00:00 ANNOUNCER: ANNOUNCER.
00:34 Kurt Baker: Good morning and welcome back to another edition of Master Your Finances, presented by Certified Wealth Management and Investment. I am Kurt Baker, a certified financial planner professional, located in Princeton, New Jersey. I can be reached through our website, which is www.cwmi.us, or you can call me directly at 609-716-4700. This week, very pleased to have with us Jane Fearn-Zimmer, who is a shareholder in Flaster Greenberg. Dedicated her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning, and estate administration. Jane, very pleased to have you on today, thank you very much for coming on. I know we’ve had a lot going on over the last few months. And just from talking to other people I know that are helping out the population as far as legal side, a lot of people are getting really focused on their planning and so forth. I’m just wondering what you’ve been seeing since the beginning of the year, and then when the pandemic hit. And so what have you been seeing as far as your client base goes out there? What is…
01:45 Jane Fearn-Zimmer: It has been a very, very busy time of year for us from January up to present, and I’m glad people are doing their documents because they really need… They need to look at their finances. There have been so many legal changes and so many economic changes that it really is imperative to look through all of that paperwork on your desk and make sure that your finances are in order because we have an unprecedented element of uncertainty in our time that we have not seen before. So one of the things that I encourage people to do is look at all of their assets. And a lot of you, your biggest asset is either your house or your retirement account. So I don’t know if you’re familiar with what’s called the SECURE Act, but that was new legislation that is now about just about nine months old. And we don’t have the regulations yet, so we don’t know exactly how it’s going to play out, but the legislation was touted as a win for the tax payers. It was promoted as a law that will help people who are on the brink of retirement conserve their finances and help people who have already retired, reserve everything that they’ve worked so many years for to save, and it would purport to do that by extending the age to take your minimum required distribution to age 72.
03:12 Jane Fearn-Zimmer: And all that is just great, and but we had a new law under the CARES Act that allows you, if you elect to, to not take your minimum required distribution this year because of COVID and everything that’s going on. But what really did not get a lot of press, as far as I could see, was the negative aspects of the SECURE Act on your household. And one of the big… The way that this legislation is financially fiscally neutral, so the ledger has to pay for itself. And the way it does that is by changing and eliminating, in most cases, the mechanism to defer taxation of your retirement accounts. You have a retirement account and it is typically, unless it’s a Roth IRA, I’m not talking about those. I’m talking about tax-qualified retirement accounts, which would be like individual retirement accounts, the traditional ones, and 401 [a] s, 401 [k] s, 403 [a] and [b] s, 457. Kurtis, what am I forgetting? I’m sure that there are other types of them out there.
04:30 Kurt Baker: Right, right.
04:30 Jane Fearn-Zimmer: But basically, your qualified retirement accounts that are pregnant with untaxed income. And we used to, prior to the end of 2019, be able to defer the taxation of these accounts by naming a qualified designated beneficiary. And that person, if it was done right, whether it’s to an individual person or to a trust would possibly stretched out, taking their distributions and stretched out the income tax as a result from the distributions over their own actuarial lifetime. Maybe it had a different result, depending on how old the retiree was who funded the account when he died, and whether he or she was taking minimum distributions or not. But now, that, you had, in theory, the ability to defer for years and years and years those distributions and the income on them.
05:29 Jane Fearn-Zimmer: So the SECURE Act has gotten rid of that scheme and now, the default setting is that you have to distribute out all the income in your retirement accounts. If you’re the qualified designed beneficiary, over a period of 10 years, and what they really don’t tell you, here’s the catch, is that you’re not required to take any distribution in years one through 10. I’m sorry, one through nine, excuse me. Which means that if you gotta take it out in 10 years, everything comes out, in one big bowl of income in the tenth year. So if you have older trust documents that are drafted for retirement assets, those documents absolutely have to be be updated because they probably don’t say that the trustee has the ability to consider the potential income tax results especially under the SECURE Act in making a distribution. They’ll probably say you can make a distribution for health, education, maintenance, support or for special needs, but they absolutely need to be updated or your beneficiaries are gonna be unexpectedly paying hundreds of thousands of dollars of income tax that they can legally avoid.
06:43 Kurt Baker: That’s quite a change. I know we have these inherited IRAs that we’ve been used to, right? So if it doesn’t go to your spouse, which is… That goes okay, no problem, right? But it’s when it goes to a son or daughter or somebody that’s outside of your immediate… Your spouse, right? So people need to be aware of that and plan for it as you’re pointing out, right?
