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Law Office of Michael D. DellaMonaca

Have a Plan for Life

What Doesn’t Medicare Cover?

Medicare Part A and Part B are also known as Original Medicare or Traditional Medicare. These two parts cover a large portion of your medical expenses, after you turn age 65. Part A is hospital insurance that helps pay for inpatient hospital stays, stays in skilled nursing facilities, surgery, hospice care and even some home health care.

Part B is your medical insurance that helps pay for doctors’ visits, outpatient care, some preventive services and some medical equipment and supplies. Most seniors can enroll in Medicare three months before the month they turn 65.

Kiplinger’s article, “7 Things Medicare Doesn’t Cover,” takes a closer look at what isn’t covered by Medicare, plus information about supplemental insurance policies and strategies that can help cover the additional costs, so you don’t wind up with unanticipated medical bills in retirement.

Prescription Drugs. Medicare doesn’t provide coverage for outpatient prescription drugs. However, you can purchase a separate Part D prescription-drug policy for that or a Medicare Advantage plan that covers both medical and drug costs. You can sign up for Part D or Medicare Advantage coverage, when you enroll in Medicare or when you lose other drug coverage. You can switch policies during open enrollment each fall.

Long-Term Care. Medicare provides coverage for some skilled nursing services but not for custodial care. That includes things like help with bathing, dressing and other activities of daily living. However, you can purchase LTC insurance or a combination long-term-care and life insurance policy to cover these costs.

Deductibles and Co-Pays. Part A covers hospital stays and Part B covers doctors’ services and outpatient care. Nonetheless, you have to pay out-of-pocket for deductibles and co-payments. Note that over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit (“lifetime reserve days”). After that, you’ll pay the full hospital cost. Part B typically covers 80% of doctors’ services, lab tests and x-rays. However, you must pay 20% of the costs, after a $183 deductible (in 2018). A Medigap (Medicare supplement) policy or Medicare Advantage plan can fill in the gaps, if you don’t have the supplemental coverage from a retiree health insurance policy. If you purchase a Medigap policy within six months of signing up for Medicare Part B, insurers can’t reject you or charge more because of preexisting conditions. Medicare Advantage plans have medical and drug coverage through a private insurer. They also may also provide additional coverage, like vision and dental care. You can switch Medicare Advantage plans annually in open enrollment.

Most Dental Care. Medicare will not provide coverage for routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. There are Medicare Advantage plans that cover basic cleanings and x-rays, but they usually have an annual coverage cap of about $1,500. You could also get coverage from a separate dental insurance policy or a dental discount plan.

Routine Vision Care.  Medicare doesn’t cover routine eye exams or glasses (exceptions include an annual eye exam, if you have diabetes or eyeglasses after certain kinds of cataract surgery). However, some Medicare Advantage plans give you vision coverage, or you may be able to purchase a separate supplemental policy that provides vision care alone or includes both dental and vision care. If you saved money in a health savings account before you enroll in Medicare, you can use the money tax-free at any point for glasses, contact lenses, prescription sunglasses, and other vision care out-of-pocket expenses.

Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, but some Medicare Advantage plans cover hearing aids and fitting exams, and some discount programs provide lower-cost hearing aids.

Medical Care Overseas. Medicare usually doesn’t cover care you receive while traveling outside of the U.S., except for very limited situations (like on a cruise ship within six hours of a U.S. port). However, Medigap plans C through G, M, and N cover 80% of the cost of emergency care abroad with a lifetime limit of $50,000. There are some Medicare Advantage plans that cover emergency care abroad. Another option is to purchase a travel insurance policy that covers some medical expenses, while you’re outside of the U.S.

Reference: Kiplinger (May 23, 2019) “7 Things Medicare Doesn’t Cover”

Suggested Key Terms: Medicare, Retirement Planning, Long-Term-Care, Life Insurance, Medigap, Health Savings Account (HSA)

How Can I Goof Up My Estate Plan?

There are several critical errors you can make that will render an estate plan invalid. Many of these can be easily avoided, by examining your plan periodically and keeping it up to date.

Investopedia’s article, “5 Ways to Mess Up Estate Planning” gives us a list of these common issues.

Not Updating Beneficiary Designations. Be certain those to whom you intend to leave your assets are clearly named on the proper forms. Whenever there’s a life change, update your financial, retirement, and insurance accounts and policies, as well as your estate planning documents.

