ESTATE MAINTENANCE 2 YEAR PROGRAM
It's possible that if you don't perform proper maintenance on your new car and keep gas in it, it will fail in the future. Don't let that happen to your estate plan.
Many individuals and families do not have any estate plans for one reason or another. However, every family SHOULD have one of their own or else the state and the IRS will create one for you which will be contradictory to your wishes. We take the holistic approach when doing estate planning because we take into consideration the long term care needs of individuals.
Guardianships / Conservatorships
Guardianship takes away a person’s ability to make choices. Because the appointment of a guardian takes away a person’s ability to make decisions about his or her life, other options which place fewer restrictions on the person with a disability should be considered first. One of these less restrictive options may be able to meet the person’s needs without the appointment of a guardian.
What is a Guardian?
A guardian is a person, corporation or an association appointed by a probate court to be legally responsible for another person and/or for another person’s property (estate) when that person is unable to manage his or her personal needs or property because of a mental disability. Only a “natural person” (not a corporation) can be appointed as a guardian of the person.
What is a Ward?
A ward is the person for whom a guardian has been appointed.
Why are Guardians Appointed?
A probate court will appoint a guardian to direct the legal, financial affairs and/or the personal care of a person who is not able to manage his or her own affairs because of a mental disability. Family members or others can ask the court to act to protect someone who appears to be lacking ability to do so for him or herself and is therefore “incompetent.” If the court finds that the person is incompetent and a guardianship is necessary, the court will appoint a guardian. Once appointed, a guardian is accountable to the probate court for providing proper care and management of the ward’s affairs in the ward’s best interest.
What are the General Powers and Duties of a Guardian?
The control that a guardian has over a ward is limited to the authority granted by Ohio statutes, decisions of Ohio courts, and orders and rules of the probate court. All guardians must obey the orders and judgments of the probate court which appointed them. The probate court may give broad and far-reaching powers to a guardian, or it may limit or deny any power granted under Ohio statutes or Ohio case law. Ohio law provides for different types of guardianships.
What are the Types of Guardianship?
Limited Guardianship - Limited guardianship allows a probate court to appoint someone as guardian over only the portion of a person’s life where he or she is both incompetent and has a need. Thus, there can be a limited guardian for medical purposes only (to provide consent for medical procedures), or for placement purposes only (admission to a group home), or for the limited purpose of approving behavior plans and/or psychotropic medications. This less restrictive form of guardianship should be used instead of full guardianship whenever possible. A ward for whom a limited guardian has been appointed retains all rights in all areas not covered by the court’s order.
What Rights are Taken Away When a Guardian Is Appointed?
The rights taken away depend upon the type of guardianship established by the probate court.
If a guardian of the estate is appointed, the guardian’s decisions can not be contested. However, even if the ward has a guardian of the estate, the ward can make contracts for necessary items.
If a guardian of person is appointed, the ward may make any decision that is not contrary to the authority of guardian. Also, the ward can contest the presumption that he or she does not have the ability to make a decision.
The loss of personal rights is why guardianship is a very serious step that should be taken as a matter of last resort. A limited guardianship that identi.es and limits a speci.c area in a person’s life, and does not affect any other rights, is preferred if guardianship is necessary. Less restrictive alternatives to guardianship should be considered before guardianship because these options allow the person to keep as many personal rights as possible while providing protection in those areas the person needs.
Does the Ward Retain Any Rights?
Some areas of the person’s life may involve fundamental rights or a right of privacy. There may be speci.c medical procedures, such as those that implicate reproductive rights, for example abortion or sterilization, that should be decided by the person whenever possible. If this is not possible, the law may require the guardian to ask the probate court to review the guardian’s decision. In addition, voting is a fundamental right. Unless a court speci.cally rules, after a hearing, that a person is incompetent for purposes of voting, the person retains the right to vote even if the person has a guardian of the person and the estate.
Also, some rights are personal to the ward and cannot be exercised by a guardian. A guardian cannot make a will or execute a power of attorney for the ward. The ward may be able to exercise these rights if he or she has the capacity to do so.
What are Some Less Restrictive Alternatives to Guardianship?
A person may have significant deficits in life, but the person’s support network (for example, families, friends, service providers) may be so effective that guardianship is not necessary. Other options exist that can effectively address a person’s needs without the appointment of a guardian:
What happens at a guardianship hearing?
The court will set the matter for hearing, often before a magistrate instead of the judge. If everyone is in agreement that the guardianship is needed, or if no one appears to object, then a letter of guardianship is awarded. If anyone objects, including the person who would receive the guardian, then the hearing becomes more like a trial where witnesses will be examined and cross-examined.
Gun Trusts can be set up to be very flexible. Most are established as a revocable trust, which means it can be changed by the grantor during his or her life. With a revocable trust, the grantor may add or subtract individuals or weapons to and from the trust as necessary. Another advantage is that a trust allows the grantor to legally bypass many ATF application requirements. Fingerprints, photographs, and CLEO signature are not required. Not only can this speed up the process, but you do NOT need to provide the government with this information.
Sometimes people will ask about setting up a corporation as the registered owner. Trusts are generally private and do not require public filing (this may not be the case in every state so you should check with a local attorney on this). Corporations are public, do require filing, and also require annual maintenance fees and taxes. For these reasons, setting up a Gun Trust is the way to go.
Gun ownership is an important decision. It is important that guns and weapons are stored and used safely. Let us help you own, share, and transfer them safely.
We will prepare an NFA Gun Trust and all necessary supporting documentation which will make your ownership, possession, and utilization of your NFA items compliant with Federal laws and regulations. The cost of the trust is $500.00. If you want us to mail the trust back to you, it is an additional $5.00.
If you wish to have a trust prepared for you, click here to download and complete a questionnaire. You can either mail or email the completed form, along with your payment of $500.00 to:
Americans are living longer than ever before, and many elderly people eventually require long-term care (nursing home care). It’s never too late to plan. Nursing home care can be very expensive, averaging $6,000 per month in Ohio. Medicare does not pay for this type of care so it’s no wonder that many families run out of money within the first year of a prolonged nursing home stay. We can help you qualify for assistance from Medicaid without spending ALL your income or giving up most if not all your assets. We have a number of powerful legal tools to work for you to prepare financially for a nursing home stay.
Do You Qualify For Financial Assistance For Nursing Home Care?
The Consumer’s Guide to Medicaid Planning and Division of Assets
The decision to move a family member or loved one into a nursing home is one of the most difficult decisions you can make. Perhaps the move is being made because the family member can no longer care for him or herself...or has a progressive disease like Alzheimer’s...or has had a stroke or heart attack. No matter the reason, those involved are almost always under great stress. At times like these, it’s important that you pause, take a deep breath and understand that there are things you can do. Good information is available and you can make the right choices for you and your loved one. This Consumer’s Guide to Medicaid Planning and Division of Assets is designed to help provide you with information and answers to some of the questions you will encounter. These are questions which we, as Elder Law attorneys and nursing home professionals, deal with on a daily basis. Our clients have found this guide to be a valuable resource, and we hope you will find it useful too.
Americans are living longer than ever before. At the turn of the 20th century, the average life expectancy was about 47 years. As we enter the 21st century, life expectancy has almost doubled. As a result, we face more challenges and transitions in our lives than those who came before us. One of the most difficult transitions people face is the change from independent living in their own home or apartment 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 home...a home where the person lived for many years with a lifetime of memories. 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, and still others have progressive dementia, like Alzheimer’s disease, 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. The task is no small one, and a huge sigh of relief can be heard when the right home is found and the loved one is moved into the nursing home. For many, the most difficult task is just beginning: How to cope with nursing home bills that may total $6,000 to $6,500 per month or more?
How to Pay for Nursing Home Care
One of the things that concerns people most about nursing home care is how to pay for that care. There are basically four ways that you can pay the cost of a nursing home:
1. Long Term Care Insurance - If you are fortunate enough to have this type of coverage, it may go a long way toward paying the cost of the nursing home. Unfortunately, long term care insurance has only started to become popular in the last few years and most people facing a nursing home stay do not have this coverage.
2. Pay with Your Own Funds - This is the method many people are required to use at first. Quite simply, it means paying for the cost of a nursing home out of your own pocket. Unfortunately, with nursing home bills averaging between $4,000 and $5,500 per month in our area, few people can afford a long term stay in a nursing home.
3. Medicare - This is the national health insurance program primarily for people 65 years of age and older, certain younger disabled people, and people with kidney failure. Medicare provides short term assistance with nursing home costs, but only if you meet the strict qualification rules.
4. Medicaid - This is a federal and state funded and state administered medical benefit program which can pay for the cost of the nursing home if certain asset and income tests are met. Since the first two methods of private pay (i.e. using your own funds) and long term care insurance are self-explanatory, our discussion will concentrate on Medicare and Medicaid.