07:04 Jane Fearn-Zimmer: Exactly. So the default setting now is completely different. You basically have to take all of your distributions over the 10-year period unless you’re a surviving spouse, unless you’re a chronically ill individual or a disabled individual, and disabled means really disabled. So basically, you’ve had the Social Security Administration determine you that you’re entitled to SSI, Supplemental Security Income, or SSD or maybe Medicaid has determined you’re disabled or the State Disability Board has done so or you have a chronic condition that, it is so serious that it limits you and you’re unable to work more than $1200, $1300 a month in income because of that disability and it’s expected to last for more than one year. So disabled under the SECURE Act means very disabled, and I think that those are the exceptions. So you have to start looking at your retirement assets and thinking, “Okay, do I have a special needs child with an existing trust? Do I need to tweak that trust and make it complaint with the SECURE Act so that the trustee can distribute the income to the trust, to the child, and take income tax consequences into consideration.”
08:42 Jane Fearn-Zimmer: Yes, there’s still an exception to the SECURE Act, but you still need to update your trust documents. And because your distribution standard now is a little bit different, you need a different one. And you need to look at how you’re funding your estate plan. Because now, all these people that were gonna have retirement accounts funding their estate plan, they may wanna consider buying life insurance to offset the income tax plight that is otherwise gonna happen because their beneficiaries are going to have to take their distributions over a period of 10 years now and not their lifetimes. So life insurance is huge and updating your documents is very critically important.
09:24 Kurt Baker: No, that’s very good advice. And as I’m sure you’re aware, when you start having to implement some type of a life insurance strategy, the sooner you do this, the better. And obviously from a tax standpoint, it’s always wise to do things earlier rather than later. But any of these types of things that you’re doing as far as estate planning, it’s really important to do them early because circumstances do change or something you can do today, you might not be able to do next week, next month, next year. So once you’re aware of it, it’s really kind of critical to get on board and start doing that. And from what you’re telling me, it sounds like a lot of your clients… Or you’re reaching out to your clients and making sure that you’re getting all the documentation updated and making sure the strategies are tweaked to comply with the new tax situation based on what their situation is.
10:04 Jane Fearn-Zimmer: We’re encouraging clients to meet via Zoom. We can do it all remotely. You don’t necessarily have to physically come in the office to execute your documents. What we can do is there’s a remote notarization law, which is in effect in New Jersey throughout the public health emergency which Governor Murphy has proclaimed. And I can if I draft my documents with the correct provisions in the notarial clause, I can meet with you via Zoom or my paralegal can meet with you via Zoom. She’s better because she’s straight, and she will witness your signature. And we have the person, the testator, who signed their documents or the settler, the trustee, sit in a picture window, right in front of the window, and then maybe we have two witnesses outside and we can see them through the window and they’re six feet apart, maybe one’s in a car. And we can see all of them. We all interact via Zoom, and boom, boom, boom, you have documents. And so it’s important to not defer and not worry about, “How are we gonna do this during the COVID pandemic?” Because your attorneys, the attorney that you work with, they’re professionals and there’s a solution for everything. For every challenge…
11:27 Kurt Baker: Wow, that’s fantastic, Jane. I appreciate you going over that. We’re gonna take a quick break. You’re listening to Master Your Finances. We’ll be right back.
11:41 ANNOUNCER: ANNOUNCER.
12:00 Kurt Baker: Alright, welcome back, you’re listening to Master Your Finances. I’m Kurt Baker, here with Jane Fearn-Zimmer, and we’ve been talking about estate planning and some of the things that have been going on since the pandemic hit. People have a little bit of time to think about some things, and I know estate planning people have been busy. And it’s good you’re busy because there’s a lot that needs to happen with some of the things that are coming out that we need to actually deal with, right? So you’ve got the SECURE Act, so there’s some changes that happened there and the way that assets, retirement assets like IRAs and so forth, the distribution is different, the taxation is different. So it’s very important to update your trust documents and things like that and get them up to date.
12:38 Kurt Baker: And I know there’s a lot of other planning that’s going on, so that’s really what you and I both are in line with is it’s ideal really to plan ahead for the things that may happen and hopefully they never do. But in case they do happen, at least you got best practices in place so you can deal with them in the best way possible, and the legal aspect or the financial aspect is not quite as burdensome and you can focus on the actual event from a human standpoint as opposed to these other issues which have to be done, and it’s great to get that structure in place ahead of time. So what other things are you dealing with as far as that pre planning aspect, kind of getting everybody where they really should be legally right now.
