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In the past, attorneys commonly used a life estate strategy for purposes of obtaining Medicaid eligibility.  Although better approaches existed, the life estate method continued to be the most common. Many people (including attorneys) fail to understand how a life estate is treated when it comes to the Medicaid recipient’s estate. So what exactly is a life estate? How does Medicaid Estate Recovery work in Ohio? What can be done to avoid this problem?


What is a Life Estate?


A life estate is a type of property ownership, generally between two parties. A deed for a farm might read, “To Dad for life, remainder to Son.” In this example, Dad is the life tenant and Son holds what is referred to as the remainder interest. As the life tenant, Dad is entitled to the use and enjoyment of the property during his lifetime. Dad is also entitled to all the income the property may produce, which for certain types of property (i.e. farms, rental properties, etc.), may be significant. Dad is also responsible for the property taxes during his lifetime.


Son’s remainder interest is a present interest in the farm. It can be deeded, encumbered or even sold to a third party. This type of transfer or encumbrance cannot bother Dad’s present use of the property.


So how does a life estate affect Dad’s Medicaid eligibility? Well, so long as the life estate is listed for sale, Dad will be able to receive Medicaid benefits assuming he is otherwise financially eligible. However, the BIG issues arise when it comes to estate recovery after Dad’s passing.


History of the Medicaid Estate Recovery Program


In 1993, Congress passed the Omnibus Budget Reconciliation Act, which created the Medicaid Estate Recovery Program. As part of the program, states such as Ohio were required to demand repayment for Medicaid benefits previously provided.


Congress also gave states the option of collecting from only probate assets or using an expanded probate definition to collect typically non-probate assets. These non-probate assets include life estates. A life estate interest owned by a person at the time of death is recoverable pursuant to 42 U.S.C. Section 1396p(b)(4)(B), if the state adopts the expanded definition of an “estate”.


Prior to 2005, Ohio only collected against the probate assets of an estate like Dad’s. On June 30, 2005, Ohio Medicaid Estate Recovery and lien laws changed dramatically when House Bill 66 became effective. As part of the bill, Ohio adopted the expanded version of an “estate.” Thus, the life estate which terminated at Dad’s passing could not be recovered against. Medicaid recovery has changed. Today, Ohio now collects against both the probate and non-probate assets of the decedent’s estate. (2013) O.A.C. 5101:1-38-10.


When it comes to estate recovery, many Ohio families have been receiving very unpleasant news in the past few years. In our example above, if Dad dies, the personal representative for his estate must file a form with the County Auditor disclosing whether or not Dad (or Mom) received Medicaid benefits during his or her lifetime. See Ohio Revised Code § 2117.061, at (2013). The Ohio Attorney General’s Office then begins a vigorous attempt to collect against Dad’s estate.


Defending against Medicaid Recovery is a complex process. Simply determining the recoverable value of the asset can be difficult. Ohio uses the applicable federal interest rate for the month in which the Medicaid recipient passed away. The calculation includes determining not only the applicable federal interest rate, but then the corresponding life estate percentage in the Code of Federal Regulations. Confused yet?


Calculating a Life Estate Value for Medicaid Recovery


Consider the following example. Dad, the Medicaid recipient, was 72 years old when he died in June of 2013, and the property value on his date of death was $200,000. The applicable §7520 federal interest rate is 1.2% ( To determine the corresponding life estate percentage, we look to Table S, 26 CFR 20.2031-7T. Based on the 1.2% rate, the remainder value of Dad’s life estate property is 0.85996 of the value of the whole ($200,000). Thus, the value to Son is $171,992 and the Medicaid Recovery Value for Dad’s interest at death is $28,008. The government will now place a lien against the property Son inherited. How could this family have avoided this lien and saved the Son $28,008?




If you’re an Ohioan and own property, and particularly if you’re a farmer, it is in the best interest of you and your family to consider your current ownership method and your plan for long-term care costs in the future. Protecting your valuable real property can be accomplished, but a life estate is simply an antiquated way and based on Medicaid Estate Recovery, is no longer the best option for most.