What About Medicare?
There is a great deal of confusion about Medicare and Medicaid. Medicare is the federally funded and state administered health insurance program primarily designed for older individuals (i.e. those over age 65). There are some limited long term care benefits that can be available under Medicare. In general, if you are enrolled in the traditional Medicare plan, and you’ve had a hospital stay of at least three days, and then you are admitted into a skilled nursing facility (often for rehabilitation or skilled nursing care), Medicare may pay for a while. (If you are a Medicare Managed Care Plan beneficiary, a three day hospital stay may not be required to qualify.)
If you qualify, traditional Medicare may pay the full cost of the nursing home stay for the first 20 days and can continue to pay the cost of the nursing home stay for the next 80 days, but with a deductible that’s nearly $120 per day. Some Medicare supplement insurance policies will pay the cost of that deductible. For Medicare Managed Care Plan enrollees, there is no deductible for days 21 through 100, as long as the strict qualifying rules continue to be met. So, in the best case scenario, the traditional Medicare or the Medicare Managed Care Plan may pay up to 100 days for each “spell of illness.” In order to qualify for these 100 days of coverage, however, the nursing home resident must be receiving daily “skilled care” and generally must continue to “improve.” (Note: Once the Medicare and Managed Care beneficiary has not received a Medicare covered level of care for 60 consecutive days, the beneficiary may again be eligible for the 100 days of skilled nursing coverage for the next spell of illness.)While it’s never possible to predict at the outset how long Medicare will cover the rehabilitation, from our experience, it usually falls far short of the 100 day maximum. Even if Medicare does cover the 100 day period, what then? What happens after the 100 days of coverage have been used? At that point, in either case you’re back to one of the other alternatives… long term care insurance, paying the bills with your own assets, or qualifying for Medicaid.
What is Medicaid?
Medicaid is a benefits program which is primarily funded by the federal government and administered by each state. Sometimes the rules can vary from state to state. One primary benefit of Medicaid is that, unlike Medicare (which only pays for skilled nursing), the Medicaid program will pay for long term care in a nursing home once you’ve qualified. Medicare does not pay for treatment for all diseases or conditions. For example, a long term stay in a nursing home may be caused by Alzheimer’s or Parkinson’s disease, and even though the patient receives medical care, the treatment will not be paid for by Medicare. These stays are called custodial nursing stays. Medicare does not pay for custodial nursing home stays. In that instance, you’ll either have to pay privately (i.e. use long term care insurance or your own funds), or you’ll have to qualify for Medicaid.
Why Seek Advice for Medicaid?
As life expectancies and long term care costs continue to rise, the challenge quickly becomes how to pay for these services. Many people cannot afford to pay $4,000 per month or more for the cost of a nursing home, and those who can pay for a while may find their life savings wiped out in a matter of months, rather than years. Fortunately, the Medicaid Program is there to help. In fact, in our lifetime, Medicaid has become the long term care insurance of the middle class. But the eligibility to receive Medicaid benefits requires that you pass certain tests on the amount of income and assets that you have. The reason for Medicaid planning is simple. First, you need to provide enough assets for the security of your loved ones -- they too may have a similar crisis. Second, the rules are extremely complicated and confusing. The result is that without planning and advice, many people spend more than they should and their family security is jeopardized.
Exempt Assets and Countable Assets: What Must Be Spent?
To qualify for Medicaid, applicants must pass some fairly strict tests on the amount of assets they can keep. To understand how Medicaid works, we first need to review what are known as exempt and non-exempt (or countable) assets. Exempt assets are those which Medicaid will not take into account (at least for the time being). In general, the following are the primary exempt assets:
All other assets are generally non-exempt, and are countable. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt. This includes:
Some Common Questions
I’ve added my kids’ names to our bank account. Do they still count?
Yes. The entire amount is counted unless you can prove some or all of the money was contributed by the other person who is on the account. This rule applies to cash assets such as:
Can’t I Just Give My Assets Away?
Many people wonder, can’t I give my assets away? The answer is, maybe, but only if it’s done just right. The law has severe penalties for people who simply give away their assets to create Medicaid eligibility. In Ohio, for example, every $6,023 given away during the five years prior to a Medicaid application creates a one month period of ineligibility. So even though the federal Gift Tax laws allow you to give away up to $13,000 per year without gift tax consequences, those gifts could result in a period of ineligibility for Ohio Medicaid of three months and a four month waiting period of ineligibility in Ohio. Though some families do spend virtually all of their savings on nursing home care, Medicaid often does not require it. There are a number of strategies which can be used to protect family financial security.
Division of Assets:
Medicaid Planning for Married Couples
Division of Assets is the name commonly used for the Spousal Impoverishment provisions of the Medicare Catastrophic Act of 1988. It applies only to couples. The intent of the law was to change the eligibility requirements for Medicaid where one spouse needs nursing home care while the other spouse remains in the community, i.e., at home. The law, in effect, recognizes that it makes little sense to impoverish both spouses when only one needs to qualify for Medicaid assistance for nursing home care. As a result of this recognition, division of assets was born. Basically, in a division of assets, the couple gathers all their countable assets together in a review. Exempt assets, discussed above, are not counted. The countable assets are then divided in two, with the at-home or “community spouse” allowed to keep all countable assets to a maximum of approximately $109,560. All other countable assets must be “spent down” until less than $1,500 remains for the other spouse. The amount of the countable assets which the at-home spouse gets to keep is called the Community Spouse Resource Allowance (CSRA). Each state also establishes a monthly income for the at-home spouse. This is called the Minimum Monthly Maintenance Needs Allowance. This permits the community spouse to keep a minimum monthly income ranging from about $1,821 to $2,739. If the community spouse does not have at least $1,821 in income, then he or she is allowed to take the income of the nursing home spouse in an amount large enough to reach the Minimum Monthly Maintenance Needs Allowance (i.e., up to at least $1,821). The nursing home spouse’s remaining income goes to the nursing home. This avoids the necessity (hopefully) for the at-home spouse to dip into savings each month, which would result in gradual impoverishment. To illustrate, assume the at-home spouse receives $800 per month in Social Security. Also assume that her needs are calculated to be the minimum of $1,821. With her Social Security, she is $1,021 short each month.
$1,821 at-home spouse’s monthly needs (as determined by formula)
$ 800 at-home spouse’s Social Security
$1,021 short fall
In this case, the community spouse will receive $1,021 (the shortfall amount) per month from the nursing home spouse’s Social Security and the rest of the nursing home spouse’s income will then go to pay for the cost of his care. This does not mean, however, that there are no planning alternatives which the couple can pursue. Consider the following case studies:
Case Study: Medicaid Planning for Married People
Ralph and Alice were high school sweethearts who lived in Youngstown, Ohio, their entire adult lives. Two weeks ago, Ralph and Alice celebrated their 51st anniversary. Yesterday, Alice, who has Alzheimer’s, wandered away from home. Hours later she was found sitting on a street curb, talking incoherently. She was taken to a hospital and treated for dehydration. Ralph comes to see you after their family doctor tells him he needs to place Alice in a nursing home. He tells you they both grew up during the Depression and have always tried to save something every month. Their assets, totaling $100,000, not including their house, are as follows:
Savings account .......................................... $15,000
Money Market account ................................. 37,000
Checking account ........................................... 3,000
Residence (no mortgage) ............................. 80,000
Ralph gets Social Security and Pension checks totaling $1,500 each month; Alice’s check is $450. His eyes fill with tears as he says, “At $4,000 to the nursing home every month, our entire life savings will be gone in less than three years!” What’s more, he’s concerned he won’t be able to pay her monthly nursing home bill because a neighbor told him that nursing home will be entitled to all of their Social Security checks. There is good news for Ralph and Alice. It’s possible he will get to keep his income and most of their assets… and still have the state Medicaid program pay Alice’s nursing home costs. While the process may take a little while, the end result will be worth it. To apply for Medicaid, he will have to go through the Ohio Department of Job and Family Services (ODJFS). If he does things strictly according to the way ODJFS tells him, he will only be able to keep about 1/2 of their assets (or about $50,000) plus he will keep his income. But the results can actually be much better than the traditional spend-down, which everyone talks about. Ralph might be able to turn the spend down amount of roughly $50,000 into an income stream for him that will increase his income and meet the Medicaid spend down virtually right away. In other words, if handled properly Alice may be eligible for Medicaid from the first month that she goes into the nursing home. Please note this will not work in every case. That’s why it is important to have an Elder Law attorney guide you through the system and the Medicaid process to find the strategies that will be most beneficial in your situation. So, he will have to get advice from someone who knows how to navigate the system. But with proper advice he may be able to keep most of what he and Alice have worked so hard for. This is possible because the law does not intend to impoverish one spouse because the other needs care in a nursing home. This is certainly an example where knowledge of the rules and how to apply them can be used to resolve Ralph and Alice’s dilemma. Of course, proper Medicaid planning differs according to the relevant facts and circumstances of each situation as well as the state law.