13:17 Jane Fearn-Zimmer: So people really fall into different classifications. You have people that have really not suffered economically during this pandemic and they need to make sure that they have peace of mind, that their I’s are dotted, that their T’s are crossed, that they they have the right documents in place, and that they… Beneficiary designations are done correctly, that their trusts are funded, that they have the right life insurance, and all of this, this estate plan is going to work. And you have to work with people like Kurtis to make sure that what you worked hard for all your life is going to end up the way that you want it to, and that you understand your documents. You should never ever sign a document unless you understand it.
14:03 Jane Fearn-Zimmer: So one of the things that I do with my clients now, and always really, is to sit down and talk about what are their goals, and a lot of people are charitably inclined. There are people that are very, very successful even in this day and age, and they’re looking for a way maybe to assist a nonprofit, which are really terribly hard to hit because of the change in the income tax laws a couple of years ago from the itemized deduction to the standard deduction, whereby now your standard deduction is so relatively high or so comparatively high, that it makes sense not to itemize because you’re probably not gonna have a higher deduction if you itemize than your standard deduction. So now all of these nonprofit companies or entities that were going to be funded by a series of annual contributions, poof that’s gone away, how do you help them? One of the opportunities that if you’re in a higher income strata, is if you wanna reduce your taxable income and you’re under 70 1/2, you can take a charitable rollover and you could roll over. Instead of taking your required minimum distributions, you can take it but earmark it to go directly to the charity so that it’s not going to you.
15:28 Jane Fearn-Zimmer: And one of the nice things about that is that you can benefit the nonprofit or the charity and it also does not invade your one-year rollover per calendar year rule. In 2014, there was a tax case that came out and nobody expected it, it was called the Bobrow case, and basically the IRS introduced a new policy at that point. Now it is in a regulation under, I think it’s IRC 408, it’s one of the 408 regs, and it basically changed the prior policy and practice that you could pretty much use your IRA as a financial planning tool and take money out of your IRA and then put it back within another IRA within 60 days and you’re okay. And you could do that. There was no published limitation on the number of times per year that you could do it prior to 2014. So if you wanted to, if you were sick of your custodian, you’re tired of dealing with bank X that has fees, you don’t wanna deal with them anymore.
16:44 Jane Fearn-Zimmer: Or a bank, custodian, whatever, has a better rate and you’re not making a custodian-to-custodian transfer, or maybe you need a short-term loan and you don’t wanna pay bank rates, prior to 2014 and this Bobrow decision you could take the money out of your IRA multiple times in one calendar year and put it back within 60 days, and now you can’t do that. Under Bobrow, there’s a one IRA rollover per calendar year, and that is not a custodian-to-custodian transfer. It’s only when you’re actually receiving the money and then putting it back, it’s gotta be within the 60 days. And the nice thing about the charitable rollover strategy is it doesn’t invade your one free bite of the apple. So that’s a great option for people that are in those income brackets that wanna reduce it, and here to benefit a charity. Another thing that I’m encouraging clients to do always is to buy life insurance and long-term care insurance. Life insurance is a great way to fund an inheritance. If you have a family business and you have one kid who’s working in the business and maybe you have other kids that are not involved in the business and the business is not left liquid, if Johnny gets the business, Susie and Mary are gonna be really upset.
18:15 Jane Fearn-Zimmer: And you don’t want your family to have discord because Johnny doesn’t have the cash to pay ’em out. So go to Kurtis Baker and talk about your life insurance needs. That’s a big thing. If you have a special needs child, particularly if you’re going through a divorce and you know that kid is never going to be able to work and you want that child to be taken care of, one strategy would be to fund a special needs trust with an… Or a irrevocable life insurance trust with special needs provisions, and it’s gotta be very carefully crafted because it’s an interesting mixture of policies here. Do that and your child will be able to be taken care of comfortably even if you’re no longer in the picture. So that’s another option. We are looking now at a lot of people who are… Maybe who haven’t planned and they’re just being hit by this crisis and it’s terrible, and it’s like the rug is being pulled out from under them. So if, God forbid, you suddenly find yourself without your usual income stream from employment, there are a number of things that you really have to do, and I would encourage you to work with your financial advisor to see if you have the liquidity…
19:43 Jane Fearn-Zimmer: Is this a good year to do a Roth IRA conversion? Because now, your income might potentially be in a lower bracket than you were anticipating, and it’s gonna go up next year. All of this will pass away. It’s not permanent, I think. I think Spanish flu was about two years and at some point, we’re gonna be cycling through this and life is gonna be good again. And so you may very reasonably find yourself at a much higher income bracket than you were in 2020, and this might be a great time to do a Roth conversion. If for some reason you do it, you’re not necessarily locked in. I think you have a 60-day period to undo it. So that’s an opportunity that, economically, you might not have in the future because you may be in a higher bracket, and you can give your beneficiaries tax-free dollars. Also if, God forbid, you have a wealthy parent or an elderly person who is probably looking at a terminal situation and they’re either competent or you have a power of attorney and they are so inclined, do you want to do a Roth conversion for those people?