If you want to learn more about protecting your property or your farm from long-term care costs, contact an attorney at AlerStallings or give us a call at 614-612-1115. for a free consultation.


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Most Medicaid applicants quickly realize that giving away assets can get them in trouble. To receive help paying for the nursing home through Medicaid, you must disclose your financial transactions during the last five years, referred to as the “look-back period.” Ohio has a five-year look-back period. If you gave away an asset or sold it for less than fair market value, the state considers that an improper transfer.  What does that mean?  It means when you run out of money, the state will not pay for your care until you’ve served your penalty!


During the penalty period, you’re ineligible for Medicaid benefits and must find private dollars to pay for care. This period of time can be problematic, because you are out of money.  To calculate your penalty period, Ohio divides the amount you improperly transferred by the average monthly cost of nursing home care.


If you’ve already made an improper gift, you can “cure” the gift.  However, the entire value of the gift must be returned to you.  If this occurs, the improper gift would then be “cured” in the eyes of the state and no penalty period would result.


What happens if you gave money to a family member and that family member now refuses to return the value of the gift?  What if they already spent the money? You have a big problem.  You should immediately contact an experienced elder law attorney at AlerStallings. We can best help you and your loved ones navigate the complicated Medicaid process and have legal strategies to drastically improve your situation.  For more information, contact an AlerStallings attorney today to arrange for a complimentary phone consultation.


If you want to learn more about medicaid benefits, contact an attorney at AlerStallings or give us a call at 614-612-1115 for a free consultation.


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Using a life estate to transfer a house or other real property has been a planning technique used by many seniors.  But what exactly is a life estate?  Simply put, a life estate is a legal arrangement to transfer property upon a person’s death.  One person (typically the giver) retains or is given an interest in the property for their lifetime.  This person is called a life tenant.  When the life tenant passes away the property passes automatically to the designated recipients, the remaindermen.


Many people who use this tool do so because it is quick and easy.  In reality, what they are doing may result in a variety of unintended consequences.  One of those consequences is that the person creating a life estate may unknowingly exceed their annual gift tax exemption.


When you create a life estate in property you usually retain the ability to use the property for your life.  The remaindermen don’t receive any actual benefit from the property until your passing.

Logic would seem to indicate that the remainder interest in the property would only be equal to some portion of the total value of the property.  Sadly, as is often the case with the IRS logic isn’t controlling in this instance.  Rather, the IRS taxes the giver of a life estate for the entire value of the transfer under § 2702 of the Internal Revenue Code.  While this section of the code seems only to apply to transfer of property via trust, there is a clarification that “The transfer of an interest in property with respect to which there is 1 or more term interests shall be treated as a transfer of an interest in a trust.”

What exactly does this mean?  Well, here’s an example:


Grandma, a widow, lives in a nice home on several acres of land.  Grandma’s home, according to the Auditor, is worth $300,000.  After talking to her neighbor (instead of an estate planning and elder law attorney), Grandma decides to set up a life estate.  Grandma deeds her house to her son, Bill, reserving a life estate for herself.  She intends for Bill to get the house at her passing, wants to avoid probate and only wants the ability to live in the house for as long as she lives.  What mistake has grandma made? Grandma, unknowingly, has greatly exceeded her gift tax exemption.  Under the current law, Grandma is allowed to give Bill up to $15,000 in any given year.  Grandma has exceeded her exemption by $285,000.  As a result, Grandma is now required to file a gift tax return, and, depending on what other gifting she has done, may owe gift tax to the IRS.

Had Grandma consulted with an attorney, she could have used a number of other vehicles to accomplish her goals without incurring any negative tax implications.  For example, if she had met with an attorney at AlerStallings, she may have been able to protect her house using a Trust.




If you or a friend or family member has any questions about Life Estates or the alternative methods that can be used to protect your home, don’t hesitate to contact AlerStallings.  Even if you have already created a life estate, it’s never too late, to look into the alternatives.  An attorney at AlerStallings will gladly meet with you to discuss what planning has already been done and how best to move forward.

