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Unfunded trust

The Dangers of Not Funding a Trust, could be the Trick to your Treat!

The Dangers of Not Funding a Trust, could be the Trick to your Treat!

 A failure to fund a trust can result in costly probate proceedings or worse—a transfer of your estate to the wrong beneficiaries. Rather than undermining the very purposes of the trust by failing to fund, individuals should take concrete steps in order to ensure complete trust funding.

A Trust is a very uniquely personalized set of documents. A good Trust outlines your wishes and your needs, it also aligns your assets into your Trust, hence funding. Here at Legacy Planning Law Group, we specialize in Trusts. Our Attorney Bill O’Leary has been practicing Estate Planning Law for over 20 years.

We know the importance of aligning assets into your Trust. Most of our Trust Plan’s come with Asset Alignment absolutely free. We have an Asset Alignment Coordinator: Courtney Roka, dedicated to Asset Alignment. She works with you to align your assets into your trust so that you have peace of mind. We call this our” Done with You” program. When choosing to obtain a Trust making sure it is properly funded is crucial.

In a lot of instances our individualized Asset Alignment program is what sets us apart from other Estate Planning Law Firms.

So, don’t get tricked by choosing a Trust without an asset alignment or funding plan included.

Call us today at 904-880-5554

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When you create a Trust with Legacy Planning Law Group it’s a real Treat!

Read more related articles here:

Creating a Trust is the first step, but what if the fund isn’t funded?

What does it mean to fund a Trust?

What happens to assets left out of your Trust?

Also, Read one of our previous blogs at:

An Unfunded Trust is a Useless Trust.

Click here to check out our On Demand Video about Estate Planning.





medicaid trust

How Medicaid Planning Trusts Protect Assets and Homes from Estate Recovery

How Medicaid Planning Trusts Protect Assets and Homes from Estate Recovery

Last updated: January 04, 2021

What are Medicaid Asset Protection Trusts (MAPT)?

Medicaid Asset Protection Trusts (MAPT) can be a valuable planning strategy to meet Medicaid’s asset limit when an applicant has excess assets. Simply stated, these trusts protect a Medicaid applicant’s assets from being counted for eligibility purposes. This type of trust enables someone who would otherwise be ineligible for Medicaid to become Medicaid eligible and receive the care they require be at home or in a nursing home. Assets in this type of trust are no longer considered owned by the Medicaid applicant. MAPTs also protect assets for one’s children and other relatives, which is a win-win for Medicaid applicants and their families. Medicaid Asset Protection Trusts are also referred to as Medicaid Planning Trusts, Medicaid Trusts, or less formally, Home Protection Trusts.

It is important to understand that there are many different types of trusts and not all of them are Medicaid compliant. For instance, family trusts, commonly called revocable living trusts, are different from MAPTs. Generally, family trusts are not adequate in protecting money and assets from Medicaid because the language of the trust makes it revocable (meaning the trust can be cancelled or altered) or allows for money in the trust to be used for the Medicaid applicant’s long-term care costs. Therefore, assets in this type of trust would have to be “spent down” to meet Medicaid’s asset limit in order for one to qualify for Medicaid.

This page is about Medicaid Asset Protection Trusts. There are several other types of trusts that are relevant to Medicaid eligibility, but will not be covered in this article. Irrevocable funeral trusts, also known as burial trusts, are used to protect small amounts of assets specifically for funeral and burial costs. There are also qualifying income trusts (or qualified income trusts, abbreviated as QITs). This is important to mention because one might find it easy to confuse MAPTs and QITs. While MAPTs protect one’s assets and allow one to meet the asset limit, QITs (also called Miller Trusts) allow one who is over the income limit to become income eligible for Medicaid purposes. Unfortunately, not all states allow QITs.

Did You Know? If you transfer your home to a Medicaid asset protection trust, you can reserve the right to live there for as long as you live.

Why Are Medicaid Asset Protection Trusts Important?

While each state runs its Medicaid program within federally set guidelines, there is “wiggle” room for each state to set its own rules within those larger guidelines. Generally speaking, the asset limit for eligibility purposes for an elderly individual applying for long-term care Medicaid is $2,000. However, this asset limit can be lower or higher depending on the state in which one resides. (For state specific asset limits, click here). While some higher value assets are usually considered exempt (uncountable), such as one’s primary residence, a vehicle, and wedding rings, too often applicants are still over the asset limit but still cannot afford their cost of care. Therefore, any assets that exceed the asset limit need to be “spent down” or a planning strategy, such as a Medicaid Asset Protection Trust, needs to be put into place to help the applicant qualify for the care they require. One can determine how much of their assets must be spent down to become Medicaid eligible using our Calculator.

How Do Medicaid Asset Protection Trusts Work?

To get a better grasp of Medicaid asset protection trusts, it’s important to understand the terminology associated with them. First, there is the individual who creates the MAPT. This person may be referred to by a number of names, including grantor, trustmaker, and settlor. The trustee is the manager of the trust and controls the assets in the trust. While neither trustmakers nor their spouses can be trustees, adult children and other relatives can be named as trustees. They must adhere to the rules set forth by the trust, which are very specific as to how the money can be used. For instance, there should be a strict prohibition of using trust funds on the trustee. There is also a beneficiary or beneficiaries, who is / are the person(s) who benefits from the trust after the trustmaker passes away. In order for the trust to be Medicaid exempt, the principal beneficiary must be someone other than the trustmaker. This is because if the trustmaker were also the beneficiary, he or she would have access to the assets, and Medicaid would consider them available to pay for his or her care and supports.

In addition, the trust must be irrevocable in order to be exempt from Medicaid’s asset limit. This means that the trust cannot be cancelled or changed. Once the assets are transferred into the trust, they no longer belong to the trustmaker, nor can the trustmaker regain ownership of them. If the assets are in a revocable (can be changed or terminated) trust, Medicaid considers the assets to still be owned by the Medicaid applicant. This is because the person who created the trust still has control over the assets held in the trust. Therefore, the assets are counted towards Medicaid’s asset limit.

   MAPTs cannot be used to shelter or reduce assets if the applicant is immediately applying for Medicaid.

Planning well in advance of needing long-term care Medicaid is the best course of action when considering a Medicaid Asset Protection Trust. This type of trust is not suitable for persons who need Medicaid immediately or within a short period of time. This is because MAPTs are a violation of Medicaid’s look back period if not set up prior to 5 years (2.5 years in California) before one applies for Medicaid. That said, there are other planning strategies for those who need Medicaid currently or in the near future.

Benefits of a Medicaid Asset Protection Trust

The assets in a Medicaid asset protection trust not only allow one to meet Medicaid’s asset limit without “spending down” assets, but the assets are also protected for the beneficiaries listed by the trustee. This means the assets are safe from Medicaid estate recovery. In simplified terms, when a Medicaid recipient passes away, the state in which the individual lived and received Medicaid benefits, attempts to collect reimbursement for which it paid for long-term care. This is done via the deceased’s estate. However, if one’s home and other assets are in a MAPT, the state cannot come after those assets. Learn more about Medicaid estate recovery.

Shortcomings of a Medicaid Asset Protection Trust

Planning well in advance of the need for Medicaid, if at all possible, is the best course of action. Medicaid asset protection trusts are ideal for persons who are healthy and don’t foresee needing Medicaid in the near future. This is because MAPTs violate Medicaid’s look back period. This is a period of 60-months in all states, with the exception of California, which only looks back 30-months. (New York is in the process of implementing a 30-month look back period for long-term home and community based services). During the look back period, Medicaid checks to ensure no assets were sold or given away for less than they are worth in order for one to meet the asset eligibility limit. For Medicaid purposes, the transfer of assets to a Medicaid asset protection trust is seen as a gift. Therefore, it violates the look back rule. This can result in a period of Medicaid ineligibility. Therefore, a MAPT should be created with the idea that Medicaid will not be needed for a minimum of 2.5 years in California and 5 years in the rest of the states.

In addition, once the assets have been transferred to a MAPT, the trustee no longer has control or access to them. They no longer are considered owned by the individual.

