Medicaid’s Gift to Children Who Help Parents Postpone Nursing Home Care

Elderly parent and sonIn most states, transferring your house to your children (or someone else) may lead to a Medicaid penalty period, which would make you ineligible for Medicaid for a period of time. However, there are circumstances in which transferring a house will not result in a penalty period.

One of those circumstances is if the Medicaid applicant transfers the house to a “caretaker child.”  This is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s entering a nursing home and who during that period provided care that allowed the applicant to avoid a nursing home stay.  In such cases, the Medicaid applicant may freely transfer a home to the child without triggering a transfer penalty.  Note that the exception applies only to a child, not a grandchild or other relative.

Each state Medicaid agency has its own rules for proof that the child has lived with the parent and provided the necessary level of care, making it doubly important to consult with your attorney before making this (or any other) kind of transfer.

Others to whom a home may be transferred without Medicaid’s usual penalty are:

  • Your spouse
  • A child who is under age 21 or who is blind or disabled
  • Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home

For more information, contact Kristen Prull Moonan or Amy Stratton.

Should You Sell Your Life Insurance Policy?

Older Americans with a life insurance policy that they no longer need have the option to sell the policy to investors. These transactions, called “life settlements,” can bring in needed cash, but are they a good idea?

If your children are grown and your mortgage paid off, you may decide that there is no longer a reason to be paying premiums every month for a life insurance policy, or you may reach a time when you can no longer afford to keep up with the premiums. If this happens, you may be tempted to let the policy lapse and get nothing from it or to surrender the policy for its cash value, which usually is a fraction of its death benefit. Another option is a life settlement. This allows you to sell your policy to an investor for an amount that is greater than the cash value, but less than the death benefit. The buyer pays all future premiums and receives the death benefit when you die.

Life settlements offer seniors a way to get cash to supplement retirement income and help pay for living expenses, health care, or other needed items. They can be a good alternative to surrendering a policy or letting it lapse. But as with any financial transaction, you need to exercise caution.

The amount you receive from a life settlement depends on your age, your health, and the terms and conditions of the policy. It is hard to determine if you are getting a fair price for the policy because there are no standard guidelines for life settlements. Before selling you should shop around to several life settlement companies. You should also note that the amount you receive will be reduced by transaction fees, which can eat up a good chunk of the proceeds of the sale. In addition, you may have to pay taxes on the lump sum you receive. Finally, the beneficiaries of your policy may not be pleased with the sale, which is why some life settlement companies require beneficiaries to sign off on the transaction.

Before choosing a life settlement, you should consider other options. If you need cash right away, you can borrow against your policy. If the premiums are too much, you may be able to stop premiums and receive a smaller death benefit. In some cases of terminal illness, you can receive an accelerated death benefit (this allows you to receive a portion of your death benefit while you are still alive). If you don’t need the cash but no longer want the policy, another possibility is to donate the policy to charity and get a tax write-off.

To find out the right solution for you, talk to Kristen Prull Moonan or Amy Stratton.

For more information from the Financial Industry Regulatory Authority on the pros and cons of life settlements and questions to ask to protect yourself in a sale, click here.

 

Reports Find Hospice Deficiencies Go Unaddressed

Hospice care is supposed to help terminally ill patients maintain their quality of life at the end of their life, but two new government reports find that serious problems in some hospices may be actually causing harm to hospice patients. The reports propose that additional safeguards are needed.

Medicare provides a comprehensive hospice benefit that covers any care that is reasonable and necessary for easing the course of a terminal illness. Most hospice care is provided in the home or in a nursing home. State agencies or private contractors survey hospices to make sure they comply with federal regulations. If a hospice fails to meet a standard, the surveyor cites the hospice with a deficiency.

A pair of reports by the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) found that from 2012 through 2016, more than 80 percent of hospices surveyed had at least one deficiency and one in five had a deficiency serious enough to harm patients. About 300 hospices were identified as “poor performers” and 40 had a history of serious deficiencies.