“A Lifetime Accumulating Wealth,  An Afternoon Preserving It.”


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- AlerStallings

Ohio’s laws on Medicaid estate recovery are among the most aggressive in the country. Following the death of a Medicaid beneficiary, the state must seek reimbursement for the cost of benefits paid on behalf of a beneficiary during his or her lifetime. While most states limit reimbursement only to the assets of the Medicaid beneficiary’s estate that pass through probate, Ohio has elected to make non-probate assets subject to a Medicaid estate recovery. This includes a house that is transferred to a survivor through joint tenancy, tenancy in common, survivorship, living trust or other arrangement.


Many couples assume incorrectly that titling the house solely in the name of a healthy spouse will protect the house from a Medicaid estate recovery for benefits paid to a Medicaid beneficiary spouse. Unfortunately, most assets that are titled in the name of the healthy spouse are subject to recovery for the cost of care paid for the Medicaid beneficiary spouse — including a house titled only in the healthy spouse’s name.


However, the state is prohibited from placing a lien on the house either while the Medicaid beneficiary intends to return home, or while the healthy spouse continues to occupy it. Further, the state may recover from an estate only after the Medicaid beneficiary spouse and the healthy spouse have died.


So, what happens when the healthy spouse wishes to sell the house after the state has paid benefits to the Medicaid beneficiary spouse?


The good news is that since the state is prohibited from placing a lien on the house while either the Medicaid beneficiary spouse or the healthy spouse is alive, the healthy spouse will be able to sell the house free and clear of a Medicaid lien.


The bad news is that Medicaid may assert an estate recovery claim at the death of the healthy spouse to recover expenses paid for the care of the Medicaid beneficiary spouse from the healthy spouse’s estate. Therefore, even though the healthy spouse may sell the house and purchase another, the state will ultimately collect from the healthy spouse’s estate. And the full value of the house will not be passed on to the heirs of the healthy spouse.


At AlerStallings, we have heart. We understand that these situations can be tough, and we are here to listen and help you through difficult and confusing times. Contact us to learn how to protect the value of your house from a Medicaid estate recovery so you can pass the value of the house on to your loved ones. For more information, contact an AlerStallings attorney today to schedule a complimentary 15-minute phone consultation.


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- AlerStallings

How can I make sure my loved ones get my personal property? Read below to learn three different techniques used to distribute your “stuff” at your passing.


A critical aspect of any estate plan is the decision of how your tangible personal property will be distributed when you die.  What exactly is tangible personal property?  It’s your “stuff.” Examples include your car, jewelry, furniture, photos, china, and artwork.  Although these items may seem of little actual value, their sentimental value can be significant. In fact, their sentimental value makes tangible personal property the number one cause of family feuds.


There isn’t one perfect way to distribute your personal property. Just remember whatever your method, your intentions should be clear so as to preserve family peace.


Ways to Distribute


Here are a few examples to make sure that your tangible personal property passes to your loved ones in accordance with your wishes.


1. General Gifts via Will. The simplest way to transfer tangible personal property is by a general gift through your will.  For example, your will can read, “I leave any tangible personal property to my spouse.”  Alternatively, you can provide that your personal property should be sold and that the proceeds should be distributed to beneficiaries such as your children with a certain portion being distributed to each of them.


2. Specific Bequests via Will. A second way for your personal property to be distributed after you pass is by making specific gifts of certain items to your beneficiaries.  For example, “I leave my wedding ring to my oldest daughter Jennifer.” Keep in mind you need to account for what would happen if a particular beneficiary predeceases you.


3. Personal Property Memorandum.  A third approach is to use a personal property memorandum which is not part of your will.  Within this memo, you may list specific people to receive specific item(s). For example, “Piano to my son Paul.” Note, however, there is a very important difference between using a memo and the specific bequest approach mentioned above. The distinction is that a memo, unlike a specific bequest, is not legally binding. That is, the Executor of your will can choose not to honor the list. If, however, you are comfortable with your family dynamics, the use of a memo is often a more economical option.