Forgetting Key Legal Documents. Revocable living trusts are the primary vehicle used to keep some assets from probate. However, having only trusts without a will can be a mistake—the will is the document where you designate the guardian of your minor children, if something should happen to you and/or your spouse.

Bad Recordkeeping. Leaving a mess is a headache. Your family won’t like having to spend time and effort finding, organizing and locating your assets. Draft a letter of instruction that tells your executor where everything is located, the names and contact information of your banker, broker, insurance agent, financial planner, attorney etc.. Make a list of the financial websites you use with their login information, so your accounts can be accessed.

Faulty Communication. Telling your heirs about your plans can be made easier with a simple letter of explanation that states your intentions, or even tells them why you changed your mind about something. This could help give them some closure or peace of mind, even though it has no legal authority.

Not Creating a Plan. This last one is one of the most common. There are plenty of stories of extremely wealthy people who lose most, if not all, of their estate to court fees and legal costs, because they didn’t have an estate plan.

These are just a few of the common estate planning errors that happen. For more information on how to be certain your assets will be dispersed according to your wishes, talk with a qualified estate planning attorney.

Reference: Investopedia (September 30, 2018) “5 Ways to Mess Up Estate Planning”

Suggested Key Terms: Estate Planning Lawyer, Wills, Guardianship, Revocable Living Trust, Probate Court, Inheritance, Beneficiary Designations, Transfer on Death (TOD) Accounts, Letter of Instruction, Executor

When Do I Need a Power of Attorney?

Estate planning is important. Signing a power of attorney can be essential for those seeking to safeguard their financial resources and other assets.

The Tri-County Times explains in its article, “Power of attorney protects loved ones,” that a POA is granted to an “attorney-in-fact” or “agent.” It gives that individual the legal authority to make decisions for an incapacitated “principal.” The laws for creating a power of attorney vary based on the state.  However, there are some general similarities.

Many people think their families will be able to intercede, if an event occurs that leaves them incapacitated and unable to make decisions for themselves. That’s not always true. If a person isn’t named as an agent or granted legal access to financial, medica, and other information, family members may be left out. Further, the government may appoint someone to make certain decisions for an individual, if no POA is named.

Almost everyone can benefit from establishing a power of attorney.

A signed power of attorney will remove the legal obstacles that may arise in the event that a person is no longer physically or mentally capable of managing certain tasks.

A power of attorney is a broad term that covers a wide range of decision-making. The main types of POA are a general power of attorney, health care power of attorney, durable power of attorney and special power of attorney.

The responsibilities of some of these overlap, but there are some legal differences. For instance, a durable power of attorney relates to all the appointments involved in general, special and health care powers of attorney being made “durable”—meaning that the document will remain in effect or take effect if a person becomes mentally incompetent.

Certain powers of attorney may expire within a certain time period.

An agent appointed through POA may be able to handle many tasks, depending on what powers are granted in the document. They include banking transactions, filing tax returns, managing government-supplied benefits, deciding on medical treatments and executing advanced health care directives.

Although a power of attorney document can be completed on your own, sitting down with an experienced estate planning attorney is preferred to better understand the intricacies of this vital document and ensuring that it will be legally binding and properly prepared.

Reference: Tri-County (MI) Times (January 24, 2019) “Power of attorney protects loved ones”

Suggested Key Terms: Estate Planning, Power of Attorney, Healthcare Directive

How Older Travelers Can Stay Safe

One of the top dreams of retirees is to travel, whether to visit the kids and grandkids or go to all those places you did not have the time or money to explore when you were working and rearing your family. The joy of travel can turn into a nightmare, however, if you find yourself a victim of unsafe circumstances. Here are some recommendations from the U.S. Department of State on how older travelers can stay safe when abroad.

Months Before Your Trip

If there is a problem with your passport, you could get stranded at customs and immigration in a foreign country. When you first begin to plan your trip, pull out your passport and check the expiration date. If there are not at least six months left after you return from your travels, renew your passport.

Some people make the mistake of thinking that the six-month guideline applies to the day you start your trip. However, it actually refers to the date you get home. Just make sure you do not delay in sending in your renewal application. It can take several months or longer for you to receive your new passport.

