Can You Protect Your Home If You Need Medicaid? – Annapolis and Towson Estate Planning

Anyone who owns a home, whether a magnificent mansion or a modest ranch, worries about the possibility of losing the home because of long-term care. How can they keep the home for their spouse or even for their family, if they need to apply to Medicaid for long-term nursing care costs?

The problem, reports The Mercury in a recent article “Protecting your house and Medicaid” is often the strategies that people come up with on their own. They usually don’t work.

The first thought of someone who is confronted with the need to qualify for Medicaid is to immediately transfer ownership of the family home to another person. The idea is to take the home out of their countable assets. But unless the person who receives the house is an adult child, that transfer only leads to problems.

Medicaid’s basic premise is that if you can afford to pay for your own care, you should. Transfer of a home, let’s say one with a value of $400,000, means that a $400,000 gift has been given to someone. There is a five-year lookback period. Any assets given away or transferred in that five-year period means that you had the asset under your control. Medicaid will not pay for your care in that case.

There are some exceptions to the gifting rules, but this is not something to be navigated without the help of an experienced elder law estate planning attorney. Here are the exceptions:

Your spouse. It’s understood that your spouse needs a place to live and a transfer of the home to your spouse does not result in penalties under Medicaid rules. This usually means transfer from title as joint tenants with rights of survivorship or tenants by the entireties to the healthier wife or husband. It is also understood that a transfer to your spouse at home is not a disqualifying transfer. This is a common practice and part of Medicaid planning.

A disabled child. A parent may transfer a house to their disabled child on the theory that it is needed for self-support. It is not necessary for a child to lose a home because a parent will be on Medicaid. This is a common mistake, and completely avoidable. Talk with an elder law attorney to learn more.

If a child is a caretaker. An adult child who moves in with the parents for a period of at least two years to care for them so they could stay at home and avoid going to a nursing home, or if the child has lived with their parents for longer than that and they need this care at home, under federal law the home can be transferred to the child without penalty and the parent can go to a nursing home and receive care under Medicaid. This is another very common mistake that causes adult children to be left without a home.

For a person who is single or a widow or widower who will never move home after moving into a Medicaid certified nursing home, the house may be sold and planning can be done with the proceeds of the sale. Paying bills to maintain a vacant home for no reason and having the government take the home as a creditor through the estate recovery program does not make sense. An elder lawyer estate planning attorney can help navigate this complex and often overwhelming process.

Reference: The Mercury (July 31, 2019) “Protecting your house and Medicaid”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Should I Know About a Special Needs Trust? – Annapolis and Towson Estate Planning

Your disabled family member may be eligible for a number of government programs. However, Pauls Valley (OK) Democrat’s recent article asks “Can your family benefit from a special needs trust?” The article reminds us that these programs don’t cover everything. You may need to close the gaps.

A few government programs have eligibility restrictions based on the level of financial assets that are available to the recipient. This means the financial help you’re wanting to provide may do more harm than good unless you establish a special needs trust.

As the donor, you supply the funds. A trustee holds and administers them according to your instructions. The beneficiary typically can’t use the trust for basic support or to receive benefits that can be provided by the government. The special needs trust can be used to provide specialized therapy, special equipment, recreational outings and other expenses.

When considering a special needs trust, you’ll need to look at several issues with your attorney.  However, there are two that are critical. The first is designating a trustee. You could name a family member or close friend as a trustee. While this works well for many, it has the potential to cause family conflicts. You could also name a trust company. This company can provide professional management, expertise and continuity of administration. A third option is to name an individual and a trust company as co-trustees.

The second critical issue with a special needs trust is funding the trust. You can fund the trust during your lifetime or have it activated when you die.

Note that you don’t have to be the sole donor. A special needs trust can be created so other family members can also contribute to it. The trust can be funded with securities (stocks and bonds), IRA proceeds, insurance death benefits and other assets.

You’ll need to understand the requirements of various federal, state and local benefit programs for people with disabilities, so that your loved one’s benefits are not at risk.

Speak with an experienced elder law or estate planning attorney about how you can to make life better for a disabled child or family member with a special needs trust.

Reference: Pauls Valley (OK) Democrat (August 1, 2019) “Can your family benefit from a special needs trust?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Planning for the Unexpected – Annapolis and Towson Estate Planning

A woman was not notified when her elderly mother had fallen and hurt herself.  Sadly, this is not an unusual situation.

The daughter spoke with her mother once or twice a week, and the fall happened just after their last conversation. She dropped what she was doing and drove to the hospital, according to the article “Parents” in BusinessWest.com. At the hospital, she was worried that her mother was suffering from more than fractures, as her mother was disoriented because of the pain medications.

