Handling Guilt When Moving Loved One to Assisted Living Versus Nursing Home

Just 5% said they wanted to be cared for in an assisted living community, and only about 13% actually moved into a community.

McKnight’s Senior Living’s recent article entitled “Family feels less guilt when loved one moves to assisted living versus nursing home: study” says that a family that moved an older adult into assisted living reported having greater feelings of guilt related to that move due to limits in their ability to provide assistance (35%) compared with providing care at home (22%), moving an older adult into a caregiver’s home (15%), or moving an older adult to an adult day facility (9%). However, the feelings of guilt were more for families with loved ones that moved into nursing homes(40%).

The pandemic increased the belief in the importance of early planning. About a third (29%) of respondents in 2021 said they believed in long-term care insurance, compared with 15% in 2018. However, the number of people who actually bought long-term care insurance hasn’t changed significantly (14% as in 2018). The study points out that insurance impacts where care is delivered. Owners of long-term care insurance (25%) were significantly more likely than non-owners (11%) to receive care in an assisted living community, where, researchers said, residents may have more space and better accommodations than what typically is provided in nursing homes.

Compared with 2018, family caregivers were more likely to use professionals when looking for support and knowledge about caregiving options. This included social workers (23% of respondents said they used them in 2021; compared to just 18% in 2018), financial professionals (20% from 17%), and attorneys or elder law specialists (11% up from 7%). The primary “helpful” resources for family caregivers in 2021 were television programs (70%), internet-based social networks (68%), attorneys or elder law specialists (66%), financial advisers (65%) and nonprofit groups (61%).

However, the average time families spent researching professional caregivers dropped from 7.6 hours in 2018 to 6.8 hours in 2021. Overall, the study found longer lifespans and more demand for complex care are complicating caregiving. Care needs are more severe and longer lasting compared with 2018 study results, the researchers found.

According to the most recent research, about half (49%) of care recipients need assistance with all activities of daily living. That’s an increase from 39% in 2018. And the average duration of care needed rose from 3 years to 3½ years.

Seniors also have more age-related limitations (47% had such limitations in 2021, up from 44% in 2018), cognitive impairments (32%, up from 26%) and accidents requiring rehabilitation (23%, up from 21%).

Reference: McKnight’s Senior Living (Nov. 2, 2021) “Family feels less guilt when loved one moves to assisted living versus nursing home: study”

 

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Do Gifts Count Toward Estate Taxes?

With all of the talk about changes to estate taxes, estate planning attorneys have been watching and waiting as changes were added, then removed, then changed again, in pending legislation. The passage of the infrastructure bill in early November may mark the start of a calmer period, but there are still estate planning moves to consider, says a recent article “Gift money now, before estate tax laws sunset in 2025” from The Press-Enterprise.

Gifts are used to decrease the taxes due on an estate but require thoughtful planning with an eye to avoiding any unintended consequences.

The first gift tax exemption is the annual exemption. Basically, anyone can give anyone else a gift of up to $15,000 every year. If giving together, spouses may gift $30,000 a year. After these amounts, the gift is subject to gift tax. However, there’s another exemption: the lifetime exemption.

For now, the estate and gift tax exemption is $11.7 million per person. Anyone can gift up to that amount during life or at death, or some combination, tax-free. The exemption amount is adjusted every year. If no changes to the law are made, this will increase to roughly $12,060,000 in 2022.

However, the current estate and gift tax exemption law sunsets in 2025. This will bring the exemption down from historically high levels to the prior level of $5 million. Even with an adjustment for inflation, this would make the exemption about $6.2 million. This will dramatically increase the number of estates required to pay federal estate taxes.

For households with net worth below $6 million for an individual and $12 million for a married couple, federal estate taxes may be less of a worry. However, there are state estate taxes, and some are tied to federal estate tax rates. Planning is necessary, especially as some in Congress would like to see those levels set even lower.

Let’s look at a fictional couple with a combined net worth of $30 million. Without any estate planning or gifting, if they live past 2025, they may have a taxable estate of $18 million: $30 million minus $12 million. At a taxable rate of 40%, their tax bill will be $7.2 million.

