Eagle Publishing: UPDATE TO Guiding Those Left Behind in Indiana

CHANGES IN GENERAL RULES OF DESCENT

The General Rules of Descent were amended in 2005. If a person dies without a Will his property is inherited as follows:

DESCENDANT, NO SPOUSE
If the decedent was single, his children inherit his net Estate, i.e., whatever remains after all valid claims and expenses are paid. The children inherited the net Estate in equal shares, by representation, meaning that if a child dies before the decedent, and that child is survived by one or more children, they inherit the share intended for the deceased child. If the deceased child has no surviving lineal descendants, the surviving child(ren) share equally in the net Estate.

SPOUSE, NO CHILD, NO PARENT
If at the time of death the decedent was married and had no lineal descendants (child, grandchild, great-grandchild, etc.), and no surviving parent, the surviving spouse inherits his net Estate.

SPOUSE, NO CHILD, SURVIVING PARENT
If the decedent had no surviving descendants but was survived by a spouse and at least one parent, the spouse inherits 75% of the net Estate and the parent(s) inherit the remaining 25%.

SPOUSE, DESCENDANT
If the decedent was survived by a spouse and lineal descendants, the spouse gets half the net Estate and the descendants inherit the other half in equal shares, by representation.

CHILD FROM A PRIOR MARRIAGE
Things get a bit complicated if the decedent was survived by a spouse who had no children with the decedent, and there are children from the decedent’s prior marriage. In such case, surviving spouse inherits an amount equal to 25% of the fair market value of the decedent’s real property — not counting monies owed on the property. The decedent’s children inherit the decedent’s real property in equal shares, by representation.

In addition to 25% of the value of the decedent’s real property, his surviving spouse is entitled to half of the decedent’s personal property (securities, bank accounts, etc.). The decedent’s children inherit the remaining half of his personal property, in equal shares, by representation.

PARENT, NO SPOUSE, NO DESCENDANT
If the decedent had no spouse or descendant, his property is divided between his parents, brothers, sisters, and descendants of a deceased brother or sister. Each is entitled to an equal share, provided each parent receives at least 25% of the Probate Estate. For example, suppose the decedent is survived by his parents, 2 sisters and a niece and nephew from a deceased brother. Each parent is entitled to 25%. The remaining half is divided into 3 shares, one share for each sister and one for the deceased brother. The share intended for the deceased brother is divided equally between his two children (IC 29-1-2-1)

NO CHILD, NO SPOUSE, NO PARENT, NO SIBLING
If there is no surviving parent or sibling, the decedent’s nieces and nephews inherit all of the property in equal shares, by representation.

GRANDPARENTS OR THEIR DESCENDANTS
If there is no surviving spouse, parent, sibling, or descendant of a sibling, the net Estate is divided equally between the surviving grandparents. If there are no surviving grandparents, the net Estate is divided equally among the aunts and uncles of the decedent. The share intended for a deceased aunt or uncle, goes to his/her descendants, provided the descendant survived his parent (i.e., the aunt and uncle) and the decedent (IC 29-1-2-1).

HOMESTEAD PROTECTION FOR SURVIVING SPOUSE REPEALED

Indiana Lawmakers repealed 29-1-2-2 so the creditor protection described in Chapter 4, page 92 is no longer available to the surviving spouse.

As of July 1, 2006, the Minimum Monthly Maintenance Needs Allowance has been increased from $1,605 per month, to $1,650.

SMALL ESTATE AFFIDAVIT

Effective July 1, 2006 the amount that can be transferred by means of a Small Estate Affidavit has been increased from $25,000 to $50,000.

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 is otherwise eligible and 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.

HOMESTEAD PROTECTION FOR SURVIVING SPOUSE REPEALED

Indiana Lawmakers repealed 29-1-2-2 so the creditor protection described in Chapter 4, page 92 is no longer available to the surviving spouse.

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

CHAPTER 9: MEDICARE UPDATE
The 2006 figures for a stay in a skilled nursing facility (i.e., a nursing home) under the Original Medicare Plan are as follows:
You pay nothing for the first 20 days of skilled nursing care and $119 for days 21-100; i.e., you pay up to $9,520 for the next 80 days of a stay in a skilled nursing facility.
You are responsible for all costs thereafter.

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.

MEDICARE AND YOU (Publication No. CMS-11050) 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 Boulevard

Baltimore, Md 21244-1850

CHAPTER 10: MEDICAID UPDATE -
CHANGES MADE IN 2007

In 2007 the federal government set the following values:

The maximum Community Spouse Resource Allowance is $101,640.

The Minimum Community Spouse Resource Allowance is $20,238.

Community Spouse MAXIMUM Monthly Maintenance Needs Allowance is $2,541.

The Community Spouse MINIMUM Monthly Maintenance Needs Allowance is @$1650.

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.

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 Indiana.

Page 46 ELECTIVE SHARE
The Elective share is half of your Probate Estate, but if you have a child who is not that of your surviving spouse, then it is one-third of the personal property and one-fourth of your real property.

Page 93 FAMILY ALLOWANCE

The Family Allowance has been increased from $15,000 to $25,000.

Page 108 TRANSFERS TO MINORS & Page 166 of the second edition

The legislature has changed the amount from $5,000 to $10,000; i.e., the bank can turn the account over to the parents, or whoever is taking care of the minor, provided the account does not exceed $10,000.

Page 121 TIME TO CHALLENGE THE WILL

Whoever wants to challenge a Will must do so within 3 months from the date the Court accepted the Will into Probate. (changed from 5 months to 3 months).

Page 138 TYPO

The telephone number at the bottom of the first paragraph is that of the Indiana Department of Insurance. Change the word "Michigan" to Indiana.

Updates to: Guiding Those Left Behind in Indiana

SMALL ESTATE AFFIDAVIT

Effective July 1, 2006 the amount that can be transferred by means of a Small Estate Affidavit has been increased from $25,000 to $50,000.

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 38: 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."

Page 50 MEDICARE AND YOU (Publication No. CMS-11050) 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 92 HOMESTEAD PROTECTION FOR SURVIVING SPOUSE REPEALED
Indiana Lawmakers repealed 29-1-2-2 so the creditor protection described in Chapter 4, page 92 is no longer available to the surviving spouse.

Page 93 FAMILY ALLOWANCE
The Family Allowance has increased from $15,000 to $25,000.

Page 108 TRANSFERS TO MINORS & Page 166 of the second edition
The legislature has changed the amount from $5,000 to $10,000; i.e., the bank can turn the account over to the parents, or whoever is taking care of the minor, provided the account does not exceed $10,000.

Page 121 TIME TO CHALLENGE THE WILL
Whoever wants to challenge a will must do so within 3 months from the date the Court accepted the Will into Probate. (changed from 5 months to 3 months).

Page 138 TYPO
The telephone number at the bottom of the first paragraph is that of the Indiana Department of Insurance. Change the word "Michigan" to Indiana.

CHAPTER 7: GIFT TO A MINOR CHILD
The amount that can be transferred to the person having care and custody of the minor child without court permission has been changed from $5,000 to $10,000.

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 $105/day.
Medicare does not pay for nursing care beyond 100 days.

CORRECTION
Page 241 Chapter 10: PAYING FOR LONG TERM CARE
Medicare pays the excess of $105 per day for the 21st through the 100th day of nursing care; i.e., the patient is responsible to pay for up to $105 per day for days 21 through 100. The patient pays $8,400 for the next 80 days.