Sure, it’s easy to overlook.  Some attorneys don’t even bother asking about it.  But if you don’t take the appropriate steps to transfer your personal property upon your death, your items may not pass on as you intended. Or even worse, unnecessary family discord will result.  Remember, the most important decision in this process is choosing an attorney with heart. Please consult your local AlerStallings attorney to help you prepare a plan that meets your wishes with regards to the transfer of your tangible personal property. At AlerStallings we’re with you, with heart, for life.


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- AlerStallings

What if I told you there was a way you could protect one of your biggest assets from the nursing home and the Medicaid “spend-down.” For many seniors, learning that there is a way to shield their house or their family farm from the cost of long-term care is some of the best news they have received in years.  AlerStallings has a trust instrument which is designed to help seniors protect their home and to have something of significant value to leave as a legacy for their loved ones. That trust’s technical name is an “Intentionally Defective Grantor’s Trust (IDGT).” We call it the “Heritage Trust.” The Heritage Trust is derived from a specific section of the tax code. This type of trust has been permitted under federal law since the passage of the Omnibus Budget Reconciliation Act of 1993. Below is a brief summary of how our trust operates within Medicaid & the Internal Revenue Code (“IRC”)




An Intentionally Defective Grantor Trust is one that is created under §671-679 of the IRC. A trust can be made into an IDGT through several drafting mechanisms:


1. The grantor or his/her spouse retains the power to recover the trust assets by exchanging the assets for property of equal value (i.e. mom and dad can buy back the assets from the irrevocable trust);


2. The grantor or his/her spouse can or does benefit from the trust income (the grantor or a non-adverse trustee can sprinkle income for the benefit of the spouse);


3. The grantor or spouse possesses a reversionary interest worth more than 5% of the value of the trust upon creation;


4. The grantor or spouse controls to whom and when trust income an principal is distributed, or has other administrative powers which are beneficial to the grantors;


5. The beneficiary has a power to withdraw the trust income or principal to himself or herself (Crummey power); and/or


6. The grantor and/or a non-adverse trustee has the power to apply trust income to the payment of premium for insurance on the life of the grantor or spouse.



The tax code explicitly allows any of the above mechanisms to be employed to make a trust instrument an intentionally defective grantor’s trust. Our Heritage Trust utilizes #4 above, the limited power of appointment approach.


Limited Powers of Appointment

Examples of limited powers of appointment which may be retained through these types of trusts include: – The power to remove and replace the trustee; and – The power to change beneficiaries among a class of possible beneficiaries.


Retention of a limited power of appointment, such as through our Heritage Trust, is often important to clients. These powers allow the grantor to maintain indirect control over the assets in the trust. Think of this power as keeping some strings tied to the trust assets. By reserving this power, our Heritage Trust allows clients to respond to changing family circumstances and changing financial needs. Furthermore, the power to change beneficiaries avoids the giving of a “completed gift” for gift tax purposes. This allows for a step-up in tax basis upon the grantor’s passing.




Income Tax 


Making a trust intentionally defective results in the grantor, for income tax purposes, still being deemed the owner of the assets and therefore liable for the income tax attributable to those trust assets. § 677 of the IRC establishes the guidelines whereby a trust is considered a grantor’s trust if the grantor is liable for any taxable income generated by assets held in the trust. Practically, this benefit is applicable for income producing assets moved to the Heritage Trust, whereas, many times we are transferring real property (residence). That being said, this is still an important benefit because if the grantor moves money or securities over to the Heritage Trust, they are typically retired and thus their income tax bracket is lower and the result is less tax exposure. This is in contrast to transferring a client’s assets to a typical irrevocable trust (not defective) which would most likely result in higher income tax due by the trust, given the nature of the tax rates for trusts.


Gift Tax 


The transferor is NOT required to file a gift tax return for his/her transfer to the Heritage Trust because the IRS deems such gift “incomplete.” This is due to Grantor’s ability to change the trust beneficiaries via the limited power of appointment at any point during his/her lifetime. See Treas. Reg. §25.2511-2(b).


