ILLINOIS UPDATE  

It is the goal of EAGLE PUBLISHING COMPANY to keep our publications fresh and up to date. To do so we will print changes in the law and corrections to the book that have come to our attention after the book has gone to print. The following are updates to:
A Will Is Not Enough In Illinois and
When Someone Dies in Illinois

Update to both books
The new Illinois Statute Web site is http://www.ilga.gov

HOMESTEAD EXEMPTION DOUBLED
The Homestead Exemption has been doubled. Now up to $15,000 of the value of your Homestead is protected from your creditors. Up to $30,000 is protected is you own your home jointly with another (735 ILCS 5/12-901).

EXEMPT PERSONAL PROPERTY
The amount that is exempt has been doubled:
personal property from $2,000 to $4,000
interest in motor vehicle from $1,200 to $2,400
personal injury award from $7,500 to $15,000

THE SMALL ESTATE AFFIDAVIT
The amount of personal property that can be transferred by Affidavit has been increased to $100,000.

Update to: A Will Is Not Enough In Illinois, 1st Edition

NOTE: These updates are current through 2005.
The 2006 edition will replace the first edition.

A Gestational Surrogacy Contract is an agreement, usually between a married couple (the intended parents) and a woman (the gestational or Surrogate mother) in which the woman agrees to be the birth mother of a child conceived with the sperm of the husband, or the egg cell of the wife, or the embryo of the intended parents. This means the husband or wife is the biological parent of the child.

As of January 1, 2005, the Illinois GESTATIONAL SURROGACY ACT (Chapter 750, Act 47) went into effect. Under current Illinois law, a Gestational Surrogacy Contract is enforceable provided the contract is drafted according to Illinois law. The law requires the Surrogate parent(s) and the intended parent to be represented by their own independent attorney who will explain the law and the consequences of entering into a Surrogacy Contract. The parties can agree to compensate the Surrogate parent above the amount needed for medical expenses, however the funds must be placed in escrow prior to the procedure taking place.

Provided all of the conditions of Illinois law are met, immediately upon birth, the intended parent(s) becomes the legal parent of the child with full duty to support the child. The Surrogate parent(s) have no rights or any responsibility to raise the child.

CHAPTER 9: The 2007 Medicare value for a stay in a skilled nursing facility for days 21 through 100 is $124 per day.

In 2008, those on the original Medicare plan will pay:

$128 per day for days 21-100 in a skilled nursing facility for each benefit period. This is $4 higher than the 2007 value.

CHAPTER 10: MEDICAID UPDATE - Effective 1/1/06
The federal and state governments have increased the Community Spousal Resource Allowance to a maximum of $99,540 and a minimum of $19,908.  They increased the Minimum Monthly Maintenance Needs Allowance to $2,488.50.

The average cost of nursing care used by the state of New Jersey in 2006 is $6.525. This is the value used as a divisor to compute the Penalty Period for an uncompensated transfer.

CHANGES MADE BY CONGRESS IN 2006
Congress passed the following changes to the Medicaid law:
FIVE YEAR LOOK BACK
The Look-back period is extended from three years to five years.

PENALTY PERIOD STARTS WHEN YOU APPLY
Under the prior Medicaid law the Penalty Period started from the day the transfer was made. Under the new law the Penalty Period begins on the day the Applicant applies for Medicaid, meaning that the Penalty clock doesn’t start ticking till the Applicant actually applies. For example, if a person makes an uncompensated transfer during the five year period before he applies for Medicaid, the Penalty Period will begin as of the day he applies for Medicaid.

HOMESTEAD WITH EQUITY OF $500,000 OR MORE
 If the equity in the Applicant’s home (current market value less mortgages and liens) is equal to $500,000 or more, he will not be eligible to receive Medicaid benefits. States are given the option of increasing this value to $750,000 or more.

 These changes need to be adopted by the states, so it may take several months before these laws are put into effect.

Check with an Elder Law attorney to determine the status of the Medicaid law in Illinois.

Update to: When Someone Dies in Illinois

NOTE: These updates are current through 2005.
In 2006, GUIDING THOSE LEFT BEHIND IN ILLINOIS will replace
When Someone Dies In Illinois

CHAPTER 1: VA Pamphlet 051-000-00228-8 FEDERAL BENEFITS FOR VETERANS AND DEPENDENTS now costs $7, however you can download it without charge: http://www.va.gov.