The conversation with her brother and mother about why she wasn’t notified immediately was frustrating. They “didn’t want to worry her.” She was worried, and not just about her mother’s well-being, but about her finances, and whether any plans were in place for this situation.

Her brother was a retired comptroller, and she thought that as a former financial professional, he would have taken care of everything. That was not the case.

Despite his professional career, the brother had never had “the talk” with his mother about money. No one knew if she had an estate plan, and if she did, where the documents were located.

All too often, families discover that no planning has taken place during an emergency.

The conversation took place in the hospital, when the siblings learned that documents had never been updated after their father had passed—more than 20 years earlier! The attorney who prepared the documents had retired long ago. The originals? Mom had no idea. The names of her banks and financial institutions had changed so many times over the years, that she wasn’t even sure where her money was.

For this family, the story had a happy ending. Once the mother got out of the hospital, the family made an appointment to meet with an estate planning attorney to get all of her estate planning and elder law planning completed. In addition, the family updated beneficiaries on life insurance and retirement accounts, which are now set to avoid probate.

Both siblings have a list of their mother’s assets, account numbers, credit card information and what’s more, they are tracking the accounts to ensure that any sort of questionable transactions are reviewed quickly. They finally have a clear picture of their mother’s expenses, assets and income.

If your family’s situation is closer to the start of the story than the end, it’s time to contact a qualified estate planning attorney who is licensed to practice in your state and have all the necessary preparation done. Don’t wait until you’re uncovering family mysteries in the hospital.

Reference: BusinessWest.com (Aug. 1, 2019) “Parents”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Elder Law Estate Planning for the Future – Annapolis and Towson Estate Planning

Seniors who are parents of adult children can make their children’s lives easier, by making the effort to button down major goals in elder law estate planning, advises Times Herald-Record in the article “Three ways for seniors to make things easier for their kids.” Those tasks are planning for disability, protecting assets from long-term care or nursing home costs and minimizing costs and stress in passing assets to the next generation. Here’s what you need to do, and how to do it.

Disability planning includes signing advance directives. These are legal documents that are created while you still have all of your mental faculties. Naming people who will make decisions on your behalf, if and when you become incapacitated, gives those you love the ability to take care of you without having to apply for guardianship or other legal proceedings. Advance directives include powers of attorney, health care powers or attorney or proxies and living wills.

Your power of attorney will make all and any legal and financial decisions on your behalf. In addition, if you use the elder law power of attorney, they are able to make unlimited gifting powers that may save about half of a single person’s assets from the cost of nursing home care. With a health care proxy, a person is named who can make medical decisions. In a living will, you have the ability to convey your wishes for end-of-life care, including resuscitation and artificial feeding.

When advance directives are in place, you spare your family the need to have a judge appoint a legal guardian to manage your affairs. That saves time, money and keeps the judiciary out of your life. Your children can act on your behalf when they need to, during what will already be a very difficult time.

Goal number two is protecting assets from the cost of long-term care. Losing the family home and retirement savings to unexpected nursing costs is devasting and may be avoided with the right planning. The first and best option is to purchase long-term care insurance. If you don’t have or can’t obtain a policy, the next best is the Medicaid Asset Protection Trust (MAPT) that is used to protect assets in the trust from nursing home costs, after the assets have been in the trust for five years.

The third thing that will make your adult children’s lives easier, is to have a will. This lets you leave assets to the family as you want, with the least amount of court costs, legal fees, taxes and family battles over inheritances. Work with an experienced estate planning attorney to have a will created.  If your attorney advises it, you can also consider having trusts created, so your assets can be placed into the trusts and avoid probate, which is a public process. A trust can be easier for children, because estates settle more quickly.

Think of estate planning as part of your legacy of taking care of your family, ensuring that your hard-earned assets are passed to the next generation. You can’t avoid your own death, or that of your spouse, but you can prepare so those you love are helped by thoughtful and proper planning.

Reference: Times Herald-Record (July 13, 2019) “Three ways for seniors to make things easier for their kids”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Do I Need to Know About Long-Term Care Insurance? – Annapolis and Towson Estate Planning

Long-term care policies are available from insurance companies. Federal employees can also obtain them through the federal FLTCIP program. LTC (long-term care) policies offer a wide variety of features.

Some policies may pay for care not only in a nursing home but also in an assisted living facility or at the home of the person who requires care.

Policies may also include cost-of-living adjustments, which will increase future benefit payments.

Some companies also offer LTC policies that cover both spouses at a discounted rate, rather than having to purchase two separate policies.

Fed Week’s recent article, “Selecting among Long-Term Care Options to Hold Down Costs,” explains that there also are life insurance policies that double as LTC insurance.

