If a person dies owning a seat license for Pittsburgh Steelers football games, will someone need to open a probate estate to transfer the license?

Yes, according to a number of estate attorneys I have spoken with who have had this issue arise in their practices. According to the official Pittsburgh Steelers website:

“Transfer Resulting From Death Of A Seat License Holder - In addition to all other items required for processing a transfer request, the following requirements must be met: (1) a certified copy of the death certificate of the deceased license holder must be submitted; (2) the Transfer Form must be signed by the Executor or Administrator of the deceased license holder’s estate; and (3) the Executor or Administrator must submit official evidence of his/her capacity. In the case of an Executor, a recently-dated short certificate of Letters Testamentary must be submitted; or, in the case of an Administrator, Letters of Administration, bearing a raised seal.”

Can you avoid probate by owning the seat license jointly with someone else? The Steelers website says no:

“No Joint-Ownership Of Seat Licenses - There shall be no joint-ownership of any seat license. There may only be one license holder for a given seat at any given time.”

However, the seat license may be owned by a corporation or partnership and transferred by the signature of an “authorized official.” A person could also avoid probate by transferring ownership before death.

Here are three tips I picked up at a talk by Natalie B. Choate, a Boston lawyer and author who is nationally renowned for her expertise in retirement benefits. She addressed a packed house of financial professionals at the Financial “Four”um in Pittsburgh a few months ago.

Many of her tips were quite sophisticated or applied in rare circumstances only, so I’m including only those that apply to a wide array of retirees. These tips are aimed at qualified retirement plans such as individual retirement accounts, 401(k)s, 403(b)s, and similar plans, which have rules different from “defined benefits” pension plans.

“If you do these three things,” Ms. Choate said, “you will be 95% of the way toward happy IRA ownership.”

Take your RMDs

Starting at age 70½, most plan owners need to start taking a required minimum distribution (RMD) each year. The RMD is an amount taken from a plan based on your life expectancy and the total amount you hold in all your plans. You need to request a distribution, which is then paid to you out of your plan and is taxable.

You can defer your first year distribution until April 15 of the next year. As Ms. Choate pointed out, deferral may make sense unless it puts you in a higher tax bracket.

The penalty for not taking your distribution on time is severe: an additional tax equal to 50% of the amount you should have taken.

So you really need to take your proper RMD each year.

Fill out your beneficiary form

One of the most valuable wealth-preserving features of IRAs and similar plans is the ability of your beneficiary to stretch distributions over many years (or in the case of a surviving spouse, the ability to roll it over and make it their own).

But your beneficiaries will have these abilities only if you do one thing: put your beneficiaries’ names on your beneficiary form.

Sounds simple, and it is, but it mustn’t be neglected. Without named beneficiaries, the retirement plan administrator may require your funds to go to your estate. In that case, all funds must be paid out in five years and your beneficiaries’ wealth-preserving advantages will be lost.

Be careful with rollovers and transfers

IRS rules allow you to transfer or roll over your funds from one plan to another, such as rolling over your 401(k) funds into your own IRA when you retire.

However, you must take care to follow some strict rules.

For example, if you retire and ask for a lump sum distribution of your 401(k) plan, you have 60 days to roll it over into an IRA. If you accomplish that within the 60 days, you keep all the many tax and savings advantages that come with these retirement plans. If you miss the deadline, those advantages are lost and you will have to pay tax on your whole lump sum distribution. (A better alternative in this example is to roll over your 401(k) to an IRA with a direct “trustee-to-trustee” transfer, meaning the funds go from one bank to another without being paid to you in the interim.)

Bad things happen with rollovers and transfer, Ms. Choate reminds us, so make sure you follow the rules to the letter.

Ms. Choate’s book, Life and Death Planning for Retirement Benefits, is widely considered the “Bible” of retirement plan law. It is available for order online at http://www.ataxplan.com/.

On last night’s broadcast, NBC News reported on the loneliness and isolation felt by millions of Americans who provide care to elderly relatives.

NBC spotlighted findings from a new AARP study, including the fact that 42 million Americans age 40 to 60 spend time each week caring for an older adult. Of those, 29% devote more than 40 hours a week to caregiving.

The burden on caregivers can be overwhelming at times. AARP has sponsored public service announcements to call attention to the issue, and to let caregivers know there is help available, NBC reported.

AARP provides a Caregiving Resource Center website, with links to an online support group, a place to submit questions to a panel of experts, and basic information for caregivers and their families.

An article in Consumer Reports’ latest issue caught my attention this week. It evaluated whether do-it-yourself legal documents created on popular websites LegalZoom, Nolo, and Rocket Lawyer met consumers’ needs. 

The conclusion: “Using any of the three services is generally better than drafting the documents yourself without legal training or not having them at all. But unless your needs are simple — say, you want to leave your entire estate to your spouse — none of the will-writing products is likely to entirely meet your needs.” As a result, “many consumers are better off consulting a lawyer.”

You can read the entire article here.

I would add a couple of points. First, if a low price is your top priority, a legal stationery store can provide forms for a few dollars each, far below the price of the on-line sites. But the same challenges remain: will you know what provisions you need, how to write or insert them properly, and how to make the document valid with proper execution?

Second, a danger not raised by Consumer Reports is the false sense of security people may feel with documents created by some entity that gives the appearance of expertise. That sense of security may prevent consumers from seeking the advice they need. They (or more likely their families) won’t discover the pitfalls until it is too late.