Before You Finalize Your Travel Plans

Do not deposit any money or pay for your airfare, hotel, tours, or other costs, before you check out these websites:

  • The S. State Department website issues travel warnings to let you know when there is a safety concern in another country. You do not want to walk into the middle of a country’s civil war or other violence. The State Department will also let you know the legal requirements for entering specific countries. If you need a visa, follow the instructions on how to obtain one and allow plenty of time. Some countries allow you to get a visa online or at your arrival airport.
  • The Centers for Disease Control (CDC) issues guidance on required and recommended vaccinations for visiting particular countries. Some of these vaccines require multiple injections spaced weeks apart, so you should check well in advance of your trip. You might have to carry proof of vaccinations to be allowed into a country.

Money Makes the World Go ‘Round

It is no fun to be on your trip of a lifetime and suddenly be unable to use your bank or credit cards. Notify your banks and credit card companies of the dates you will be traveling, and in which countries, so they do not put a security freeze on your accounts. Find out where you can make deposits and withdrawals, while on the road.

Compare international transaction fees to avoid excessive charges. You can order some local currency from your bank to have on hand, as soon as you land in a country. Therefore, you will not have to stand in long lines at the currency exchange in the airport. Search online to find out where you can get the best currency exchange rate at your destination. Exchange rates fluctuate constantly, so be sure to check and recheck.

Medication

Some countries restrict certain medications that are legal in the United States. Check on the State Department website to find out if any of your drugs are illegal where you will be traveling. Always carry prescription medication in the original pharmacy container, and have your doctor write extra prescriptions for you, in case you lose your drugs. Carry enough medicine for the trip and some extra, in case you experience any delays.

Your local elder law attorney can help you prepare the legal documents that will give you peace of mind during your travels, and explain to you how your state regulations might differ from the general law of this article.

References:

AARP. “State Department Wants Older Travelers to Stay Safe.” (accessed December 29, 2018) https://www.aarp.org/travel/travel-tips/safety/info-2018/state-department-recommendations.html

U.S. State Department. “Country Information.” (December 30, 2018) https://travel.state.gov/content/travel/en/international-travel/International-Travel-Country-Information-Pages.html

CDC. “Vaccines. Medicines. Advice.” (December 30, 2018) https://wwwnc.cdc.gov/travel

Why is Financial Fraud So Risky for Seniors?

“[Financial fraud] is a very high risk for 100 percent of the elderly population,” said North Carolina Secretary of State Elaine Marshall. “Senior citizens have social security coming [in]. Maybe they have a pension [or] some savings. This is a magnet for crooks and people who want to take their golden years away from them and line their pockets with somebody else’s gold.”

WRAL.com says, in the article “Elderly population a ‘very high risk’ for financial fraud,” that scams looking to make a quick buck and disappear may be easier to see, than the subtle but truly harmful abuse that makes a more significant impact.

As people get older, they usually depend more on close family and friends for help, but it can be very easy to abuse that relationship. These types of activities usually target seniors who have diminished mental or physical capacities. Abuse can begin when seniors put their trust in the wrong people. It can be a very close, trusted family member or the caregiver—someone who’s very close physically or in relationship.

It’s not uncommon for a senior to be persuaded to change his will to benefit a person with whom he had developed a close relationship, only to find out the person had ulterior motives. This type of financial abuse or exploitation can also be hard to see initially.

“Sadly, so much of the elder abuse is done by somebody in the family who is trusted, who is caring for this person, and then takes advantage of them,” Marshall said.

“A word of caution to families–as folks get isolated and lonely, it is very important that they have social contact in a positive nature, every day. Not just somebody coming in to see if they’re walking around and eating,” Marshall said. “They need socialization. And therein becomes an avenue for crooks to follow.”

Seniors should also be wary of invitations to sales pitches masked as “free lunches,” charities that aren’t who they say they are and writing checks to unverified individuals. If it sounds too good to be true, the elderly should use extreme caution before making a financial commitment.

To prevent this, families can divide responsibility between more than one family member. If you have multiple children, giving each one access to the finances makes certain that anything bad will be detected quickly. Another option is to create a trust with the help of an elder law or estate planning attorney. A trust permits the designation of a trustee and requires a more thorough credentialing process to access the assets. An elder law attorney can help in creating a trust and can provide advice on any other methods to protect your finances.

It comes down to determining whom you can trust. Finding credentialed individuals to help you manage and establish safeguards for your assets is critical.

Reference: WRAL.com (January 2, 2019) “Elderly population a ‘very high risk’ for financial fraud”

How Much Control from the Grave Can Parents Have?

