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 Elder
Law Update
North Carolina Edition
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Vol 2
Issue Two
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July 2008
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PLEASE VISIT MASON LAW
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I WANT TO KNOW
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If you have an idea or comment that
will help me make this a better
newsletter
please send it to me. Just
click! |
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Dear Bob,
238 years into the Great American
Experiment and counting. Saturday
evening the Masons began watching
the HBO series John Adams. So far,
after Episodes I and II we are
impressed.
For those of you who haven't seen
it, the first episode centers on
attorney John Adams' successful
defense of the British soldiers
accused of murder in the Boston
Massacre case. You can imagine his
popularity after that decision. Yet
the locals respected his integrity
and courage enough to send him to
the first Continental Congress.
Episode II covers the lead-up events
to the Declaration of Independence.
Lack of cohesion, argumentation,
entreaties to bargain with the King.
Yet sudden cohesion when the King
wrote back that treason would be met
with a noose.
Two things struck me. One was the
incredible courage and integrity of
the leading figures. The other was
the rather shallow, self-serving and
mundane view of many of the lesser
politicos and the mindless behavior
of the lawless mob.
Some things change . . . others
never do.
Update on Vet Benefits
Since publishing my Missing Puzzle
Piece brochure on veterans' benefits
(view by clicking
HERE). I have had enough further
questions that I wish to clarify two
related points.
If income exceeds the benefit
threshold (say, for example $1,842)
you may still qualify for benefits.
Remember, the VA looks at income
after a downward adjustment for
certain medical expenses (including
the cost of sitters, assisted living
facilities, or nursing homes). On a
second look many, many who believed
they did not qualify do qualify.
The other point is that while there
is an informal asset limit of around
$80,000, a variety of techniques can
be used to qualify . . . and often
they aren't too painful. So don't
give up simply because you believe
you are over the VA asset level.
Again, for more info look at
Veterans Benefits:The Missing Puzzle
Piece. By the way, if you need
some hard copies you may download
the online version or shoot me an
email and I'll send some to you.
Gift
Tax Repeal
As you may know the North Carolina
general assembly is on the verge of
repealing the gift tax. While that
is great news (the tax has been more
of a nuisance than a revenue
generator), it does not alter the
essential advice I will give clients
regarding transfers of assets.
Read below for my summary of why a
direct transfer to others (notably
children) is not a good idea and
what I propose as a much better
idea.
Accompanying Mom or Dad to the Doc's
Dr. Shevlin is back this month with
a great article. Here's the article
setup: Many older parents have a
child (even an in-law) accompany
them on visits to the doctor to
listen in, take notes, and weigh in
with commentary. That is going on in
both sides of my family as I write.
Dr. Shevlin concludes with a
resolution to herself on how she
intends to handle such situations as
a physician. Nevertheless,
children-caregivers should take much
of what she says to heart. Don't let
your own agenda cloud your thinking,
and listen to what Mom wants.
Preparing for the Emergency
For many readers (along both the
North Carolina and Georgia coasts)
summer fun may include more than
broiling under the sun - it may
involve dodging hurricanes.
Geriatric Care Manager Barbara Dunn
continues her three part series on
hurricane (and other emergency)
planning for seniors with episode 2.
Barbara has a wealth of knowledge in
this area and, in addition to
running her own practice, is Chair
of the Disaster Services Committee
for the Savannah Chapter of the Red
Cross.
Have a great 4th of July . . . and
give thanks for the courage,
character and intellect of John
Adams, Thomas Jefferson, Ben
Franklin and their colleagues.
Bob Mason
Certified Elder Law Attorney
Certified by the
National Elder Law Foundation,
recognized by the American Bar
Association as the certifying entity
for specialization in Elder Law.
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TRANSFERRING PROPERTY: THE WRONG WAY
AND THE RIGHT WAY
Bob Mason
My clients understand that I am
rarely in favor of outright
transfers of property (especially
real property) for asset protection
purposes. One of the reasons I have
not favored direct transfers is the
possibility of North Carolina gift
taxation.
In response to the
ALERT! of June 27 describing
a likely repeal of the North
Carolina gift tax (which would be
effective January 1, 2008, by the
way) a number of clients emailed me
and asked if my position regarding
direct transfers had changed.