Capital Gains Tax


Due to the incomplete nature of the gift, this is not considered a lifetime transfer. Therefore, when an asset is transferred to the trust it does not inherit the cost basis (like a typical irrevocable trust), but instead is afforded a step-up in basis when the trust distributes its assets to the beneficiaries at the grantor’s passing. See IRC §2036 and Treas. Reg. §20.2036-1. Because the Heritage Trust is designed so that the assets are included in grantor’s estate, the trust beneficiaries will receive a step-up in tax basis to the fair market value of the assets.




Although the assets are attributable to the transferor for income tax purposes, the grantor is not considered the owner for Medicaid purposes after the expiration of the 5-year look-back for any transfer due to the irrevocable transfer language of the trust. As a result, the Heritage Trust can be used to shield assets held by the trust from the Medicaid spend-down process. Under Section 505 of the Uniform Trust Code, as long as the grantor retains the rights to income only, then the underlying assets are protected from creditors, and are non-countable assets for Medicaid purposes.




Given any real property or other assets pass via trust to the beneficiaries (not by will or intestate), there will be no probate expenses regarding such assets. The Heritage Trust, therefore, is an excellent tool to use as a part of a plan to avoid probate.




The Heritage Trust is one of our most important tools when it comes to Asset Protection planning. Contact an AlerStallings attorney to learn more about this exciting trust instrument and to begin creating your Asset Protection plan.


“A Lifetime Accumulating Wealth, An Afternoon Preserving It”


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- AlerStallings

The answer is no! One of the largest myths surrounding probate is that designating the distribution of your assets and possessions through a will, avoids the probate process. Even if you have a will, your estate will still end up in probate.


What You Need to Know About the Probate Court Process


If you do not have a will at the time of your death, your estate ends up in probate court. Essentially, you have assets but did not designate how much and to whom your assets should be delegated. You die intestate, that is, without a will. When this happens, the probate court will assign an attorney or law firm to review your assets and locate your inheritors. As you can imagine, this process is lengthy, expensive and your assets may not be delegated as you would have wanted!


What many do not realize, is that even if you have a will in place when you pass away, your estate still ends up in probate court. Every will goes through probate. There is no way around it! Although the document will state what your assets are and who inherits them, the process can still take many months to complete. The probate attorneys will charge your estate for the work performed, with the standard fee between 5 and 10 percent of your estate’s total value. The probate process is also very difficult on loved ones since it will occur as they mourn your loss.


How to Avoid Probate


There are several methods to avoid probate court. This probate avoidance process begins by meeting with AlerStallings, specializing in estate planning. Beneficiaries can be designated while you are still alive, and the assets of your estate can be placed into a special trust. A trust does not limit your access to your funds while you are still alive, as long as the trust is set up properly. Upon your death, all of your assets will be in the hands of your beneficiaries in accordance to the directives of the trust.


Avoiding probate court is your best course of action. A will is simply not enough! Begin the asset protection and probate avoidance process by meeting with an experienced estate planning attorney.  The estate planning attorneys at AlerStallings can help you today!


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- AlerStallings

Protecting Assets from “The Three Big Bad Wolves”


Many of our clients have worked tirelessly and saved for decades to ensure a comfortable retirement and a legacy to pass on to their heirs. Sadly, due to a lack of pre-retirement preparation, some have seen their nest egg depleted by the Three Big Bad Wolves: probate expenses, taxes, and the high cost of long-term healthcare.

The good news is that you don’t have to let this happen to you. There are steps you can take right now to help make sure the nest egg you have worked so hard to build is protected.


Fighting the High Cost of Long-term Healthcare


Without a doubt, the cost of healthcare during the twilight years is likely to be greatest financial challenge. For many retirees, the chance of losing their assets exists even if they never set foot inside a long-term care facility: many people experience the unpleasant surprise of discovering their assets can be seized in order to help pay for the costs incurred by a spouse.

Because of the high cost of an extended stay in a long-term care facility, we at AlerStallings strive to do everything we can to educate our clients on various asset protection strategies. Due to complex federal and state statutes, the assistance of an experienced estate planning attorney is necessary, but the good news is that you can protect the assets you have worked so hard to obtain.


