Morton Legal Blog

What are Trusts, and How are they Used?

There are many types of trusts, and many reasons that people execute them.  In its most basic form, a trust is simply an agreement between two people to hold something of value for a period of time under a specific set of instructions.  "Will you hold my wallet while I swim in the ocean so it does not get wet.  If I drown, please give it to my wife."  That was a trust, with me as the grantor, the person holding my wallet as the trustee, and me as the beneficiary.  My wife is the substitute beneficiary.   

Alabamba Thwarts Common Medicaid Planning Strategies

It is Alabama's policy to value life estates at zero and to presume that annuities are saleable in determining the transfer penalty, even under the Deficit Reduction Act of 2005 (DRA), according to a recent letter by an Alabama Medicaid official.

New Estate Tax Exemption?

The House and Senate have approved a $2.9 trillion budget resolution that would keep the estate tax at where it will be in 2009 under the current law. This means that the per-person estate tax exemption would be $3.5 million ($7 million for a married couple) and the top tax rate would be 45 percent.

States May Now Penalize Community Spouse Transfers Post-Qualification

A Center for Medicare and Medicaid Services (CMS) official says that the agency believes states now have the option of imposing a transfer penalty on an institutionalized spouse if the community spouse transfers protected resources after the institutionalized spouse's eligibility has been determined.

Policy Review of Trust Owned Life Insurance

This article explores many of the common misperceptions about trust owned life insurance - plus a process for you to add significant value for your clients by incorporating policy reviews of trust owned life insurance.

Although trust owned life insurance (TOLI) is a common planning vehicle for high net worth individuals and families, relatively few TOLI policies ever meet their initial projections. Industry studies reveal that TOLI portfolios rarely receive the required vigilant fiduciary oversight routinely associated with other assets held in trust, such as equities, real estate, etc.

Better Protection than Guardianship

A Guardianship is controlled by the Chancery Court. The Court determines whether an individual is competent to handle their own affairs, or needs a guardian. The Court determines who will be the guardian to look after the affairs of the ward. Usually, detiled information about how the ward’s money is spent is periodically provided to the Court through a process called the “annual accounting.” The Court determines what is, and is not, an appropriate expense for the ward, and how aggressively the ward’s money can be invested.

Impact of DRA Uncertain

A new Government Accountability Office (GAO) study concludes that few of the elderly are transferring assets in order to become financially eligible for Medicaid coverage of long-term care, and that of the transfers that are made, the amounts are modest. The study also finds that the impact of the Deficit Reduction Act of 2005 (DRA), which imposed harsh new asset transfer provisions, is uncertain.

Assisted Living Facility Qualifies as Long Term Care

A U.S. District Court in Ohio finds that an assisted living facility is a long-term care facility under the terms of a long-term care insurance policy, even though the facility did not have a nurse on site 24 hours a day. Hoekenga v. Continental Casualty Company (U.S. Dist. Ct., S.D. Ohio, No. 1:06-cv-458, April 18, 2007).

Endowment Contract is Life Insurance

One Medicaid planning strategy available for crisis planning is to purchase an endowment contract.  The purchase should not result in a penalty, since the commercially available contract was purchased for fair market value, and should not be counted as a resource since it has no cash value, and pays a death benefit until endowed.  That result was affirmed by a recent Michigan case.   Mis v. Michigan Department of Human Services (Mich. Cir. Ct., No. 06-23722-AA, March 3, 2007).

Planning for Tax-Qualified Plans

Planning for tax-qualified plans, which includes IRAs, 401(k)s and qualified retirement plans, requires a careful examination of the potential taxes that impact these assets. Unlike most other assets that receive a "basis step-up" to current fair market value upon the owner's death, IRAs, 401(k)s and other qualified retirement plans do not step-up to the date-of-death value.