Friday, September 30, 2011

IRS publishes new Estate Tax Return Form (706) and Instructions

The IRS has published a new revision of the estate tax return form (Form 706) to be used for decedents dying in 2011.

For decedents dying in 2011, Form 706 must be filed by the executor for the estate of every U.S. citizen or resident: 

  • Whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $5,000,000; or, 

  • Whose executor wants to make by the election to permit the decedent’s surviving spouse to use the decedent’s unused exclusion amount, regardless of the size of the decedent’s gross estate.

The applicable exclusion for decedent’s dying in 2011 consists of a basic exclusion amount of $5,000,000 and the unused exclusion amount of a predeceased spouse (who died after December 31, 2010). This means that even if you determine filing a return for the estate is not required, you nonetheless should file a return if you intend to elect to allow the decedent’s surviving spouse to use the decedent’s unused exclusion amount for estate and gift tax purposes.  A timely and complete Form 706 filed for the predeceased spouse’s estate is required, even if there is no tax due, to allow the surviving spouse to use the last predeceased spouse’s unused exclusion (DSUE) amount. 

Note that the Form 706 filing due date is 9 months after the date of the decedents death, which means it falls in October 2011 for decedents who died in January 2011.  If you are unable to file Form 706 by the due date, you may file for an extension of the time to file. Use IRS Form 4768 to apply for an extension.

Upon the later death of the survivor spouse, his or her executor will be required to attach a copy of the Form 706 filed in the estate of the predeceased spouse along with a calculation of the DSUE in order to claim the first spouse’s unused exclusion amount. 

The DSUE portability provisions are found at 26 U.S.C. Section 2010 (c)(4). Under the Tax Relief Act of 2010 they apply to decedents dying in 2011 and 2012. They create a significant trap for the unwary executor.  

The IRS has also issued Notice 2011-82 which provides further guidance on electing portability of the DSUE amount. 

According to Notice 2011-82, in order to make the portability election on the Form 706 as straightforward and uncomplicated as possible and to reduce the risk of inadvertently missed elections, “the Treasury Department and the Service have determined that the timely filing of a Form 706, prepared in accordance with the instructions for that form, will constitute the making of a portability election by the estate of a decedent dying after December 31, 2010. Thus, by timely filing a properly-prepared and complete Form 706, an estate will be considered to have made the portability election without the need to make an affirmative statement, check a box, or otherwise affirmatively elect, on the Form 706. Until such time as the IRS revises the Form 706 to expressly contain the computation of the deceased spousal unused exclusion amount, a timely-filed and complete Form 706 that is prepared in accordance with the instructions for that form will be deemed to contain the computation of the deceased spousal unused exclusion amount, thereby satisfying the requirements in section 2010(c)(5)(A) for making an effective election.”

See also my earlier posts for more information on portability:

Monday, September 26, 2011

Medicare payment cuts to nursing homes hit on October 1st

Skilled nursing facilities across the country are bracing for significant reductions in the payments they receive from Medicare.  A new rule issued by the Centers for Medicare and Medicaid Services (CMS) for skilled nursing facility Medicare reimbursement takes effect on October 1st

The nursing home industry has responded to the impending payment reductions with alarm, suggesting that the cuts could result in a loss of jobs and reduced quality of care for nursing home residents.  See, American Health Care Association (for-profit nursing homes), "CMS Issues Final Rule on Medicare Payments to SNFs; Federal Agency Disregards Calls for Phase-In, Drastically Reduces SNF Payments" (Press Release, July 29, 2011); Leading Age (formerly known as American Association of Homes and Services for the Aging, not-for-profit nursing homes), "Medicare Rate Cuts: Shocking, Unfair and Punitive" (August 1, 2011); Alliance for Quality Nursing Home Care (chain nursing homes), "New Medicare Cuts in CMS Final Rule a Clear and Present Danger to SNF Sector Stability, Quality Patient Care, Local Jobs" (Press Release, July 29, 2011).

Severe cuts in federal Medicare funding threaten Pennsylvania’s already fragile skilled nursing facility sector” according to Stuart Shapiro, MD, President of the PA Health Care Association, a trade group of Pennsylvania nursing homes and other long term care providers. “These cuts, combined with inadequate Medicaid reimbursement, may very soon limit access to Pennsylvania nursing home care, place the quality of care at risk, and jeopardize thousands of health care jobs.”

According to Dr. Shapiro “Pennsylvania’s nursing homes will suffer a nearly $200 million cut in their annual Medicare payments beginning Oct.1 under a new rule announced by the Centers for Medicare and Medicaid Services (CMS). This translates into an 11.1% cut in their basic Medicare rates.”  

The financial stress on nursing homes could be intensified if additional payment cuts result from the Budget Control Act passed by Congress in August and its creation of a Congressional deficit reduction “super-committee.” The “super-committee” could propose further cuts to Medicare and/or Medicaid payments for long term care. Or a 2% payment cut could be automatic if Congress fails to act. See, FAQ: 'Super Committee' Could Have Big Impact On Medicare, Medicaid Spending.