Case Study: A Trust for a Disabled Child
Margaret and Sam have always taken care of their daughter, Elizabeth. She is 45, has never worked, and has never left home. She is “developmentally disabled” and receives SSI (Supplemental Security Income). They have always worried about who would take care of her after they die. Some years ago, Sam was diagnosed with dementia. His health has deteriorated to the point that Margaret can no longer take care of him. Now she has placed Sam in a nursing home and is paying $4,000 per month out of savings. Margaret is even more worried that there will not be any money left for the care of Elizabeth. Margaret is satisfied with the nursing home Sam is in. The facility has a Medicaid bed available that Sam could have if he were eligible. Medicaid would pay his bill. However, according to the information she got from the social worker, Sam is $48,000 away from Medicaid eligibility. Margaret wishes there was a way to save the $48,000 for Elizabeth after she and Sam are gone. There is. Margaret can consult an Elder Law attorney to set up a “special needs trust” with the $48,000 to provide for Elizabeth. As soon as Margaret transfers the money to the trust, Sam will be eligible for Medicaid. Elizabeth won’t lose her benefits, and her security is assured. Of course, all trusts must be reviewed for compliance with Medicaid rules. Also, failure to report assets is fraud, and when discovered, will cause loss of eligibility and repayment of benefits and perhaps even criminal penalties. Still, some people question making gifts before entering a nursing home.
I Heard I Can Give Away $13,000 Per Year. Can I?
As discussed earlier, many people have heard of the federal Gift Tax provision that allows them to give away $13,000 per year without paying any gift taxes. What they do not know is that this refers to a Gift Tax exemption. It is not an absolute right where Medicaid is concerned. Having heard of the exemption, they wonder, “Can’t I give my assets away?” The answer is, maybe, but only if it’s done within the strict allowances of the law. So even though the federal Gift Tax law allows you to give away up to $13,000 per year without incurring tax, those gifts could result in a Medicaid period of ineligibility for months. Still, some parents want to make gifts to their children before their life savings is all gone. Next, consider the following case study:
Case Study: Financial Gifts to Children
After her 73 year old husband, Harold, suffers a paralyzing stroke, Mildred and her daughter, Joan, need advice. Dark circles have formed under Mildred’s eyes. Her hair is disheveled. Joan holds her hand. “The doctor says Harold needs long-term care in a nursing home,” Mildred says. “I have some money in savings, but not enough. I don’t want to lose my house and all our hard-earned money. I don’t know what to do. “Joan has heard about Medicaid benefits for nursing homes, but doesn’t want her mother left destitute in order for Harold to qualify for them. Joan wants to ensure that her father’s medical needs are met, but she also wants to preserve Mildred’s assets. “Can’t Mom just give her money to me as a gift?” she asks. “Can’t she give away $13,000 a year? I could keep the money for her so she doesn’t lose it when Dad applies for Medicaid. “Joan has confused general estate and tax laws with the issue of asset transfers and Medicaid eligibility. A “gift” to a child in this case is actually a transfer, and Medicaid has very specific rules about transfers. Gifts made after February 8, 2006 will be subject to a five year lookback. The state won’t let you just give away your money or your property to qualify for Medicaid. Any gifts or transfers for less than fair market value that are uncovered in the look-back period will cause a delay in Harold’s eligibility for Medicaid. In addition to the changes in the lookback period from three to five years, the new law also states that the penalty period on asset transfers will not begin until the Medicaid applicant is in the nursing home and already spent down. This will frustrate the gifting plans of most people. So what can Harold and Mildred do? They may be able to institute a gifting program, save a good portion of their estate, and still qualify for Medicaid. But they have to set it up just right. The new rules are very “nit-picky”. You should consult a knowledgeable advisor on how this may be done.
Will I Lose My Home?
Many people who apply for medical assistance benefits to pay for nursing home care ask this question. For many, the home constitutes much or most of their life savings. Often, it’s the only asset that a person has to pass on to his or her children. Under the Medicaid regulations, the home is an exempt asset (so long as equity is less than $500,000). This means that it is not taken into account when calculating eligibility for Medicaid. But in 1993, Congress passed a little-debated law that affects hundreds of thousands of families with a spouse or elderly parent in a nursing home. That law requires states to try to recover the value of Medicaid payments made to nursing home residents. Estate recovery does not take place until the recipient of the benefits dies (or until both spouses are deceased if it is a married couple). Then, federal law requires that states attempt to recover the benefits paid from the recipient’s probate and in some cases non-probate estate. Generally, the probate estate consists of assets that the deceased owned in his or her name alone without beneficiary designation. The non-probate assets include assets owned jointly or payable to a beneficiary.
About two-thirds of the nation’s nursing home residents have their costs paid in part by Medicaid. Obviously, the Estate Recovery law affects many families. The asset most frequently caught in the Estate Recovery web is the home of the Medicaid recipient. A nursing home resident can often own a home and receive Medicaid benefits without having to sell the home. But upon death, if the home is part of the probate or non-probate estate, the state may seek to force the sale of the home in order to reimburse the state for the payments that were made. Since Medicaid rules are constantly changing, you will need assistance from someone knowledgeable about these rules.
Aging persons and their family members face many unique legal issues. As you can tell from our discussion of the Medicaid program, the legal, financial, and care planning issues facing the prospective nursing home resident and family can be particularly complex. If you or a family member needs nursing home care, it is clear that you need legal help. Where can you turn for that help? It is difficult for the consumer to be able to identify lawyers who have the training and experience required to provide guidance during this most difficult time. Generally, nursing home planning and Medicaid planning is an aspect of the services provided by Elder Law attorneys. Consumers must be cautious in choosing a lawyer and carefully investigate the lawyer’s credentials. How do you find a law office that has the knowledge and experience you need? You may want to start with recommendations from friends who have received professional help with nursing home issues. Who did they use? Were they satisfied with the services they received? Hospital social workers, Alzheimer and other support groups, accountants, and other financial professionals can also be good sources of recommendations. In general, a lawyer who devotes a substantial part of his or her practice to nursing home planning should have more knowledge and experience to address the issues properly. Don’t hesitate to ask the lawyer what percentage of his or her practice involves nursing home planning. Or you may want to ask how many new nursing home planning cases the law office handles each month. There is no correct answer. But there is a good chance that a law office that assists with two nursing home placements a week is likely to be more up-to-date and knowledgeable than an office that helps with two placements a year. Ask whether the lawyer is a member of any Elder Law planning organizations. Is the lawyer involved with committees or local or state bar organizations that have to do with nursing home planning? If so, has the lawyer held a position of authority on the committee? Does the lawyer lecture on nursing home planning? If so, to whom? (For example, if the lawyer is asked to teach other lawyers about Elder Law and nursing home planning, that is a very good sign that the lawyer is considered to be knowledgeable by people who should know.) If the lawyer lectures to the public, you might try to attend one of the seminars. This should help you decide if this is the lawyer for you. The leading national organization of Elder Law attorneys is the National Academy of Elder Law Attorneys (NAELA), 1604 North Country Club Road, Tucson, Arizona. While mere membership in the Academy is open to any lawyer and is no sure sign that the attorney is an experienced Elder Law practitioner, membership does at least show that the lawyer has some interest in the field. In addition, the Academy runs three-day educational sessions twice each year to help lawyers stay current on the latest aspects of elder law and nursing home planning. Attending these sessions takes time and commitment on the part of the lawyer and is a good sign that the lawyer is attempting to stay up to date on nursing home issues. You may want to look for an attorney who is a member of NAELA and has recently attended one or more of its educational sessions. In the end, follow your instincts and choose an attorney who knows this area of the law, who is committed to helping others, and who will listen to you and the unique wants and needs of you and your family.
“The choice of a lawyer is an important decision and should not be based on advertisements alone.”
A MEDICAID CRISIS is where a person has already been admitted to a nursing home—or will be placed in one in the near future—and has been informed that they have too many assets to qualify for Medicaid assistance. Beware of the information provided to you from the nursing home intake staff, social workers, Medicaid workers, and other well-meaning professionals. Even though their intentions are good, they are not always correct. Medicaid laws are constantly changing and it is difficult for some to stay ahead of the changes. If you or someone you love is currently facing a Medicaid crisis situation, please contact us to learn how we may be able to help. We can still possibly get you assistance while protecting your life savings.
NON-CRISIS PLANNING is the ideal situation where individuals are currently healthy but want to ensure that if they do become incapacitated, they will be prepared and able to protect their life savings. It is important that a firm that focuses on elder law prepares your estate plan. Having a well drafted plan in place only ensures you will be cared for if you become incapacitated. Plus, it will bring you piece of mind.
Applying for Medicaid Assistance should be done with the help of an elder law attorney unless you are absolutely certain you qualify. This is because once you apply, the flexibility to protect your assets may be gone. You may be forced to spend down your assets and deplete your life savings. Applying successfully requires filling out paperwork accurately and answering many confusing questions. We can give you the best chance of receiving the assistance you may be entitled to. Please call us today before you file an application with Medicaid. We can quickly determine if it is possible to save you money.
Why is Probate Necessary?
When an Ohio resident dies owning probate property in the state, a legal proceeding is necessary to determine what those assets are, their value, and who they are to be distributed. This occurs if the person dies with or without a will. If the person has a will, the probate court will generally follow the terms of that will. However, if the will is deemed invalid or there is no will, the court will distribute the assets according to Ohio statutory law. This proceeding happens in the county where the deceased property owner resided. It is necessary to protect the assets of the decedent for the heirs, creditors, and anyone else due money from the estate. It also ensures the collection of money due to the estate, if any. Probate provides for the payment of outstanding debts, taxes and the expenses of administration of the remainder of the estate to the heirs. It should also be pointed out that probate is open to the public. Any document filed with the court can be viewed, which includes an accounting and inventory of all the assets in the estate and where each asset went.
What Does a Probate Administration Entail?
Probating an estate requires the appointment of a person to conduct the administration of the estate. The person appointed in the will is called an executor. If there is no will, then the probate court will appoint an administrator. The executor or administrator can be an individual, a bank, or a trust company. They may be required to post a surety bond to protect the assets of the estate they are administering.
The duties of an executor or administrator are as follows:
The probate court judge supervises the work of the executor or administrator because the duties require the preparation and filing of numerous legal documents, hearings in court, appraisals of the assets, inventory of assets, accounting of funds, etc. Because these procedures can be quite complex, an attorney is usually required to assist the executor or administrator.
How Much Does Probate Cost?
The costs are based on a schedule of charges established by law for each type of document filed in the court. Attorney fees and fiduciary fees (executor / administrator fees) must be approved by the court. These can range anywhere from 1% to 4% of the estate depending on the nature and value of the assets. However, court costs may be decreased depending on the size of the estate. If the total value of all the property is $35,000 or less ($100,000 or less where the surviving spouse receives the entire estate), the estate can be relieved of most of the administrative requirements, allowing for lower court costs. Additionally, a summary administration may be allowed whre the assets do not exceed the lesser of $2,000 or the costs of the funeral and interment of the decedent.
How Long Does Probate Take?
Smaller estates which can be relieved from administration can take only 3-4 months. Those estates requiring full administration, though, can take over a year if federal estate taxes are required. Estate taxes are not due until nine months after the decedent's death. The audit of a federal estate tax return can take another year, and the executor or administrator cannot safely distribute all the assets until released from personal liability for estate taxes. Claims against the estate may be made up to one year from the date of death. Additionally, probate may be delayed for will contests, personal injury or wrongful death lawsuits, land sale proceedings, etc. At the minimum, it will take 6 months for an estate to be administered.
How do I Avoid Probate?
Depending on the size of one's estate will depend on how to avoid probate. It can be as simple as adding a POD (payable on death) to a checking account or a TOD (transfer on death) to a vehicle. It can also be as complicated as creating a trust to hold all the assets. It is important to see an estate planning attorney to see what works best for your situation. As a reminder, though, just because one may avoid probate does not mean one avoids taxes.
How Much are Estate Taxes?
Currently, Ohio's estate tax is levied against an estate worth in excess of $338,333 with no surviving spouse. However, beginning January 1, 2013, Ohio has repealed the estate tax so no estates will owe tax dollars to the state. Federal estate taxes are much more complicated. It would be beneficial to seek legal assistance when developing a plan for federal taxes.
Special Needs Planning
Individuals with disabilities who receive public benefits can place those benefits in jeopardy when he/she receives a personal injury settlement, a divorce settlement, or an inheritance. To protect these public benefits, a Special Needs Trust can house the money to supplement the current benefits. The trust can help pay for such items as:
Information for Parents of a Disabled Child
Information for Personal Injury
Estate planning by parents who have children with disabilities includes the following challenges:
Often, parents of children with special needs try to resolve these issues by leaving their estates to their other children, leaving nothing to the disabled children. They have a number of reasons for this approach: The disabled child should not receive anything because she can’t manage money and would lose her benefits. She does not need any inheritance because she will be taken care of by the public benefits she receives. The other children will take care of their sister.
This approach is to be discouraged for a number of reasons. First, public benefits programs are often inadequate. They need to be supplemented with other resources. Second, both public benefits programs and individual circumstances change over time. What’s working today, may not work tomorrow. Other resources need to be available, just in case. Third, relying on one’s other children to take care of their siblings places an undue burden on them and can strain relations between them. It makes it unclear whether inherited money belongs to the healthy child to spend as he pleases, or whether he must set it aside for his disabled sister. If one child sets money aside, and another does not, resentments can build that may split the family forever.
The better answer to many of these questions is the Supplemental Needs Trust, also often called a “Special Needs Trust.” Such trusts fulfill two primary functions: The first is to manage funds for someone who may not be able to do so himself or herself due to disability. The second is to preserve the beneficiary’s eligibility for public benefits, whether that is Ohio Medicaid, Supplemental Security Income, public housing, or any other program. They come into play in a multitude of situations, including parents planning for a disabled child, a disabled individual coming into an inheritance, winning or settling a personal injury claim, or one spouse planning for a disabled spouse.
First, a short explanation of what trusts are and how they work: A trust is a form of ownership of property, whether real estate or investments, where one person—the trustee—manages such property for the benefit of someone else—the beneficiary. The trustee must follow the instructions laid out in the trust agreement as to how to spend the trust funds on the beneficiary’s behalf—whether and when to distribute the trust income and principal. In general, trusts fall into two main categories: self-settled trusts that the beneficiary creates for himself with his own money and third-party trusts that one person creates and funds for the benefit of someone else.
Each situation and each benefit program has its own rules which affect the drafting, funding, and administration of special needs trusts. The public benefit programs in many ways track the treatment of trusts in terms of creditor protection. Just as you cannot create a trust for your own benefit and protect the trust funds from creditors (the new Delaware and Alaska trusts being an exception to this long-accepted rule), you generally cannot create a trust for your own benefit and have the funds uncountable for purposes of Ohio Medicaid, SSI, and other public benefits programs. However, Ohio Medicaid and SSI have provided for “safe harbors” that permit the creation of self-settled supplemental needs trusts in certain circumstances.
Preserving Public Benefits
In general, if one person creates a trust for the benefit of someone else, and the trust is drafted to give the trustee complete discretion whether and when to make distributions to the beneficiary, the trust funds will not be considered as available when considering the trust beneficiary’s eligibility for public benefits. Unfortunately, matters get more complicated when the trust funds are actually used for the beneficiary. For instance, trust funds distributed to the beneficiary will reduce his SSI dollar for dollar. In many circumstances, trust funds used on the beneficiary’s behalf will also cause a reduction in SSI benefits. In other words, while the existence of a properly-drafted trust will not affect eligibility for benefits, the use of the trust funds could if care is not taken.
As a result, some supplemental needs trusts are written to restrict the trustee’s discretion to make payments so that only those payments from the trust that will not affect eligibility for public benefits are permitted. Other trusts are written to give the trustee complete discretion, but the trustee receives instruction on how to make distributions to minimize their impact on eligibility for benefits. In most cases, the second approach is preferred because it allows for more flexibility. Since the future cannot be predicted with any certainty, flexibility permits the trustee to adjust to whatever takes place.
Choice of Trustee
Choosing a trustee is one of the most difficult parts of planning for a child with special needs. The trustee of a supplemental needs trust must be able to fulfill all of the normal functions of a trustee—accounting, investments, tax returns, and distributions—and also be able to meet the needs of the special beneficiary. The latter can include an understanding of various public benefits programs, sensitivity to the needs of the beneficiary, and knowledge of services that may be available.
There are a number of possible solutions available. Often parents choose to appoint co-trustees—a bank or law firm as a professional trustee along with another child as a family trustee. Working together, they can provide the necessary resources and experience to meet the needs of the child with special needs. Unfortunately, in many cases such a combination is not available. Professional trustees generally require a minimum amount of funds in the trust, usually at least $500,000. Otherwise, their fees become unreasonable in relation to the size of the trust. In other situations, there is no appropriate family member to appoint as co-trustee.
Where the size of the trust is insufficient to justify hiring a professional trustee, two solutions are possible. The first is simply to have a family member trustee who would hire accountants, attorneys, and investment advisors to help with administering the trust. The second is to use a pooled trust. In Ohio, five non-profit agencies provide pooled trusts through which they manage funds left for individuals with disabilities. These are “third-party” pooled trusts, not to be confused with “(d)(4)(C)” trusts that are described below.
