Information on Tax and Estate Planning from the Masonic Charities of the Grand Lodge of Pennsylvania
I said, “John and Sue, I hate to break this news to you, but we can’t take all that money from you.
"You must understand that the Medicaid guidelines provide that if you apply for Medicaid, the government will look back five years to determine how much you have given away during that period, and any gifts (including a gift annuity) in excess of $500 a month will be counted against Medicaid payments, thereby delaying when those payments will kick in.”
John looked perplexed. He said, “Al, Sue and I have $1 million. How could we ever go on Medicaid in the next five years?”
To which I replied, “John, if you and Sue got dementia and were moved to the memory care area in the Masonic Health Care Center, it would cost both of you $30,000 a month to stay there. That is $360,000 a year or $1.8 million in five years. In other words, you would have no funds in less than three years and would have to apply for Medicaid. This scenario is highly unlikely, but being an attorney, I think of the worst and hope for the best.”
WHEN A GIFT IS REALLY NOT A GIFT
I was visiting Brother John and his lovely wife, Susan, who live on our Masonic Village at Elizabethtown campus, to discuss their estate plan with them. They had about $1 million in assets, namely a $500,000 brokerage account and a $500,000 traditional IRA owned by John. They saw that the charitable gift annuity rates increased on Jan. 1 and wanted to increase their income by buying a $100,000 annuity each year for five years to cover their monthly expenses. They said since they wanted to leave their assets to Masonic Villages in their estate plan, it would be a great way to increase their income while taking care of their favorite charity. My response to their idea wasn’t what they expected.
Sue then replied, “Well, what should we do, Al?”
I told them they should find a middle ground for purchasing the gift annuities (or giving away their assets to anyone).
Since they were both in decent health with no signs of dementia, I suggested they consider a gift annuity of $25,000 for each of the next four years and go from there. I also reminded them that there is a similar limitation to giving assets away in the Resident Agreement for the Masonic Villages, since it could be on the hook for any disqualified Medicaid payments as a result of such gifts.
Based on my recommendation, John and Sue then purchased a $25,000 two-life charitable gift annuity from the Masonic Villages and told me they were thankful they live here, because they knew they would have good care as they age.
A Power of Attorney NIGHTMARE
Several years ago, I met with a couple in Yardley, PA, who wanted to support the Masonic Children’s Home. Jeff and Betty did not have any children, but they liked the idea that they could leave their estate upon the passing of the surviving spouse, to provide for scholarships and other needs for the children at the children’s home. I met with them and their attorney, Sam, to go over an estate plan to carry out their wishes. Sadly, Betty passed away from cancer a couple years later, and Jeff developed macular degeneration, but still stayed in his home as his vision severely declined.
Jeff had someone he knew through a friend, named Sally, who began delivering meals to him since he was homebound. A friendly relationship developed, and Jeff asked Sally if she wanted to be his agent under his power of attorney. Sally agreed. When I visited with Jeff, he indicated Sally was handling his financial affairs, and that she had another attorney she knew draw up the document for Jeff’s signature. I was concerned about how quickly Sally was taking over Jeff’s financial affairs, so I called Jeff’s attorney to meet with Jeff and me. When Sam heard about what was happening, he warned Jeff that Sally may be taking advantage of him, but Jeff dismissed his concerns.
Subsequently, Sally and her attorney friend met with Jeff to draw up a new Will giving Sally a $100,000 bequest and naming her Executor of his estate. When I met with Jeff again, he told me about the new Will and insisted that Sally deserved his support. Several weeks later, Jeff confided to me that he had made several gifts to Sally to support her and had given her money for a down payment to buy a new home. I was now alarmed that this had become overreaching on Sally’s part and called Sam to intercede in the situation.
Sam met with Jeff and told him to call him when Sally’s attorney visited to sign the new Will. He also asked Jeff to reach out to his stepson in New Jersey for help. Jeff reluctantly agreed. A week later, Sally called Jeff to tell him she was coming by with her attorney and the new Will. Jeff called Sam to let him know of the meeting, and Sam arrived in time to confront Sally and her attorney about the changed document. Jeff then realized that Sam meant him well, and Sally was told not to come back again. The stepson was named Jeff’s new agent. Jeff passed away several weeks later, leaving $4.3 million to the Masonic Children’s Home, as intended.