Parents who want to protect their home from being sold by heirs can do so by way of a dynasty trust but it gets complicated, explains the Santa Cruz Sentinel’s article “Not a good idea to keep home in ‘dynasty trust.’” Every situation is different, so every family considering this strategy should meet with an experienced estate planning attorney to learn if this is a solution or an added complication.

Why would the parents want to make their children’s lives complicated? Perhaps they think the children are likely to end up in a bad situation and they are attempting to provide a safe landing for what they believe is inevitable. Or they simply cannot manage the idea that one day the house won’t be part of the family.

The house can be protected from a sale through the use of a revocable trust. Instead of distributing the home in equal shares among their children along with all of their other assets, the house can be put in the trust and their trust can continue after their deaths. The trust can include any restrictions they want with respect to how they want the home to be maintained after their deaths.

They can even put their home into a dynasty trust. Done correctly, a dynasty trust can hold the property for the children, grandchildren and great-grandchildren. However, there are some issues.

First, if the home is held in trust it means that the trust must be funded since there will be expenses for the home, including maintenance and upkeep. Unless the home is used as a rental property, there won’t be any income to pay for these expenses. The parents will need to leave a significant amount of assets in the trust so that big and small items can be paid for, or the children may be charged with paying for the expenses.

Next is the problem of capital gains taxes. When the parents pass, the home receives a stepped-up cost basis. That means that when the property is eventually sold, the amount of capital gains tax and in this case, California income tax due, will be based on the increase of the value of the property since the surviving spouses’ date of death.

If the home is held in trust until all of the siblings have died, the value of the house will likely have increased dramatically. Where is the money to pay the taxes coming from? Will the house need to be sold to pay the tax?

What if one of the children decides to move into the house and lets it get run down? The other two siblings may never receive their inheritance. There are so many different ways that this could lead to an endless series of family disputes.

Keeping a “spare” house may not be realistic. It may force the children to become rental property managers when they don’t want to. It may exhaust their finances. In other words, it may become a family burden, and not a place of refuge.

Talk with an estate planning attorney. It may be far better to distribute the home outright to the children along with other assets and let them decide what the best way forward will be.

Reference: Santa Cruz Sentinel (December 1, 2019) “Not a good idea to keep home in ‘dynasty trust.’”

 

Disinheriting Loved Ones is A Common Mistake

It happens way more often than you’d ever expect. The account owner dies, the assets go directly to the beneficiaries on the account, and the heirs learn for the first time that whatever is in the will doesn’t override the beneficiary designation. They can argue and even go to court but it won’t do them much good, says the recent article “Don’t accidentally leave your estate to the wrong person” from The News-Enterprise.

One of many examples, is the widower who remarries after his first wife passes away. He neglects to change his IRA beneficiary form so when he dies, his second wife does not receive any funds. The case of what happens to the funds has to go to court because the assets obviously cannot go to his deceased first wife.

Many different kinds of accounts now have beneficiary designations. They include:

  • S. Savings Bonds
  • Bank Accounts
  • Certificates of Deposits
  • Investment Accounts
  • Life Insurance
  • Annuities
  • Retirement Accounts

Some of these accounts can be titled “Payable on Death” or “Transferable on Death,” so that they can more easily be distributed to heirs without going through probate.

If you’ve changed jobs, remember that beneficiary designations do not transfer over, when you roll your 401(k) over to a new plan or IRA.

Here’s another thing most people don’t know about beneficiary designations: they don’t have to be individuals. Beneficiaries can be trusts, charities, organizations, your estate, or, no one at all (although that’s not recommended). Be careful, though, if you are thinking about being creative, like saying “All of my living grandchildren.” What if someone who your family has never met comes forward and claims to be a grandchild? It’s best to discuss this with an estate planning lawyer.

There are situations where you don’t want to name someone as a beneficiary. You don’t want to leave assets outright to minors, since they cannot inherit property. A court-appointed guardian would have to be named to care for the assets, until the child reaches age 18. Then the 18 year old inherits everything at once and goes on a wild spending spree, and the money is gone. A better approach is to set up a trust, so the trust is the beneficiary of the assets and the trust pays money to heirs over an extended period of time.

Caution must be taken, when considering Special Needs Individuals. If they are receiving government benefits, an inheritance could cause them to lose all benefits. Instead, speak with your estate planning attorney about the use of a Special Needs Trust or Supplemental Needs Trust.