Therefore, if these policies cover long-term care expenses; the policy’s death benefit will be reduced.

However, if long-term care is not needed, the insured individual’s beneficiary eventually can receive the full death benefit.

Remember also that the ongoing premiums will be lower, compared with policies bought when a person is older.

When you’re shopping for LTC insurance, there are some tactics that can reduce your policy cost. Here are just a few:

  • Reduce benefits. A policy that pays benefits as long as you need long-term care can be very expensive. However, a policy with a five-year maximum payout will be less expensive. There are not many people who will need more than five years of long-term care.
  • Wait longer. You can reduce costs, by extending the period before you collect benefits. A policy with a 90-day waiting period will be less expensive than an LTC policy with a 20-day wait. Of course, this is only a bargain, if you can afford to pay for 90 days from your own resources.
  • Avoid automatic inflation increases. A policy that increases your benefit each year from $100 a day to $105 to $110, etc., will be very costly. You can go with a “future purchase option.” This will let you to buy more coverage, if you need it, even if your health has declined.

Reference: Fed Week (June 27, 2019) “Selecting among Long-Term Care Options to Hold Down Costs”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

When Is the Best Time to Disinherit a Child? – Annapolis and Towson Estate Planning

This may sound like something out of a Dickens novel, but sadly, it is someone’s real life. A woman is mourning the loss of her mother. She is the trustee and only beneficiary of her mother’s trust, as explained in the article “It’s never too early to disinherit children” appearing in the Santa Cruz Sentinel. After disappearing for decades, her sister visited with the mother a few times a year toward the end of the mother’s life. Now the sister has retained an attorney to challenge the trust, accusing the woman of elder abuse and stating that the mother was insane.

What can this sister expect?

The goal of the formerly absent sister is to get the trust thrown out so that the estate will pass equally between the two sisters. She can accomplish this if she is able to invalidate the trust and invalidate any prior wills the mother may have signed disinheriting one sister and leaving everything to the other sister.

She may not have a case with a lot of merit, but it is going to cost a lot to defend the estate plan. She may be hoping for a quick payoff.

Whether the case is successful may depend upon the circumstances surrounding the creation of the trust. In the best case, the mother would have gone to see the attorney by herself and created the trust with zero involvement of the sister who is the trustee. Even better would be if the trustee sister didn’t know a thing about the trust or the estate plan, until after it was completed.

Here’s the concern: if the mother created the trust only after she became dependent on the more involved sister and if that sister selected the attorney, made the appointment and had a conversation with the attorney about how awful the other sister was, then it will be hard to prove that the trust was set up purely on the mother’s wishes.

It’s an odd lesson, but in truth, it’s never too early to take steps to disinherit children. If someone knows that they are going to create an estate plan that is going to make one or more people very unhappy, the sooner they document these wishes, the better. It should be done while the person is still living independently and does not require a lot of help from any family member.

Keeping the people who will benefit from the disinheritance out of the creation of the estate plan is best, since it further removes them from involvement and is better when they are accused of being manipulative.

The best tactic is to create an estate plan with the help of an experienced estate planning attorney who can serve as a neutral and unbiased witness and can testify to the fact that the person knew what they were doing when the estate plan was created.

Reference: Santa Cruz Sentinel (June 2, 2019) “It’s never too early to disinherit children”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Financial Scams Targeting Seniors: How To Protect Yourself – Annapolis and Towson Estate Planning

It’s scary to think about. A time in life when people have the most assets under their care, is also the time that aging begins to take its toll on their bodies and their cognitive abilities. The legions of individuals actively preying on seniors to take advantage of them seems to be growing exponentially. What can you do?

Marketplace offers tips on how to best protect yourself and loved ones from scammers in its article “Concerned about financial scams? Here’s your guide.”

Stay in touch with family members, especially if they have lost loved ones to death or divorce. Isolation makes seniors vulnerable to scammers.

Try not to be judgmental and be empathetic if someone reveals that they have been scammed. Seniors who have been scammed are embarrassed and fearful.

Talk about the scams that you have heard about with loved ones. They may not know about the scams, and this may give them better awareness when the call comes.

If anyone in the family calls with an urgent request for money—often about a grandchild who is in trouble overseas or a fee for a prize that needs to be claimed immediately—pause and tell them that you need time to consider it.

Don’t send or wire money to anyone you don’t know. Gift cards from retailers, Google Play, iTunes or Amazon gift cards are often used by scammers to set up fraudulent transactions.

Once one scammer has nailed down contact information for a victim, they are more likely to be contacted by other scammers. If a loved one is getting calls at all hours of the day, they may be on a list of scam prospects. Consider changing the number, even though that is a hassle. The same goes for email addresses.