Why do I tell this story? Because it is true and can happen to any one of us as we age and our mental capacity and health decline. Jeff was afraid of losing Sally, and she knew it and took advantage of the situation. Thank goodness Jeff had a diligent attorney who interceded on his behalf, or the whole estate may have gone to Sally.
What should you consider to prevent this from happening to you?
Make sure you have a good attorney.
Avoid selecting a caregiver who you depend on as your financial agent.
Insist that your agent report to your attorney or any other independent advisor on a regular basis about the activity of your financial affairs.
If possible, only give access by your agent to your checking account and require that your agent ask your financial advisor for any additional funds, as needed, so he or she is aware of any unusual activity.
Keep your financial power of attorney with your attorney, and make sure he or she has control over when it is used by your agent.
If your agent insists on handling your financial affairs in secrecy, never let him or her serve.
If you follow these checks and balances with your financial power of attorney, you can limit the possibility of overreaching like Jeff went through with Sally.
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Neither Masonic Charities of the Grand Lodge of Pennsylvania, nor Alvin H. Blitz, Esq., provide legal, financial or tax advice. None of the information
The Blitz should be deemed legal, financial or tax advice or acted upon by any person without prior consultation with appropriate professional advisors.
ON YOUR FINANCIAL ADVISOR
I was visiting with Brother Steve the other day at his home in Kutztown. We were chatting about the stock market and how great his financial advisor was at making him money at no cost to him. Steve quipped, “Al, my advisor doesn’t charge any commission or fees for investing my $3 million in assets I have with her. She is fantastic.” I looked at Steve with bewilderment and said, “Steve, if it’s too good to be true, then usually it isn’t.” I suggested to Steve we do a background check on the advisor to see if she has run into any problems with the authorities in the past. Steve told me he didn’t think that was necessary, but if I insisted on doing it, he wouldn’t stop me.
Steve gave me the name of his advisor, and I went to brokercheck.finra.org to do a broker check on the name.
I was reminded of the famous Mark Twain quote: “It’s easier to fool people than to convince them that they’ve been fooled.”
I did not argue with Steve other than to leave him the document for his own records. Once before, I lost a potential gift to Masonic Villages when I convinced a fellow Mason to move his account from his advisor, who had over 20 complaints filed against her for misrepresentation of fees, to a trusted advisor I had worked with in the past who had a clean record. When the new advisor took a fee for his work on the account, this Mason got so upset that he moved his account back to the so-called “free” advisor and told me he didn’t want to deal with me anymore. It was a hard lesson learned.
I did not want the same thing to happen with Steve, so I wished him the best with his advisor and told him, “Let’s stick to playing golf together after I retire and not talk about our financial plans anymore.” He agreed.
When I brought the complaints to Steve’s attention, he was in denial and said his advisor would never do that to him.
If you would like to check the background of any financial professional, go to brokercheck.finra.org and type in the name of the person you want to run a background check on. It’s free and reliable. At least you will have peace of mind.
1-800-599-6454 | MasonicCharitiesPa.org
Sure enough, there were five complaints filed against this advisor for misrepresentation of fees.
One Masonic Drive
Elizabethtown, PA 17022
Last Chances to Join Me for Lunch
Please see the dates below where I will be holding upcoming luncheons prior to my upcoming retirement. To RSVP, call 1-800-599-6454 or email ABlitz@masonicvillages.org.
New Bern, NC
Palm Harbor, Florida
Brother Alvin H. Blitz, Esq., Carlisle Lodge No. 260, serves the Masonic Charities of the Grand Lodge of Pennsylvania, which consists of the Masonic Villages, the Masonic Children's Home, the Pennsylvania Masonic Youth Foundation, The Masonic Library and Museum of Pennsylvania and the Grand Lodge of Pennsylvania Charity Foundation.