20:57 Jane Fearn-Zimmer: Because if they have a future estate that is filled with retirement accounts, those accounts are pregnant with untaxed income, and if it’s not structured right, the beneficiary now is gonna have to be stuck paying the tax. Potentially, do a Roth conversion and pay the tax, offset it with your medical expenses that the senior has, and maybe do better. You really have to crunch the numbers than if you just did nothing and let the retirement accounts go into the estate. That’s something you really have to look at if you wanna do a deathbed Roth conversion. I know it sounds really tacky. It’s not what you wanna think about when you’re with your loved ones, but you have to be practical, too. That’s…
21:48 Kurt Baker: No, absolutely. Yeah. Yeah. You covered a lot here and I know a lot of this comes down to having these conversations with your loved ones and really understanding what those funds are gonna be used for, for that next generation, to make sure you put them in the right format so that they can transfer down. And as you stated, the Roth has the great advantage of, once it’s converted, there’s no tax. Of course, you pay a tax on the conversion, but now, the asset can be transferred on. And it’s more favorable at that point, especially if you have outside assets that can help cover those taxes. And that’s really nice ’cause so now you can keep the corpus of that IRA or a lot of that IRA right there, and really use some of the non-qualified funds to cover some of those expenses. No, that’s great. That’s great advice and…
22:38 Kurt Baker: Oh, I know another thing you mentioned, I just want to talk real quickly, but we’re gonna wanna break. But the insurance is really important, especially in family businesses because if you start really talking to those who are gonna inherit the business, I know many people are surprised to find out who’s actually interested in the business and who really doesn’t want a whole lot to do with it. Those conversations are really critical to have before there is an event and somebody passes, and now, everybody’s trying to decide what to do. Much better to have those conversations way in advance, so everybody kinda knows exactly who’s gonna run it, how it’s all gonna transfer. We’re gonna take a quick break. You’re listening to Master Your Finances. We’ll be right back.
23:19 ANNOUNCER: ANNOUNCER.
23:38 Kurt Baker: Welcome back. You’re listening to Master Your Finances. I’m Kurt Baker here with Jane Fearn-Zimmer, and we are talking about some of the great estate planning concepts that you’re working on, especially during the pandemic. And people are getting a moment to sit back and really focus on what they should be doing. And this is always an issue that we always talk about, and I know it’s even more so now with all the changes that are going on both from a financial standpoint and some of the laws that are changing. But planning, reviewing your estate plan is something that people, everybody should be doing periodically. This is really a critical year to do it, I think. If you haven’t done it for a while, you definitely need to sit down and make sure it’s all in order. I know some people pull things offline and the problem with that is, New Jersey and a lot of the states like New Jersey, there’s a lot of nuances that you need to be aware of. And just pulling off a boilerplate probably is not gonna meet your needs in most cases. Be really cautious about that. What are your thoughts about what people should be doing right now in making sure their estate plan documents are in good shape?
24:44 Jane Fearn-Zimmer: Just make sure that you’re clear about your intentions and that your estate plan is set up in a way that it’s going to accomplish those intentions. One of the most common situations that I see, and it’s very easily preventable, is where you have a house in an estate and an elderly person or somebody who was ill was living in the house and there are deferred maintenance issues. And so now, you have this house, and it’s probably the individual’s biggest asset, and they may have financial accounts, but maybe those accounts have a beneficiary designation. And some maybe you have a small bank account and the house is going into the probate estate. If you want your executor to have fond memories of you after you’ve passed, you’d better make sure your estate plan works in a manner that will facilitate the executor’s ability to sell the house, and they might need to fix the house up in order to do that.