Where no appropriate family member is available to serve as co-trustee, the parent may direct the professional trustee to consult with named individuals who know and care for the child with special needs. These could be family members who are not appropriate trustees, but who can serve in an advisory role. Or they may be social workers or others who have both personal and professional knowledge of the beneficiary and the resources available for her care. This role may be formalized in the trust document as a “Care Committee.” Again, where no such individuals exist, the pooled trusts described above provide a solution. Both trusts have professionals on staff that can provide the care component of a special needs trust.
Funding the Trust
A number of issues arise with respect to the question of how much to put into the trust. First, how much will your child with special needs require over her life? Second, should you leave the same portion of your estate to all of your children, no matter their need? Third, how will you assure that there is enough money?
The first question is a difficult one. It depends on what assumptions you make about your child’s needs and the availability of other resources to fulfill those needs. An attorney with experience in this area can help make projections to assist with this determination. However, it is better to err on the side of more money rather than less. You cannot be certain current programs will continue. In addition, you have to factor in paying for services, such as case management, that you provide free-of-charge today.
If these assumptions mean that your child with special needs will require a large percentage of your estate, how will your other children feel if they receive less than their pro rata share? After all, your estate may already be smaller than it would be otherwise due to the time and money spent providing for the child with special needs. Moreover, your other children may have received less of your attention growing up than they would have otherwise had they not had a sibling with special needs.
One solution to the question of fairness and to the challenge of assuring that there are enough funds is life insurance. You could divide your estate equally among your children, but supplement the amount going to the supplemental needs trust for your child with special needs with life insurance. The younger you are when you start, the more affordable the premiums will be. In addition, if you are married, the premiums can often be lower if you purchase a policy that pays out only when the second of you dies.
The above discussion primarily involves estate planning by parents for money they plan to leave for their children with special needs. A supplemental needs trust can also serve to hold any inheritance that may come from a grandparent or other family member. However, it cannot hold funds belonging to the disabled individual himself. Generally, the funds held by such a self-settled trust would be considered available to the disabled beneficiary and render him ineligible for Ohio Medicaid or SSI benefits.
Fortunately, both Ohio Medicaid and SSI share three “safe harbor” trusts that permit a beneficiary to shelter his own funds, qualify for public benefits, and remain a continuing beneficiary of the trusts. These trusts are Special Needs Trust, Supplemental Services Trust, and Pooled Trusts. The special needs trusts are generally referred to as “(d)(4)(A)” trusts, referring to the enabling statute, or “payback” trusts, referring to their primary feature that any fund remaining in the trusts upon the beneficiary’s death be used to reimburse the state for any Ohio Medicaid expenditures it has made on the beneficiary’s behalf. Only if funds remain after such reimbursement may they be passed on to the beneficiary’s family.
The supplemental services trust is specific to those individuals eligible for services from the Department of Mental Retardation / Developmental Disabilities or the Department of Mental Health. It cannot be funded by the person with disabilities, has a cap on the initial funding amount, and has a “payback” clause. This clause must state that at the death of the disabled person, at least 50% of the remaining assets must be subject to payback the Medicaid program for any services rendered.
The pooled trusts are generally referred to as “(d)(4)(C)” trusts, again referring to the enabling statute, or “pooled disability” trusts. Like the third-party pooled trusts described above, these are operated by non-profit organizations.
Each of these safe-harbor trusts has its own rules that must be strictly followed to qualify for the Ohio Medicaid and SSI exceptions. “Payback” trusts must be created while the disabled individual is under age 65 and they must be established by his or her parent, grandparent, or legal guardian or by a court. They also must provide that at the beneficiary’s death any remaining trust funds will first be used to reimburse the state for Ohio Medicaid paid on the beneficiary’s behalf.
A non-profit association must manage pooled disability trusts. Unlike individual disability trusts, which may be created only for those under age 65, pooled trusts may be for beneficiaries of any age and may be created by the beneficiary herself. In addition, at the beneficiary’s death the remainder must either be paid back to Medicaid for reimbursement or retained by the trust. Although a pooled trust is an option for a disabled individual over age 65 who is receiving Medicaid or SSI, those over age 65 who make transfers to the trust may incur a transfer penalty.
Special Needs Trusts in the Context of Personal Injury Settlements
Virtually any personal injury case will involve two issues that are often seen as afterthoughts by personal injury attorneys, but which can be vital to the success of any case from the point of view of the client: satisfaction of liens against the settlement and structuring the settlement to best meet the client’s circumstances and needs. The second issue involves both the preservation of public benefits and management of settlement proceeds for clients who cannot or should not manage funds on their own.
While private insurers and health care providers often have contractual and statutory claims to be reimbursed for the expenses of caring for a tort plaintiff, the most significant lienholders for disabled clients and their attorneys are Medicaid and Medicare liens. Not only are these government programs most likely to be the insurers, but they have statutory claims that impose liability on the personal injury attorney if their liens are not met.
Medicaid is a state and federally administered program that provides health benefits to a recipient. When payments are made to cover medical care for a beneficiary for injuries resulting from someone’s negligence, the state agency automatically has a lien against any money recovered in any claim asserted as a result of that accident.
Notice requirements for Medicaid liens are often much more vague than notice requirements for other types of insurance. While a statute may state that a lien is perfected after notice to the third party, notice is not defined. It is unclear if it must be in writing and sent by the department or if it can be oral or even constructive. In Ohio, for instance, a Medicaid beneficiary is compelled by statute to complete an “Assignment” form assigning whatever is recovered to the state, up to what is owed, when he or she applies for benefits. This form states that if the assistance is due to an accident the claimant must repay the agency for any benefits received. In practice, this “Assignment” functions as notice. In addition to the obligation to complete the “Assignment,” the claimant must notify the agency within ten days of the commencement of a civil action to establish liability of a third party. Again, each state is likely to vary in their notice practices, thus an attorney should identify their responsibilities for their particular state.
In practice, the Medicaid agency generally agrees to share in attorney’s fees if it is contacted prior to settlement. In seeking a reduction, the plaintiff’s lawyer will be asked to complete a form detailing information about the case, including the proposed amount of the settlement, any remaining unpaid medical expenses, and whether the attorney is willing to reduce his fees. Reduction negotiations should begin before the actual settlement of the third party claim is reached. Otherwise, the Medicaid agency will have no incentive to reduce its claim since it has a statutory right to its entire claim.
The Medicaid lien is only for benefits resulting from the injury for which the beneficiary receives recovery. It is possible, but difficult, to argue that a portion of the recovery is for other injuries for which the beneficiary did not receive Medicaid benefits. A more successful argument can often be made, where there are multiple plaintiffs, that a portion of the settlement amount should be attributed to plaintiffs who did not receive Medicaid benefits. Finally, it is important to review the Medicaid claim carefully to make sure that it is submitting a claim only for benefits paid as a result of the injury that gave rise to the personal injury action.
Litigants in a number of states have argued that under 42 U.S.C. §1369p(d)(4)(A) they should be permitted to fund a “(d)(4)(A)” trust prior to paying off any Medicaid lien. Despite some early success, this line of case has ultimately been unsuccessful.
Medicare is the federal health insurance program administered by the Centers for Medicare and Medicaid Services (“CMS”) formerly known as Health Care Financing Administration for Social Security beneficiaries, either retirees or disabled workers. Medicare’s right to reimbursement is contained in 42 U.S.C. §1395y(b)(2)(A), (B) and the regulations interpreting the statute are at 42 C.F.R. §§411.20-411.54. These rules are somewhat contradictory. First, Medicare is prohibited from paying medical bills when Medicare is a “secondary payer,” meaning that there is some other “primary” insurer to pay the bills. A primary insurer is essentially any insurance company that either is or will pay for the medical bills in question, thus making Medicare a secondary payer. Second, Medicare may, however, pay for such bills even if there is a primary payer but in that case, the payments are automatically conditioned on Medicare being reimbursed no later than 60 days following the receipt of any kind of settlement or judgment proceeds. If the payments are not reimbursed in those 60 days, interest may be assessed. Additionally, if Medicare is not reimbursed within 60 days, it may seek reimbursement from “any entity that has received a third party settlement.” This includes attorneys.
Medicare’s right of reimbursement arises when it pays a medical bill and there is existing notice that a primary insurer exists which has paid or can reasonably be expected to pay the same bill. The existence of such a primary insurer is obvious in third party litigations since there would not be litigation if the primary insurer did not exist. Thus, there is essentially no notice requirement. In practice, Medicare often sends written notice of its right to reimbursement to all parties in the litigation process.
