The Facts: Jack is fifty years old and has Down’s Syndrome. His mother is eighty-three years old and is a widow. Jack’s mother was an only child; Jack is an only child.
The Problem: Jack’s mother was recently diagnosed with Stage Four lung cancer. She has decided not to go through a second round of chemotherapy or radiation. Jack’s mother is afraid – not of dying, per se, but of leaving Jack alone in a world that he doesn’t completely understand.
Unfortunately, this scenario is one that many attorneys either don’t understand or can’t appreciate on a personal level. Maybe their suggestion is for Jack to be committed to an institution for people with mental or physical disabilities. Maybe their suggestion is to find a distant relative who can care for Jack, removing him from the only home he has ever known. For Jack’s mother, neither of these scenarios presented an answer that she could rest with at night. After meeting with countless attorneys, Jack’s mother came to the conclusion that the only way to ensure Jack’s safety was for her to live forever. But she knew that her time was coming to an end.
At Thom L. Cooper Co., LPA, we see many clients who face scenarios similar to Jack and his mother. Sometimes, a simple trust presents the best solution – one that provides for a trustee to manage a disabled child’s assets so that he or she can live independently for as long as possible without interference from the court system. Other times, a more complex planning strategy needs to be implemented in order to preserve a parent’s assets so that there are options when a disabled child is left alone. The good news is that there are solutions. The bad news is these solutions often involve legal consequences that extend beyond the daily care of the disabled child; they often include the care of the parent as their own health fails. There is help – you just have to know where to look.
The Solution: If you or a loved one are planning for the care of a disabled child, your best option is to pursue a life plan with a certified Elder Law attorney whose expertise can help construct a plan tailored to a client’s specific, special needs. An attorney with experience is great; an attorney with experience who listens and cares is better.
by Kathy Cooper
Sometimes, with the best of intentions, things just don’t work out like you planned. Joe and Marie were married for five years. It was a second marriage for both and they each had children of their own from previous marriages.
Shortly after they married, Joe became critically ill with a degenerative nerve illness that whittled away at his strength and his ability to care for himself. Marie stuck with him and took care of him through some tough times. The bills came piling in from his terrible illness, so their “living money” was getting low.
When Joe finally passed away, Marie called in total distress. It turns out that Joe had named his daughters as the beneficiaries of his large IRAs. Marie was fine with his daughters receiving his IRAs, after all, she wanted her children to be the heirs of her estate.
The problem was this: because he was the first to die and he gave his IRAs to his children directly at that time – and NOT to his spouse, the Ohio Estate Tax was due immediately. There is no Estate Tax exemption for non-spousal beneficiaries. Marie ended up owing the Ohio Estate Tax on the proceeds of the IRAs. Even worse for Marie was that Joe’s IRA paid out directly to his daughters so there was nothing held back to help Marie pay the taxes!
With the best of intentions to help his children, Joe created a very difficult situation for his second wife. If you are faced with a terminal illness, work with a qualified elder law attorney to make sure your wishes are carried out without unintended consequences!
by Kathy Cooper
Among the most common family money disputes are inheritance quarrels, which can be particularly painful because they erupt during periods of grief and loss.
Whether it’s a matter of a piece of jewelry that has sentimental value or the disposal of a family farm, beneficiaries don’t always agree on how to deal with inheritance issues. Emotional tension, jealousy, and sibling rivalry exist in most families and are all likely sparks for an inheritance dispute.
Consider John, who was the trustee for his dad’s estate. The problem was that Dad had been married twice and had two sets of children who were civil but had little interaction with each other. Dad was of the opinion that the best plan was to “let them figure it out – I won’t be there, so I won’t care!”
The big assets – the house, the farm and the farm equipment – were left to all of the children equally through Dad’s trust, so John had little trouble over distribution of these assets. On the other hand, John was left with a house full of mementos and no direction in Dad’s Trust about where they should go. No matter what John did, the second family was upset. They fought over who got the pictures and whose mom bought the corner cupboard. They fought over the value of the furniture and who should keep up the lawn work until the house was sold. It became so contentious that the second family demanded an additional appraisal to determine the value of the contents of the house. They did not care that the costs for the appraisal reduced everyone’s inheritance!
In the end, the families became bitter enemies. Even with Dad’s c’est la vie attitude, it was never his intention to polarize his families. With a little forethought and written direction about who should get what in his Trust, he could have avoided this situation. It’s a very good idea to be as specific as possible about your wishes for distribution of the sentimental items you possess.
