number. 1-800-282-0253.  Call and tell your legislators to stop the Governor’s attacks on Medicaid. And if they won’t stand up for us, then we’ll have to send them a more clear message, next November.

---Armond Budish