If the couple had gifted the maximum $23.4 million now under the current exemption, their taxable estate would be reduced to $6.6 million, with a tax bill of $2,520,000. Even if they were to die in a year when the exemption is lower than it was at the time of their gift, they’d save nearly $5 million in taxes.

There are a number of estate planning gifting techniques used to leverage giving, including some which provide income streams to the donor, while allowing the donor to maintain control of assets. These include:

Discounted Giving. When assets are transferred into an entity (commonly a limited partnership or limited liability company), a gift of a minority interest in the entity is generally given a discounted value, due to the lack of control and marketability.

Grantor Retained Annuity Trusts. The donor transfers assets to the trust and retains right to a payment over a period of time. At the end of that period, beneficiaries receive the assets and all of the appreciation. The donor pays income tax on the earnings of the assets in the trust, permitting another tax-free transfer of assets.

Intentionally Defective Grantor Trusts. A donor sets up a trust, makes a gift of assets and then sells other assets to the trust in exchange for a promissory note. If this is done correctly, there is a minimal gift, no gain on the sale for tax purposes, the donor pays the income tax and appreciation is moved to the next generation.

These strategies may continue to be scrutinized as Congress searches for funding sources, but in the meantime, they are still available and may be appropriate for your estate. Speak with an experienced estate planning attorney to see if these or other strategies should be put into place.

Reference: The Press-Enterprise (Nov. 7, 2021) “Gift money now, before estate tax laws sunset in 2025”

 

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Does Anyone Know Where Your Money Is?

A woman’s brother is in a coma. No one in the family, even the man’s wife, knows anything about his savings, investments, debts, or any financial matters. The family doesn’t know who his financial advisor is, if he has a will or how much money is available to pay bills, which are piling up rapidly. When they did locate bank accounts, the family had to work with three different banks to get access to the money. At least there was a Power of Attorney in place, so bills could be paid. However, what else did he own?

The family’s story, as related in the article “Someone Needs to Know Where Your Money Is” from Kiplinger, is not unusual. An estate plan with preparations for incapacity as well as death, shared with his wife or a family member, would have prevented many of these problems. What can you do if faced with this same scenario?

Finding the most recent tax return will yield a lot of information. This document will have the name of the person who prepared the return, if the person used a CPA. The tax return will also document income and possibly list some assets. Information like earned interest, dividends, pension income and withdrawals from retirement accounts will be on the tax return. If you know the name of the person’s employer, call the human resources department, since they may be aware of a life insurance benefit or a 401(k) account.

The person in this example was admitted to the hospital and their health deteriorated so rapidly that there was no time to make any proper arrangements. We never know what the future will bring. Having an estate plan and gathering information on finances and assets—and sharing this information with loved ones—should be done by everyone.

Here are the documents most people need in case of incapacity:

  • Will, Financial Power of Attorney and Trust Documents, if any exist
  • Bank, Investment and Social Security statements
  • Information for all online assets, including financial assets, websites, business accounts and cryptocurrency
  • List of all Retirement Accounts, annuities and life insurance policies
  • Cost basis of all investment in taxable brokerage accounts or stocks
  • A list of any assets of value, including real estate and automobiles
  • A list of debts, and
  • Most recent tax returns.

Schedule B on a tax return can reveal some surprises for family members. If there are no paper records or log-in information to financial websites, ask the tax preparer for a copy of the 1099 form for each asset. Once the list is complete, put together the information, along with all insurance company information and the tax return, into a large envelope to be reviewed once a year.

Some estate planning attorneys keep original wills for clients, but not all do. Contact your estate planning attorney to find out what would happen if you became incapacitated and be sure to have the necessary documents created or updated, including a will, financial power of attorney, health care power of attorney and any trust documents. A copy of your Social Security card, birth and marriage certificates and your estate planning documents can go into a big envelope marked “Legal Documents” and placed in a secure location, also to be reviewed annually.

Tell your executor and trusted family members where these documents are, so they can be accessed when needed. They will be able to act on your behalf in the event of incapacity and you will have spared them unnecessary stress and expenses.

Reference: Kiplinger (Nov. 1, 2021) “Someone Needs to Know Where Your Money Is”

 

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