Given the fairly expensive fees associated with the creation of a Medicaid Asset Protection Trust ($2,000 – $12,000), they are typically not used for assets less than $100,000. Should a family need to reduce one’s assets to qualify for Medicaid in amounts less than $100,000 there are other approaches.

Gifting Assets vs. Creating a Medicaid Asset Protection Trust

While there is more flexibility with gifting assets and it does not require any legal work, it also violates Medicaid’s look back rule. As previously mentioned, this results in a period of Medicaid ineligibility as a penalty. Therefore, like with MAPTS, gifting should occur 5 years (2.5 years in California) in advance of the need for Medicaid. In addition, capital gains taxes are a common concern with gifting.

What Type of Assets can go in an Asset Protection Trust?

A number of different types of assets can be put into a Medicaid Asset Protection Trust, including one’s home. When a trustee places his or her home in a MAPT, he or she can continue to live in the home. In fact, it is even possible to sell the home and for the trust to buy another one. However, there is one exception to this rule. In Michigan, a home is considered a countable asset when placed in a MAPT. Stated differently, the home is non-exempt and is counted towards Medicaid’s asset limit.

Other assets that are placed in MAPTS include real estate other than one’s primary home, checking and savings accounts, stocks and bonds, mutual funds, and CDs. In most cases, transferring retirement accounts (401k’s and IRAs) is not recommended due to tax implications with cashing out the plans and transferring them to a MAPT.

If assets that produce income are placed in the trust, the trustmaker is able to collect the income. Said differently, the principal is protected by the trust and the trustmaker receives the income produced by the principal. However, Medicaid also has income limits, so it’s important that this income does not cause one to have income over the limit. As of 2021, most states have an income limit of $2,382 / month for a single senior applying for long-term care. (To see income requirements in the state in which one resides, click here). In the situation where a Medicaid applicant is in a nursing home, income produced by the principal generally goes to the nursing home to help pay the cost of care.

How Do Medicaid Asset Protection Trust Rules Change by State?

Medicaid Asset Protection Trust rules are not only complicated and tend to change frequently, they also differ based on the state in which one resides. As mentioned above, Michigan considers a home in a trust, even if it is irrevocable, a countable asset. California Medicaid (Medi-Cal), on the other hand, has very lax rules in regards to transferring a home to a trust. In CA, a home, even in a revocable trust, is exempt from Medicaid’s asset limit and is safe from estate recovery. This is very unusual. In most circumstances, revocable trusts do not keep assets safe from Medicaid’s asset limit and estate recovery. In addition, in CA, the state can only seek reimbursement of long-term care costs from those assets that go through probate (a legal process where a deceased person’s assets are distributed). If assets have been transferred to a revocable living trust, it is safe from estate recovery. This means it will avoid probate and estate recovery and the need for MAPTs are not as great in the state of CA as in other states.

Wisconsin also stands apart from the other states. In WI, trusts that are irrevocable can generally be altered or cancelled if all parties (trustmaker, trustee, and beneficiaries) are in agreement.

Is an Attorney Needed to Set up a Medicaid Asset Protection Trust?

It is imperative that a Medicaid Asset Protection Trust be set up correctly in order to ensure the assets transferred into the trust are exempt from Medicaid’s asset limit. As previously mentioned, the rules change frequently, as well as vary by state. This makes it important to have the trust created by someone who is familiar with the MAPT laws in one’s specific state. Also, remember that this type of trust needs to be created well in advance of the need for Medicaid, so as to not violate Medicaid’s look back rule. Incorrectly setting up a MAPT can inadvertently cause one to be ineligible for Medicaid, defeating the purpose of creating one. Therefore, an attorney should be used to set up a Medicaid Asset Protection Trust. Private Medicaid Planners often work with attorneys to keep costs low for their clients.

How Much Does it Cost to Create a Medicaid Asset Protection Trust?

The cost of creating a Medicaid Asset Protection Trust varies significantly from a low of $2,000 to a high of $12,000. While the price might seem high, in reality, a MAPT ends up saving persons money in the long run. This is because the nationwide average cost of nursing home care is over $7,750 / month, and a MAPT prevents one from having to pay out of pocket for nursing home expenses (and other long-term care costs).

When considering the cost, there are a lot of variables. First, some attorneys don’t strictly do MAPTS. Rather they do a package of sorts. This may include a pour-over will, powers of attorney, advance health care directive (living will), and HIPAA medical information releases, in addition to the MAPT. Cost can be impacted by if the client is single or married, the assets being transferred into the trust, and if a crisis plan is needed. In addition, price varies by geographic location, with the price in urban areas generally costlier than in rural areas. The experience of the attorney can also impact the cost.

Alternatives to a Medicaid Asset Protection Trust

In addition to Medicaid asset protection trusts, there are other planning strategies to help lower one’s countable assets. These may include funeral trusts and annuities. In addition, there are also strategies to help lower one’s income to become eligible for Medicaid.

Read more related articles here:

How to Use a Trust in Medicaid Planning

Benefit or Backfire: Navigating the Irrevocable Medicaid Trust

Also, read one of our previous Blogs at:


Click here to check out our On Demand Video about Estate Planning.

EP and EL

Elder Law Versus Estate Planning: Not So Different After All

Elder Law Versus Estate Planning: Not So Different After All

How different is elder law from estate planning, really? Estate planning, in part, deals with helping clients plan for disability, minimize taxes at their death, and to help their estate pass to their desired beneficiaries under conditions set by the client. Estate planning can also involve asset protection, retirement planning, and business succession planning.

Elder law involves many of the same issues, but for an aging population. As we age, our needs change – both health and legal needs. For example, in elder law, attorneys often help clients plan for the possibility of needing long-term care and how to pay for it without depleting all of their savings. Elder law can also involve helping clients already receiving long-term care. Helping people with disabilities is also an important area of elder law, as is assisting wartime Veterans in obtaining care-related benefits.

What is estate planning?

Estate planning is a proactive task. It is all about preparing for the inevitable – death. Proper estate plans establish the who, what, and when of what happens to a client’s property after the client’s death. The plan provides a roadmap for families to follow when they can no longer look to the client for guidance.

A client will express his or her desires concerning the distribution of their property after their death, and the attorney will know the best strategies to obtain the desired outcome. This could include drafting one of the following for a client: last will and testament, revocable living trust, irrevocable trust, special needs trust, pour-over will, business formation documents, and documents to transfer assets.

Without a recognized estate plan, the court decides how to distribute the decedent’s property. The results can be devastating to families that have discussed informal arrangements that were not properly established through appropriate planning. Planning for where the client’s money goes, who will care for their children, what happens if they become disabled, whether trusts are in order, and avoiding probate are all important focal points for the estate planning attorney.

Estate planning is an ongoing task. Estate plans should be updated whenever the client experiences noteworthy life changes. Acquiring a rental house, selling an existing home, buying stocks, new children or grandchildren, marriage or divorce are all significant reasons for the estate planning lawyer to recommend revisiting the existing plan.

The estate planning lawyer’s purpose is to minimize estate taxes through trusts, establish caretakers for children, name executors, and identify beneficiaries for IRA’s, life insurance, and other financial assets. Plans also include funeral arrangements, charitable contributions, and personal property distributions. These lawyers commonly create wills and trusts to manage the needs of their clients.

An estate planning attorney will likely draft a durable power of attorney and medical power of attorney for their clients, as a part of their estate plan. These documents give a named person the authority to make medical or financial decisions for the client, should the client become incapacitated. Without these documents in place, a client’s family would have to file a lawsuit against the client in order for a judge to give someone the authority to make these decisions. Finally, an estate planning attorney will likely draft a living will or medical directive for each client. This document states the client’s wishes regarding life support and other medical care in the event the client is incapacitated or otherwise unable to state their wishes.

What is elder law?

Where estate plans lay the groundwork for a client’s desires for their family and their assets after their death, an elder law attorney focuses on the many needs of the senior population. This often includes focusing on preserving assets and obtaining medical care while the client is elderly or incapacitated.