25:50 Jane Fearn-Zimmer: Particularly in this market, we’re seeing a massive shift in the real estate market, and a lot of people are moving from the city to the suburbs. A lot of people are moving from the suburbs into the country. And now, more than ever, it’s important to just pull out the old estate plan, dust it off, and make sure it’s gonna work like you expect it to. Because if your executor can’t sell the house because there is a problem with it or they can’t pay the water bills and they’ve got to dip in their pocket to pay for the sprinkler and the gas and the electric and all of that, they’re gonna be very resentful, and that’s not… You want to give them peace of mind so…
26:36 Kurt Baker: Yeah. Another important aspect of that, of course, we all know if the house is in good shape and nice, and now it’s ready to move in, you’re gonna get a significantly higher price than one where somebody’s gonna have to come in and literally renovate the home before they can really move into it, your market opens up significantly if they can close, move in the next day, as opposed to close and spend the next two or three months readying it so they can move in. And that affects the dollar amount. And I know you’re aware of this than I am is when you have an estate sale, there’s some people, they look for these estate sales because they know they’re hard to begin with because you have multiple sellers sometimes that have to sign off on it and the easier you make the product, the house to get to sell, the much more likely you’re gonna have a successful sale and a price, ’cause they’ll dispute what the price is even. Right? One of the heirs will say, “Well, I think it should be X.” The other one is like, “Well, it’s not worth that because it needs work,” and they just won’t sign off, so then you end up in this vicious cycle of not being able to get everybody to even agree to the sale, and then you lose value even there, right?
27:36 Jane Fearn-Zimmer: That’s one of the reasons why you want to have a valid will in place, is that you don’t have a fight between the heirs, as to what the price of the house is, who’s gonna do what, and you have somebody authorized and in the driver’s seat to actually do the work that needs to be done to sell the house and to sit at the closing table and to sign the documents. Otherwise, you’re in a position of having to go to court and get somebody else appointed, and now, more than ever… Like the New Jersey judges are wonderful. We have a very highly regarded judiciary, but they are just overwhelmed. They have the resources in terms of time and money to do things, and it takes twice as long because of the technology issues. They can’t, it takes forever to get everybody into the Zoom court session and now you’ve got to go to court to get somebody appointed when you could have just written a will.
28:34 Jane Fearn-Zimmer: A really simple solution, very cost-effective compared to what you could spend in your estate, if you didn’t do it. I would encourage you to just tweak out, dust out the old estate plan and just check it over, make sure it’s still works. But there’s a vast category of people that didn’t plan, and they’re now really hard hit. I’m seeing a lot of people who are at home and they’re afraid to go to the hospital or to the urgent care clinic because of COVID-19 and how do you… What do you do?
29:12 Jane Fearn-Zimmer: I’m seeing people that are laid off and they may or may not be aware that they have a special enrollment period. If they’re of age to get Medicare, and they were previously covered by an employer health plan, they’ve got a finite period of time to cover, to elect and pay opt into Medicare A and B and D for your prescription drugs. And if you don’t do that at the appropriate time, there’s a penalty, but if you… The really bad situation is that if you don’t do that at the appropriate time, and maybe you’re disabled and your insurance company is paying your premiums, now you’ve got coordination of coverage issues, and you may find that even though your health insurance company is paying… Your employer is paying your premiums, you may have your claims denied, because you don’t meet the criteria of an employee, so it really makes sense to sit down. Did I say that clearly? Is that…
30:24 Kurt Baker: Yes. Yes, right. Yeah, we wanna make sure all your insurance fits together properly, right? You wanna make sure…
30:29 Jane Fearn-Zimmer: Exactly. And it may not be what you think it is. I would really recommend that you sit down again with Kurtis or somebody like him, and go over the separation package, if there’s a disabilities issue, and just make sure that all your ducks are in a row, like you think they are. For people who need care in a crisis situation, it’s really another ball of wax. There are tons of people now who maybe are going into the hospital and they come out, they’re generally reconditioned, or they’ve had some sort of health issue and they’re going into a long-term care situation and they hadn’t planned for it. And the good news is that there’s, particularly if you’re married, there’s an awful lot that you can do to protect your finances and to protect the home and preserve the ability of the healthy spouse to stay at home. We can talk about those more after the break.
31:39 Kurt Baker: No, that’s good. No, I know that… We wanna make sure that the spouse is taken care of, so we have just another minute or two, but… Right? I think one of the concerns people have sometimes is when one person has to go… Well, two things, one, you should plan ahead for the long-term situation because most couples will have at least, one of you will need a long-term care facility at some point in your life. Whether or not you self-fund that or whether you use long-term care insurance is one conversation, but there’s so many tax benefits to long-term care insurance. I’m finding that most people, even if the assets, they end up putting into some kind of strategy that involves at least partially using the insurance because it is very favorable from a tax standpoint.
32:26 Kurt Baker: And then, if you haven’t planned for it, that’s the other area that you touched on briefly there, is, you don’t wanna get into a crisis situation because then you’re gonna miss a lot of the choices you might have normally been able to have. When you’re planning ahead, you can literally sit down and say, “Here’s the kind of facility I’d like to go into,” because there’s multiple types of facilities out there, and I think now more than ever, given that we have the crisis with the pandemic, I think people are paying even more attention to, “What would happen if I had to go into one of the facilities? How do I make sure I’m safe, my loved one is safe, if I’m putting them in there? And how are they taken care of and what’s the communication gonna be like?” Right? Because that’s changed.