Following up our last post, here is a four-minute video explaining the recent Pennsylvania case holding a son liable –retrospectively–for his mother’s $93,000 nursing home bill: video

Lesson: encourage your parents to do advance long-term care planning with an elder law attorney. It is well worth the investment. They (and you) can’t afford not to.

In a previous post, we explored the state law making adult children liable to support indigent parents who need long term care.

A recent Pennsylvania case reaffirmed these concerns.

In Health Care & Retirement Corp. v. Pittas (decided May 7, 2012), Pennsylvania’s Superior Court upheld a judgment of $92,943 against the son of an elderly woman who had resided in a nursing home. The nursing home had to show the son had the ability to pay the bill, the court said, but found sufficient proof because the son had yearly income of over $85,000 and had recently paid off a tax lien by making monthly payments of $1,100.

The court further held that the trial court need not consider other sources of income available to the mother, such as the mother’s husband, her two other grown children, or her pending application for Medicaid benefits. As a result, the one son sued by the nursing home was stuck for the entire bill, unless the mother’s Medicaid application was ultimately approved.

This case once again underscores the importance of having a plan in place to pay for long term care, protect assets, and avoid becoming a burden to family members.

There is a subtle but important distinction between the Medicaid look-back rule and the ineligibility rule – while the look-back period is limited to five years, the ineligibility period is not.

Think about that.

If you file a Medicaid application, the state asks you to reveal any transfers of assets in the past five years. Any transfers made before that won’t count. So you might think that any transfers you have made shouldn’t make you ineligible for benefits beyond five years. But here is the tricky thing: the ineligibility period is unlimited.

Here is an example of how these two rules work.

Madge has modest means, but the vacation house her father left to her has greatly increased in value over the years. In February of 2007, when the property was appraised at $650,000, she transferred title to her three children. Since she spent every summer there with her children when they were young, Madge wanted to keep it in the family.

Now in January of 2012 she enters a nursing home. The value of her assets is such that she could qualify for Medicaid benefits to pay for her care in a month or two.

Her nursing home has a policy of routinely filing an application for every new resident that transfers from a hospital, as Madge did. The nursing home, understandably, wants to make sure that every resident who qualifies for benefits gets approved as soon as possible so that the nursing home can continue to get paid.

But look at Question 10 on the Pennsylvania’s Medicaid application:

Within the past 60 months, have you or your spouse closed, given away, sold or transferred any assets such as: a home, land, personal property, life insurance policies, annuities, bank accounts, certificates of deposit, stocks, IRA, bonds or a right to income?

If her application is filed in January, Madge must answer “yes” and list the transfer of title to her children.

The result? The state finds Madge ineligible for Medicaid benefits for 80 months, or more than 6 ½ years! (The ineligibility period comes from a formula based on the value of the property transferred: $650,000 ÷ $8,112.13 = 80.13.) Madge may have to have her children transfer the house back to her, sell it, and spend down much of the proceeds.

The sad part is that Madge wasn’t even eligible for benefits until March. Had she waited until then to file her application, the transfer of title to her children would not have counted because it would have occurred more than five years before.

So if you have made sizeable transfers of your assets, be careful about when you file a Medicaid application. Better planning can help you achieve your estate planning goals.

You may have heard that a Medicaid applicant becomes ineligible for benefits as a result of giving away assets.

But what are the details?

First let me give you the rule, then we’ll examine the parts.

Rule:  A Medicaid applicant will be found ineligible for benefits as a result gifts made during the look-back period. Calculation of the length of the ineligibility period (also called “penalty period”) depends on the amount of total gifts. That period begins to run when the applicant is otherwise eligible for benefits.

Gifts. If you’re a Medicaid applicant, the rules allow you to spend your money as long as you can show you received goods or services at a fair value in return. What gets penalized is a gift – that is, a transfer of assets for less than fair market value. Pennsylvania regulations define fair market value as the “price which property can be expected to sell for on the open market or would have been expected to sell for on the open market in the geographic area in which the property is located.” 55 Pa. Code §178.2.

Some people deed a house to one of their children for $1. If the house could be sold for $100,000, then Medicaid rules would count that transfer as a gift of $99,999.

Currently in Pennsylvania, no penalty period applies if total gifts in a calendar month were $500 or less. 62 P.S. § 441.5(a).

Some transfers are exempt from penalty, and therefore do not result in any penalty.

Look-back period. The rule applies only to gifts made during the look-back period, which you can read about here. Gifts made before don’t count.

Calculation. To calculate the period of ineligibility in Pennsylvania, the Department of Public Welfare divides the fair market value of the transferred property by the state’s penalty divisor (currently $266.70 per day, or $8,112.13 per month), a figure based upon the average statewide cost of nursing home care. Partial months are counted, but partial days are not. 

For example, if an applicant gave his son $30,000 during the look-back period, then the penalty period will be calculated to be 112 days ($30,000 ÷ $266.70 = 112.49, rounded down to 112).

Other states similarly divide the gifted amount by a regional penalty divisor to calculate the days of ineligibility, but the amount of the penalty divisor varies.

When the penalty begins.  The penalty period begins running when the transfer is made, or the date when the applicant would otherwise be eligible for benefits, whichever is later. For example, if an applicant gives his grandson $30,000 for college today, then applies for benefits four years from now, after suffering a stroke and spending down his other resources, the 112-day period of ineligibility will begin at the time of application.

But if a currently eligible Medicaid recipient deeds away his house today, the period of ineligibility would begin running today.

The take-away. Knowing the details of the ineligibility rules helps potential applicants make better planning decisions and (hopefully) avoid future ineligibility problems.