Planning for long-term care, whether in advance of the need for it or when the need arises, is a difficult road to navigate. Qualifying for Medicaid or Veteran’s benefits can be a confusing and strategic process, especially when a client has assets in their name. An elder law attorney can advise a client how to protect these assets in the best manner while qualifying the client for medical benefits as soon as possible. Many elder law attorneys are experts at Medicaid planning for long-term care. Although Medicaid is a federal program, states vary on qualification criteria. An elder law attorney can help a client preserve assets, fill out and submit the Medicaid application, handle any Medicaid hearings or appeals, talk with Medicaid or nursing home employees, and ensure the client continues to qualify for Medicaid.

If an elderly client becomes incapacitated, planning is needed to protect their assets and obtain the necessary medical care. Hopefully the client had the proper estate planning in place and has written documentation of their wishes in the event of incapacitation. Then, the elder law attorney will help the client’s family carry out those wishes in the best manner possible. Does the client require a special needs trust? A conservatorship? How are they going to pay for their medical care? Do they have the proper support network in place to provide trusted and competent care? These are some questions an elder law attorney can help their clients answer.

An elder law attorney will also advise clients on senior rights, age discrimination, elder abuse, and other issues that impact the senior community. Seniors can be targets for crime and discrimination and some will need an elder law attorney to help battle these issues. Many states are recognizing the wide-spread and growing problem of elder abuse and are starting initiatives, such as crime units, to aid seniors in their struggle against crime and abuse. An elder law attorney can assist their senior client in recognizing abuse and crime, reporting it, and making sure their rights are protected.

Expanding Into the Elder Law Realm

Estate planning attorneys write the blueprints for a future event, the passing of his or her client, and help that client protect his or her assets along the way. Elder law attorneys help seniors navigate their changing needs as they age. Many lawyers find that these areas of law often overlap, both in skill and clientele. Because of this, many estate planning attorneys find it useful and beneficial to also offer elder law services. Their existing client-base likely needs elder law services now or in the future. Why not offer more services to existing clientele, with whom the attorney already has a good rapport? It would be advantageous to both the attorney and the client if these additional services were available. Attorneys could increase their workload while the client can stay with the same trusted attorney over their lifespan, as their needs change.

Skills used in estate planning can also be useful in elder law. For example, seniors will need to make sure they have their disability documents in place and have a plan for their assets after they pass. Seniors will have some of the same goals that a traditional estate planning client might have. An estate planning attorney can cross these estate planning skills over into a new area of law, elder law, pathing the way for additional revenue while offering a more comprehensive set of services.

In Sum

For an estate planning attorney, it would be a practical choice to expand their practice to include specialization in elder law areas. Estate planning clients will develop elder law needs at some point during their lifetime. Why not be ready to satisfy them? Even younger clients can succumb to illness or disability and the skills used in elder law could be helpful for their needs. Estate planning attorneys often find it easy to expand on their skills to include elder law, since there are similarities and overlapping between the two. Expanding to include elder law in an attorney’s practice can mean the difference between getting that additional business or the client being referred to someone else that does.

Read more related articles at: 

The Difference Between Elder Law and Estate Planning Attorneys

Do You or a Family Member Need to Hire an Elder Law Attorney?

Do you need an estate plan?

Also, read some of our previous Blogs here:

When Do I Need an Elder Law Attorney?

How Do I Find a Great Estate Planning Attorney?

Click here to check out our On Demand Video about Estate Planning.

GRAT and Estate Taxes

 Case Law: Grantor-retained Annuity Trust and Estate Taxes

Case Law: Grantor-retained Annuity Trust and Estate Taxes

In Badgley v. United States, the 9th Circuit upheld summary judgment in favor of the IRS in a case regarding the legality of including the entire Grantor-retained Annuity Trust (GRAT) value in a decedent’s estate for purposes of the estate tax under 26 U.S.C. § 2036(a)(1).

A GRAT is an irrevocable trust that meets the requirements of 26 U.S. Code § 2702. A GRAT is usually used to transfer appreciating assets to the next generation with minimal taxes due. When property is transferred to the GRAT, then such property is subject to gift taxes on the present value of the GRAT’s remainder interest, in accordance with 26 U.S. Code § 7520. A reduction in the gift value of trust property is permitted if the Grantor retains an annuity interest in the trust. However, if the beneficiary is a family member, then the annuity interest must be a qualified interest under §2702. Trust property can be transferred to the beneficiary without gift tax implications by modifying the trust term and annuity amount in a way as to zero out any remainder. But what about estate taxes if the Grantor dies during the annuity payout period?

In this case, the decedent created a GRAT to transfer her partnership interest in a family-run company to her daughters, while retaining a right to an annuity paid from it for 15 years. The decedent died before the end of the 15-year period, and the estate tax return included the GRAT’s assets as part of the gross total estate. The executor of the estate filed a tax refund action, arguing that the inclusion of the entire date-of-death value of the GRAT led to an overpayment and that only the net present value of the unpaid annuity payments should have been included. The district court held that the decedent’s annuity interest was both a right to income from and continued enjoyment of the property, and that thus the entire date-of-death value of the GRAT should be included in the gross estate.

The court here agreed and ruled that the IRS properly included the entire date-of-death value of the GRAT in the gross estate. The court stated “At the most colloquial level, § 2036(a) stands for the proposition that if the taxpayer does not let property go, neither will the taxman.” While 26 U.S.C. § 2036(a)(1) does not expressly mention annuities, in that section Congress established three ways of tying a grantor to property, a string, that would require the possessor to include the property interest in the grantor’s gross estate for estate tax purposes: possession, enjoyment, or a right to income therefrom. The form of that string is not what matters – just that the string exists from one type of property to the Grantor.

In addition, the court ruled that the annuity from a GRAT should be treated as a substitute for wills under § 2036(a), because the grantor did not fail to completely divest herself of possession, enjoyment, and income from the property, and the beneficiaries’ interest did not take effect prior to the grantor’s death. Here, the grantor derived substantial present economic benefit from the property, meaning she retained enjoyment of the property for the purposes of § 2036(a)(1).

The executor argues that the right to income string means a distinction should be made whether the Grantor had a right to trust income or trust principal. The court here was not convinced, saying that the analysis depends on substance rather than formalities. The court declined to speculate about which part of the of trust property the annuity was drawn from. The business interest was the only property funded into the GRAT, and so the annuity stemmed from that property interest. The Grantor “died before the termination of the GRAT, the property was not transferred to its beneficiaries before her death—and remained tied to her by the string she created.”

Because the grantor retained strings to the property used to fund the GRAT, the Court determined that it should be included in the gross estate. Accordingly, the Circuit Court upheld the district court’s grant of summary judgment in favor of the IRS in Badgley v. United States.

ElderCounsel is here to keep you up-to-date on cases throughout the country. Contact us today to learn about all of the benefits of membership. If you’re interested in learning more about estate planning or support and documents for estate planning, visit our partners at wealthcounsel.com.

Read more related articles at:

What Is a GRAT—And What Are Its Benefits for Estate Planning?

Great time for a GRAT

Also, read one of our previous Blogs at:

What is a GRAT and Does Your Family Need One?

Click here to check out our On Demand Video about Estate Planning.

Medicaid Crisis

Medicaid “Crisis” Planning

Medicaid “Crisis” Planning

Medicaid “Crisis” Planning is defined as when an individual is already in a skilled nursing facility or will be entering within a short time-period and needs to qualify for Medicaid benefits immediately. This event may also involve failing to qualify for Medicaid benefits because of either too much income or too many assets, or both.

In the case of a married couple, an applicant may be able to also increase the well spouse’s Community Spouse Resource Allowance or redirect some of the nursing home spouse’s income away from nursing home costs, and back towards the well spouse, using the Minimum Monthly Maintenance Income Allowance.

A large percentage of Florida seniors will require long-term care at some point in their lives.  To be able to pay the enormous expense, most will need to rely on Medicaid for help. Unfortunately, many residents in this state did not take prior steps to ensure they will qualify for the program. In such cases, there are some Medicaid “Crisis” solutions that can be used even at the last minute to help seniors become eligible.