33:08 Kurt Baker: A lot of things have changed even in the facilities themselves. And they were traditionally set up to be kind of a neighborhood, networking, keeping-people-socially-active type situations. But when you’re dealing with a pandemic, you have to be separated to some degree just purely from a health standpoint. People are looking at things at a slightly different viewpoint than they might have been doing even a few months ago, I think. What are you seeing about that?
33:34 Jane Fearn-Zimmer: You’ve hit on a couple of really important points. And one is that, it’s always, always, always, if you can qualify for it, a good idea to seriously consider buying long-term care insurance. In nearly all the cases, it’s much more cost-effective than self-funding your own retirement in a nursing home at $14,000 a month. It’s always better to pay for your care with somebody else’s money, right? Long-term care insurance gives you a way to do that. It is very tax-favored, and I think that if I were to get into the weeds of that, it would be confusing in the short time that we have left and it would certainly bore you. And so, if you go to janefzimmer.com, I have a blog. And on my blog page, there is a very comprehensive long-term care insurance worksheet, and it basically gives six or seven scenarios of different strategies of how you can pay for long-term care insurance using your retirement, minimum required distributions, how it can help, and who it benefits.
34:45 Jane Fearn-Zimmer: I have some families look at their parents, and they realize, particularly, if the parent was divorced and remained single and maybe devoted his or her life to the kids, they look at their parents and realize that as much as they love mommy or daddy, that they’re a walking… A huge heart and walking financial nightmare. And the kids get together and buy a long-term care insurance policy for mommy or daddy because the kids know that if they don’t, it’s gonna be a whole lot more expensive in terms of their lifestyle and finances at home or in a nursing home.
35:22 Kurt Baker: No, that’s great advice. And that’s definitely part of the family planning aspect, is, how are you gonna take care of mom or dad if something were to happen? We’re gonna take a quick break. You’re listening to Master Your Finances. We’re gonna be right back.
35:42 ANNOUNCER: ANNOUNCER.
35:58 Kurt Baker: Welcome back. You’re listening to Master Your Finances. I’m Kurt baker here with Jane Fearn-Zimmer, and we’ve been talking about planning. I guess, we broke off with a little bit of long-term care insurance planning, which is really a family planning aspect ’cause your parents are gonna get older or you’re gonna get older, and somebody needs to manage that. And so, if you do it correctly, you’ll have the budget and some people will have a nice retirement. And even if they have to got to a long-term care facility, it’s something that’s appropriate for them, and it definitely takes the stress off the family because if parents are expecting their kids to take care of them, you don’t want them to be your caretaker and your child. You’d much rather they could be your child and come and visit you and enjoy you as opposed to having to take care of you all the time. I know I’ve heard many stories about where it’s significantly better relationship where they’re actually able to spend time getting to know their parents more and more as opposed to simply coming in to help them from a medical standpoint.
36:48 Kurt Baker: I know that when we plan, unfortunately, hopefully, our clients have all done that and they have a pretty good retirement if they have a plan in place. But as we know, sometimes people don’t plan, and you hear these stories about a loved one, their father falls and now has to be put into a long-term care facility, and there’s no plan, there’s no assets, there’s no idea of where they’re gonna go or how they’re gonna do it. What happens in such situations? Not ideal, but there are things that people can do, correct?
37:24 Jane Fearn-Zimmer: Absolutely. It’s important to pull the bottom line, as well as to make sure your loved one gets the best possible, that you get a seasoned elder law attorney involved as possible. Basically, you’re bound to look for somebody who devotes their practice to elder care planning, elder law. And these are typically people who are a member of the National Academy of Elder Law Attorneys. That’s like the good housekeeping seal of approval, or they might be leaders in the Local Bar Association. Their websites, you can tell that they know what they’re doing. And it’s just too complex an area to go to somebody who doesn’t deal with this every single day. You wanna get the elder law attorney involved as soon as possible because they can help you. They can help make sure that your parent has had a three-day qualifying stay, which is important in order to get Medicare dollars to pay for your care.
