MASSACHUSETTS 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 Massachusetts 1st Ed. and
Guiding Those Left Behind in Massachusetts

Update to: Both Books

The value of the ESTATE OF HOMESTEAD was increased to $500,000 as of 10/04; i.e., up to $500,000 can be protected from the claims of creditors.

Update to: A Will Is Not Enough In Massachusetts 1st and 2nd Ed.

Note: Updates for the 1st Ed. (not available) are current only up to April 2006. In October 2006, A Will Is Not Enough In Massachusetts 2nd Edition will replace the 1st Ed..

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.

CHAPTER 10: MEDICAID UPDATE - Effective 1/1/06
 The average cost of nursing care is $246 per day. This value is used to compute the penalty period.

CHANGES MADE IN 2007

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

The Minimum Community Spouse Resource Allowance is $20,328.. 

Community Spouse Excess Shelter Allowance is $495. 

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

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

The 2007 private pay rate to determine the penalty period for uncompensated transfers is $5246.

As of Feb, 2007, the Massachusetts legislature has opted for  the $500,000 homestead equity exemption.

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 $750,000 OR MORE
 If the equity in the Applicant’s home (current market value less mortgages and liens) is equal to $750,000 or more, he will not be eligible to receive Medicaid benefits.  

 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 Massachusetts.

Updates to: Guiding Those Left Behind in Massachusetts

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.

CORRECTION: Bottom of Page 123
The elective share is equal to a Life Estate in 1/3rd of all the real and personal property owned by the wife.

THE ELECTIVE SHARE
 The Elective Share as described at the end of Chapter 5 applies only to the example given. The law regarding the Elective Share is more complex than was presented; however, in order not to deviate from the story, the author abridged the discussion.

The Elective Share in Massachusetts depends on the value of your Estate and whether you left descendants or kinfolk. If you leave no family members, your surviving spouse is entitled to $25,000 plus half of all of the property that you own. If you leave descendants, your spouse is entitled to a share of 1/3rd of all of your real and personal property; but if that share is worth more than $25,000, your spouse will take $25,000 and the income for life from the remainder of that share. If you are survived by kinfolk, and no children, then that share is half of your property distributed in the same as before; i.e., $25,000 to the surviving spouse, and income for life from the remainder of that share (MGL 191:15, 191:17).

For example, suppose all you own is a bank account worth $100,000. If you try to cut your spouse out of your Will, or give your spouse less than the Elective Share, then any time within 6 months from your death, your spouse can ask the Court for an Elective Share instead of what was provided in the Will. That Elective Share depends on whether you are survived by descendants or kinfolk:

NO DESCENDANTS, NO KINFOLK
Elective Share to surviving spouse:
$25,000 + half of the remaining bank account ($75,000/2 = $37,500) or $62,500

DESCENDANTS
Elective Share: 1/3rd of the bank account with $25,000 outright and the income from the remaining 1/3 share for life. The remaining 1/3rd share is equal to $8,333.33.
$100,000/3 = $33,333.33 $33,333.33 - $25,000 = $8,333.33

NO DESCENDANTS, BUT SURVIVING KINFOLK (i.e. blood relation)
Elective Share: 1/2 of the bank account with $25,000 outright and the income from the remaining $25,000 for life. The Massachusetts statute provides for the $25,000 to be held in trust for the life of the surviving spouse. The surviving spouse will receive the income from the trust funds for life. Once your spouse dies, the $25,000 is distributed according to the terms of your Will.

LOST POLICIES (Chapter 2)
The American Council of Life Insurers does 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

UPDATE: MASSACHUSETTS COURT UPHOLDS SAME SEX MARRIAGES
A Massachusetts Court found that it is a violation of the Massachusetts Constitution right of equal protection to deny people of the same sex to marry.  The Court has suspended their ruling for 6 months in order to give the Legislature time to pass legislation that would enable couples of the same sex to marry (Goodridge v. Department of Public Health, 440 Mass. 309 (2003)).  The Massachusetts Supreme Judicial Court upheld the ruling so as of May 17, 2004, same sex marriages will be allowed in Massachusetts.

CORRECTION PAGE 102, 2ND PARAGRAPH: TENANTS BY THE ENTIRETY
The Massachusetts legislature did away with the old form of Tenants by the Entirety.
Delete the last sentence of that paragraph and replace with:
Massachusetts Courts have ruled that the 1980 law created a new form of Tenancy by the Entirety as described in GLC 209:1. Deeds held as Tenants by the Entirety prior to 1980 retain rights of survivorship. No document need be recorded unless the couple wish to change to this new form of Tenancy by the Entirety (West v. First Agricultural Bank, 419 N.E.2d 262).
Both the old and new form of Tenancy by the Entirety have rights of survivorship; however under the new law a Tenancy by the Entirety recorded after February 11, 1980:
— husband and wife are equally entitled to the income and possession of the property;
— if one spouse owes money and the property is the primary residence of the non-debtor
spouse, then the creditor cannot take the house as payment for the debt; however both
are equally responsible to pay for necessities furnished to either spouse or to a member
of their family (MGL209:1).
If you have property that you own as Tenants by the Entirety prior to February 11, 1980, it is important to have your attorney explain the pros and cons of leaving the deed as is, or change title to the new Tenancy by the Entirety by having a document recorded with the Register of Deeds in the county where the property is located.

Page 46 MEDICARE AND YOU (Publication No. CMS-11007) 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

MEDICARE UPDATE
The Original Medicare Plan is limited in long term care coverage. It does not pay for extended nursing care. Medicare pays for the first 20 days of skilled nursing care. You pay up to $109.50 per day for days 21 through 100.

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.

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

CHANGE IN FEDERAL TAXES (Page 34)
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

There is an unlimited marital tax deduction for property transferred to the surviving spouse; so in most cases, no Estate tax need be paid if the decedent was married. Regardless of whether taxes are due, federal and state Estate tax returns must be filed whenever the decedent’s Estate exceeds the Exclusion Amount in effect as of his date of death. The law as passed in May, 2001 phases out Estate taxes for the year 2010, but the law is effective only until December 31, 2010. If lawmakers do nothing, then in 2011, the Federal Estate Tax goes back into effect; and estates that exceed one million dollars will once again be subject to Estate taxes. And that is not the only uncertainty. Each state has its own Estate Tax structure. It remains to be seen how each state will react to the Federal change. Some states may follow the lead of the Federal government and increase the Exclusion amount in the same manner. Other states may see this as an opportunity to "pick up the slack" i.e., to have a lesser Exclusion value, so that Estate taxes will now be paid to the state instead of the Federal government.

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."

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