Consumer advocate The Center for Medicare Advocacy (CMA) explains the October 1 change in nursing home payments in a reality check article entitled: “Medicare Reimbursement For Skilled Nursing Facilities Remains High For 2012 Despite Reductions In Overpayments: Advocates Must Be Vigilant to Protect and Promote Quality of Care for Residents.

The CMA suggests that advocates for nursing home residents need to be especially vigilant over the next few months to protect the quality of care provided to residents. According to the Center:

CMS' reduction of overpayments to SNFs [Skilled Nursing Facilities] is one effort to bring down health care costs and to assure that payments are made to health care providers for services that are actually provided, but residents' advocates must assure that care for residents does not decline.  The opportunity for harm to residents is especially significant this year.

SNFs' expenses include expenses that must be paid – mortgage or rent, utilities, taxes – and expenses where SNFs may see flexibility – chiefly staffing, food, and supplies.  Staffing is particularly in danger because of the weak federal standards for nurse staffing.  Federal law requires SNFs, regardless of size, to have one registered nurse on the day shift and licensed and unlicensed nurses 24 hours a day that are "sufficient" to meet residents' needs. This vague standard is difficult to enforce, giving SNFs leeway to staff at low levels, a significant problem when CMS has already documented that more than 90% of facilities nationwide have too few staff to prevent avoidable harm to residents and to meet resident needs.

Advocates may want to closely monitor SNFs' posted staffing levels. Under federal law, SNFs are required to post daily, at the beginning of each shift, the number of licensed nurses (registered nurses, licensed practical or vocational nurses) and unlicensed nursing staff (certified nurse assistants) who are "directly responsible for resident care" as well as the resident census.  Facilities must make the information available to the public in a readily accessible place, and on request, and "must maintain the posted daily nurse staffing data for a minimum of 18 months, or as required by State law, whichever is greater."

Advocates may file complaints with the state survey agency (generally located in the state health department) if staffing levels decline and residents are harmed or are in danger of harm as a result.  They may also encourage CMS to direct surveyors to give special attention to staffing.

Wednesday, September 21, 2011


            One of the most difficult transitions we may have to face as we age is the change from independent living in our own home to living in a long term care facility, or “nursing home”. There are many reasons why this transition is so difficult. One is the loss of a home...a home where we may have lived for many years and where our loved ones may still reside. Another is the loss of independence. Still another is the loss of the level of privacy we enjoy at home, since nursing home living is often shared with a roommate.

            Most people who make the decision to move to a nursing home do so during a time of great stress. Some have been hospitalized after a stroke, some have fallen and broken a hip, still others have a progressive dementia like Alzheimer’s and can no longer be cared for in their own homes.

            Whatever the reason, the spouse or relative who helps a person transition into a nursing home during a time of stress faces the immediate dilemma of how to find the right nursing home. This task is no small one, and a huge sigh of relief can be heard when the right home is found and the move is successfully accomplished. But the most difficult task may just be beginning:  How do you make sure you get good care in a nursing home?

How to Get Good Care - Tips from an Elder Law Attorney
There will always be issues and problems with how care is delivered in a nursing home. No one is going to be able to take care of you or your loved one exactly the way you think it should be done. The question is how to deal with these inevitable problems. Nine times out of ten, a solution can be found if one is polite and persistent. Solutions come from people, not paperwork. Don’t assume a hostile attitude, it just makes matters worse. A worker who is treated with respect and kindness is more apt to treat you or your loved one the same way.

The Transition

            For the caregiver, the best way to help your loved one get good care in a nursing home is to make a transition yourself.  It is time for you to move from the role of caregiver to the role of care advocate.

            In this advocacy role, while you may continue to do a variety of things for your spouse or relative, your main job is to ensure that the nursing home staff provides good care. You cannot be at the nursing home 24 hours a day, so you want to know that the staff is caring for your loved one as it should.

            The single best method to ensure that your loved one receives good care is to understand the care planning process and to become consistently involved in it. The care plan is a blueprint that outlines such things as physical and speech therapy, range-of-motion exercises, nutrition requirements, and other appropriate activities required for optimum functioning. This plan, which must be reviewed every three months (or more often if there is a major change in condition), works like this:

            The Baseline Assessment.
During the first few days after admission to the nursing home, each resident undergoes a thorough assessment by the facility’s multi-disciplinary staff, a team that includes physicians, nurses, dietitians, physical or occupational therapists, recreation therapists and social workers. (The nursing home calls this assessment the MDS, which stands for Minimum Data Set.) Together this team gathers information from both the resident and the family about the medical and psycho-social (i.e. emotional/ lifestyle) needs of the resident. The team has two weeks to complete this assessment. At that time, a formal care plan must be put in place.

            Your role:
            As care advocate, you should contribute the information you possess about your loved one’s medical, psychological, spiritual and social needs, as well as information the staff should know about your loved one’s preferences. For example, “Dad likes to watch the news and then read for a while each night. He also likes to have a snack of graham crackers and milk. This has been his routine for years and helps him relax before going to sleep.” This helps the staff get to know your Dad and allows him to maintain routines that are familiar and comforting.