Unlike the Medicaid lien, CMS does share attorney’s fees and other costs. Pursuant to 42 C.F.R. §411.37, Medicare must reduce, on a pro rata basis, the amount it seeks to be reimbursed. The reduction percentage is the same percentage as the “procurement costs” in the case, meaning the percentage of the recovery going to the lawyer for his or her fees and costs.
Insurers and Medical Providers
Depending on state law, ERISA, and health insurance contracts, private health care providers and insurers may also have subrogation rights to a share of personal injury awards. Unlike Medicaid and Medicare’s right to assert a lien, insurer’s rights to assert a lien are often based on contract and attorneys are generally not liable for their payment.
The first rule of thumb is that any Medicaid or Medicare lien must be settled along with the underlying case. All too often, they are regarded as afterthoughts. Second, even at the outset of a case, attorneys must consider who all the plaintiffs are. This can be important both for avoiding or minimizing claims against the recovery and for funding the best possible trust for the client. In addition, for large cases, distributing the settlement proceeds among several plaintiffs can limit estate tax consequences down the line.
It is often the case that a spouse or child(ren) will have claims for negligent infliction of emotional distress or loss of consortium. In a settlement, the defendant or defendants don’t care too much how the money is distributed among all claimants. However, in order to escape successful challenge by a lienholder, the distribution of the funds must bear some defensible relation to the injury suffered by each plaintiff. The attorney must ask questions about the relationship between a tort victim and close relatives if she is going to argue for large loss of consortium or emotional distress damages. To avoid potential allocation conflicts, an attorney should seek assent of the lienholder, subrogated insurer, or assigner before a final settlement is agreed upon.
PUBLIC BENEFITS PROGRAMS
The personal injury plaintiff may be receiving benefits from any number of public benefits programs whether as a result of the injury or prior to its occurrence. The principal health care programs are Medicaid and Medicare and the principal income support programs are Supplemental Security Income (SSI) and Social Security Disability Income (SSDI). But plaintiffs may also receive Aid to Familes with Dependent Children (AFDC), food stamps or subsidized housing benefits. Every program has its own eligibility rules and the receipt of a settlement may mean the loss of benefits, depending on the program. If this means the loss of housing, a medical provider, or a structured work program, the plaintiff may be better off not recovering anything. However, in most cases the settlement can be structured to preserve the benefits. Each program has its own rules regarding transfers of assets and trusts. The rules of the major programs are described below.
Under the Medicaid program, in general, the funds in a trust created by an applicant for Medicaid or by his or her spouse (or by someone else using the applicant or spouse’s funds) will be considered available to the applicant to the extent the trustee has discretion to make payment to the applicant or on his or her behalf. With respect to trusts created by someone other than the applicant (or spouse) but to benefit the Medicaid applicant, the funds will be considered available only to the extent the trustee has an obligation to make payment to or on behalf of the Medicaid applicant or beneficiary. If the trust is discretionary, the funds will be considered available only to the extent the trustee chooses to make them available by distributing funds to the applicant or by paying for food, clothing, or shelter on his or her behalf.
Congress has carved out two safe harbors of special interest to tort victims: the “(d)(4)(A)” or “Payback” trust and the “(d)(4)(C)” or “Pooled” trust. Assets in these trusts are not considered countable assets in determining an applicant’s eligibility.
The corpus and income of a Payback trust will be treated under the same rules as a third-party trust as long as it meets the following requirements set out in 42 U.S.C. §1396p(d)(4)(C):
A Pooled trust will also be treated as a third-party trust as long as it meets the following requirements set out in 42 U.S.C. §1396p(d)(4)(C):
The Payback and Pooled trusts are similar, but have significant differences. First, the Payback trust is an individual trust while the Pooled trust is an account within a larger trust run by a nonprofit organization. Second, the beneficiary of the Payback trust must be under age 65 when it is set up (though the safe harbor continues after he or she passes that threshold), while the Pooled trust account can be set up at any age. Third, the beneficiary himself or herself cannot set up a Payback trust (this is reputed to be scrivener’s error on the part of Congress, but it has never been corrected); it must be created by a parent, grandparent, guardian, or court. The Pooled trust account can be created by these people or entities, or by the beneficiary himself or herself. Finally, with the Payback trust, the requirement that the state Medicaid agency (or agencies) be paid back at the beneficiary’s death is sacrosanct. With the Pooled trust, the person setting up the account has the option of directing that some or all of the funds remain in the trust for the benefit of other disabled individuals. (Check to see how your state is interpreting this rule. While some states are overreaching by not leaving this decision to the person setting up the account, it’s hard to fight a state agency on this.)
Supplemental Security Income (SSI)
Supplemental Security Income (SSI) provides a minimum level of income for people 65 years of age or older, or who are blind or disabled. Financial eligibility for the program rests upon both income and resources requirements. With the exception of retroactive SSI payments and retroactive Social Security Disability Insurance, lump sums received by a beneficiary, whether from a tort settlement or another source, are considered income in the month received and resources if the beneficiary’s assets still exceed $2,000 in the subsequent calendar month. Prior to December 1999, SSI beneficiaries could freely transfer resources to get below the $2,000 threshold and fund trusts for their own benefit. If the trusts were irrevocable they would be treated like third party trusts with the funds being counted as available to the beneficiary only to the extent the trustee (1) is obligated to make distributions to the beneficiary, (2) makes distributions directly to the SSI beneficiary, or (3) pays for “necessities”—food, clothing, or shelter. These rules still apply to trusts created and funded before January 1, 2000.
In December 1999, as part of the Foster Care Independence Act, Congress adopted the Medicaid transfer and trust rules for SSI. The new rules apply to trusts established on or after January 1, 2000, and to transfers made on or after December 14, 1999, the date the Act was signed into law. Under the new rules, property of self-settled trusts will be considered available to the beneficiary for purposes of determining eligibility for SSI unless it falls into the Payback or Pooled trust safe harbors.
Once a settlement or judgment is reached in the personal injury case, the attorney and recipient must evaluate whether to have the funds distributed outright to a plaintiff or to use a structured settlement or a supplemental needs trust, or a combination of both. The attorney must consider: (1) whether the client might benefit from available public benefits programs now or in the future; (2) whether the client can manage responsibly a large amount of funds; (3) creditor protection; (4) investment strategy; and (5) protection against liens and estate claims by state agencies.
The four strategies that exist for managing the settlement or judgment are spending the award, giving it away, transferring it into a trust that is in compliance with public benefit rules, and allocating the award to other plaintiffs.
Spending the Settlement
While most public benefits programs count assets, a personal injury award can be preserved by spending it on noncountable assets. All public benefits programs that have an asset eligibility limit have a list of exclusionary assets exempt from counting. These assets frequently include a home of any value, a prepaid irrevocable funeral contract, clothing, household goods, and a car. If a personal injury recipient wishes to choose the spend-down option, the list of noncountable assets should be studied in advance so that expenditures can be planned and executed quickly.
Giving Away Assets
Prior to the imposition of the new SSI transfer rules at the beginning of 2000, SSI recipients often gave away personal injury settlement funds in order to maintain their eligibility for benefits. They might expect family members to hold the funds as an informal trust. This could work, but might not. Common problems include the expenditure of the settlement by the transferee for their benefit, the division of the settlement with the transferee’s spouse in cases of divorce, the loss of the settlement to the transferee’s heirs if the transferee dies before the disabled person, or to estate taxes on the transferee’s estate.
With the new SSI rules, there is a debate about whether transfers may still be made if this is done during the month that the settlement funds are received. The SSI program has always distinguished between income and resources, treating settlements as income during the month of receipt and as resources the following calendar month. The new transfers rules only apply to resources. An argument can be made that the transfer penalties do not apply to transfers of income. So far, this has not been clarified by the Social Security Administration or any court.
Transferring a settlement into a trust is often the most effective way to preserve the settlement and the victim’s public benefits. The fact that a settlement has been transferred into a trust does not necessarily, however, protect the assets. The trust must be drafted in accordance with the specific rules of the public benefits program of which the person is a recipient. While each program has its own rules, there are certain rules common to all trusts:
The interplay of the Medicaid and SSI rules on transfers and eligibility, and the fact that the attorney often is dealing with eligibility for public benefits of both the grantor and the beneficiary, cause considerable confusion. The following list of the various trust options and their uses should be considered when dealing with a personal injury settlement or judgment:
1. Supplemental Needs Trusts
This is a third-party trust created by one person, usually a parent, for the benefit of a disabled person. The trust must be clearly discretionary in nature and not be a support trust. It must name a remainder beneficiary. The trust may be revocable or irrevocable.
2. Sole Benefit Trust
Also for the benefit of someone else, but used in situations where the grantor is seeking Medicaid eligibility for him or herself. The beneficiary must be under age 65. The trust must only be for the benefit of the disabled beneficiary. In many states, at the beneficiary’s death the trust must be payable to his or her estate or to the state, to the extent of Medicaid payments on the beneficiary’s behalf. This may make the trust countable with respect to the beneficiary’s SSI benefits. This trust must be irrevocable.