Reducing the Expense of Probate


You’ve likely heard horror stories of people who pass away, leaving a significant estate for their heirs, only for it to be squandered by endless court battles. Even if your heirs are not the type to litigate endlessly over an estate, the reality is that probate can be costly. By planning ahead today, we can help reduce or even eliminate the expense of probate once you pass, leaving more for your loved ones.


Fighting the Tax Collectors


It’s true that two things in life are certain: death and taxes. Fortunately, through proper estate planning techniques, you can greatly reduce the chunk of your estate that ends up in the government’s pocket. We at AlerStallings are intimately familiar with the federal and state taxing statutes, and we can help create an estate planning strategy that keeps your money where it belongs: in the hands of those you care about.

- AlerStallings

As Elder Law Attorneys, we are often asked this question. The simple answer follows.


If you have something you don’t want to lose to the nursing home, an Asset Protection Trust is right for you. Just make sure you set it up and fund it at least five years and one day before you need long-term care. Unfortunately, we don’t have a crystal ball to tell us when we will need help with our care.


Practically speaking, if you have assets you want to protect in the event you need long-term care, an Asset Protection Trust is right for you. Many of clients want to protect their home. Unlike other trusts, an Asset Protection Trust is time sensitive. Assets placed into the Asset Protection Trust must be in trust for five years before it is 100 percent protected from your long-term care costs. Every week, people come in to set up these trusts and say, “I should have done this five years ago.”


You don’t need to have a million dollars to benefit from a trust. You just need to have ‘something’ that you want to protect from the costs of long-term care. If you have that ‘something,’ the time to plan is now.


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- AlerStallings

Navigating long-term care and nursing home care for your family


As our loved ones age, they may begin to need assistance with everyday tasks, and help to remain safe and healthy. Many families turn to live-in facilities for the daily care of a loved one, and if your family is looking for a nursing home for a loved one, you probably have a lot of questions. What level of care does your loved one need? How can you find a facility that meets your loved one’s particular needs? What financial arrangements need to be made to keep your family financially healthy?


At AlerStallings, our goal is the same as yours: to ensure the long-term health and safety of your loved ones. That’s why we provide assistance for families navigating live-in facilities and nursing homes on behalf of a loved one. We developed a proprietary program, the CPS Nursing Home Navigation System, to help you access every resource you need along the way.


The CPS Nursing Home Navigation System focuses on the three things your family needs most:


  • Care. Your loved one deserves the care that’s right for their unique needs.
  • Protection. Protecting your loved one’s assets and your family’s assets is important when facing major healthcare expenses.
  • Support. Your family needs the peace of mind of expert help with Medicare applications, medical bills, and any questions that arise along the way.


When you work with our team of attorneys, social workers and case managers, we’ll begin with an assessment determining (or confirming) what kind of care is needed, and what locations can meet your loved one’s needs. We may review in-home care, assisted living, or skilled nursing home care, depending on your loved one’s individual situation.


Next, we’ll explore the options that you have for payment. That includes public and private options, and with Medicare and benefits experts on your side, you’ll be able to create a strategy that’s right for your family. Long term care can be expensive, so we’ll help you focus on three areas of protection: probate protection, tax protection, and long-term care protection. Your strategy could include setting up your assets to avoid the delay and cost of probate at death, strategies for avoiding unnecessary income tax or capital gains taxes, and an evaluation of retirement assets and real estate to determine how to preserve your assets when the need for long term care arises.


We’re able to support your family through every step of the process because our dynamic team includes attorneys, licensed social workers, and specialists in various benefits programs. With our Lifetime Support, you can call us whenever you have a question about the strategy you developed with us. We continue to provide assistance by reviewing incoming bills, statements, and public program paperwork as needed.


If your family is navigating the world of nursing home care or long-term care for a loved one, our team is here to help. Call us today to learn more about our CPS Nursing Home Navigation System and how we can help your whole family through this process.


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