Each year brings a new set of important figures for Medicaid (also known as Title 19) in Connecticut.  The new figures will only have meaning, however, if you understand how they work.  We provide the new figures with an example so you can understand how Medicaid works in Connecticut in 2014.

Here are the Connecticut Medicaid figures that apply in 2014:

*          Changes every July 1^st

**       Changes every October 1st

Let’s take an example. Teresa, age 70, and Todd, age 69, live in Mystic, CT.  Teresa is out walking her dog, Skittles, and collapses from a heart attack.   Skittles starts barking and saves the day.  Todd comes running.   Teresa goes to the hospital on January 15, 2014, and stays for 4 days.   She is discharged to Overlook Nursing & Rehabilitation Center, a nursing home, which costs $14,000 per month.  They can’t afford this, and must apply to The Connecticut Department of Social Services (DSS) for Medicaid assistance.  

First, DSS will evaluate Teresa and Todd’s combined assets to determine if they are financially eligible.  Teresa and Todd have the following assets:

1.    A jointly owned home (with $300,000 equity),

2.    A joint checking account with $1,000,

3.    Todd has a bank certificate of deposit (CD) with a balance of $50,000,

4.    Teresa has a deferred annuity with a cash surrender value of $65,000.   

Total = $416,000 net worth

The house is an exempt asset under Medicaid as long as the spouse resides in it. Accordingly, they only have $116,000 in countable assets after excluding their home.  Unfortunately, even though Todd and Teresa have countable assets less than the maximum Community Spouse Protected Amount (CSPA) of $117,240, they cannot keep all of their countable assets.  DSS will divide Todd and Teresa assets in half and limit Todd to one-half of the countable assets.   This one-half the spouse gets to keep can be no more than a maximum of $117,240, and no less than the minimum of $23,449.80. 

Thus, under our facts Todd is limited to keeping $58,000 in countable assets in his name calculated as follows: Countable Assets (1,000 + 50,000 + 65,000) ÷ 2 = $58,000. Teresa can keep $1,600 in her name, which is the asset limit for an individual receiving Medicaid.  Between them they can keep $59,600.  To become eligible for Medicaid, Teresa and Todd must spend down $56,400 on eligible expenditures.  

Todd wants to know how much of Teresa’s income will go to the nursing home.   Todd has $1,750 of monthly gross income and Teresa has $1,500 of monthly gross income.  They have a mortgage payment of $500/month, real estate taxes of $500/month, and homeowners insurance of $200/month.  Connecticut gives Todd, the community spouse, a Community Spouse Allowance, which is determined by subtracting the community spouse's monthly gross income from what is known as the community spouse's Minimum Monthly Needs Allowance (MMNA).The calculation of Todd’s MMNA is shown in the following table.

Since the amount calculated above is greater than the maximum Monthly Maintenance Needs Allowance of $2,931, Todd’s MMNA is $2,931. From that, we subtract Todd’s monthly gross income of $1,750 to arrive at his Community Spouse Allowance of $1,181. Because Teresa’s monthly gross income of $1,500 exceeds Todd’s Community Spouse Allowance of $1,181, Todd can keep $1,181 of Teresa’s income.  That leaves $319 per month for Teresa.  Teresa receives her personal needs allowance ($60 as of 7/1/13) and the remaining amount ($259) is applied to outstanding bills for Teresa’s medical care or her nursing home costs.

If Teresa goes home and applies for the Medicaid under the Connecticut Home Care Program for Elders, she will also have to meet the Medicaid income requirements.  For 2014, Teresa can have no more than $2,163 in monthly income to qualify for Medicaid at home.  Fortunately, her income is only $1,500 so her income does not exceed the income limit.

In another twist, Teresa gave $20,000 to her daughter, Lori, 3 years ago to help her buy a home.  Teresa is going to be ineligible for Title 19 for 2 months after she applies for Title 19 because she transferred assets to Lori within the 5 year look back period.  The penalty period is calculated as follows: $20,000 ÷ average monthly cost of care in Connecticut ($11,581) = 1.7 months. The penalty will not start to run, though, until she applies for Title 19 so she might as well go ahead and apply once she spends down to the $1,600 asset limit.  She may have to borrow money from Lori or other family members during the penalty period to pay the nursing home.

For many people, the new $5.34 million applicable exclusion amount is more than adequate to avoid the federal estate tax. But, if you transfer more than $5.34 million upon your death, you will be taxed at the estate tax rate of 40 percent. 