The reports found that the most common types of deficiencies involved poor care planning, mismanagement of aide services, and inadequate assessments of beneficiaries. Some of the most serious problems that were found included a beneficiary who developed pressure ulcers on both heels, which worsened and developed into gangrene, requiring amputation of one leg. Another beneficiary developed maggots around his feeding tube insertion site. Both of these beneficiaries had to be hospitalized, which hospice is meant to prevent.

Meanwhile, the OIG found that it is hard for consumers to learn about which hospices are doing a good job. The Centers for Medicare and Medicaid Services (CMS) launched the Hospice Compare website in 2017, but the site does not include information from the surveyors’ reports. Hospices also do not have as strong reporting requirements as nursing homes. In addition, CMS has limited ability to discipline hospices other than to drop the hospice from Medicare.

The reports provide a number of recommendations to CMS to improve monitoring of hospices, including the following:

  • Expanding the data that surveying organizations report to CMS and using these data to strengthen its oversight of hospices
  • Taking steps to include the survey reports on Hospice Compare
  • Educating hospices about common deficiencies and those that pose particular risks to beneficiaries
  • Increasing oversight of hospices with a history of serious deficiencies
  • Strengthening requirements for hospices to report abuse, neglect, and other harm
  • Ensuring that hospices are educating their staff to recognize signs of abuse, neglect, and other harm
  • Improving and making user-friendly the process for beneficiaries and caregivers to make complaints.

To read the OIG reports, click here and here.

For National Public Radio’s coverage of the reports, click here.

For more information, contact Kristen Prull Moonan or Amy Stratton.

New Rule Once Again Allows Nursing Home Arbitration Agreements

The Trump administration is officially rolling back a ban on the use of arbitration agreements by nursing homes that was initiated under President Obama. The Centers for Medicare and Medicaid Services (CMS) issued a rule that once again allows nursing facilities to use arbitration to settle disputes with residents.

Historically, nursing homes increasingly asked — or forced — patients and their families to sign arbitration agreements prior to admission. By signing these agreements, patients or family members gave up their right to sue if they believed the nursing home was responsible for injuries or the patient’s death. The dispute had to be settled in private arbitration, and any injury to the patient did not have to be disclosed to the public.

In 2017, CMS issued a final rule prohibiting nursing homes that accept Medicare and Medicaid from entering into binding arbitration agreements with a resident or their representative before a dispute arises. In doing so, CMS cited abundant evidence that resolving disputes behind closed doors was detrimental to the health and safety of nursing home residents.

The nursing home industry immediately challenged this rule in court and a U.S. district court issued an injunction prohibiting it from going into effect. The Trump administration then announced it was reviewing the rule.

The new rule, which takes effect on September 16, 2019, allows nursing homes to enter into pre-dispute arbitration agreements with residents, but prohibits nursing homes from requiring residents to sign an arbitration agreement as a condition for admission. The rule also adds a requirement that facilities give residents a 30-day period to rescind their agreement to arbitrate disputes. And it prohibits language in the arbitration agreement that prevents residents from contacting federal or state authorities.

Although under the new rule nursing homes will not be able to require residents to sign arbitration agreements as a condition of admission, nursing home resident advocacy groups contend that the effect will in many cases be the same as forcing residents to sign.

“[T]he circumstances surrounding the admissions process combined with the enormous disparity of bargaining power means that most prospective residents are unaware of the content of what they are signing or the significance of the decision to enter into a pre-dispute arbitration agreement,” the group Justice in Aging said in a statement. “In short, allowing facilities to ask residents to sign pre-dispute arbitration agreements is unfair to residents and their families and will harm their rights, safety, and quality of care.”

To read the rule, click here.  For more information, contact Kristen Prull Moonan or Amy Stratton.

Preventing a Will Contest

Emotions can run high at the death of a family member. If a family member is unhappy with the amount they received (or didn’t receive) under a will, he or she may contest the will. Will contests can drag out for years, keeping all the heirs from getting what they are entitled to. It may be impossible to prevent relatives from fighting over your will entirely, but there are steps you can take to try to minimize squabbles and ensure your intentions are carried out.

Your will can be contested if a family member believes you did not have the requisite mental capacity to execute the will, someone exerted undue influence over you, someone committed fraud, or the will was not executed properly.

The following are some steps that may make a will contest less likely to succeed:

  • Make sure your will is properly executed. The best way to do this is to have an experienced elder law or estate planning attorney assist you in drafting and executing the will. Wills need to be signed and witnessed, usually by two independent witnesses.
  • Explain your decision. If family members understand the reasoning behind the decisions in your will, they may be less likely to contest the will. It is a good idea to talk to family members at the time you draft the will and explain why someone is getting left out of the will or getting a reduced share. If you don’t discuss it in person, state the reason in the will. You may also want to include a letter with the will.
  • Use a no-contest clause. One of the most effective ways of preventing a challenge to your will is to include a no-contest clause (also called an “in terrorem clause”) in the will. This will only work if you are willing to leave something of value to the potentially disgruntled family member. A no-contest clause provides that if an heir challenges the will and loses, then he or she will get nothing. You must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.
  • Prove competency. One common way of challenging a will is to argue that the deceased family member was not mentally competent at the time he or she signed the will. You can try to avoid this by making sure the attorney drafting the will tests you for competency. This could involve seeing a doctor or answering a series of questions.
  • Video record the will signing. A video recording of the will signing allows your family members and the court to see that you are freely signing the will and makes it more difficult to argue that you did not have the requisite mental capacity to agree to the will.
  • Remove the appearance of undue influence. Another common method of challenging a will is to argue that someone exerted undue influence over the deceased family member. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your will in drafting your will. Family members should not be present when you discuss the will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive you to the attorney.

Bear in mind that some of these strategies may not be advisable in certain states. Talk to Kristen Prull Moonan or Amy Stratton about the best strategy for you.

Updating Your Estate Plan When Your Finances Change

Sometimes homes and portfolios lose value or income and investments increase significantly. If this is the case for you, do you need to change your will? If your finances have changed markedly since you wrote your will, you should check your estate plan to see if you need to make any changes.

If your will or estate plan divides your estate into percentages for beneficiaries, then changes in value won’t affect how your estate is distributed. However, if you include specific bequests in your will, a fall or rise in your estate could have consequences. For example, if your estate plan gives $50,000 to your favorite charity and the rest of your estate to your children, a reduction in the value of your estate could mean your children won’t get as much as you intended.

A change in value of assets could also affect your estate plan if you intended to treat your children equally by giving them assets of equal value. For example, suppose your will gives your house worth $500,000 to your daughter and your stock worth $500,000 to your son. If the value of either the house or the stock portfolio increases or decreases significantly in value, your children will no longer receive equal gifts. It is also important to update your estate plan if the overall nature of your assets has changed. For example, if you sold the stock and bought real estate instead, this will affect the distributions to your children.

In addition, if your estate has significantly increased in value, it is important to reassess whether your estate will be subject to estate taxes. In 2019, estates worth more than $11.4 million for individuals and $22.8 million for couples are subject to estate tax. Most estates are not subject to federal estate tax, but some state tax smaller estates. It is important to be prepared for any eventuality.

For more information, contact Kristen Prull Moonan or Amy Stratton.

What Makes a Will Valid?

Movies, television, and books like to present wills in dramatic ways–handwritten notes, videos, deathbed utterances–but what actually makes a will valid? The law varies depending on what state you live in, but there are some basic rules.

The legal requirements for a will are fairly simple. In order for your will to be valid, you must know what property you have and what it means to leave it to someone, then sign and date the document and have it witnessed according to the laws of your state. Most states require two witnesses to watch you sign the will and then sign as witnesses. Usually one of the witnesses can be the lawyer who drafted the will. Most states do not allow beneficiaries under the will to be witnesses.

Some states allow you to make a handwritten will, called a “holographic” will. This will does not need to be witnessed, but it is much more likely to be challenged after you die. Some states require that the entire will be in your handwriting; others call for just the important portions to be in your handwriting. The writing must indicate your intent to make a will and clearly describe the property being given away. Some states require the will to be dated and signed.