You can prevent scams by talking with people you trust about your financial goals. Talk with an estate planning attorney about creating an advance medical directive and medical power of attorney, then do the same for finances. A power of attorney for your finances allow someone who you know and trust to make financial decisions for you, if you become incapacitated, by illness or injury.

There are different powers of attorney:

General: A designated person can control parts of your financial life. When you return to normal functioning, the power of attorney ends.

Durable: This power of attorney remains in effect, if you become incapacitated.

Springing: This power of attorney is triggered by a life event, like the onset of dementia, an accident or disease, makes you mentally diminished or incapacitated. Certain states do not permit this type of power of attorney, so check with your estate planning attorney.

Reference: Marketplace (May 16, 2019) “Concerned about financial scams? Here’s your guide”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys 

What Can I Do When My Aging Parent Refuses to Give Up Control? – Annapolis and Towson Estate Planning

It’s a common problem for families when a parent in charge of finances develops cognitive impairment and needs help managing the family trust and his own spending. It can be financially dangerous with a stubborn parent.

Forbes’ recent article asks, “What Can You Do When A Stubborn Aging Parent Refuses To Give Up Control?” The article explains what it took one family to get an aging parent out of the position as trustee and to permit the successor, the adult daughter, to take over.

The family saw signs of dementia and a family member’s financial abuse.

The trust provided that the parent could be removed as trustee, if two physicians declared him to be incapacitated for handling his own finances. In that case, a judge’s decision wasn’t required. The doctors verified that the elderly parent was incapacitated to safely handle his money. However, all this takes time.

A parent’s failure to listen to reason and their stubborn refusal to resign as trustee when asked, can cost his children dearly. In that situation, a family may have to engage an attorney to resolve the problem.

Remember that even if your aging parents are fine, there’s no time like the present to ask them to review their estate planning documents with you. Look at the terms that define what happens in the event of “incapacity.” Be sure that all of you understand what would happen, if impaired parents are unwilling to give up financial control and you have to institute the proscribed process to remove control from them.

Those who are named in a trust as the “successor trustee,” must know what that means and how much responsibility is involved. The family needs to recognize that financial elder abuse is a huge problem in our country, and family members are frequently the abusers. If you see abuse, and your elderly parent can’t resist the pressure to give money to any dishonest person, an elder law attorney will be able to give you worthwhile advice on the best approach, as well as the law.

Lastly, in the event your aging parent never created an estate plan, work with an experienced estate planning attorney and ask your parent to get going for the family’s sake. You don’t want to live through the situation described above, with no legal means to stop an impaired parent from financial ruin.

Reference: Forbes (May 7, 2019) “What Can You Do When A Stubborn Aging Parent Refuses To Give Up Control?”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

How are Financial Advisors Trying to Prevent Financial Exploitation? – Annapolis and Towson Estate Planning

The next time you see your financial adviser, you may be asked to provide a trusted point of contact, such as a relative or friend to call, if the adviser has a reasonable belief that you might be a victim of financial exploitation.

Kiplinger’s recent article, “New Rules Battle Financial Scams, Elder Abuse” says that your adviser could place a temporary hold on a suspicious disbursement request from you, so your money is protected until the concern is investigated. Once money leaves an account, it’s hard to get it back.

Changes include several new laws that protect seniors and their money. For older adults, financial exploitation is a growing problem. One in five older Americans are the victim of financial exploitation each year, resulting in the loss of $3 billion annually.

Mild cognitive impairment can result in older adults not seeing red flags for fraud, says Michael Pieciak, president of the North American Securities Administrators Association (NASAA), which represents state securities regulators. The ability to judge risk may be diminished. He noted that social isolation plays a part, with vulnerable seniors home during the day and apt to answer the phone when a fraudster calls.

Federal and state lawmakers, along with the financial services industry, have initiated new rules to help safeguard seniors and their assets. The idea is that financial institutions and professionals are on the front lines of spotting elder financial abuse. The changes are designed to protect seniors and to shield financial professionals from liability for reporting possible exploitation.

Congress passed the Senior Safe Act in 2018. This law protects financial services professionals from being sued over privacy and other violations for reporting suspected elder financial abuse to law enforcement, provided they’ve been trained. If a bank teller notices that a senior seems confused about withdrawing money or making puzzling transactions, the teller could tell a superior, who could contact authorities, if necessary.

Nineteen states have enacted some version of a NASAA model act that provides registered investment advisers and broker-dealers with guidance on telling a trusted point of contact and putting a temporary hold on a client’s account to investigate financial fraud.

Reference: Kiplinger (April 3, 2019) “New Rules Battle Financial Scams, Elder Abuse”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys