Frequently Asked Questions

What is elder law?

Elder law is a very individualized area of law that focuses on advance planning for life events as well as health and wealth management. It is a unique area of the law because it addresses individual and estate needs through a multi-disciplinary lens, often incorporating services of social workers, tax specialists, and other professionals. Some services provided by elder law attorneys are:

  • Asset protection;
  • Medicare and Medicaid planning;
  • Harmonizing long-term care and financial planning;
  • Utilizing long-term care insurance;
  • Health care decision-making and using advanced directives;
  • Estate planning through devices such as durable powers of attorney, living trusts, wills and real estate strategies; and
  • Researching housing options and alternatives to nursing homes.
What are the essential estate planning documents I should know about?
  • Wills;
  • Health care proxies;
  • Powers of attorney;
  • Revocable and irrevocable trusts;
  • Gift giving plans; and
  • Asset protection plans.
What are federal and state estate taxes and how do they differ from gift taxes?
Estate taxes are assessed at one’s death, whereas gift taxes are assessed at the time a gift is made or transferred during one’s lifetime. Estate taxes may be due from the estate of the last to die of a husband and wife, or from the estate of an unmarried individual. There is a 100 percent tax exemption for bequests between spouses, but when the surviving spouse then dies, a higher, graduated tax may be owed on the entire estate if planning is not done before the first spouse dies. For both estate and gift tax purposes, it is essential to plan ahead. For example, the federal estate, gift, and generation-skipping transfer (GST) taxes form a transfer tax system that was formerly unified but became separated in 2004. The GST tax exists in order to make sure property does not skip a generation without a transfer tax. While the federal gift tax exemption will remain at $1 million for now, unlimited marital and charitable deductions may be made from this exemption. The estate and GST tax exemption will be valued as of the year of death of the individual, as follows:

  • 2006–08 $2 million
  • 2009 $3.5 million
  • 2010 Unlimited
  • 2011 $1 million

There is much confusion about tax-free gifts. A change in federal law allows each person to now make a tax-free gift of $13,000 (with small cost of living increase each year) to each appropriate individual, every year. A married couple can make joint gifts of up to $26,000 to each individual every year. Each gift is applied as a credit on the estate tax exemptions. If a person or couple is not concerned about estate taxes, then gifts in excess of $13,000 (or $26,000 a couple) per person may be given with no adverse consequences to the donor or donee, up to the lifetime exemption amount. A qualified accountant, or a certified public accountant (CPA), can advise you as to whether a gift tax return should be filed and can provide you with filing instructions.

What is a health care proxy?
A health care proxy is a signed document that permits you to designate, in advance, who will make your healthcare decisions in the event that you become incapacitated or unable to make your own health care decisions. The agent or person you appoint must be 18 years of age or older, and if you are unable to communicate your wishes, he or she will be permitted to make a wide range of medical decisions on your behalf.
What are the differences between a health care proxy and a living will?

A living will is a document that specifies in advance any life-sustaining measures a person refuses to undergo if there is no reasonable expectation of recovery. Typically, a person may refuse the use of feeding tubes, respirators, and cardiac resuscitation. The living will make an incapacitated individual’s treatment preferences known in a set of limited and specific circumstances and serves as a guide in medical decisions. The health care proxy is not limited to a specific set of circumstances but allows an agent the flexibility to make treatment decisions in a wide range of situations. At Shepherd Elder Law, the health care proxy is the recommended method for medical decision making in the event of incapacity.

Who will make medical decisions if no health care proxy exists?

If you become unable to make or communicate treatment decisions to health care providers and you do not have a proxy or agent, decisions will often be made by next of kin or a guardian. This is usually a slower process than if a health care proxy is in place. More importantly, treatment decisions made by a committee of family and health care professionals may not reflect your values and beliefs. In sum, the health care proxy assists in having your treatment preferences carried out in the most efficient manner possible.

What is “power of attorney” and what can it do?

A durable power of attorney is a written legal document created by an individual in order to authorize another person, or persons, to legally act on their behalf in handling their property. The person creating the power (the principal) specifies in the legal document the specific authority he or she wants the other person, the attorney-in-fact, to possess. The attorney-in-fact (the person acting on behalf of the principal) will only have those powers specifically granted to him or her by the principal. The principal can authorize the attorney-in-fact to complete a broad range of activities, including signing checks, making investment decisions, entering into contracts, making gifts, creating trusts and transferring property. The principal can grant to the attorney-in-fact the power to do most things the principal could have done for him or herself. This is a very powerful estate planning tool and should be used with discretion and care.