38:25 Jane Fearn-Zimmer: If I walked down the street and I asked 10 people, “Hey, if you need nursing-home care, how are you gonna pay for it?” I would be astounded if, at least seven of them didn’t tell me that Medicare was gonna pay for it. But that really is a misnomer. Medicare, C-A-R-E, is a health program, and it basically was put into place in 1965 by President Johnson to provide a safety net for healthcare. And it does pay for a little bit of long-term care, some of the time, but only if you qualify for it. And you have to have a three-day qualifying stay. And if you are admitted into a long-term care facility within 30 days of the three-day qualifying stay, then Medicare will pay for up to 100 days of nursing home care. It really is a wonderful source of free money. There’s a co-pay. There are other nuances. I don’t wanna get in the weeds. But basically, look at the situation where you have somebody in the hospital but they are not actually on inpatient status.
39:38 Jane Fearn-Zimmer: If you have that problem, you’re going to get cheated out of your Medicare dollars if you would be otherwise eligible for Medicare. And your local elder law attorney will advocate that you be immediately put on inpatient status so that you get your stay. That can save you hundreds, tens of thousands of dollars. The other thing an elder law attorney can do is assist the discharge planner, who I can pretty much guarantee you has many, many other clients besides your loved ones to place in a very short period of time. And so, he or she is probably going to be inclined, unless you provide them with other resources, to get them to the easiest placement, which may not be the place where your parent has the best fit.
40:29 Jane Fearn-Zimmer: So the elder law attorney can help you navigate the long-term care continuum quickly and figure out what are the great facilities in your area. What is economically feasible? Where does your parent belong on the care continuum or your loved one? And do you have a realistic option of getting in there? If you do, they can help you review the admissions agreement because what you don’t want to do is sign as responsible party for your parent’s assisted living bill. And in New Jersey, with respect to assisted living, you could be held responsible for your parent’s bills if you agree to it. So do you really wanna pay voluntarily out of your pocket between $4,500 and $7,000, maybe 7,500 per month, for your parent for the rest of their life? Probably not. So if you have an elder law attorney, you can have them review the admissions agreement and protect your bottomline. Another thing that you can do is to work with an elder law attorney if you think your parent or loved one will need care soon to make sure that they have a power of attorney that will allow you to assist them and will have provisions that will protect them.
41:45 Jane Fearn-Zimmer: You want to be careful to have a provision in there that you are not authorized to agree to binding arbitration involving a long-term care facility on your parent’s claim because what if they fall and break their hip or there’s something horrible happens, and now you’ve gone and signed the admissions agreement because you didn’t go to an attorney and you didn’t review it and you didn’t have the right power of attorney, and now you’re in a position where your parent’s claim is arbitrated, which means that you’re gonna be paying for three different arbitrators, who pretty much have been hand-selected by the nursing home or the admissions facility, whatever it is. I’d much rather be in front of a jury in that case. So you don’t know what you don’t know, and these are all things that an elder law attorney can help you. And this way you can just be the kid or the wife or the husband, and not the heavy-lifter. They can help you get a Medicaid application together quickly. They can help you address if there were gifts.
42:50 Jane Fearn-Zimmer: I see a lot of parents who have given economic support to their kids over the years and all of a sudden they’re in crisis and they need to go into long-term care, and how do we address the gifts? And the good news is that depending on the assets, if you have more than maybe $40,000, $50,000, there’s probably some crisis planning we can do.
43:16 Kurt Baker: That’s all great advice and just you wanna recap the difference between the Medicare and the Medicaid ’cause sometimes people don’t understand what the differences are. Just real quickly.
43:27 Jane Fearn-Zimmer: Medicare is that short-term health program and it’s the alphabet soup. It’s got A, which is hospital. It’s got part B, which is your long-term care facility, or you could have your Medicare be in the home. You can get Medicare to pay for some limited home care and therapies like physical therapy, occupational therapy, speech therapy, in your home. And there’s D, which is the prescription drug plans. And there are other… There’s F. There’s all sorts of alphabetical options for Medicare, and that’s your short-term health insurance coverage. Medicaid is a public benefits program that provides long-term healthcare… It provides healthcare for poor people. Those are people with low income and low assets. And it also can provide, through the New Jersey Family Care program, financing for insurance benefit that if you don’t have access to comparable coverage through an employer or other situation, if you can’t buy it on the marketplace, New Jersey Family Care, if you’re below certain income limits, it can provide health insurance coverage for you. It is not asset-based.