Very few states allow an “oral” will (called a “nuncupative” will). The states that allow this type of will have very specific requirements for when it is valid. For example, Indiana only accepts an oral will if it is made by someone in imminent peril of death who then dies as a result of the peril. States may require two witnesses and that the will be reduced to writing soon after the declaration. There also may be a limit to the amount of property someone can dispose of with an oral will.

Video wills are not recognized as a form of will in any state. States may recognize a video will as a valid oral will if it meets all the requirements, but a video will, by itself, is not a valid will. However, using video to record a will signing can be a good method to prevent a will contest. A video recording of the will signing allows your family members and the court to see that you are freely signing the will and makes it more difficult to argue that you did not have the requisite mental capacity to agree to the will.

The best way to make sure your will is considered valid is to consult with your attorney. Contact Kristen Prull Moonan or Amy Stratton here.

A Brief Overview of a Trustee’s Duties

If you have been appointed the trustee of a trust, it is a strong vote of confidence in your judgment and trustworthiness. It is also a major responsibility. A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” The following is a brief overview of a trustee’s duties:

  1. Fiduciary Responsibility. As a trustee, you stand in a “fiduciary” role with respect to the beneficiaries of the trust, both the current beneficiaries and any “remaindermen” named to receive trust assets upon the death of those entitled to income or principal now. As a fiduciary, you will be held to a very high standard, meaning that you must pay even more attention to the trust investments and disbursements than you would for your own accounts.
  2. The Trust’s Terms. Read the trust itself carefully, both now and when any questions arise. The trust is your road map and you must follow its directions, whether about when and how to distribute income and principal or what reports you need to make to beneficiaries.
  3. Investment Standards. Your investments must be prudent, meaning that you cannot place money in speculative or risky investments. In addition, your investments must take into account the interests of both current and future beneficiaries. For instance, you may have a current beneficiary who is entitled to income from the trust. He or she would be best off in most cases if you invested the trust funds to generate as much income as possible. However, this may be detrimental to the interest of later beneficiaries who would be happiest if you invested for growth. In addition to balancing the interests of the various beneficiaries, you must consider their future financial needs. Does a trust beneficiary anticipate buying a house or going to school? Will the beneficiary be depending on the trust income for retirement in 15 years? All of these questions need to be considered in determining an investment plan for the trust. Only then can you start considering the propriety of individual investments.
  4. Distributions. Where you have discretion on whether or not to make distributions to a beneficiary you need to evaluate the beneficiary’s current needs, future needs, and other sources of income, as well as your responsibilities to other beneficiaries before making a decision. And all of these considerations must be made in light of the size of the trust. Often the most important role of a trustee is the ability to say “no” and set limits on the use of the trust assets. This can be difficult when the need for current assistance is readily apparent.
  5. Accounting. One of your jobs as trustee is to keep track of all income to, distributions from, and expenditures by the trust. Generally, you must give an account of this information to the beneficiaries on an annual basis, though you need to check the terms of the trust to be sure. In strict trust accounting, you must keep track of and report on principal and income separately.
  6. Taxes. Depending on whether the trust is revocable or irrevocable and whether it is considered a “grantor” trust for tax purposes, the trustee will have to file an annual tax return and may have to pay taxes. In many cases, the trust will act as a pass through with the income being taxed to the beneficiary. In any event, if you keep good records and turn this over to an accountant to prepare, this should not be a big problem.
  7. Delegation. While you cannot delegate your responsibility as trustee, you can delegate all of the functions described above. You can hire financial advisors to make investments, accountants to handle taxes and bookkeeping for the trust, and lawyers to advise you on questions of interpretation. With such professional assistance, the job of trustee need not be difficult. However, you still need to communicate with those you hire and make any discretionary decisions, such as when to make distributions of principal from the trust to one or more beneficiaries.
  8. Fees. Trustees are entitled to reasonable fees for their services. Family members often do not accept fees, though that can depend on the work involved in a particular case, the relationship of the family member, and whether the family member trustee has been chosen due to his or her professional expertise. Determining what is reasonable can be difficult. Banks, trust companies, and law firms typically charge a percentage of the funds under management. Others may charge for their time. In general, what’s reasonable depends on the work involved, the amount of funds in the trust, other expenses paid out by the trust, the professional experience of the trustee, and the overall expenses for administering the trust. For instance, if the trustee has hired an outside firm for investment purposes, that expense would argue for the trustee taking a somewhat smaller fee. In any case, it makes sense to consult with a professional experienced with trust work who can guide you on what would be normal fees considering all of the circumstances.

