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Estate Planning for Baby Boomers Comes with Some Special Considerations

Mar 20, 2022 | Articles, Estate Planning

By Matthew DeGioia, Attorney

The Baby Boomer generation, generally understood as those born between 1946 and 1964, comprises the largest generation in American history. It also is the generation that is heading into retirement.

While every individual case or situation is unique, there are special considerations that Baby Boomers should take note of when doing their estate planning.

1. Estate Taxes

The Center for Retirement Research at Boston College estimates that Baby Boomers can expect to inherit more than $8 billion from their Depression-era relatives by 2030. Moreover, financial experts tell us that as Baby Boomers age, approximately $30 trillion in assets will pass to Generation X (born between 1965 and 1980) and Millennials (1981-1996). These numbers represent what many expect to be the largest transfer of wealth in history.

With any transfer of wealth, it is essential to be wary of any tax implications for your estate. As a result of the 2017 Tax Act, the federal estate tax exemption currently sits at $11.7 million (indexed for inflation), and the Maryland estate tax exemption sits at $5 million (not indexed for inflation). While the federal estate tax is not an issue for most people because of the high exemption amount, the federal tax code has an automatic sunset provision that will come into effect after December 31, 2025. If Congress does not act, the federal estate tax exemption will revert to what it was in 2010, approximately $6 million (indexed for inflation).

If you have a question regarding any estate or inheritance tax that could be payable upon your death, I encourage you to contact a CPA to minimize any potential tax liability.

2. Long-Term Care and Medicaid

Another issue that many Baby Boomers will face is the increasing cost of long-term care. The national annual median cost of care for a private room in a nursing home is approximately $102,200.00. Seventy percent (70%) of people aged 65 and older will need some form of long-term care in their lives, whether in the form of home healthcare, assisted living, or nursing homes.

While many people expect public medical assistance programs such as Medicaid to pay for their long-term care costs, they often do not think about how they would qualify for Medicaid in the first place. There are stringent income and resource limits to the Medicaid program. A Medicaid applicant’s income must be less than the cost of care imposed by the nursing home, and almost all of the applicant’s income is payable to the nursing home. In addition, a Medicaid applicant cannot possess more than $2,500.00 in countable resources. If the applicant has too much in resources, they are generally required to cash out and spend down their resources for goods and services at fair market value before applying for Medicaid. Put another way, they cannot simply give their assets away to become eligible for Medicaid. Medicaid penalizes gifts (i.e., transfers for less than fair market value) made by an applicant or their spouse in the 60 months before they apply for Medicaid, subject to certain exceptions. For each $9,231 transferred for less than fair market value, the applicant is denied one month of nursing home eligibility, and for each $304, one day of denied eligibility.

Medicaid rules can be problematic for Baby Boomers who, as we saw before, are currently involved in possibly the most significant wealth transfer in history. What is a person to do if they receive an inheritance but are disabled and need to be eligible for Medicaid to afford long-term care?

Fortunately, Maryland state policy encourages the use of special needs trusts to preserve funds to provide for the needs of individuals with disabilities and to enhance their quality of life. Special needs trusts protect and preserve countable resources for anyone who wants to receive or apply for public benefits, or to provide management of property for disabled individuals who are unable to manage their resources. The principal and income of special needs trusts are not countable resources for Medicaid purposes because the trust’s beneficiary does not have access to those funds. Most special needs trusts are still subject to a five-year lookback period or ineligibility period; the only transfers that are exempt from a penalty are transfers to a special needs trust for the sole benefit of an individual under the age of 65, or transfers to a disabled child/special needs trust for the sole benefit of a disabled child.

As you can see, the Baby Boomer generation has some unique challenges that they will face when thinking through their estate planning. I encourage you to contact an experienced estate planning lawyer today to help you think through your options as you approach retirement.


About Andalman & Flynn, P.C.: Founded in 1998 in downtown Silver Spring, Maryland, Andalman & Flynn has forged a distinguished reputation for legal excellence. The firm practices family law throughout Maryland and the District of Columbia, and represents individuals seeking disability benefits throughout the country. The firm focuses on cases that impact the rights of everyone, and are there for clients when responsive legal help is most critical. The firm has provided legal analysis on national and local television and radio, and their attorneys often testify before legislative bodies and are routinely invited to contribute to prominent legal publications. For more information about Andalman & Flynn, please visit the website at andalmanflynn.com or call 301.563.6685.


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