Nursing homes in Florida can cost up to $10,000 per month or more. And typically, Medicare will not pay for it. For most families, this means they need to either qualify for Medicaid or try to come up with the money out of their own pocket


Medicaid Crisis Planning Strategies

When a senior has an immediate need for long-term care, the government does not intend for you to transfer your assets one day, enter the nursing home the next day, and apply for Medicaid benefits the following day. Therefore, there is a five-year “look back” period for most asset transfers. If you transfer assets within the “look back” period, you are subject to a penalty.

Fortunately, there are certain types of asset transfers that are exempt from the “look back” period, and thus can be employed as last-minute solutions to qualify for Medicaid. These include assets transferred to:

  • Your spouse (or another person if it is for your spouse’s benefit)
  • A child who is blind or disabled
  • A trust for the benefit of a child who is blind or disabled
  • A trust for the sole benefit of someone who is disabled and under age 65

If the asset you are transferring is your home, there are a few added exemptions in addition to those mentioned above, including transfers to:

  • A child who is under age 21
  • A sibling who has equity in the home and has lived in it at least a year prior to the applicant entering a nursing facility
  • A child who lived in the home at least two years prior to the applicant entering a nursing facility, and who provided care that helped keep the applicant living at home

If any of these situations apply to you, it may be possible to transfer your assets and qualify for Medicaid without penalty.

Qualified Income Trusts

Also known as a Florida Medicaid trust, Miller trust, or d4B trust, a qualified income trust is an irrevocable living trust that is set up to divert excess income and allow the creator to qualify for Medicaid. While the Medicaid recipient is alive, assets in the trust can be accumulated, invested, or spent.

Upon death, any remaining assets in the trust must be paid back to the state up to the total amount the state paid the recipient for long-term care (minus applicable taxes and trust administration fees). While this is a less than ideal scenario, a qualified income trust can help you qualify for Medicaid while giving you control of your assets while you are alive.

Other strategies that can be taken last-minute to help qualify for Medicaid include:

  • “Spend downs” of excess countable assets into exempt assets such as home improvements and automobiles
  • Medicaid pooled trusts in which excess funds are put into a group trust with leftover funds remaining in the trust after you die and being used to help others in the pool
  • Medicaid-compliant annuities that irrevocably convert countable assets into an income stream

There are several other strategies that may be available depending on your situation. A qualified Elder Law Attorney can fully review your needs to determine the best solutions for your specific circumstance.

Read more related articles at:

Florida Medicaid (SMMC-LTC) Income & Assets Limits for Nursing Homes & Long Term Care

Medicaid Eligibility Test / Pre-Screen for Long Term Care

Also, read one of our previous Blogs at:


Click here to check out our On Demand Video about Estate Planning.




IRS dirty dozen

IRS’ “Dirty Dozen”

IRS’ “Dirty Dozen”

By Jill Roamer, J.D., CIPP/US topicIcon Elder Law

Each year, the Internal Revenue Service (IRS) puts out their “dirty dozen” list. This is a list of scams that are prevalent that the IRS wants everyone to watch out for. Let’s see what’s going on in scammer-town this year.

The scams fall into four main categories: pandemic-related scams; scams relating to personal information; schemes focusing on certain victims; and scams that persuade taxpayers into taking crooked actions.

Pandemic Scams

Due to the pandemic, the government passed legislation that provided financial help to individuals and businesses. A scam can focus on stealing these payments. The IRS alerts taxpayers to watch out for mailbox theft of stimulus checks. The IRS reiterates that an IRS employee will not initiate contact via phone, email, or text asking for your social security number or other information in order to process stimulus checks.

Scammers have stolen identities and filed unemployment claims, the IRS says. These scammers have benefited from the bolstered unemployment benefits but the legitimate taxpayer is the one who may receive a Form 1099-G to report on their income tax return. If you received this form and you didn’t actually receive those unemployment benefits, you should contact the appropriate state agency for a corrected form.

Scams Related to Personal Information

Personal information (PI) is information that is used to identify you and thus could lead to a scammer impersonating you. PI includes your social security number, driver’s license number, banking information, passwords, and more.

The first scam related to PI that the IRS warns against is phishing. This involves the scammer sending you a communication that looks like it is from a legitimate source, like a government agency. You think you are dealing with the IRS but you are instead dealing with a ne’er-do-well. The scammer collects your PI and then is able to perpetrate fraud on your accounts. Or the scammer has a virus embedded in the communication that compromises the security of your computer or phone.

There are also scams related to social media. The scammer may open a social media account and pretend to be friend or family member in order to extract PI from you. Or the con artist could ask you for money due to an “emergency” or for a fake charity contribution.

Schemes Focusing on Certain Victims

With the pandemic, fraudsters have set up fake charities or disaster relief companies. Or they create bogus stories on social media about a fake family that has had it particularly rough due to COVID-19. These stories or charities pull at your heart strings. Before you give to a cause, do your research to make sure it is legitimate, and your funds will be used as you intend. Be wary of a charity asking for a donation via gift card or money wire.

Immigrants are the targets of some scammers. The con artist will impersonate a government employee and threaten deportation or jail if a sum is not paid. The IRS states that a legitimate IRS agent will not make these threats. Similarly, those with limited English-speaking capability are susceptible to phone scams. The Schedule LEP let’s a taxpayer request a change in their language preference so that they can more easily understand official IRS communications.

Scams that Persuade Taxpayers into Taking Crooked Actions

Scammers may offer big discounts for a “settlement” with the IRS, or say that they will file for certain relief programs, such as an Offer in Compromise. While relief programs do exist with the IRS and can prove very helpful for some taxpayers with IRS debt, you need to make sure you are dealing with a reputable company who will actually do legitimate work on your behalf. Look out for misleading advertising or deals that seem too good to be trust. It might be worth contacting the IRS yourself first to see what options you have. There are many resources on the IRS’ website, including a questionnaire to see if you qualify for an Offer in Compromise. And, of course, the IRS offers its forms online.


Scammers are out there waiting to prey on the vulnerable and unsuspecting. The IRS warns to look out for any scam that requests payment via gift cards. Also, be aware that in most circumstances, the IRS will first communicate with you via mail. If the first contact is a phone call, be cautious. And the IRS will almost never send out communications to you via email.

As an elder law attorney, you work with the target age group for many of these scams. It’s important to keep your clients informed. If someone contacts your clients purporting to be from the IRS, they should call the IRS at 800-829-1040 to see what the facts are before proceeding.

Read more related articles at:

IRS wraps up its 2021 “Dirty Dozen” scams list with warning about promoted abusive arrangements

IRS urges caution with email, social media and phones as part of “Dirty Dozen” series

Also, read one of our previous Blogs at:

What are the Latest Senior Scams?

Click here to check out our On Demand Video about Estate Planning.


medicaid 5 year lookback


Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances
Last updated: January 07, 2021

Medicaid’s Look-Back Period Explained
When a senior is applying for long-term care Medicaid, whether that is for services in one’s home, an assisted living residence, or a nursing home, there is an asset (resource) limit. In order to be eligible for Medicaid, one cannot have assets greater than the limit. Medicaid’s look-back period is meant to prevent Medicaid applicants from giving away assets or selling them under fair market value in an attempt to meet Medicaid’s asset limit.

All asset transfers within the timeframe of the look-back period are reviewed, and if an applicant is found to have violated this rule, a penalty period (a period of Medicaid ineligibility) will be established. This is because had the assets not been gifted, sold under their fair market value, or transferred, they could have been used to pay for the elderly individual’s long-term care. If one gifts or transfers assets prior to this look-back period, there is no penalization.

The date of one’s Medicaid application is the date from which one’s look-back period begins. In 49 states and D.C, the look back period is 60 months. In California, the look back period is 30 months. New York will also be implementing a 30-month look-back period for their Community Medicaid program, which provides long-term home and community based services. (At the time of this writing, NY has a 60-month look-back for nursing home Medicaid, but no look-back for Community Medicaid). As an example of the look back period, if a Florida resident applies for Medicaid on Jan. 1, 2021, their look-back period extends back 60 months to Dec. 31, 2015. All financial transactions during that timeframe will be subject to review.

Examples of the type of transactions that could result in a penalty include money that was gifted to a granddaughter for her high school graduation, a house transferred to a nephew, collectors’ coins sold for half their value, or a vehicle donated to a local charity. Even payments made to a personal care assistant without a formal care agreement or assets that were gifted, transferred, or sold under fair market value by a non-applicant spouse can violate the look-back period and result in a period of Medicaid ineligibility.

Even after the “initial” look back period, if a Medicaid beneficiary comes into some money, say for example, via an inheritance, and gives all (or some) of the money away, he / she is in violation of the look back rule. Said another way, despite an initial determination that one has not violated the 60-month (or 30-month in CA and soon for NY Community Medicaid) look back period and is receiving long-term care Medicaid, he / she can violate this rule, and hence, be disqualified for Medicaid benefits.

The American Council on Aging now offers a free, quick and easy Medicaid eligibility test for seniors.

For Which Medicaid Programs is Look-Back Relevant
Medicaid offers a variety of programs and the look-back period does not necessarily apply to all of them. This article is focused on elderly care and Medicaid benefits for long-term care, and these programs consider the Medicaid look-back period. Therefore, if one is applying for nursing home Medicaid or for a Home and Community Based Services (HCBS) Medicaid Waiver, the state’s Medicaid governing agency will look into past asset transfers.

Medicaid programs such as those for pregnant mothers and newborn children do not have a look-back period.


How Look-Back Varies by State
While the federal government establishes basic parameters for the Medicaid program, each state is able to work within these parameters as they see fit. Therefore, all 50 states do not have the same rules when it comes to their Medicaid programs nor do they have the same rules for their look-back period. As of 2021, every state, but California, has a Medicaid Look-Back Period of 60 months (5 years). California has a much more lenient look-back period of 30 months (2.5 years), and New York will be phasing in a 30-month look back for their Community Medicaid beginning April 1, 2021.

The “penalty divisor”, which is used to calculate the penalty for someone found in violation of the look-back period, also varies by state. The penalty divisor is tied to the average cost of nursing home care in a specific state. For instance, a state may use a daily average penalty divisor or a monthly average penalty divisor. Penalty divisors by state can be found here.

Some states may not implement the look-back period for community / in-home care. One such example is New York, which only uses the look-back period for nursing home care. However, as mentioned above, a 30-month look-back period will be phased in for home and community based services. In addition, some states might allow applicants an exception for small gifts. Pennsylvania is one such state and allows Medicaid applicants to gift as much as $500 / month without violating Medicaid’s look-back period.

The Medicaid look-back period is complicated, especially since the rules that govern it vary by state. Therefore, it is best to contact a professional Medicaid planner to learn more about the Medicaid look-back period in the state in which one resides.


Unintentional Violations of Look-Back Rules
IRS Gift Tax Exemption – The IRS allows an annual estate and gift tax exemption. This means, as of 2021, an individual in the U.S. can gift up to $15,000 per recipient without paying taxes on the gift(s). However, one may not realize this federal tax exemption does not extend to Medicaid’s rules. Said another way, if one gifts $10,000 to a daughter or son, this gift is not exempt from Medicaid’s look-back period. As mentioned above, even a cash gift to a family member for graduation can be in violation of the look-back rule. It’s also important to note, the rules that govern gifting vary by state, further complicating this possible violation. More.

Lack of Documentation – Another way one may unknowingly violate Medicaid’s look-back rule is by not having sales documentation for assets sold during the look-back period. While the assets may have been sold for fair market value, if documentation is not available to provide proof, it may be determined one has violated the look-back period. This is particularly relevant for assets, such as automobiles, motorcycles, and boats, that have to be registered with a government authority.

Irrevocable Trusts (also called Medicaid Qualifying Trusts) – One might assume that these type of trusts are exempt from Medicaid’s look-back period, but this is not always true. The term, Medicaid Qualifying Trust, can create confusion, as the name suggests it is used to qualify for Medicaid. Unfortunately, if the trust is created during the look-back period, it is considered a gift, and therefore, is in violation of the look-back period. In simple terms, a Medicaid Qualifying Trust is a legal arrangement where assets are transferred from an individual, called the grantor, to a third party, called the trustee. The trustee becomes the owner of the assets and holds them for the named beneficiary. A variety of assets can be transferred via a trust and may include a Certificate of Deposit (CD), stocks, property, cash, and annuities. The term, irrevocable, means that the grantor cannot amend or cancel the trust.

Paying a Family Member to Provide Care – while it is acceptable under Medicaid rules to pay family members for providing care, doing so without proper legal documentation and caregiver agreements is a very common cause of Medicaid penalties. More information is provided below on how to do this without breaking Medicaid’s rules.


Look-Back Rule Exceptions & Loopholes
There are several exceptions and loopholes to Medicaid’s look-back rule. For instance, certain transfers can be made without violating Medicaid’s look-back period in order to protect an applicant’s family from having too little from which to live. These exceptions allow asset transfers without fear of penalty. To ensure they are done correctly and to avoid penalization, it is highly recommended one consult with a Medicaid planning professional prior to making any asset transfers.

Joint Assets of a Married Couple
For Medicaid eligibility purposes, all assets of a married couple, which are considered jointly owned, are calculated, and a portion is allocated to the non-applicant (community) spouse in order to prevent spousal impoverishment. This is called the Community Spouse Resource Allowance (CSRA), and as of 2021, may be as high as $130,380. The federal government sets this figure, and states may elect to use a lower figure. For example, South Carolina has a maximum CSRA of $66,480.

Each state is either a 50% or 100% state. For 50% states, a community spouse can keep half of the couple’s joint assets, up to $130,380, or in the case of South Carolina, up to $66,480. For example, a couple has assets equal to $300,000 in a state that has a maximum CSRA of $130,380. In a 50% state, this means that $150,000 in assets belongs to the applicant spouse and $150,000 in assets belongs to the non-applicant spouse. The non-applicant spouse can keep up to $130,380 of those assets. (The non-applicant spouse is generally only able to retain $2,000 of those assets). In a 100% state, a community spouse can retain 100% of the couple’s assets, up to the allowable $130,380, or again, in South Carolina, up to $66,480. Therefore, if a couple has $120,000 in assets in a state that has a maximum CSRA of $130,380, the non-applicant spouse is entitled to all $120,000 in assets. (To see CSRA and applicant asset limits by state, click here).

When there are excess assets, they must be “spent down” in order to meet Medicaid’s asset limit for qualification. It is not unusual that they be spent on the cost of long term care, whether that be nursing home care or in-home care, until the spouse in need of long-term care meets the asset limit. Other ways in which excess assets can be “spent down” are discussed further below in this article.

Asset Transfers to Minor Children
Transfers for the benefit of one’s child(ren,) given the child(ren) are under 21 years old, are disabled, or are legally blind. In addition to the transfer of assets, this includes the establishment of trusts.

Asset Transfer of a Home
One can transfer a home to a sibling. The sibling to which the home is being transferred must have ownership in it and must have lived in it for at least one year prior to the Medicaid applicant relocating to a nursing home. A home can also be transferred to an adult child who has served as a caregiver for their parent(s). This is called the caregiver child exemption. In order to be eligible for this exemption, the adult child must have been the primary caregiver of their aging parent(s), preventing the parent(s) from having to relocate to a nursing home or assisted living, and lived in the home with their parent(s) for at least two years prior to the parent(s) entering a nursing home.


What to Do When You’ve Violated Medicaid’s Look-Back Rules?
If one is in the unfortunate position of having violated Medicaid’s look-back period, there are ways in which one can still gain Medicaid eligibility. Usually the best course of action is to work with a professional Medicaid planner, as this is a precarious situation, and if not handled correctly, will result in a penalization period.

Free initial consultations with Medicaid planning professionals are available. Get started here.
Asset Recuperation
If one has gifted assets or transferred them for under fair market value and is able to recuperate the assets, the penalization period will be reconsidered. Therefore, if there has been any violation of the look-back period, it is extremely important to try to recover all assets. In some states, all assets transferred must be recuperated or the penalization period will remain the same. Other states might allow for partial recuperation of assets and adjust the penalty period accordingly.

Undue Hardship Waiver
If one has tried to recover assets they have gifted or transferred, but were not able to do so, they can apply for an undue hardship waiver. The Medicaid applicant must prove recuperation of assets failed, and if not granted Medicaid benefits, they will face significant hardship. This means they won’t be able to provide food, clothing, or shelter for themselves. It is very hard to be granted an undue hardship waiver unless it is very clear that the individual will suffer significant hardship without it.


Spend Down Assets Without Violating the Look-Back Period
There are ways for one to spend down excess assets without violating Medicaid’s look-back period, and hence, avoid penalization. (Calculate your total spend down amount here.) While the following strategies are all ways in which one can do so, the look-back period is extremely complicated. Therefore, it is highly recommended one contact a professional Medicaid planner prior to using one of the following strategies. Read more.

Life Care Agreements
Life care agreements, also called caregiver agreements or elder care agreements, are a great way for seniors who require a caregiver to spend down extra assets without violating Medicaid’s look-back period. In simple terms, caregiver agreements, which generally last for the duration of the care recipient’s life, are legal contracts between a caregiver, often a relative or close friend, and an elderly individual who requires care. Often life care agreements remain in effect even after the senior care recipient moves into a nursing home, as the caregiver can serve an advocate role for the senior. The contract needs to include the date care services are to begin, the type of care that will be provided, such as personal care assistance, light housecleaning, and preparation of meals, the frequency / hours the care will be provided, and the rate of pay. The pay rate must be reasonable for the area in which one lives. (If not, one may be in violation of the look-back period.) Life care agreements should make it very clear that payments to a caregiver are not simply gifts. That said, it’s best to also have supportive documentation, such as a log of executed caregiving duties, the days and number of hours worked, and written invoices for payment.

Medicaid Exempt Annuities
Medicaid exempt annuities, sometimes called Medicaid compliant annuities, are another way one can spend down assets without violating Medicaid’s look-back period. Annuities convert a lump sum of cash into a monthly income stream for the Medicaid applicant or their spouse, effectively lowering one’s countable assets for Medicaid eligibility. Annuity payments can be for the duration of the recipient’s life or for a set period of time. It’s important to note, each state has its own rules for Medicaid annuities, and not all annuities may be Medicaid compliant. In addition, if one purchases a deferred annuity, which means payments are delayed until a date in the future, this violates Medicaid’s look-back period. When considering an annuity, one must proceed with caution.

Paying Off Debt
Paying off debt, such as a mortgage or credit cards, is not in violation of Medicaid’s look-back period and effectively lowers one’s assets.

Home Modifications
One can also use assets in excess of Medicaid’s eligibility limit for home modifications and reparations without violating the look-back period. This includes replacing old plumbing systems, updating electrical panels, adding first floor bedrooms and / or bathrooms, installing wheelchair ramps, chair lifts, widening doorways to allow wheelchair access, and replacing carpet with more wheelchair friendly surfaces.

Irrevocable Funeral Trusts
Irrevocable funeral trusts, which pay for funeral and burial costs in advance, provide a way to spend down excess assets without violating Medicaid’s look back rule. The term, “irrevocable”, meaning the trust cannot be changed or terminated, is extremely important, as funeral trusts that are revocable violate the look back rule. More.

Determine Your Medicaid Eligibility


Read more related articles at:

Five year rule for Medicaid is often misunderstood

The Medicaid Look Back Period Explained

Also, read one of our previous Blogs here:

Protect Assets from Medicaid Recovery


Baby Boomers

The Aging of America: Will the Baby Boom Be Ready for Retirement?

The Aging of America: Will the Baby Boom Be Ready for Retirement?

This article is part of a broader study of saving funded by the National Institute on Aging and TIAA-CREF.

The baby boom generation—the roughly 76 million people born between 1946 and 1964—has been reshaping American society for  decades. From jamming the nation’s schools in the 1950s and 1960s, to crowding labor markets and housing markets in the 1970s and 1980s, to affecting consumption patterns almost continuously, boomers have altered economic patterns and institutions at each stage of their lives. Now that the leading edge of the generation has turned 50, the impending collision between the boomers and the nation’s retirement system is naturally catching the eye of policymakers and the boomers themselves.

Retirement income security in the United States has traditionally been based on the so-called three-legged stool: Social Security, private pensions, and other personal saving. Since World War II the system has served the elderly well: the poverty rate among elderly households fell from 35 percent in 1959 to 11 percent in 1995.

But the future is uncertain. Partly because of the demographic bulge created by the baby boomers, Social Security faces a long-term imbalance. The solution, even if it involves privatization, must in some way cut benefits or raise taxes. The private pension system has changed dramatically in ways that give workers increased discretion over participation, contribution, and investment decisions and easier access to pension funds before retirement—thus raising questions about how well future pensions can help finance retirement. Personal saving, also problematic, has remained anemic for over a decade. Net personal saving other than pensions has virtually disappeared.

These developments would be enough to raise concern about retirement preparations under the best of circumstances. But the prospect of a huge generation edging unprepared toward retirement raises worrisome questions about the living standards of the baby boomers in retirement, the concomitant pressure on government policies, and the stability of the nation’s retirement system.


Are the baby boomers making adequate preparations for retirement? In part, the answer depends on what is meant by “adequate.” One definition is to have enough resources to maintain preretirement living standards in retirement. A rule of thumb often used by financial planners is that retirees should be able to meet this goal by replacing 60-80 percent of preretirement income. Retired households can maintain their preretirement standard of living with less income because they have more leisure time, fewer household members, and lower expenses. Taxes are lower because retirees escape payroll taxes and the income tax is progressive. And mortgages have, for the most part, been paid off. On the other hand, older households may face higher and more uncertain medical expenses, even though they are covered by Medicare.

From a public policy perspective, assuring that retirees maintain 100 percent of preretirement living standards may be overly ambitious. But should policymakers aim to ensure that they maintain 90 percent of their living standards? Or that they stay out of poverty? Or use some other criterion? Retirement planning takes time, and these issues need to be addressed sooner rather than later.


A second big question is how to measure how well baby boomers are preparing for retirement. Studies that focus only on personal saving put aside for retirement yield bleak conclusions. One found that in 1991 the median household headed by a 65-69 year old had financial assets of only $14,000. But expanding the measure to include Social Security, pensions, housing, and other wealth boosts median wealth to about $270,000.

A third issue—crucial but as yet little explored—is which baby boomers are not providing adequately for retirement and how big the gap is between what they have and what they should have. Some boomers are doing extremely well, others quite poorly. Summary averages for an entire generation may not be useful as descriptions of the problem or as          suggestions for policy.

The uncertain prospects for the baby boomers in retirement are particularly troubling because, as a society, we as yet understand little about the dynamics of retirement. Only one or two generations of Americans have had lengthy retirements, and the crucial retirement issues—health care, asset markets, Social Security, life span—keep changing rapidly, making long-term predictions even harder.

How Well Are the Boomers Doing?

Interpreting the Evidence

Only a few studies have examined how well the boomers are preparing for retirement. The Congressional Budget Office recently compared households aged 25-44 in 1989 (roughly the boomer cohort) with households the same age in 1962. Boomer households, it turned out, had more real income and a higher ratio of wealth to income than the earlier generation. Though this finding seems promising, in fact the CBO study implies that baby boomers are going to do well in retirement only if (i) the current generation of elderly is thought to be doing well, (ii) the retirement needs of the two generations are the same, (iii) the experience from middle age to retirement is the same for both, and (iv) boomers will be content to do as well in retirement as today’s retirees. None of these is certain. For example, although today’s elderly are generally thought to be doing well, some 18 percent were living below 125 percent of the poverty line in 1995. And the boomers’ longer life expectancy means that they will need greater wealth for retirement.

Whether the boomers and the previous generation will have similar experiences from middle age to retirement is an open—and still evolving—question. The earlier generation benefited from the growth of Social Security and housing values in the 1970s. But the boomers have gained from the dramatic rise in the stock market since the early 1980s, from smaller household size, which reduces living expenses, and from higher employment rates for women, which will raise their pension coverage. In addition, boomers are more likely to be in white-collar work and so should expect earnings to peak later in life and be able to work longer if they wish.

Finally, boomers may not be content with the living standard of today’s retirees. They may aim instead for retirement living standards more comparable to those of their own working years. For all these reasons, how to inter-pret CBO’s finding is unclear, even if the finding itself is unambiguous.

The most comprehensive study of these issues was undertaken by Stanford’s Douglas Bernheim in conjunction with Merrill Lynch. Bernheim developed an elaborate computer model that simulates households’ optimal saving and consumption choices over time, as a function of family size, earnings patterns, age, Social Security, pensions, and other factors. He then compared households’ actual saving with what the simulations indicated they should be saving. His primary finding, summarized in a “baby boomer retirement index,” is that boomers are saving only about a third of what they need to maintain preretirement living standards in retirement.

The index has attracted much attention but is not well understood. It does not measure the adequacy of saving by the ratio of total retirement resources (Social Security, pensions, and other assets) to total retirement needs (the wealth necessary on the eve of retirement to maintain preretirement living standards). Instead, it examines the ratio of “other assets” to the part of total needs not covered by Social Security and pensions.

As a result, the index reveals little about the overall adequacy of retirement preparations (see table 1). In case A, a hypothetical household needs to accumulate 100 units of wealth. It is on course to generate 61 in Social Security, 30 in pensions, and 3 in other assets. Total retirement resources are projected to be 94 percent of what is needed to maintain living standards. But according to the boomer index, the household is saving only 33 percent of what it needs.


Table 1. Two Ways to Measure Adequacy of Retirement Saving
Units of wealth
Case Social Security
Other assests
Total resources
index (%)
Boomer index (%)
A 61 30 3 100 94 33
B 0 0 33 100 33 33
C 20 20 20 100 60 33
D 61 0 33 100 94 85
E 61 0 33 100 78 45
F 61 30 3 95 99 75
G 61 30 3 93 101 150


Thus, a baby boomer index standing at one-third does not imply that, absent changes in saving behavior, boomers’ retirement living standards will be one-third their current living standard. It could mean that (as in case B), or it could mean retirement living standards will be 60 percent of current living standards (case C), or 94 percent (case A), or even over 99 percent (if Social Security and pensions were 99 and other saving were 0.33).

A second problem is that changes in the boomer index over time, or differences across groups, do not correspond to changes or differences in the adequacy of overall retirement saving. If, as in case D, the household in A rolls over its pension into an IRA, the boomer index soars, though total retirement resources are unchanged. If, as in case E, household A rolls over half of its pension into other assets and spends the rest on a vacation, the household has a higher boomer index, but less adequate total retirement preparation.

Finally, the boomer index can be extremely sensitive to estimates of retirement needs. In case F, retirement needs are 5 percent lower than in A, and the index rises from 33 percent to 75 percent. In case G, retirement needs are 7 percent lower than in A, and the index rises to 150 percent.

Bernheim points out that his model understates the retirement saving problem. The wealth measure, he notes, includes assets the household has earmarked for retirement as well as half of other (non-housing) wealth. The model also assumes no cuts in future Social Security benefits, no increases in Social Security taxes, and no increase in life span.

But in other ways the model overstates the problem. It assumes that any man not covered by a pension at the time of the survey, when respondents are 35-45 years old, will never be covered, though pension coverage rates tend to rise a good bit as a worker ages. The model also likely understates pension benefits since it uses benefit data from the 1970s. Because the pension system grew rapidly from the 1940s to the 1970s, workers retiring in the 1970s likely had fewer years in the pension system and hence lower benefits than the boomers will upon retiring.

The model excludes all housing wealth and inheritances—no small matter, since, by Bernheim’s calculation, including housing would raise the index to 70 percent, and a fair proportion of boomers is likely to receive substantial inheritances.

The model assumes that people will retire at age 65, though the normal Social Security retirement age will be 66 for most boomers, 67 for the youngest. The model also excludes all earnings after “retirement,” though about 18 percent of the income of the elderly today is from working. And with partial retirement on the increase, retired boomers may work even more regardless of the adequacy of saving.

Finally, the model makes no allowance for retirees’ lower work-related expenses or lower expenses for mortgages or other durable goods—such as furniture, appliances, and cars. Whether all these biases are larger or smaller than those in the opposite direction noted by Bernheim is unclear. Measuring and including these items is an important area for further research.

A New Perspective

Fundamental questions about retirement saving remain not only unanswered, but unasked. What proportion of households is saving adequately for retirement? What are the characteristics of those households? How has the proportion changed over time? Among those not saving enough, how big is the problem?

Table 2 begins to answer such questions by presenting my own estimates of the proportion of married households, with the husband working, who are “on track” toward accumulating enough wealth for retirement. The measure of “on track” is based on calculations in a study by Bernheim and John Karl Scholz, of the University of Wisconsin, that determines how much a household needs to have saved by a given age, given its earnings, prospective Social Security benefits, pension status, family size and other characteristics. (That study uses the Bernheim model described above, so the data suffer from all the biases already mentioned. Another bias here is that the sample includes only married couples where the husband works full time. Other married couples and singles are likely to be faring worse.)


Table 2. Proportion of Married Households Saving Adequately for Retirement
Proportion Saving Adequately When:
Year Net assets exclude housing equity Net assets include half of housing equity Net assets include all of housing equity
All householdsa
1983 44 66 76
1986 53 71 78
1989 43 63 72
1992 47 61 70
Baby boomer householdsb
1989 48 67 73
1992 48 63 71
Source: Author’s calculations from the Survey of Consumer Finances.
a Husband is aged 25-64 and works at least 20 hours per week.
b Husband was born between 1946 and 1964 and works at least 20 hours a week.


When housing equity is not counted, slightly less than half of all households—and about the same share of all boomers—were saving adequately in 1992. When half (all) of housing equity is counted, the adequacy rate climbs to 61 percent (70 percent).

Adequacy rates rise with education and income. Within the baby boom generation, adequacy rates generally decline somewhat with age. They are higher for boomers with pensions than for those without, either because pensions raise households’ overall wealth or because people more oriented toward saving and thinking about retirement are also more likely to have jobs with pensions.

High adequacy rates do not necessarily require high levels of saving. For example, suppose annual retirement needs are 75 percent of final earnings. According to the Social Security Administration, Social Security benefits replace about 46 percent of final earnings for the average worker earning $50,000 at retirement. (Note that in this example Social Security replaces 61 percent—46/75—of total retirement needs, as in case A in table 1. The percentage would be higher for workers with lower earnings.) With pensions typically replacing 25-30 percent of final earnings, a household with Social Security and a pension would not need much more saving to maintain adequate living standards, especially if the household can work for a time in retirement or expects to receive bequests.

As table 3 shows, the wealth shortfall among households that are not saving adequately (ignoring all housing equity) is relatively small for many. The median inadequate saver has a shortfall of $22,000, or about six months of earnings—a problem that could be solved either by postponing retirement for six months or by lowering retirement living standards a little. Even among 60-64 year-olds, the median inadequate saver could completely resolve his or her saving shortfall by working for two more years past age 65.


Table 3. Median Shortfall in Retirement Wealtha
Age In dollars In terms of annual earnings
25-29 2,960 0.12
30-34 3,400 0.10
35-39 13,180 0.37
40-44 26,940 0.73
45-49 33,500 0.82
50-54 65,100 1.25
55-59 51,800 1.47
60-64 75,470 2.17
All households 22,480 0.52
Baby boomer
13,480 0.38
Source: Author’s calculations based on the 1992 Survey of Consumer Finances.
a The sample is households not saving adequately for retirement when housing equity is not included.


Thus, the glass can be viewed as half full or half empty. When housing equity is ignored, the typical household seems to be barely saving adequately or just missing. When housing is included, over two-thirds of households appear to have more than the minimum needed, given their age and other factors. Roughly speaking, a third of the sample is doing well by any measure, a third is doing poorly by any measure, and the middle third is (or may be) just hanging in there. Both of the following statements are equally true. Up to two-thirds of the households are now saving at least as much as they should be. And two-thirds are “at risk” in that any deterioration in their situation could make it impossible for them to maintain their living standards in retirement.

In short, two key factors matter tremendously to any characterization of the problem: the heterogeneity of saving behavior across households and uncertainty concerning the right measures of wealth to use.

Areas of Uncertainty

The boomers’ prospects are also complicated by uncertainty in other areas: retirement patterns, life spans, home values, asset markets, health care costs, and the economy itself.

Average age at retirement, which fell through the 20th century for men, may start rising regardless of the adequacy of saving. Many of today’s jobs do not depend on “brawn” and can thus be done by older people. The normal Social Security retirement age will rise to 66 by 2009 and 67 by 2027 even if no further changes are made in Social Security.

Partial retirement may matter as well. Many retirees cut back on work gradually rather than abruptly. According to a study by economist Christopher Ruhm, only 36 percent of household heads retire immediately at the end of their career jobs. Nearly half remain in the labor force for at least ve years. Of workers eligible for a pension, 47 percent continue to work after leaving their career job. If people continue to work even after retirement, they will be better able to support living standards in retirement.

A related uncertainty involves life span. Expected remaining life spans of 65 year-olds have grown in the past two decades and are projected to grow further. Living longer means having to stretch a given amount of money over a longer period.

Uncertainty regarding home equity is twofold. First, how will housing prices evolve? Both demographic pressures and the reduction in tax rates in the 1980s may reduce the long-term value of housing. And, second, regardless of housing values, to what extent should housing be counted as part of household wealth? In recent decades, the elderly have been reluctant to cash in their housing equity. But baby boomers have been willing to extract housing equity and were major recipients of home equity lending booms in the 1980s and 1990s. It remains to be seen whether the boomers in retirement will act more like themselves in earlier years or like current retirees. In any case, a household with low financial assets that lives in a $300,000 house and refuses to dip into housing equity may not be considered a pressing social concern.

Asset markets too are uncertain. Equity values cannot continue to grow as rapidly as they did in 1996. And even if the boomers accumulate what seem to be sufficient retirement funds, they will, loosely speaking, all want to cash in those funds at roughly the same time. That could mean massive sell-offs of stocks and bonds that could depress asset prices. Conceivably asset prices could fall sharply, but since markets are forward looking, asset prices may instead be stagnant for a long period. Finally, the evolution of health care costs and of the economy as a whole could have a major impact on the adequacy of retirement preparations.

What’s in Store?

The retirement prospects for the baby boomers are uncertain. One issue is what policymakers and boomers themselves will accept as a reasonable goal for retirement living. More thought needs to be given as to how to assess living standards when, as a matter of biology, retirees face declining health. In addition, they typically have more leisure time and can literally substitute time for money. A second source of uncertainty is the boomers themselves. Whatever imponderables the economy as a whole may offer, baby boomers can improve their retirement prospects by saving more—that is, by reducing their current living standards.

What can government do? First, keep the fiscal house in order by reducing the long-term budget deficit in ways that do not reduce private saving. Second, the government could provide, or encourage others to provide, financial education to workers and households on how much they need to save. Third, the government should encourage people to use the many saving incentives already in place. Fourth, judicious Social Security and pension reform, especially pension reform that raises pension coverage, could help resolve these problems and raise private saving at the same time.

Read more related articles at: 

The pace of Boomer retirements has accelerated in the past year

Millions of baby boomers are getting caught in the country’s broken retirement system

Also, read one of our previous Blogs at:

What Is the VA’s Plan for Long-Term Care for Baby Boomers?

Click here to check out our On Demand Video about Estate Planning.

protect trust

Act Quickly to Protect an Estate

Act Quickly to Protect an Estate

For most families, the process of estate administration or the probate of a will starts weeks after the death of a loved one.  However, before that time, there are certain steps that need to be taken immediately after death, according to a recent article “Protecting an estate requires swift action” from The Record-Courier. It is not always easy to keep a clear head and stay on top of these tasks but pushing them aside could lead to serious losses and possible liability.

The first step is to secure the deceased’s home, cars and personal property. The residence needs to be locked to prevent unauthorized access. It may be wise to bring in a locksmith, so that anyone who had been given keys in the past will not be able to go into the house. Cars should be parked inside garages and any personal property needs to be securely stored in the home. Nothing should be moved until the trust administration or probate has been completed. Access to the deceased’s digital assets and devices also need to be secured.

Mail needs to be collected and retrieved to prevent the risk of unauthorized removal of mail and identity theft. If there is no easy access to the mailbox, the post office needs to be notified, so mail can be forwarded to an authorized person’s address.

Estate planning documents need to be located and kept in a safe place. The person who has been named as the executor in the will needs to have those documents. If there are no estate planning documents or if they cannot be located, the family will need to work with an estate planning attorney. The estate may be subjected to a probate proceeding.

One of the responsibilities that most executors don’t know about, is that when a person dies, their will needs to be admitted to the court, regardless whether they had trusts. If the deceased left a will, the executor or the person who has possession of the will must deliver it to the court clerk. Failing to do so could result in large civil liability.

At least five and as many as ten original death certificates should be obtained. The executor will need them when closing accounts. As soon as possible, banks, financial institutions, credit card companies, pension plans, insurance companies and others need to be notified of the person’s passing. The Social Security Administration needs to be notified, so direct deposits are not sent to the person’s bank account. Depending on the timing of the death, these deposits may need to be returned. The same is true if the deceased was a veteran—the Veteran’s Affairs (VA) need to be notified. There may be funeral benefits or survivor benefits available.

It is necessary, even in a time of grief, to protect a loved one’s estate in a timely and thorough manner. Your estate planning attorney will be able to help through this process.

Reference: The Record-Courier (Oct. 17, 2020) “Protecting an estate requires swift action”

Read more related articles at:

Estate Planning Essentials: 8 Steps to Protect Your Family

Best Ways to Protect Your Estate and Inheritances from Taxes

Also, read one of our previous Blogs here:

Share Your Estate Plan Now to Protect Your Family When You Are Gone

Click here to check out our On Demand Video about Estate Planning.

britney spears

Britney Spears: “I Just Want My Life Back”

Britney Spears: “I Just Want My Life Back”

Britney Spears opened up to a Los Angeles Judge on Wednesday. She told the judge that “she had been drugged compelled to work against her will and prevented from removing her birth control device over the past 13 years. . .”

Britney Spears further plead, “I’ve been in denial. I’ve been in shock. I am traumatized. . . .I just want my life back.”

Wednesday was the first time Britney Spears had addressed the Court and the World in such a detailed manner, outlining the struggles she has faced for years. Britney Spears asked for the conservatorship arrangement with her father, Jamie Spears, to end without her having to be evaluated. “I shouldn’t be in a conservatorship if I can work. The laws need to change,” she added. “I truly believe this conservatorship is abusive. I don’t feel like I can live a full life.”

The “Free Britney” Movement has continued to gain traction and has imploded following Britney Spears’ statements in court on Wednesday.

Britney Spears also said, “It’s embarrassing and demoralizing what I’ve been through, and that’s the main reason I didn’t say it openly,” Ms. Spears said. “I didn’t think anybody would believe me.” Ms. Spears said she had been previously unaware that she could petition to end the arrangement. “I’m sorry for my ignorance,” she said, “but I didn’t know that.”

See Joe Coscarelli, Britney Spears: ‘I Just Want My Life Back’, N.Y. Times, June 24, 2021.

Read more related articles at:

Britney Spears speaks out against ‘abusive’ conservatorship: ‘I just want my life back’

Read Britney Spears’ full statement against conservatorship: ‘I am traumatized’

Also, read one of our previous Blogs at:

Britney Spears’ Conservatorship Battle with Father Continues

Click here to check out our On Demand Video about Estate Planning.



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