Moreover, the new federal estate tax exemption does not apply to state estate taxes.  Many states, including Connecticut, impose a separate estate tax.  The Connecticut applicable exclusion amount is only $2 million. Thus, if a taxable estate exceeds $2 million, a Connecticut estate tax will be due. The Connecticut estate tax rate ranges from 7% to 12% depending on the amount above the Connecticut estate tax exclusion.  So for example, a $2.5 million taxable estate would owe approximately $36,000 in Connecticut estate taxes (this is a simplified calculation not accounting for administration expenses and assuming no lifetime taxable gifts).

Due to the low state exemption amount, many Connecticut residents should take steps to avoid estate taxes.  The following is a brief overview of two trusts that can help you avoid estate taxes.

Irrevocable Life Insurance Trusts (ILIT)

Did you know that the value of the death benefit of your life insurance policy will be included in your taxable estate even though your policy pays directly to beneficiaries and bypasses your probate estate?  For example, a $1 million life insurance policy made payable to your spouse still becomes part of your taxable estate.  A large policy like this could easily push many estates into the taxable bracket. 

The good news is you can exclude the entire amount of your life insurance policy by transferring ownership to an Irrevocable Life Insurance Trust (“ILIT”) or buying a new policy in the name of an ILIT.  You will need to name the ILIT as the owner and beneficiary of the life insurance, but you can name your spouse as a lifetime beneficiary of the Trust with a remainder to your children or grandchildren. You can use an ILIT to establish an education fund for your children or grandchildren, or to fund the buy-out of a business.  Each premium payment is a gift for gift tax purposes so a gift tax return may be due if the premium exceeds the $14,000 per person annual gift tax exclusion or if beneficiaries do not have the right to withdraw any trust contributions used to pay the premiums. An ILIT can be an effective tool for transferring wealth to your spouse or your descendants tax free. 

Credit Shelter Trust to combine exemptions of married couple

Another tax saving trust is commonly referred to as the Credit Shelter Trust.  Each spouse has his or her own estate tax exemption or credit.  By combining their exemptions, spouses can shelter a combined $10.68 million for federal and $4 million for Connecticut purposes. Spouses also have the benefit of the unlimited marital deduction.  The marital deduction allows the tax free transfer of assets of any amount between spouses.  By combining both spouses’ estate tax exemptions with the use of the marital deduction, a couple can avoid estate taxation upon the death of the first spouse and shelter up to the full amount of both exemptions upon the death of the surviving spouse.

The new federal law makes the estate tax exemption "portable" between spouses. This means that if the first spouse to die does not use all of his or her $5.34 million exemption, the estate of the surviving spouse may use it. For example, John dies in 2014 leaving an estate of $3 million to his wife Mary. He has no taxable estate because of the unlimited marital deduction.  His wife, Mary, can then pass on up to $10.68 million (her own $5.34 million exclusion plus her husband's unused $5.34 million exclusion) free of federal tax.  Mary must make an "election" on John's estate tax return to take advantage of portability and preserve John’s unused exclusion.

Unlike the federal law, however, Connecticut law does not provide for portability of the estate tax exemption. The only way for a Connecticut couple to ensure the use of their entire combined $4 million estate tax exclusion is by using a Credit Shelter Trust. 

A Credit Shelter Trust is designed to hold up to your remaining applicable exclusion amount.  So, for example, John dies in 2014 and passes on $3 million to his wife Mary. Without a credit shelter trust, the entire $3 million could pass to Mary because of the marital deduction.  However, John’s unused Connecticut exemption would be lost.  If Mary died later that year, she would only have her own $2 million Connecticut exemption available to cover her $3 million estate.  One million of her estate would be subject to estate taxation and Mary’s estate would owe approximately $72,000 in Connecticut estate taxes (this is a simplified calculation not accounting for administration expenses and assuming no lifetime taxable gifts). 

Alternatively, John could fund a Credit Shelter Trust with $2million upon his death.  This amount would be sheltered by his available $2 million exclusion amount.  The remaining $1million could pass to Mary using the marital deduction.  Upon Mary’s later death, she would only have $1 million in her estate, which she could cover with her $2 million exclusion.  The balance of John’s Credit Shelter Trust will pass outside of her estate to their children without being reduced by estate taxes even if it grew beyond $2 million.