Updating the beneficiary form is simple. Contact the financial company that holds the accounts, ask for a copy of your current beneficiary form, and a blank copy so that you can make changes, if needed. Keep a copy of all current beneficiary forms. You should also speak with your estate planning attorney to make sure that your estate plan and your beneficiary designations work together.

Reference: The News-Enterprise (November 30, 2019) “Don’t accidentally leave your estate to the wrong person”

 

What Estate Planning Documents Does My Child Need Now That She’s an Adult?

Your child may graduate from high school and head off to college or start a full-time job or vocational training program.  Although they’re still your children, the law sees them as are adults.  As a result, parents’ “rights” to protect their adult children or make decisions for them immediately becomes quite limited.

The Tewksbury Town Crier’s recent article, “Is your child turning 18? Here’s what you need to know,” explains that people often have an estate planning attorney draft the appropriate documents, so they will be legal and binding. Let’s look at a list of documents to consider and discuss with your young adult:

  • HIPAA Authorization: if your 18-year-old has a job in another state or will be attending college and needs medical records or assistance making appointments, ask her to go to the doctor’s and dentist’s office and sign forms that designate agents to act on her behalf. Due to HIPAA laws, information can’t be released without the adult child’s permission.
  • Healthcare Proxy: Have your 18-year old complete this document, make a copy, put a copy on each parent or guardian’s phone and put a copy on your child’s phone. This is for an emergency, like when the child can’t speak for herself. However, don’t wait for an emergency. If your child is at college, the school will only contact you as the emergency contact, but the proxy is between you and the hospital and includes mental health issues. A healthcare proxy lets you to participate in life and death decisions, should your child not be able to advocate for herself.
  • Durable Power of Attorney: A general durable power of attorney or financial power of attorney must also be signed by the 18-year old, designating his parents, guardians, or others as agents authorized to act on his behalf. This allows the agent access to financial information, so that he can participate in the financial issues with a university or business in the event that the child cannot.
  • Contact an estate planning attorney if you wish to discuss any of the above items. Do not prepare these documents on your own.
  • FERPA: This is an educational records release, which allows the educational institution to share grades, transcripts and other related materials with parents or designated agents. Without it, the school will not provide you with access to any information.

Finally, encourage your young adult family member to register to vote.

Reference: Tewksbury Town Crier (December 8, 2019) “Is your child turning 18? Here’s what you need to know”

 

When Should I Review My Estate Plan?

When a person hits the age of 18, they should at least have powers of attorney to designate who will make their healthcare decisions and handle their finances, in the event of any incapacity. When a person starts to accumulate assets and have children, it’s critical to have an estate plan in place.

Bankrate’s recent article, “Estate planning triggers: When to re-evaluate your estate planning strategy,” says the risk of not having a current estate plan and will that state your wishes is significant. When  people fail to put any plan into place, it leads to confusion, chaos and unintended consequences. Use this list of important life events as triggers to remind you to discuss your current situation with a trusted attorney.

Getting married. You and your future spouse probably have had some financial conversations before getting engaged. However, if you haven’t, once wedding plans are set, it’s vital to discuss all aspects of each partner’s financial situation and the desired distribution of assets. You should decide whether to sign a prenuptial agreement, the totals of your separate and joint assets and who you want inherit those assets should on or both spouses pass on. In light of these factors and the prenuptial agreement, an estate plan that satisfies both parties must be created.

Starting a family. The decision to have a child comes with the responsibility of planning for that child’s care. You and your partner will want to determine the amount of your assets you want to pass to your children in the case of a death, at what age your children will inherit those assets and name a legal guardian.

Divorce. If a couple decides to divorce, it’s important to update their separate estates. If you fail to change the beneficiary designations for a trust or life insurance policy after getting divorced, your ex-spouse may receive the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

Retirement. Beneficiaries are named when setting up a 401k or Roth IRA account. If you started the account years ago, the beneficiaries may be out-of-date. Retirees should look at their total retirement assets and update their beneficiaries to reflect their current relationship and financial circumstances.

Other life events. Any significant change in assets, a move to another state, the death or disability of a person named in your estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth, adoption, or death of a child are all important life events that should trigger a revision of your estate plan.

Reference: Bankrate (March 4, 2019) “Estate planning triggers: When to re-evaluate your estate planning strategy”