In short, acting as trustee gives you a wonderful opportunity to provide a great service to the trust’s beneficiaries. The work can be very gratifying. Just keep an eye on the responsibilities described above to make sure everything is in order so no one has grounds to question your actions at a later date. To learn more, contact Kristen Prull Moonan or Amy Stratton 

Steps to Take in Advance of Death or Disability

No one wants to face the fact that our loved ones will not be with us forever. Facing our own mortality is frightening as well. Although none of us wants to contemplate a time when we or a loved one might become disabled or die, it is important to be prepared. There are many steps families can take in advance of death or disability to avoid future conflicts or uncertainties:

  • Don’t be afraid to start the conversation. Whether you are a parent talking to your children, a husband talking to a wife, or an adult child talking to an aging parent, bringing up the topic of death and disability can be difficult, but it is an important conversation to have.
  • Make sure you or your loved ones have done estate planning. All estate plans should include, at minimum, two important estate planning instruments: a durable power of attorney and a will. The first is for managing property during your lifetime, in case you are unable to do so yourself. The second is for the management and distribution of property after death. Revocable (or “living”) trusts can also help you avoid probate and manage your estate both during your life and after you’re gone. In addition, you or your loved ones should consult with an estate planning professional about the best way to minimize estate taxes.
  • Plan for the worst. You and your loved ones need to be prepared in the event that one of you becomes disabled and will no longer be able to make your own decisions. The durable power of attorney mentioned above is an important instrument. You will also need a health care proxy (sometimes called a health care power of attorney), which gives someone else the medical authority to communicate your wishes about medical treatment.
  • Make sure you or your loved ones draw up a list to help your executors carry out your estate plans. The list should contain information on the location of assets, such as bank accounts, property, and stocks and bonds; the location, keys, and passwords to any safe deposit boxes; the identity of important professionals who might have information about your estate; and the location of important records, such as loan, insurance, and tax documents. The list can also contain things you want done immediately after you die, such as calling relatives or notifying employers.
  • Determine you or your loved ones’ wishes regarding funeral arrangements. You may want to pay for your funeral ahead of time to take the burden off of family, but you need to be careful and shop around. If you can’t make arrangements ahead of time, put your wishes in writing so the whole family knows what you want.
  • Figure out who is going to get what personal property and heirlooms. Preparation and planning in advance can avoid family squabbles after you or your loved ones die.

To learn more, contact Kristen Prull Moonan or Amy Stratton.

Don’t Leave Children Unequal Shares By Mistake

Siblings do not always receive equal shares of a parent’s estate. Sometimes the inequality is intentional and sometimes it is accidental. Regardless of how it happens, it can cause arguments among the children. However, there are some steps parents can take to promote family harmony.

If you intend to leave your children equal shares of your estate, don’t forget to consider any money or property held jointly with a child. Property in a joint account passes outside of your estate. If you add a caregiver child to one of your bank accounts out of convenience, the account will pass to that child alone when you die. This is true for any property held in joint tenancy or any property in a POD (Pay on Death) account. If you don’t intend for that child to receive a bigger share of your estate, you can add a provision in estate planning documents stating that any property passing through joint tenancy to a beneficiary will be treated as an advancement of that beneficiary’s share.

On the other hand, you may intend to leave one child a different share of your estate than your other children. For example, you may want to reward a caregiver child or you may feel that a child with a disability needs a bigger share. If you do decide to favor one child over another, you should explain in detail your reasoning in your estate planning document. This may help your children understand your decision. You also need to make it clear that it is your decision and not the influence of the favored child. If your children are unhappy with how much they have received, they may try to challenge your will.

Your attorney can help you ensure your estate is divided the way you intend. Contact Kristen Prull Moonan or Amy Stratton here.