End-of-Life Medical Decisions

When creating your estate plan, you must consider the possibility that you will become unable to make our own medical decisions, due to terminal illness, or permanent unconsciousness. Medical science continues to advance, keeping people alive much longer than before, sometimes indefinitely. In order to protect your family from the kind of heart-wrenching decisions and acrimony we have seen in the many well-publicized "right to die" cases, you can give detailed instructions regarding the kind of care you want should you become terminally ill or permanently unconscious. These instructions are called advance directives. In Connecticut, advance directives take the form of an Appointment of Health Care Representative and a Living Will.

Appointment of Health Care Representative

If your physician determines that you are incapacitated and unable to communicate your wishes concerning treatment, it is important that someone have the legal authority to communicate your wishes for you. An Appointment of Health Care Representative allows you to appoint someone to act as your agent for medical decisions. By executing an Appointment of Health Care Representative, you ensure that your wishes will be carried out by your representative even if your family members disagree with them. It also takes the burden of decision making away from the rest of your family. If you later become able to express your own wishes, you will again make your own health care decisions and the health care appointment will have no effect.

Since your representative will have the authority to make medical decisions for you, he or she should be a family member or friend that you trust to follow your instructions. Before making an appointment, talk to the person first about your wishes concerning medical decisions, especially life-sustaining treatment, and make sure they are up to the task.

You also need to ensure that your representative has access to necessary medical information in order to make decisions for you. Under the privacy rules of the Health Insurance Portability and Accountability Act (HIPAA), doctors, hospitals and other health care providers are no longer permitted to freely discuss your status or health with your spouse or other family members unless they have a signed consent form from you in hand. Your Appointment of Health Care Representative should refer specifically to HIPAA.

Living Will

A Living Will is a document that states your wishes regarding the kind of health care you want if you become terminally ill or permanently unconscious. Your Living Will can tell your physician whether you want artificial respiration, cardiopulmonary resuscitation (CPR), artificial means of providing nutrition and hydration, kidney dialysis, and antibiotics (other than for my comfort) to keep you alive. It becomes operative when your physician determines that you are incapacitated - unable to make or communicate your decisions about your medical care.  It is especially important to have a Living Will if you want to avoid life-sustaining treatment when it would be hopeless. You can always revoke it at a later date if you wish.

Your Living Will may contain very specific directions to refuse or remove life support in the event you are terminally ill or permanently unconscious, or may provide instructions to use all efforts to keep you alive no matter what the circumstances. Some people only want life support removed after a certain period of time (e.g. - 14 days after the diagnosis of terminal illness).  Others may wish to be moved to a state like Vermont or Oregon that allow residents with terminal disease the option to be prescribed a dose of medication to hasten the end of their life. Such wishes are expressed in your Living Will.

POLST (Physicians Orders for Life Sustaining Treatment): A New Approach

Because advance directives have not been consistently followed, especially in circumstances where serious terminal illnesses require more explicit instructions to health care professionals, an alternative has emerged in recent years called the Physician Orders for Life-Sustaining Treatment (POLST), sometimes called Medical Orders for Life-Sustaining Treatment (MOLST).  The POLST uses a standardized medical order form that the physician reviews with a seriously ill patient to indicate which types of life-sustaining treatment the patient wants or doesn't want if his or her condition worsens. Legislation to implement POLST in Connecticut is being developed in the General Assembly and will be the subject of a future post.

To protect your family from needless anguish and complications, make sure you consider end-of-life care decision making. Include advance directives in your estate plan.

When planning your estate, it is important to understand the difference between probate and non-probate assets. Why is this distinction so important?  To make sure your intentions are carried out.  Your will does not control the distribution of non-probate property.  Moreover, non-probate property may have some advantages, such as avoiding ancillary probate for out of state real property, or avoiding delays in transferring property at your death.       

Probate is the process through which a court determines how to distribute your property after you die. Some assets are distributed to heirs by the court according to your will (or the laws of intestacy if you don’t have a will).  These are called probate assets because they require a probate court order to pass the title.  For example, probate assets are any assets that are owned solely by the decedent. This can include the following:

• Real property that is titled solely in the decedent's name or held as a tenant in common (not joint tenants with rights of survivorship)
• Personal property, such as jewelry and furniture
• Bank accounts, boats and automobiles that are solely in the decedent's name
• An interest in a partnership, corporation, or limited liability company held in the decedent’s name
• Any life insurance policy or brokerage account that lists either the decedent or the estate as the beneficiary

In comparison, some assets bypass the court process and go directly to your beneficiaries based upon the form of title or a beneficiary designation.  These are non-probate assets because they don’t require a probate court order to pass the title. Non-probate assets can include the following:

• Property that is held in joint tenancy with rights of survivorship
• Bank or brokerage accounts held in joint names or with payable on death (POD) or transfer on death (TOD) beneficiaries
• Boats or automobiles held in joint names with rights of survivorship
• Any property held in the name of a trust
• Life insurance or brokerage accounts that list someone other than the decedent’s estate as the beneficiary
• Retirement accounts that name a beneficiary other than the decedent’s estate

When planning your estate, it is vital for you to know whether your property will be probate property or non-probate property so you can take the appropriate steps to accomplish your goals for transferring your property at your death. 