By Daneen Cline
Louise is 78 and has been a resident in a nursing home for 18 months. Her daughter, Pat, has spent all of Louise’s assets to pay for her care and knows that she now must make a medicaid application for her mother. The nursing home provides Pat with the application form and a list of documents she will need, but she must attend the face to face interview with the caseworker at the Department of Job & Family Services. She assembles the required documents, meets with the caseworker and is surprised to find that she is pleasant, seems to understand the situation Louise is in and wants to help. After the caseworker gathers all the information about Louise’s assets she asks about any asset transfers Louise made in the past 5 years. Pat tells her that almost 3 years ago her mother gave each of her 4 grandchildren $30,000 as a gift. At the end of the appointment the caseworker told Pat that her mother was financially eligible for public assistance but the gifts she had made were considered to be improper transfers and because of them, the State of Ohio wouldn’t pay her nursing home bill for 24 months.
As a result, Pat was forced to move Louise to the County Home with the cost being covered by Louise and her daughter Pat.
Louise made one of the most common mistakes there is, she gifted money without knowing what the consequences would be if a health situation occurred. Public Assistance regulations do allow for gifting, but there are penalties associated with them. To gift assets successfully it is important to know what those penalties are and how and when they will be applied. Before gifting is done, a qualified Elder Law Attorney should be consulted to implement a plan that takes into consideration the possibility of a health crisis as well as one that conforms to the necessary regulations.
With offices in Lebanon, Sidney, and Centerburg, a great portion of our client base consists of farmers and their families whose main asset is the land where they live and work. For most, this land has been in their family for many generations. It has not only a monetary value, but also a very significant sentimental value.
While the real estate market has fallen significantly in the last few years, the value of farmland has been sheltered from the current crisis and in some cases it has even increased. Consequently, a common concern for our farm clients is what happens when the value of their land causes a significant Estate Tax (we sometimes call this the “death tax”) on their children?
Recently, we were informed of the death of Betty. She was a long time client for whom we had developed an estate plan many years ago. Her son, David, met with me a short time after Betty had passed away and was terrified because his financial advisors had explained that he would have to pay significant Estate Taxes because of the value of Betty’s taxable estate. Her estate consisted of a $15K checking account and a $1.5 million farm property. His advisor explained that there would likely be a $75,000 Ohio Estate Tax consequence because of the property and David would need to sell portions of the farm to satisfy this tax. For David, selling a portion of the farm was a terrible option.
The question was, did David have any options other than selling the farm and paying the Estate Tax? It turns out that David had been farming the land himself for many years and wanted to keep it in the family. I explained that Ohio tax laws provide for an alternate valuation that may be used for farm property. Taking advantage of this alternate valuation would result in a significant reduction in the $75,000 Estate Tax it looked like he would have to pay. This is possible because the farm can be considered “Qualified Farm Property” and David is considered a “Qualified Heir” under
ORC 5731.011. David’s only commitment is that he will be required to keep the farm in Ohio’s CAUV program for the next few years following Betty’s death.
The alternate valuation election has certainly relieved a lot of stress for David and his family during a difficult time.
If you have a similar scenario, it is important that you and your advisors understand the options available to farmers and their families at death.
Margaret and Sam have always taken care of their daughter, Elizabeth. She is 45, has never worked, and has never left home. She is “developmentally disabled” and receives SSI (Supplemental Security Income). They have always worried about who would take care of her after they die. Some years ago, Sam was diagnosed with dementia. His health has deteriorated to the point that Margaret can no longer take care of him. Now she has placed Sam in a nursing home and is paying $4,000 per month out of savings. Although Margaret is satisfied with the nursing home Sam is in, she is worried that there will not be any money left to care for Elizabeth. The facility has a Medicaid bed available for Sam if he were financially eligible. However, according to the information Margaret received from the social worker, Sam is $48,000 away from Medicaid eligibility. Margaret wishes there was a way to save the $48,000 for Elizabeth after she and Sam are gone. There is. Margaret can consult an Elder Law attorney to set up a “special needs trust” with the $48,000 to provide for Elizabeth. As soon as Margaret transfers the money to the trust, Sam will be eligible for Medicaid. Elizabeth won’t lose her benefits, and her security is assured. Of course, all trusts must be reviewed for compliance with Medicaid rules. Failure to report assets is fraud, and when discovered, will cause loss of eligibility, repayment of benefits, and perhaps even criminal penalties.