CHAPTER 1: The telephone number for the Arlington National Cemetery is (703) 607-8585.

Chapter 2: The number for information about COBRA has been changed to (866) 444-3272 

CHAPTER 3: The Web site for the FAA is http://www.faa.gov.
The telephone number to call is (866) 835-5322.

Page 34 The alternative valuation may be used only if the gross estate decreases in value.

Page 42 The American Council of Life Insurers will not assist in locating lost insurance policies, but they do offers suggestions about how to find a policy at the Missing Policy Inquiry page of their Web site http://www.acli.com

Page 47 MEDICARE AND YOU (Publication No. CMS-10050) is now published by the Centers for Medicare and Medicaid Services. You can get the publication from the Medicare Web site or by writing to: U.S. Dept. of Health and Human Services
Centers for Medicare and Medicaid Services
7500 Security Blvd.
Baltimore, MD 21244-1850

Page 86 Life Insurance proceeds inherited by the surviving spouse, or a person who was dependent on the decedent for support (child, parent, any other person) are free from the claims of the decedent's creditors. 
Life insurance proceeds are not creditor proof if inherited by anyone else.

Page 91: second paragraph the cite should be 755ILCS 5/18-12(b), (d).

CHANGE IN FEDERAL TAXES (Page 36)

Both the federal and state government have the right to impose an Estate Tax on property transferred to a beneficiary as a result of the death. All the property owned as of the date of death becomes the decedent’s Taxable Estate. This includes real property (homestead, vacant lots, etc.) and personal property (cars, life insurance policies, business interests, securities, IRA accounts, etc.). It includes property held in the decedent’s name alone, as well as property that he held jointly or in Trust. It also includes gifts given by the decedent during his lifetime that exceeded $10,000 per person, per year. That value (the Annual Gift Tax Exclusion) is now based on the cost of living index and for 2002 is increased to $11,000. For most of us, this is not a concern because no federal Estate Tax need be paid unless the decedent’s Taxable Estate exceeds the Estate Tax Exclusion amount. That value is currently one million dollars and is scheduled to go even higher:

       YEAR      

EXCLUSION  AMOUNT
2004-2005 $1,500,000
2006-2008 $2,000,000
2009 $3,500,000

THE UN-UNIFIED GIFT TAX
 Up until the year 2002, if you gave someone more than $10,000 in any given year you had to report that gift to the IRS. The Annual Gift Tax Exclusion is now adjusted for the cost of living and is $11,000 for the year 2002. The IRS keeps a running count of amounts that you give over the Annual Gift Tax Exclusion. Although you are required to report the gift, no tax need be paid unless that running total is more than the federal Estate Tax Exclusion amount. If your running total does not exceed that amount during your lifetime, once you die, the cumulative value of gifts reported to the IRS will be added to your Taxable Estate. Up until the change in the tax law in 2001, the Gift and Estate tax were unified. No Gift Tax needed to be paid unless the total value of the taxable gifts exceeded the federal Estate Tax Exclusion amount. That changes in 2004. In 2004, the Estate Tax Exclusion amount goes up to $1,500,000, but the amount for the Gift Tax Exclusion remains at $1,000,000, so they are no longer unified.

To summarize: If you make a gift to anyone that is greater than the Annual Gift Tax Exclusion for that year, you must report that gift the IRS. The IRS will keep count of values that you gave in excess of the Annual Gift Tax Exclusion. In 2004, if that sum exceeds $1,000,000, you will pay a Gift Tax on any amount that you give that is over the Annual Gift Tax Exclusion.

The Estate Tax is scheduled to be repealed in 2010, but not the Gift Tax.

GIVING WITH ONE HAND — TAKING WITH THE OTHER
 The current federal Estate Tax is scheduled to be phased out in the year 2010, but a new Capital Gains Tax is scheduled to be phased in that may prove to be even more costly than the Estate Tax. The new Capital Gains Tax is related to the how inherited property is evaluated by the federal government. Real and personal property inherited by a beneficiary is inherited at a "stepped up" in basis. This means that if the decedent purchased some item now worth more than when he purchased it, the beneficiary will inherit the property at its fair market value as of the decedent’s date of death. For example, suppose the decedent bought stock for $20,000 and it is now worth $50,000, the beneficiary takes a step-up in basis of $30,000; i.e., he inherits the stock at the $50,000 value. If the beneficiary sells the stock for $50,000, he pays no Capital Gains tax. If the beneficiary holds onto the stock and later sells it for $60,000, the beneficiary will pay a Capital Gains tax only on the $10,000 increase in value since the decedent’s death.

Up to 2009, there is no limit to amount you can take as a step-up in basis. But in 2010 caps are set in place. The surviving spouse is allowed to take a step-up in basis of up to 4.3 million dollars. Property inherited by anyone else is allowed a 1.3 million dollar step-up in basis. Significant Capital Gains taxes could result. For example, suppose in 2010 you inherit a business from your father that he purchased for $100,000 and it is now worth 2 million dollars. There is a capital gains of 1.9 million dollars, but you are allowed a step-up in basis of only 1.3 million. $600,000 of your inheritance is subject to a Capital Gains tax. No one knows how the new law will be applied in 2010, but it could well be that the Capital Gains tax turns out to be the same as, if not more than, what you would have paid in Estate Taxes, before they were "phased out."

CHAPTER 4 2004 MEDICARE UP-DATE
There are many new changes in the Medicare system.

MEDICAL BILLS COVERED BY INSURANCE
If the decedent had health insurance you may receive an invoice stamped "THIS IS NOT A BILL." This means the health care provider has submitted the bill to the decedent’s health insurance company and expects to be paid by them. If the decedent was receiving Medicare, you will receive a Medicare Summary Notice listing all of the services or supplies that were billed to Medicare for the prior 30 days. In some areas of the country, you can get a copy of the decedent’s Medicare Summary Notice from the Internet: http://www.medicare.gov

HOW TO CHECK MEDICARE BILLING
The structure of Medicare has been changed giving people in some parts of the country, the option of staying with the Original Medicare Plan or choosing one of the Medicare + Choice Plans. Coverage differs depending on which plan is chosen. If the decedent was covered by Medicare, you need to determine whether he was covered under the Original Medicare Plan, or whether he chose a Medicare + Choice Plan. The publication Medicare and You explains coverage under the different options. See Chapter 2 to obtain a copy of the booklet.

An important billing question is whether the health care provider agreed to accept Medicare assignment, meaning that they agreed to accept the Medicare-approved amount. If so, the patient is responsible for the coinsurance (usually 20% of the approved amount) and any deductible amount. Doctors and health care providers who do not accept assignment, are limited in the amount they can charge for a Medicare covered service. The highest they can charge is 15% over the Medicare-approved amount. This Limiting Charge applies only to certain services and does not apply to supplies and equipment.
If all of this appears confusing, it is.

To check the decedent’s Medicare billing, you first need to determine whether he was in the Original Medicare Plan or in one of the Medicare + Choice Plans. The Medicare and You booklet explains what is covered under the Original Medicare Plan. You will need a copy of the contract for the Medicare + Choice Plans to determine what is covered under that plan.  If the decedent was in the Original Medicare Plan, you need to determine whether the health care provider accepted assignment; and if not whether the Limiting Charge applies to the services provided. Finally if assignment is accepted or the Limiting Charge applies, you need to determine the Medicare-approved amount.

NOTE: A doctor or supplier can give the patient an Advance Beneficiary Notice that says Medicare probably will not pay for a service. If the decedent received such notice and signed an agreement saying he wants the service and agrees to pay for it, then if he received the service, his estate is now liable to pay that debt.

COST OF NURSING CARE IN ORIGINAL MEDICARE PLAN
Medicare pays for the first 20 days of nursing care.
For days 21 to 100, the patient pays up to $109.50/day.
Medicare does not pay for nursing care beyond 100 days.

LONG TERM CARE INSURANCE FOR FEDERAL EMPLOYEES
The Long Term Care Security Act (Public Law 106-265) was passed by Congress to take effect in October 2002.  The law is designed to make long-term care insurance available to Federal employees, members of the uniformed services, and civilian and military retirees.  You can download a copy of the law from their Web site: 
OFFICE OF PERSONNEL MANAGEMENT
http://www.opm.gov/insure/ltc

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