Good question. The answer is: No.
I believe this is a good opportunity
to revisit why I rarely advise
direct transfers of property (often
to adult children) to protect those
assets. Quite often clients see me
years after a valuable piece of
property has been transferred
(perhaps a farm or a home) to
children . . . and if there is a
current crisis (perhaps Mom has gone
into a nursing home) the earlier
transfer worked well because the
asset is gone . . . and "protected".
The problem with direct transfers,
however, is that there are better
ways of handling the situation.
Further, even if the long-ago
transferred asset is out of Mom's
name it may not be "protected".
First, avoiding North Carolina gift
tax is usually but one of a number
of factors advising against such a
transfer. Even after the likely
repeal of the gift tax, the other
factors remain.
Trading Mom's and Dad's Risks for
the Kid's Risks
Second, when an asset is transferred
by parents to children in order to
avoid the parents' future risks
(often the fear of paying for
nursing home care), the transferred
asset is subject to a new set of
risks: the children's risks. Adult
children divorce, get sued, get in
trouble with the IRS or are
financially careless. The property
transferred by Mom and Dad is
subject to all of those risks.
A
Sound 'Basis' Saves Tax Dollars
Third, if there is any possibility
that the children may someday need
or want to sell the property, a
direct life time transfer may not
make sense, especially if the
property is highly appreciated.
Here's why.
"Basis" is a technical term that
refers to either what you paid for
property or what the property was
worth when you received the property
as a gift or an inheritance. There
are adjustments made to basis, but I
won't go into those here.
The amount someone receives on the
sale of property is called the
"amount realized" on the sale.
If someone sells property, the
amount realized minus the basis in
the property represents what you
make think of as "profit" but what
the tax code calls "gain" . . . as
in capital gain . . . as in capital
gain tax.
Now for the important part. If a
gift of property is made, the person
making the gift also transfers her
basis with the gifted property. If
Mom inherited the property in 1960
when the land was worth $100 an
acre, that is Mom's basis, and after
the transfer it is also the
children's basis. If the children
sell the property for $1,500 an
acre, the taxable gain will be
$1,400 an acre to the children.
On the other hand, if the children
do not receive the gift until (and
triggered by) Mom's death, the fair
market value of the property on
Mom's death will become the
children's basis. In this case if
the children receive the property
when it is worth $1,500 an acre and
sell the property for $1,500 an
acre, their taxable gain will be
zero (nothing!).
A
Better Way
So, what is the better way? Mom
could transfer the property to a
properly drafted trust (a plain
revocable or living trust will not
do), retain use of the property and
provide in the trust that the
property will pass to the children
on her death.
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After 5 years
the trust should be
irrelevant for Medicaid
purposes (Mom no longer owns
the property, after all . .
. the trust does).
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While Mom is
alive, the financial
mischief of the children is
also irrelevant (remember,
the trust owns the
property).
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If the trust
has been drafted correctly
and if it contains Mom's
residence, the trust may
sell Mom's residence and
still qualify for the tax
exclusion on the sale of a
home that Mom would have
enjoyed.
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When Mom
dies, the property will pass
to the children, and because
it was Mom's death that
triggered the transfer, the
children will receive
"stepped-up basis" to the
value of the property on the
date of Mom's death.
That's not too shabby!
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VISITING THE DOCTOR WITH MOM
Patricia Shevlin, MD
As a family member, I have
occasionally accompanied a relative
to a physician's office. I have been
in the exam room at times also. I
have served as driver, as informant
and as organizer of information,
prescriptions, and follow-up
appointments. I don't have this role
often. I hope, however, that some
of my recent experiences as a
physician will make me more aware of
the dynamics in the room the next
time I am in that role.
In my practice, I have many patients
who bring a family member to the
office visit. Mrs. Smith (not her
real name) is an example of the
complexity of the encounter. Mrs.
Smith has several children, one of
whom is usually with her. The
patient is fairly quiet in general,
but more so when compared to her
children.
Although I address the patient
first, I usually get a list of
complaints from the family member. I
try to watch Mrs. Smith's expression
as her symptoms are described. Some
days she appears disinterested.