3. Self-Settled Supplemental Needs Trust
Until January 1, 2000, an SSI beneficiary could create a supplemental needs trust for his or her own benefit without incurring a period of ineligibility. This is no longer true. However, an irrevocable, self-settled trust may be useful in some situations for clients receiving only specific benefits, such as subsidized housing.
4. “(d)(4)(A)” Trust
This is a self-settled trust under a “safe harbor” for purposes of Medicaid eligibility. It must be “created” by a court, guardian, parent, or grandparent and can provide discretionary income and principal to the recipient. The beneficiary must be under age 65 when the trust is created and funded. The trust must provide that the remaining trust funds at the individual’s death first be applied toward reimbursing the state for its Medicaid expenditures. Notably, only Medicaid will be reimbursed under a (d)(4)(A) trust. The trust need not provide for reimbursement of SSI. Thus, if there are no substantial Medicaid expenditures, the remaining trust funds may pass to whomever the client designates, just as before the new law.
5. “(d)(4)(C)” Trust
A (d)(4)(C) trust is a Pooled trust for disabled individuals that is established and managed by a nonprofit association. Separate accounts are managed for each beneficiary and the account may be established by the client or by a parent, grandparent, legal guardian, or court. In contrast to a (d)(4)(A) trust, funds remaining at the death of the beneficiary may stay in the Pooled trust for the benefit of other trust beneficiaries rather than being paid to the state. To the extent amounts remaining in the individual’s account at death are not retained by the trust, the trust must reimburse the state for all medical assistance paid. Although a (d)(4)(C) trust is an option for a disabled individual over age 65 who is receiving Medicaid, the new law only permits SSI recipients under age 65 to make transfers to the trust without incurring a transfer penalty.
Allocation of settlement proceeds among multiple plaintiffs was discussed above as a means to defeat a Medicaid or Medicare lien. It can be even more important in terms of preserving public benefits for a client. Funds going to another plaintiff will not affect the injured party’s continuing or future eligibility for benefits. Trusts created by a third party for the benefit of the injured individual do not come under the same restrictive rules as those created with his or her own funds. Finally, in the case of large settlements, allocation of proceeds to secondary plaintiffs can have important tax planning benefits.
In allocating proceeds among multiple beneficiaries, the attorney must follow a rule of reason so that the allocation will not be challenged. But that can take into account the realities of the case. A loss of consortium claim by a parent of a severely injured young child will be much stronger than that of a parent of an older child who was not as severely injured.
Recognizing that clients often may not be the best at managing their own funds, attorneys have often encouraged them to “structure” their settlements so that they receive their funds in partial distributions over many years. A structured settlement can ensure a consistent and predictable stream of income to the injury victim for medical and living expenses. Structures also provide significant tax advantages because the payments are not taxed. Depending on the client’s income and tax bracket, the structure may provide a better fixed-income return than is otherwise available for most investors.
Structures are also often used as a means to bring the plaintiff to settlement. On one hand, the assured income may satisfy the plaintiff that he or she will receive sufficient funds to compensate for the injury over his or her life. On the other hand, the payout over several decades may be sufficiently impressive to satisfy the plaintiff that the settlement is large enough to compensate for the injury. In cases where the settlement is small and no professional trustee and no appropriate family member or friend is available to serve as a volunteer trustee, a structured settlement can provide an ideal management tool. Additionally, annuities are further ways of avoiding probate. Annuities may name a remainder beneficiary to continue to receive payments for a guaranteed number of years.
These are all arguments for using a structure. Several arguments may be made against structures, or at least against structures by themselves as a means to manage settlement proceeds. First, they can have a devastating effect on eligibility for public benefits. If public benefits are a concern, the annuity should be paid into a supplemental needs trust. Second, while structures compete well against other fixed-income investments, they will not participate in any stock market growth such as that experienced over the past decade. Any large settlement should be at least in part invested in equities. Third, structures do not provide funds for large capital purchases, such as a house, a medical expense that is not covered by insurance, or a wheelchair van. In most cases, it is important to have a significant fund available for unanticipated needs. Fourth, in the case of large structures, they can create estate tax problems if the beneficiary dies while there are still large sums to be paid out to heirs.
Another important issue an attorney should consider in regard to structured settlements is the possibility that a client may choose to sell a portion of the settlement to a “factoring company” for a fraction of what the settlement is worth. Selling a portion of a settlement is often attractive to injury victims because it provides a larger immediate payment, as compared to the monthly amounts received from the structure. Selling part of a structure, however, results in a loss of value of the settlement and can potentially reduce the monthly payments the injury victim receives.
Depending on the situation, the best solution may be a combination of a structure and a trust. It provides for the management and public benefits protections of a trust and the assured tax advantaged returns of a structured settlement.
CHOOSING A TRUSTEE
In addition to complying with the specific requirements of each public benefits program, special consideration must be given to the selection of the trustee. Few legal restrictions exist for trustee selection. While some states may limit the ability of individuals or corporations to act as trustee without being licensed or registered by a bank or other appropriate agency, few other restrictions exist. The most obvious choices, along with some of the benefits and disadvantages of each, are listed below (Robert B. Fleming, Choosing a Trustee, Special Needs Trusts, Stetson College of Law, October 22, 1999):
1. Parents. Parents are good choices from an economic perspective, in that they usually don’t charge a fee, unlike a professional trustee. If the plaintiff is a minor, his parents will know his needs better than anyone else and will be able to plan for his future needs.
But whether particular parents are the best choice depends on a number of factors. While they are very familiar with the daily needs of the beneficiary, they may not be able to view the entire picture objectively. They frequently suffer conflicts of interest given that the decisions they must make as trustee could potentially have a large effect on the household and the parent/trustee’s decision may be influenced by that knowledge. The parent also may not have the necessary investment experience needed to manage the trust.
2. Other family members. Non-parent family members may be appropriate to serve as trustees. They may be better able to manage the business, tax, and administrative concerns of the trust. Additionally, the likelihood of self-dealing may be reduced. Family members are also economically advantageous, since they will likely charge less than a professional trustee. The reduced costs and security offered by a non-parent family member make them an attractive choice as trustee.
3. Family friends. A professional individual, a trusted advisor, or a close friend may serve as trustee. A close friend may be willing to serve as trustee for lower fees. Additionally, a close friend may be more accessible in emergency situations and more willing to take on the social worker aspects associated with the trust than would a professional trustee. However, before agreeing to a family friend, the attorney should do her best to make sure that the friend has sufficient experience and is sufficiently reliable to fill this important role.
4. Banks and trust companies. Historically, banks and trust companies were the most common choice for trustee. With a solid backing of experience, the family could reasonably expect that a given bank or trust company’s investment policies would reflect the same balance of considerations in ten years as at present. Additionally, banks and trust companies offered continuity for the family.
The major drawbacks surrounding banks and trust companies as trustees are cost and inflexibility. In addition, they may be unequipped to take on the quasi-social work role often required in special needs cases. Often banks also are unfamiliar with the rules of public benefits programs and forego available benefits, to the detriment of the trust.
Finally, the recent merger of banks has meant for many trust beneficiaries that instead of dealing with their local banker who they know and trust, they must work with an unknown trust officer who they may only know over the telephone.
5. Attorneys. In recent years, an increasing number of attorneys have begun serving as trustees. Special needs trusts are particularly conducive to attorney trustees. The eligibility, investment, and special needs considerations have legal issues and the lawyer will likely be involved in the administration of the trust, regardless of whether he or she serves as a trustee.
There are, however, difficulties associated with choosing an attorney to serve as trustee. The attorney is not as close as family members or friends and is likely to be an expensive alternative. Additionally, the attorney may not have the necessary investment and accounting background or resources on staff. Finally, individual lawyers are not as permanent as a bank or other institutional trustee.
6. Other institutional/corporate trustees. Recently, professional fiduciary organizations have been popping up throughout the country. They may either be social service agencies, offshoots from public agencies who have trained their employees to act as fiduciary, or geriatric case managers who have trained their employee to act as trustee. Such organizations may be particularly suited to administer a special needs trust. They should, however, be viewed cautiously since little regulation exists for private fiduciary business.
In short, there is no perfect choice. When choosing a trustee, the factors to be considered include the cost of the available parties, relative investment experience, and flexibility and bureaucracy. Additionally, the trustee’s knowledge of public benefits programs and their regulations, as well as the beneficiary’s special needs and circumstances, should be considered. Often it can make sense to split the necessary trustee roles, with a bank or trust company handling investments and accounting, a family member or social worker taking care of planning for the beneficiary and disbursements, and an elder law attorney advising on public benefits issues. This can be done through multiple trustees, or a single trustee advised by individuals with the necessary knowledge and experience.