            The Care Plan.

            The care plan is also written by the team. The purpose of the care plan is to spell out the areas in which care is needed by the resident and to spell out the manner in which the staff plans to address and meet these needs. For example, your Mother has suffered a stroke with resulting paralysis on one side of her body. She needs to learn to accomplish the independent activities of daily living, including hygiene needs and dressing herself, with the use of only one side of her body. The plan might be to work with physical and occupational therapy five times each week to recover independent functioning in these activities.

            Your role:
            As care advocate, you will want to make a list of all problems and needs that affect your loved one. This is important because you may be aware of a need that the staff may not uncover during its assessment. Give this list to a nurse or social worker in the early days when the assessment is being done, then bring your list to the care planning meeting.

            The Care Planning Meeting.

            No later than three weeks after admission, the facility is required to have the first care planning meeting. You should receive written notice of the date and time. The staff who attends these meetings usually includes the Director of Nursing or the Assistant Director, often another staff nurse, a social worker, a dietitian, a physical or occupational therapist if appropriate, and a recreation or activities therapist. The staff will discuss the needs of the resident and the team’s specific plan to meet those needs. It is the job of the nursing home staff to maintain or improve functioning by your loved one, when improvement is possible, and to slow the loss of functioning, when improvement is not possible. For example, if your Father is able to walk independently when he goes to a nursing home, the staff must work hard to assure his continued ability to walk, barring some medical event that changes this ability.

            Your role:
            As care advocate, attend the care planning meeting and bring the list of needs you compiled and gave to the staff during the assessment period. Also be sure your loved one attends the meeting if he or she is able to participate. Your role at this meeting is critical, because you are in a position to monitor whether all problems and needs are being addressed. If something has been missed, you or your loved one can add that information now so that a comprehensive care plan is put in place.

            Care Plan Updates.

            The nursing home is required to evaluate each resident’s care plan on a quarterly basis, or at any time there is a significant change in the resident’s status. For example, your Mother has been in the nursing home four months when she has a stroke that leaves her barely able to speak. This represents a significant change in her status and requires the staff to develop a new care plan to address her current needs. There should also be a care planning meeting to review the new plan.

            Your role:
            As care advocate, you should attend all care planning meetings to be sure your loved one’s needs are being addressed. Throughout this on-going process, you should provide input that contributes to good care for your spouse or loved one. It is widely recognized that the residents who receive the best care in nursing homes are those whose spouse and/or families consistently attend care planning meetings and communicate with staff on a regular basis. The nursing home is obligated to try its best to provide individualized care that will achieve and maintain the highest level of well-being for your spouse or loved one. In your new role of care advocate, use the care planning forum to bring your questions to the table, to identify your loved one’s needs, and to work with the staff to formulate solutions to any problems that may arise.

This article has been adapted from The Pennsylvania Nursing Home Guide, which is available for free download on the website of the law firm of Marshall, Parker and Associates at The Guide covers many additional subjects including a section on how to pay for care.  

Saturday, September 17, 2011

Estate and Gift Tax Exclusion Amounts should rise in 2012

The Federal Estate Tax exemption amount should rise to $5.120 million in 2012 according to projections published by CCH Tax and Accounting.  As a result of the unification of the estate and gift tax exemption amounts under the Tax Relief Act of 2010, an individual's lifetime gift tax exclusion should also increase to $5.120 million for 2012.  (Unless there is Congressional action, gift and estate tax levels are set to revert to much lower 2001 amounts in 2013.)

In addition, donors may continue to use their annual gift tax exclusion before having to use any part of their lifetime gift exclusion amount. The annual exclusion amount which was set at $13,000 per recipient in 2011 is expected to remain at that figure next year.  (Using the annual exclusion, $26,000 per recipient can be gifted by married couples who "split" the gift.)

The increase in the estate and gift tax exemption amounts will improve an already fertile opportunity for families to achieve estate tax savings, but perhaps only for one year.  See "Passing on Wealth to your Children: Should you Wait until you die.

CCH also projects that there will be a slight increase in income tax brackets for estates and non-grantor trusts: up $100 from $2,300 in 2011 to $2,400 in 2012 for the 15-percent bracket; up $150 from 2011 for the 25-percent bracket, to $5,600; up $200 from 2011 for the 28-percent bracket, to $8,500; up $300 from 2011 for the 33-percent bracket, to $11,650.

The per diem exclusion for long-term care insurance proceeds for 2012 are projected to be $310 per day. The dollar level of long-care premiums deductible as health insurance premiums will range from $350 for those 40 years or younger to $4,370 for those over 70 years of age.

CCH's projections are based on the inflation-adjustment provisions of the Internal Revenue Code (IRC) he average of the Consumer Price Index for All Urban Consumers (CPI-U) published by the Department of Labor for each month in the 12-month period ending on August 31, 2011. Official IRS figures will not be released until later this year.