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Farm Transition Taxes and Medicaid Estate Recovery

Farm Transition Taxes and Medicaid Estate Recovery. Kelly Nuckolls, Legal Specialist. The Agriculture Law Education Initiative.

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Farm Transition Taxes and Medicaid Estate Recovery

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  1. Farm Transition Taxes and Medicaid Estate Recovery Kelly Nuckolls, Legal Specialist

  2. The Agriculture Law Education Initiative The Agriculture Law Education Initiative (ALEI) is a collaboration of the Francis King Carey School of Law at the University of Maryland, Baltimore (UMB); the College of Agriculture & Natural Resources at the University of Maryland (UMCP); and the School of Agriculture and Natural Sciences at the University of Maryland Eastern Shore (UMES). ALEI is an initiative of the University of Maryland Strategic Partnership: MPowering the State, a collaboration between UMB and UMCP. This partnership leverages the sizable strengths and complementary missions of both institutions to strengthen Maryland’s innovation economy, advance interdisciplinary research, create opportunities for students, and solve important problems for the people of Maryland and the nation.

  3. How to reach us ( and our resources) Contact us: Website: www.umaglaw.org Twitter: @MdAgLaw Facebook: www.facebook.com/MdAgLaw Email: umaglaw@umd.edu

  4. DISCLAIMER The information provided in this presentation is intended to provide general information. It should not be construed as providing legal advice, nor should it be cited or relied upon as legal authority. Use of any of the information provided does not create an attorney-client relationship.   You should contact your attorney to obtain advice with respect to any particular issue or problem.

  5. What “Bills” Will Your Estate Have to Pay? Estate Taxes Medicaid Recovery

  6. Most Likely Won’t Pay Estate & Death Taxes If the total of your estate exceeds: 2018: $11.2 million per person Total fair market value of all property owned at death minus all liabilities & allowable deductions Only amount over the exclusion amount will be taxed

  7. States’ Estate Tax Delaware = None Maryland = 2018: $4 million; 2019 and beyond: $5 million Maryland will have spousal portability starting in 2019 Maryland Special Farm Property Valuation: up to $ 5 million Photo by Edwin Remsberg

  8. Maryland Inheritance Tax Does NOT apply to: A deceased person’s grandparents, parents, child, spouse, child’s spouse, grandchildren, grandchild’s spouse, sibling, a corporation, partnership, or LLC with only members that are excluded from the tax, or a nonprofit organization Would apply to: an aunt or uncle, niece or nephew, friend 10% of the “clear value” of the property (FMV – allowable expenses) Special Valuation for Farmland applies if meets requirements 5 years before the owner’s death

  9. Legal Tools to Protect Your Estate Give away under the annual gift tax exclusion over a period of time (shares of the business, cash, piece of land) Irrevocable Trust A will could create a trust for your heirs if the estate is over the applicable estate tax exclusion amount. Life insurance policies Installment Sales

  10. Long Term Healthcare Will I need long term healthcare? Chance that an individual will need long term health care > 50% Chance if married that one spouse needs long term health care > 65% 1 in 2 Americans over 65 will have an extended stay in a nursing home

  11. Long Term Healthcare How Much Will it Cost?

  12. How will you pay for it? Pay out of pocket Purchase long term care insurance 55: $1,980 annual premium 65: $2,990 annual premium 75: $9,315 annual premium Apply and meet eligibility requirements for government funded programs

  13. Medicare vs. Medicaid Medicare only pays for a portion (not all) of a nursing home stay if: Pays only toward first 100 days Medicaid: Medical Assistance is the Medicaid program that pays for a Nursing Facility level of care long-term stay costs Elderly Waiver Program- a Medicaid program that pays only for an Assisted Living level of care long-term healthcare stay costs

  14. What is Estate Recovery? - Will happen after your spouse or disabled child dies and/or minor child reaches 21 - Anything in your estate will pay for all costs - Then, any real property subjected to a lien will pay remaining costs -- Will NOT sell home if: -- a child has resided in home for at least 2 years before person’s admission to the long term care facility and provided care that permitted the person to reside in the home rather than in the facility. -- a sibling has resided in home for at least 1 year before person’s admission to the long term care facility

  15. Estate Recovery Lien In Maryland: If part of a Medicaid long term healthcare program and there is no reasonable expectation that you could be discharged from the facility a lien is created against that recipient’s real property Exceptions: Your home will not be included if a spouse or an unmarried child who is under 21, blind, or disabled lives in the home; or a sibling with part ownership in the home has lived their a year before you are admitted to the facility

  16. Legal Tools to Protect Your Estate Must Act Before Penalty Period (5 years before application submitted): Life estate deed Irrevocable Trust Create a Business entity and gift or sell shares to next generation Sell or gift property to the next generation How your property is titled: Joint Tenancy Substantial hardship application

  17. Wrap up No planning could result in: Questions and concerns about paying long term healthcare costs State recovery of all Medicaid long term healthcare costs Maybe Estate or Inheritance taxes Legal tools can assist Consult an attorney and any financial advisor, accountant, etc. to plan for the future

  18. 2018-19 Transition Planning Workshops Transferring the Farm to the Next Generation Workshop Dates: Queen Anne’s County – Monday, November 26, 2018 Allegany County – Thursday, December 6, 2018 Wicomico County – Wednesday, December 12, 2018 Howard County – Wednesday, January 16, 2019 Baltimore County – Thursday, January 17, 2019 Investing in Your Farm’s Future Workshop Dates: Prince George’s County– Thursday, January 31,, 2019 Talbot County –Thursday, December 13, 2018

  19. 4th Annual Agricultural and Environmental Law Conference When: Thursday, November 8, 2018; 8:00 a.m. to 3:00 p.m.  Where: The Crowne Plaza, 173 Jennifer Road, Annapolis MD  Topics Include: Maryland’s Aquaculture Industry – Legal Conflicts and Resolutions  Chlorpyrifos and the Legal Landscape of Pesticide Regulation Developing Topics in Agriculture Law Weeding through Hemp Pesticide Applicator and Delaware Continuing Legal Education Credits available. Beginning Farmers may be eligible to save 50% on registration* For more information visit go.umd.edu/2018ALEIconf *Email sdill@umd.edu to apply for beginner farmer scholarship*

  20. This material is based upon work supported by USDA/NIFA under Award Number 2015-49200-24225

  21. Kelly Nuckolls 301.405.1295 / knuckoll@umd.edu

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