ONE NOTE OF CAUTION - You should be careful not to confuse the concept of your probate estate with the concept of your taxable estate.  They are not the same!  Whether property you own at death passes as a probate or non-probate asset has absolutely no bearing on whether it will be included as part of your taxable estate.  For purposes of calculating any estate tax you may owe at death, some non-probate assets may still be included in your taxable estate.  For example, you may own insurance on your life with a named beneficiary.  This will pass to the beneficiary as a non-probate asset, but the entire death benefit will be counted in calculating the amount of your taxable estate (unless the policy is owned by an Irrevocable Life Insurance Trust, a.k.a. an ILIT, to avoid estate tax at your death). Moreover, the probate courts in Connecticut impose a probate fee on the amount of your taxable estate, which is often larger than the probate estate because it can include non-probate assets. Consequently, a probate fee may be due even if there are no probate assets!  So, unfortunately, avoiding probate does not translate into avoiding probate fees.

Your mother told you that she named you in her Will as Executor of her estate.  She trusts your judgment on financial and family matters.  Now your mother has died and you ask, "Why me? I have never been an Executor before."  Where do you begin? As Connecticut estate planning and probate lawyers, we prepared a handy list of what to do in the first week after someone dies.

1.  Handle the care of any dependents and/or pets

This first responsibility may be the most important one. Usually, the person who died (“the decedent”) made some arrangement for the care of a dependent spouse or children. You or others may need to take them home temporarily if they cannot continue living in the decedent’s home.  Decedents frequently overlook the care of pets upon their death.  Go to the house as soon as possible to check their condition. Find a good home for them even if it is temporary. The Estate can pay expenses related to dependents and pets so keep good records of all expenditures for them.

2.  Monitor the home

Keep an eye on the decedent’s home, answer phone messages, collect mail, discard food, and water plants.  If you do not live near the decedent’s home, ask a friend or relative to handle this task. If necessary, change the locks. Don’t give away any personal property in this first week. Keep current all essential utilities like heat and electricity. Save all receipts and create a spreadsheet with all expenses to be reimbursed.

3.  Notify close family and friends

Ask someone to contact others to tell them of the decedent’s passing. Find the decedent’s address book and look for their e-mail contacts.  Send cards to those who do not use e-mail regularly.

4.  Arrange for funeral and burial or cremation

Search the decedent’s papers to determine whether they have a prepaid funeral contract or burial plan. Ask a friend or family member to go with you to the mortuary. Decide how you will pay for the funeral and memorial service. Unless the decedent made you the joint owner of a bank account, you and close family will need to front these costs and get reimbursed from the estate. With respect to burial instructions, the Will is not controlling. Look for a document entitled Disposition of Remains which is on our web site. This document expresses a decedent’s wishes regarding what is to be done with their body.

5.  Prepare the funeral service

In some religious faiths, the funeral service occurs soon after death.  Find any directions from the decedent in this regard.  Our Personal Affairs and Funeral Arrangements Checklist, or a similar document, should provide you with this information.  If there are no such directions, gather close family members and create an outline of the service.  Visit with the clergy member to review the service.  Prepare remembrances and gather photos for the wake and the funeral reception.  Contact the restaurant or other venue at which you want to hold the reception. If appropriate, a eulogy for a funeral or memorial service may also be warranted.  Feel free to delegate this task if you know others who could handle this delicate assignment as well or better than you.

6.  Prepare an obituary

It will mean a lot to the family if you take the time to prepare an obituary well.  Send the obituary to the local newspaper.  If the decedent retired to another city and state, send the obituary to the newspaper there as well.

7.  Order Death Certificates

Get at least 10 original death certificates.  The funeral home will usually order these certificates for you.  Executors need original death certificates to apply for admission of the Will in Probate Court, change the ownership of joint accounts, and obtain date of death values of investments for preparing the estate tax return.

8.  Find Important Documents

Those documents include the Will, any Trust Agreement, the latest bank account statements, investment statements, deeds, birth certificate, marriage certificate, divorce decree (if any), Social Security information, life insurance policies, certificates of title to vehicles and keys to the safe deposit box or home safe.

