Estate Planning Newsletters

As always, I am pleased to write to you during this holiday season, to send greetings, and to offer some information about Tax and Estate Planning.

As I reported to you in last years letter, the Massachusetts estate tax rates effectively increased on January 1, 2003. Estates in Massachusetts now have a $700,000 exemption compared to a $1 million exemption under Federal tax rules. Next year, the Massachusetts exemption increases to $850,000 and the Federal exemption rises to $1.5 million. Those who have amended their marital trusts (also called credit shelter trusts) during 2003 should be adequately covered if their potential estates are valued above $850,000 and under $1.5 million. I am recommending that any estate plan drafted before the fall of 2002-2003 be reviewed and amended to account for recent changes in the law. Amendments of this nature can usually be drafted at a very reasonable cost to clients.

Clients concerned about nursing home costs and eligibility for Medicaid often consult me about depletion of estates due to potentially catastrophic health care costs. Typically, clients are left with two options; either completely transfer ownership of their home, or purchase Long Term Health Care Insurance (ALTCI@). The purchase of LTCI will exempt the client's home from being sold to reimburse the Commonwealth for Medicaid payments paid during a client's lifetime to a nursing home. This AMedicaid lien@ would otherwise effectively prevent a sale of the home by the estate until the State is reimbursed for Medicaid. But LTCI is expensive and only those in excellent health can qualify for the insurance. Until recently, as an alternative to costly LTCI, clients could transfer their homes into a, so-called life estate , which removes a home from their Aprobate estate. Prior to July 1, 2003, the Medicaid lien attached only to the owner's probate estate. Now, the Medicaid lien will attach to property held in a life estate.

Gifting assets to heirs may result in a three-year waiting period for Medicaid eligibility, depending on the amount gifted. The only exception to this waiting period exists where the home is transferred to a sibling or a child who lives with the senior and provides custodial care to the former owner. If the transfer of assets is made to a trust, the waiting period for Medicaid eligibility increases to five years. Massachusetts, like Connecticut, has applied for a Federal waiver to make the asset transfer rules even stricter. Connecticut's application, however, has been pending for two years, so the transfer rules may not change soon, but stay tuned. There are still steps clients can take to protect their estates, but this means retaining less control over their assets (i.e. gifting property to heirs). In summary, clients whose potential estates would be over $850,000 have less to fear from nursing home costs, and should focus instead on optimizing estate tax planning opportunities.

I continue to consult with a growing number of clients in the areas of estate settlement and estate planning. I also represent clients in all real estate transactions, as well as contract law, criminal, personal injury, and business litigation. My firm's new web site is http://www.georgefootepc.com/; my new e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few advertisements I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2003 and I wish you good health, good times, and peace for all of us in 2004.