44:40 Jane Fearn-Zimmer: So you could live in theoretically a million-dollar house and if now you’re jobless because of COVID-19, you can get health insurance in place because of your income. You would now qualify for the income limits for New Jersey Family Care. So again, an elder law attorney that works with these programs can help you sort through that. So Medicaid is not an open spigot. Medicaid is a nursing home financing program. It could also pay for benefits in your home. And it’s not an open spigot. It’s always the payer of last resort, which means if you’ve got some other way to pay for your care then Medicaid would never pay. So putting together a Medicaid application is a complicated process and there’s a five-year look-back period. You look back five years from the date of the first Medicaid application to see if there were any gifts that you did not receive fair market value for. And if there were, Medicaid is gonna impose what’s called a penalty period and it will deny funding for a period of care, funding for institutional care, like care in a facility. For a period of time, that care will be denied through a Medicaid commensurate with the amount of the gift that was made within that five-year look-back period.
46:05 Jane Fearn-Zimmer: So why am I going on and on about this? The takeaway is that it’s important to make sure that if you do need Medicaid in future, that you don’t just jump the gun and file it before you really need it because that first Medicaid application is gonna trigger the five-year look-back period. Even if you’re applying for Medicaid five years in the future. Now you’ve made it a 10-year look-back period and you didn’t mean to. So there is this very negative harsh cases out there, and so it is important to protect your finances by going to somebody that knows this because they do it every day. There are big, big, big changes in the New York Medicaid Home Care Program. I believe in October, you… Right now, you have the ability to make gifts if you’re going to receive care in the home and there’s no penalty period, there’s no look-back. But if you wait until October to do that for Medicaid home care, that system is going to change and so it’s very important to work with a licensed New York attorney to review your position, review your strategies, your fears and your financial and your physical condition, and see if there’s something you should be doing right now to protect yourself.
47:33 Kurt Baker: Yeah, absolutely. That’s all very great. It’s excellent information and I know, again, this all gets back to planning, whether you’re planning ahead of time, do it well, or if you’re in a crisis, especially the Medicaid application, it was very complicated and to get the most benefit, you really need some professional help. I just want to touch on one little subject quickly before we break but, I know that with the COVID, I think we’ve seen significant increases in the psychiatric issues that have been going on out there. So what have you been seeing and what are people kind of doing to help to deal with that, so to speak?
48:07 Jane Fearn-Zimmer: So that’s exactly right. With the stress of the COVID situation, people are very vulnerable, even more so than they normally would be and I’ve seen a lot… An increase in psychiatric emergency admissions. And so in New Jersey, it’s very important to be aware of the system and to reach out to a seasoned counsel, somebody who specializes in this area and actively does it very frequently and gets their hands dirty and helps their clients. A lot of people do guardianship, but not too many people do hands-on, involuntary, commitment-type work. It’s a very specialized area. And what you don’t know is that you can be involuntarily committed if you express an intent with a ideation, with a plan, to either hurt yourself or somebody else, and now you’ve… Maybe you were just venting, “Oh, I can’t take it anymore. I’m gonna do blah, blah, blah.” And you’re in the hospital and you’re being interviewed by the social workers, and they have specific regulations that they are required to follow. They have a specific procedure. And if they don’t follow that procedure, there may be a loophole and you may not necessarily… You can potentially be held liable for part of the cost of your care if you’re sent to a place like Carrier Clinic or Northbrook for an involuntary commitment.
49:49 Jane Fearn-Zimmer: Now the Public Assessor’s Office has got to figure out what portion of that you’re gonna pay and what portion the state’s gonna pay. And so there are very specific regulations that govern the psychiatric emergency admissions procedure and somebody who does this everyday can tell you whether or not those procedures have been followed. I also see people who may be… Particularly students, like graduate students, they’re just overwhelmed now, or college students. They’re overwhelmed with the COVID issues and they’re expressing their distress very naturally, very understandably, and they’re getting caught up in this involuntary commitment web. And because of what they’ve expressed, because of the feelings and the ideation that, maybe, they have vented, they’re now having hospital stays. And it’s important to be aware and speak with somebody who can tell you what your rights are when a voluntary… How long you can be held involuntarily and how long you have before they can give you a hearing.
51:00 Kurt Baker: No. Jane, that’s great. Yeah, excellent advice. I know we’re running a little bit long, so I don’t wanna… But yeah, that’s been fantastic. So all of these different situations, it’s really critical and I know you’ve been pointing this out in various aspects, regardless of whether it’s planning ahead and doing it correctly or whether there’s a crisis involved, a psychiatric event, all of these things. There’s some very specific nuances out there. You need to be really aware of them and having experts involved to make sure that you get the proper care and that you’re not paying any more than you absolutely have to pay. It’s critical to get the experts involved when some of these things occur. You’ve been listening to Master Your Finances. You can reach us by going to masteryourfinances.us and listen to this podcast and all of them and subscribe there. And remember, together we can master your finances so you can enjoy financial peace of mind.
52:18 ANNOUNCER: ANNOUNCER.