9.  Get a Court Decree Appointing You as Executor

Hire a Connecticut probate lawyer or law firm that focuses their practice in the area of trusts & estates.  Ask for a copy of the law firm’s probate information form so you know what information they will request to probate the estate. See our Estate Settlement Data Sheet as a sample. Get waivers of notice and hearing from each heir of the decedent. See the attached General Waiver for this probate court form. Heirs include a spouse and all children. Use e-mail to get waivers especially if the decedent had many children living in different states. Have your lawyer prepare the Application for Probate and file the Application and waivers with the Probate Court in which the decedent resides.

10.  Call the Employer

Call the decedent’s last employer if he or she was working or received pension or health insurance benefits from the employer. Request information about the amount of benefits, the successor beneficiary of those benefits, and any pay due. Ask whether there was a life insurance policy through the employer.  If the company provides life insurance, ask for an IRS Form 712 and the beneficiaries of the policy.

As 2013 draws to a close, you can still reduce your 2013 tax bill and plan ahead for 2014.


A New Definition of Married Couple

This year, a married couple includes same-sex marriages for income tax purposes. All married couples may elect to file one return reporting their combined income, computing the tax liability using the tax tables or rate schedules for “Married Persons Filing Jointly.” A joint return may be filed even though one spouse has neither gross income nor deductions. If one spouse dies during the year, the surviving spouse may file a joint return for the year in which his or her spouse died. Certain married persons who do not elect to file a joint return may be entitled to use the lower head of household tax rates.


New Tax Rates

Tax rates for 2013 changed from 2012 and are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Beginning in 2013, a 3.8% tax is levied on certain unearned income. The tax is levied on the lesser of net investment income or the amount by which modified AGI exceeds certain dollar amounts ($250,000 for joint returns and $200,000 for individuals). Investment income is: (1) gross income from interest, dividends, annuities, royalties, and rents (other than from a trade or business); (2) other gross income from any business to which the tax applies; and (3) net gain attributable to property other than property attributable to an active trade or business. Investment income does not include distributions from a qualified retirement plan or amounts subject to self-employment tax. With this additional tax, the maximum net capital gains rate on the sales of stocks is 23.8% in 2013. Because distributions from qualified retirement plans are not subject to the tax, taxpayers may want to invest in retirement accounts, if possible, rather than taxable accounts.


Gift Giving

The most commonly used method for tax-free giving is the annual gift tax exclusion. For 2013, a person can give up to $14,000 to each donee without reducing the giver's estate and lifetime gift tax exclusion amount ($5.25M) or filing a gift tax return. A person is not limited as to the number of donees to whom he or she may make such gifts. Thus, if an individual makes $14,000 gifts to 10 donees, he or she may exclude $140,000 from tax. In addition, because spouses may combine their exemptions in a single gift from either spouse, married givers may double the amount of the exclusion to $28,000 per donee. Qualifying tuition payments and medical payments do not count against this limit, but the payments must be made directly to the educational institution or the health care provider.

When someone you love passes away, how do you deal with their death on Facebook? An excellent article in Readers Digest suggests the following ways:

Keep A Profile Active

If you leave a deceased person's Facebook profile alone, it will continue to pop up as Someone You May Know and in other suggestion boxes. Memorializing the page removes old status updates and allows only friends to see the profile or locate it through a search. To memorialize a page, type "special request for deceased person's account" into the Facebook search bar and follow the directions.

Delete A Profile

Log on to the decedent’s Facebook account using his or her password. Note that without the password, you can't delete the page. Type "delete my account" into the search bar at the top of the page. On the Delete Account page, click Delete My Account to permanently erase the page, including all posts, photos, and status updates. To download the contents of the account before deleting the profile, click the Settings button at the top right of the page and select Account Settings. Click General, then Download a Copy of Your Facebook Data, and Start My Archive.

Create A Memorial Page

Sign in to Facebook and click Create a Group. Type in a name for the memorial page you want to create. Set the privacy settings to open (anyone can see the group, its members, and all posts), closed (anyone can see the group and its members, but only members can see posts), or secret (only members can see the group, other members, and any posts). Click Create. To add a donation button to your memorial page, search for "donation button creator" on Facebook. Type in the name of your charity or individual, and click Install on Facebook Page and then Add Donation Button Creator.

See Coping with Death on Facebook in Readers Digest, October, 2013 issue by clicking here.