Other days she will frown. She will
occasionally state, usually at the
end of a visit, that a particular
symptom is not very bothersome to
her at all. I find these office
visits very frustrating because I
don't want to spend time on a
symptom that isn't important to the
patient.
Recently, Mrs. Smith was
hospitalized. I had several
opportunities to speak to Mrs. Smith
alone and several facts became
clear. Like most of us, Mrs. Smith
wants to appease her family so she
will allow them to address what they
think is important to her. If it
appears that we are going to subject
her to testing, then she gives her
opinion and puts a stop to it.
Mrs. Smith also is very realistic
about her family. She knows they
would like to help her, but due to
multiple issues of their own, they
are not able to do much. She allows
them control in the office because
they feel better after the visit,
even if she doesn't. It's quite a
generous gift she's giving them: the
feeling of being helpful. She is
still in control in the exam room,
but her agenda may not be as
obvious.
So how will this information change
my next encounter with a patient and
family members? I must be aware of
the source of the information I am
given. I need to be sure to check
with the patient to be sure he or
she agrees with what's been said,
and with the plan of care. Finally,
I have to remind myself that family
dynamics are complicated, even in
the best of circumstances.
Patricia Shevlin, MD, is a principal
in Asheboro Family Physicians, with
offices in Asheboro, North Carolina.
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Evacuation Planning for Older Adults
Barbara J. Dunn, RN,
MSN
Editor's note: This is the second in
a three part series telling you how
to begin devising an emergency
evacuation plan for the elderly.
In the last issue of Elder Law
Update I stressed the absolute
importance of starting on a written
evacuation plan for older loved
ones. I also promised to discuss
some specific areas you must
consider. These may seem obvious,
but you must think through and plan
for each.
Mobility Needs
Label every single piece of durable
medical equipment (DME) no matter
how recognizable you think it is.
Walkers and canes packed into a van
or bus begin to look the same.
Is an electric scooter needed? Be
sure to plan for an extra battery. A
dead battery is useless, whether
going by private or public
transportation. Does the vehicle
have the means to transport the
scooter? Too often families face
having to leave the scooter behind.
If a wheelchair is necessary, will
it fit in the trunk or back seat and
who has the upper body strength to
load it?
Planning to take mom or dad home
with you? If so, are there mobility
barriers where you are going? How
will your loved one bathe, negotiate
the front stairs, or fit the wheel
chair through the bathroom door? Do
the bathrooms have grab bars and are
there scatter rugs that need to come
up?
Communication Needs
Eyeglasses and hearing aids can be a
problem during an evacuation. Be
sure to plan for an extra pair of
eyeglasses along with the
prescription. Even with a
prescription, replacing broken or
missing glasses hundreds of miles
from home is time consuming and
difficult at best. Don't forget to
label the glasses in some way. Does
your loved one wear a hearing aid?
Take along plenty of batteries-you
can't predict how long your loved
one will be gone.
Medication Needs
Have a current, accurate, list of
all medications. Keep it updated.
During a hurricane evacuation is not
a good time to be asking "Is Dad
really on this medication or was it
discontinued at the last visit?"
Have a current list of your loved
one's medical providers. Even then,
your loved one's primary physician
will likely evacuate too and may not
be reachable for medication issues.
What plans do you have for a back up
provider? Consider one of the web
based vehicles that make medical
records available no matter where
you are (www.medicalsummary.com is
one example). If medications are
running low, will the pharmacy plan
permit an early, emergency, refill?
Some will, some will not. Ask your
pharmacy, and then put it in your
plan.
Barbara Dunn, MSN, is owner of Elder
Care of Coastal Georgia, as well as
Chair of the Disaster Services
Committee of the Savannah Chapter of
the American Red Cross. You may
email comments and questions to
Barbara by clicking
HERE.
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The
Usual Disclaimer: This
newsletter is for general
information only. Please do not rely
on anything you read in this email
as definitive legal advice
applicable to you. All situations
are different, including yours.
Nothing you read in this newsletter
is a suitable substitute for
professional advice you may receive
from your attorney, your accountant,
or your tax advisor.
All contents copyrighted 2008 by
Mason Law, PC. Contents may be
republished with written permission
of Mason Law, PC (which permission
will usually be given!). |
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Mason Law, PC | 350 N. Cox St. No. 9 | ASHEBORO | NC | 27203
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