What is the difference between a “durable” and “non-durable” power of attorney?

A limited or non-durable power of attorney is for specific and limited authority for a specific situation, such as a sale of real estate. The limited or non-durable power of attorney is effective immediately, but it automatically terminates when the principal becomes incompetent. The non-durable power can be useless because it terminates when it is most essential. In other words, when the principal becomes incompetent the power terminates, so in order to manage the incompetent individual’s estate, their family would need to seek the appointment of a guardian or conservator from the probate court. Alternatively, if a durable power of attorney exists, the power to act on the principal’s behalf continues even after the principal becomes incompetent. The power of attorney can be revoked by a competent principal at any time, but not by an incompetent principal.

What is the difference between a “springing” and “present” durable power of attorney?

There are two basic forms a durable power of attorney can take. The first is a present durable power of attorney which authorizes the attorney-in-fact to act for principal instantaneously. The second is a springing durable power of attorney which becomes effective only upon the incapacity or incompetency of the principal.

What is a deed with a reserved life estate?

A deed is a document showing proof of ownership of real property. A deed with a reserved life estate is used when you wish to pass your real property to someone upon your death, but plan to live in and maintain control of the property until death. While you live in or control the deeded property, you are responsible for its upkeep. A benefit of this type of deed is that the remainder is passed immediately upon your death to whomever you appoint, which avoids the probate process discussed above. A disadvantage is that the property cannot be fully sold without the assent of the life and remainder estate holders. While a step up in basis for capital gains tax purposes will be realized upon the death of the life estate holder, the life tenant age 55 or older will lose the Section 121 capital gains tax exclusion if the real property is sold while the life tenant is living. Under current Medicaid estate recovery law, individuals who receive Medicaid in the community who are age 55 and older, or any age in a nursing facility, will have a lien placed on any property in which they have an ownership interest, including a life estate. If it is sold during their lifetime, the lien will be collected. If the life estate owner dies owning the property, their ownership ends, and therefore the lien will end, and there will be no recovery.

What is the difference between Medicaid and Medicare?

Medicare is a federal health insurance program associated with Social Security Insurance (SSI) benefits for people over 65 years or disabled. It is not a needs-based program. It assists in paying for medical expenses, such as hospital visits, prescriptions, and hospice care; but it does not pay for some other services, such as extended nursing home care.

Medicaid is a joint federal and state assistance program that is available to anyone who meets the financial eligibility rules, as well as those eligible for SSI. Medicaid comprehensively pays for both physical and mental health maintenance needs of those receiving coverage. It also pays for long-term nursing home care for individuals and members of couples.

If I need nursing home care, but my spouse does not, will I still be eligible for Medicaid?

Yes. You will still be eligible for Medicaid assistance in paying for nursing home costs and amended statutes protect more of your assets. The laws work to find a balance between the belief that the healthy spouse should use his or her resources to fund the other spouse’s nursing home care and the reality that such a financial burden may be devastating to the spouse still living at home. As of 2022, the Community Spouse Resource Allowance (CSRA) has been increased so that the “community spouse” may keep half of all of the couple’s assets up to a maximum of $137,400. There are various techniques available to save additional funds.

What is a supplemental needs trust?

By way of background, it is important to note that trusts are used to hold a sum of money or property to be used for the benefit of a person or persons. The money or property held in the trust is managed by a trustee according to the grantor’s instructions. A supplemental needs trust (SNT) is a specialized trust usually used to support the supplemental needs of a disabled individual not otherwise covered by government benefits and other sources of support. A SNT will often be established by parents of a child with a disability and managed by the parents or a third party. For government benefits purposes, funds in the trust are not counted as the child’s assets because the child has no access to or control over the funds. Parents or any other person can continue to add funds to a SNT after its creation without fear of disqualifying the child from benefit programs. Trusts that are created or funded by an individual receiving benefits may require that there be a provision allowing Medicaid be paid back upon that individual’s death.

When should long-term care insurance be considered?

Long-term care insurance is best suited for individuals who are not eligible for Medicaid but do not have the financial means to pay entirely out of pocket for the costs of long-term care. It is best to purchase long-term care Insurance well before one actually needs it to avoid expensive premiums. Policies purchased at age 65 cost $1,800 per year for four years of coverage, while the same policy purchased at 79 costs $5,900 per year. One way to purchase long-term care insurance is through a life insurance policy or an annuity, where withdrawals from such policies can help pay for long-term care needs can yield tax-free benefits in the Wellington Capital Group.

Excerpted and reprinted from Taking Control of Your Future, A Legal Checkup, MBA and

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