The Nuts and Bolts Guide to Veterans Benefits:
An introductory tour of the Special Monthly Pension available for wartime veterans and/or survivor spouses who are age 65 or older OR permanently and totally disabled.
Most people think of veteran’s benefits as being only for servicemen and women who were wounded or disabled while serving in the armed forces. By and large, that is true. But - we have learned that there are substantial benefits that may be available to wartime veterans who are now senior citizens and are facing the burden of long term care due to a host of diseases such as Alzheimer’s, Parkinson’s, MS, Lou Gehrig’s Disease, and many others. In fact, the Veterans Administration estimates that millions of wartime veterans and their spouses may be eligible for Special Monthly Pension benefits, and not even be aware of it!
Wartime veterans, or their surviving spouses, become eligible for the Special Monthly Pension benefit when they are over 65 years of age, are permanently disable and unable to work, are homebound, or need the regular aid and attendance of another - whether at home, in assisted living, or in a nursing home. The program is based on actual financial need for assistance, so there are income and asset limitations.
Unfortunately, there is a widespread misunderstanding regarding how to determine qualification for this important benefit. Even though finding your way through the maze can be extremely difficult, it is worth the effort to assist wartime veterans and their surviving spouses during times of great need.
The maximum benefit available can provide significant help in paying for long term care costs, either for the homebound, assisted living and/or nursing home care for the veteran/surviving spouse.
There are only four (4) types of persons who are authorized to provide a veteran with assistance filing a claim for veteran’s benefits:
Unfortunately, there are few attorneys who have knowledge in this particular area of legal practice due to the fact that it is illegal to charge a veteran a legal fee for providing assistance in filing a claim for benefits. VSOs are often hard-pressed to have sufficient resources to assist multiple generations of veterans, so it is often difficult for a veteran or his/her surviving spouse to get help in filing a claim. Sadly, the Knight-Ridder Newspapers reported on December 30, 2005 that “a veteran who turns to the VA for information about veterans benefits might want to get a second opinion. According to the VA’s own data, people who call the agency’s regional offices for help and advice are more likely to receive completely wrong answers than completely right ones.”
The only other common source of information regarding this benefit generally comes from annuity salespeople who often offer to consult with veterans and their families for free. This “free” offer is based on the strategy of counseling the veteran to meet the asset and income limitations of the benefit by buying an annuity and giving away their assets to their children. The offer is that the annuity sales organization will assist the veteran in filing for the VA benefit claim. They also promise to provide any necessary estate planning work and no charge. In reality, the annuity salesperson is being compensated by the annuity company for selling a financial product to the veteran. An annuity may be an excellent financial decision or a poor one, depending on the facts and circumstances. All we are saying is this: You should seek independent advice before making a decision to purchase an annuity.
A Medicaid Trap ......
Another important factor that one must consider when thinking about trying to meet the VA asset limitation test is that giving away cash or other things of value can create terrible problems for senior citizens if or when they later need to apply for Medicaid to assist them skilled nursing home care. Giving away assets can create a long penalty period of ineligibility for Medicaid benefits. Any senior facing long-term care needs to seek capable legal advice from an attorney who is skilled in the areas of estate planning, financial planning options, Medicaid, Medicare, income tax, and gift tax, as well as having experience regarding VA rules.
The big question for many families will be, “What will it cost me to seek advice in this area?” Although an attorney who chooses to actually file a claim for veterans benefits must do that portion of his/her work for free, the attorney may charge the usual fees related to any estate planning, financial planning options, Medicaid, Medicare, income tax, or gift tax work, as well as the determination of the financial suitability of filing for a veterans benefit claim. No one should pay an attorney fee unless receiving a fair return on his/her investment.
Compensation and Pension Benefits
There are many types of VA benefits available to veterans through the Veterans Administration for things such as education, life insurance, health care, home loans, and burial benefits. Two major categories of benefits, however, are compensation and pension.
Service-Connected Disability COMPENSATION
Compensation is a benefit that veterans receive when the veteran has a disability caused by, or exacerbated by, military service. Disability compensation is available to a qualified veteran regardless of their level of income. Once a veteran can show that they are disabled because of their military service, their level of disability is rated by the Veterans Administration (for example, 20% disabled) and the amount of compensation paid depends on the rating assigned. A veteran can apply for increases in the percent rating if the condition worsens. A rating above 100% disabled will qualify the veteran for special monthly compensation that could more than double the normal benefit. For 2009, monthly compensation payments range from $123 for a veteran with no dependents and a 10% disability rating, to $2,673 veteran with a spouse and a 100% disability rating. Special monthly compensation benefits can raise the maximum monthly payment up to $7,909.
Non-Service-Connected Disability PENSION
A pension is a benefit for veterans with low incomes who are permanently and totally disabled, when that disability is NOT related to military service. This is sometimes referred to as “Special Monthly Pension” (or sometimes an “Improved Pension”). A veteran will be considered permanently and totally disable if they are, (1) a patient in a nursing home for long-term care because of disability; (2) receiving Social Security disability benefits; (3) unemployable as a result of a disability that is reasonably certain to continue throughout their life; or (4) suffering from any disease or disorder that renders them permanently and totally disabled as determined by the Secretary of the Department of Veterans Affairs.
In 2009, the maximum disability pension rate for a veteran with no dependents is $11,380, or $985 per month. The rate for a veteran with one dependent or for two veterans married to each other is $15,493, or $1,291 per month. Each additional dependent child adds $2.020, or $168 per month, to the pension.
The VA pays a death pension to low-income surviving spouses and unmarried dependent children of deceased wartime veterans. In order to be eligible, a spouse must not have remarried, and a dependent must be under age 18, or must be under age 23 if attending a VA-approved school. Dependents who are permanently incapable of self-support because of a disability before age 18 are also eligible for the death pension. For 2009, the maximum death pension for a surviving spouse is $7,933, or $661 per month. If the spouse has a dependent child, the maximum pension is $10,385, or $865 per month. If the spouse has more that one dependent child, the benefit for each depended child is $2,020, or $168 per month. The pension for a surviving child is $2,020, or $168 per month.
If the veteran is in need of regular aid and attendance, the maximum Special Monthly Pension is increased further to $19,736, or $1,644 per month if the veteran has no dependents. With one dependent, the maximum pension is $23,396, or $1,949 per month. If the surviving spouse is in need of regular aid and attendance, the maximum pension is $12,681, or $1,056 per month. If the surviving spouse has a dependent child the maximum pension is $15,128, or $1,260 per month. Again, each additional dependent will increase the pension $2,020, or $168 per month. To be in need of regular aid and attendance, the veteran or spouse must be permanently and totally disabled and (1) a patient in a nursing home; (2) blind, or nearly blind; or (3) needing the regular aid and attendance of another person to perform basic activities of daily living, such as dressing, bathing, and attending to the wants of nature.
Attaining age 65 - Service Pension
A low-income, wartime veteran who attains the age of 65 is also entitled to a pension, known as a Service Pension, whether or not they are disabled. The amount of the maximum pension is the same as the Special Monthly Pension.
Low Income and Net Worth Requirements
In order to be eligible to receive any of the above non-service connected PENSIONS, the veteran must meet income and net worth requirements. First, the annual maximum pension amount is decreased, dollar for dollar, by the veteran’s countable income. Income that is countable is, in general: all the veteran’s income, including that of a spouse or dependents, MINUS unreimbursed medical expenses. Unreimbursed medical expenses include doctor’s fees, dentist’s fees, Medicare premiums and co-payments, insurance premiums, transportation to physicians’ offices, and the costs of assisted living facilities or in-home aides.
So, for example, if a veteran has a $20,000 in income and $10,000 in unreimbursed medical expenses, their countable income is $10,000. Their $10,000 in countable income is deducted from the maximum annual Special Monthly Pension of $11,830 for a benefit of $1,830. As another example, suppose the veteran is in a nursing home (and so qualifies for the additional pension for aid and attendance) and has an income of $50,000. If their unreimbursed medical expense for the nursing home are $5,000 per month, or $60,000, the veteran’s countable income is negative $10,000. Any negative income is counted as an income of $0 and the veteran will be eligible for the maximum annual Special Monthly Pension for aid and attendance of $19,736.
In addition to low income, the veteran must also have a limited net worth. The VA has not specifically defined “limited net worth” - however, a general guide is that the veteran must have a net worth lower than $50,000 if single or $80,000 if married. A veteran’s net worth is calculated by adding all the value of all personal and real property owned by the veteran (and their spouse), not including a home and car. Items included in the calculation of a veteran’s net worth would include things such as CDs, savings accounts, and bonds.
Who is eligible for the non-service-connected pension?
“Permanently and Totally Disabled” is defined as:
This is a needs-based program with income and asset tests.