Written by Robert T. Nickerson
The theater and Broadway world was saddened by the news of which acclaimed composer/lyricist Stephen Sondheim, had finally lowered the curtains to life when he passed away from cardiovascular disease on November 26th, 2021. He was 91 years old. His legacy was richly filled with his work such as A Funny Thing Happened on the Way to the Forum, A Little Night Music, Sweeny Todd and Into the Woods. He had also continued well into his old age, writing new songs and working with modern musical creators from Jonathan Larson to Lin-Manuel Miranda. He had won several Tonys, Grammys and even an Academy Award for his song “Sooner or Later” from Dick Tracy. I could go on longer with his work, but that would take too long. I wanted to talk about his estate plan, the kind of revokable trust that was set up, and why this matters to people who are considering something similar for their family.
It’s common for a lot of estate issues to be solved a couple of months after the death of a loved one. Regardless of how big or small the asset worth is, it still takes time to sort through the estate, contact with the law firm responsible for creating it and filing the probate petition. In the case of Stephen Sondheim, a will was created back in 2017. I haven’t seen it, but according to a New York Times article, a revocable trust was created and signed which lists the beneficiaries who’ll inherit his assets. Among his assets includes the rights to all of his shows in addition to anything that’s unreleased and unfinished. His net assets are estimated to be no higher then $75 million.
With his estate and assets being put into a revocable trust, this all but guarantees’ that his wishes will be fulfilled (and would have been should he have been disabled later in life). Revocable trusts are not only common with estate plans, but it’s something I also highly recommend. It’s even more handy should you have a loved one that’s disabled and needs a specific trust account for them. Sondheim had his set up so that the probate process would speed up. He named beneficiaries, some people and some organizations, that would receive his assets. Even if it’s challenged in court, because it was signed with proof that Sondheim was of sound mind, it would be very difficult to dispute.
This is one of the better examples of celebrities and estate plans. Yes, it’s more interesting when someone famous like Marilyn Monroe, Jim Morison, or Aretha Franklin is discovered to have botched their wills…if they had any. But it’s nice to hear when someone did something smart for once. It’s clear that Stephen Sondheim got the right people to tell him what he needed to do with his work when he was no longer around.
I’ll say now that your own personal estate doesn’t need to be worth $75 million in order to have your own revocable trust. You don’t need a million or even thousands of dollars worth of assets. What you simply need is an agreement with your loved ones on how you want your assets distributed and who’ll be named as beneficiaries. Click on the button below to know more how our offices can help your family.
Written by Jill Roamer, J.D.
The Deficit Reduction Act of 2005 (DRA) did many things. It implemented new whistleblower protections, changed the annuity rules, allowed states to vary premiums and cost-sharing for Medicaid benefits, and instituted the “Money Follows the Person” rule. But the heavy hitters of the DRA were the modifications of the look-back period and the penalty period rules.
The look-back period is the time in which a Medicaid agency can scrutinize asset transfers. Certain transfers during this time may incur a penalty period where the applicant isn’t eligible for benefits. The DRA lengthened the look-back period to 60 months. Importantly, it also changed the rule that stated the penalty period began in the month the assets were transferred. After the DRA, the penalty period doesn’t begin until a Medicaid application is filed and the applicant is otherwise eligible for benefits.
Forty-nine states implemented the new DRA rules, as they were required under federal law in order for states to continue receiving federal Medicaid funds. Since California’s implementing statute (Welf & Inst. Code 14005) contained two built-in protections from the DRA rules being imposed immediately, California is still operating under pre-DRA rules. The statute expressly states that its provisions are not enforceable until the Department of Health Care Services completely finalizes its procedures for adopting regulations in final form. (Draft regulations have yet to be issued for public comment.) In addition, the statute expressly limits the DRA implementing amendments to prospective application. Thus, it appears California will not feel the full brunt of DRA for some time to come.
In any event, California is the lone wolf in the union who has yet to fully implement the DRA; California operates on pre-DRA rules. And this is why Californians can take advantage of a Medicaid-planning technique called stacked gifting.
In order to understand stacked gifting, one must understand how the penalty divisor works. All states have a penalty divisor. Some states have one divisor for the whole state; others have regional or institution-dependent divisors. (The divisor amount changes over time and is usually based on the average private pay rate for nursing home care in that state.) The amount of the transfer made during the look-back period is divided by the figure for the divisor and this will determine the penalty period. For example, a $100,000 uncompensated transfer during the look-back period in a state with a $10,000 penalty divisor will result in 10 months of Medicaid ineligibility ($100,000 / $10,000 = 10).
Stacked gifting involves multiple gifts to possibly multiple recipients in the same month. The periods of ineligibility run concurrently and if the amount of the gifts is under the penalty divisor amount, the period of ineligibility is zero months since it is rounded down.
Here is an example. The California divisor is currently $10,298. On January 1, 2022, Sam gifts $10,000 each to ten different family members. On January 2, 2022, Sam does the same thing and gifts $10,000 each to his ten different family members. Each of the January 1 gifts results in a 0.97 period of ineligibility ($10,000 / $10,298 = 0.9710). Each of the January 2 gifts results in a 0.97 period of ineligibility. However, under California rules, penalty periods are rounded down. So, 0.97 is rounded down to zero and Sam has given away $200,000 and suffers no period of ineligibility for nursing home Medicaid benefits.
Contrasting our example with the other 49 states who have implemented the DRA, Sam’s penalty period wouldn’t start until he filed his Medicaid application and was otherwise eligible. If the uncompensated $200,000 was gifted during the prior 60 months, Sam would be looking at a penalty period of roughly 19.5 months ($200,000 / $10,298 = 19.42). Sam would have a long time to wait before he could receive benefits!
Yes, Californians have it easier when it comes to their gifting rules, but they also operate in a state of uncertainty. California practitioners have long been holding their breath, waiting for the state to implement the DRA. As of now, that implementation is nowhere in sight.
The Nickerson Law Office has dealt in many cases involved in this sort of thing. If you want more information, don't be afraid to reach out to us. Jeffrey, Matrona or the paralegals would love to explain how all of this can benefit your family. Click on the button below to contact us.
Jeffrey C. Nickerson - Estate Planning Attorney - My Passion is Special Needs Planning!