How Much Should a Trustee Be Compensated?

Serving as a trustee of a trust can be a huge responsibility, so trustees are entitled to compensation for their work. The amount of compensation depends on the type of trustee and the complexity of the trust.

Depending on the trust, a trustee’s duties can include managing trust assets, making distributions to beneficiaries, paying taxes, and creating an annual report of all income and distributions. Performing these tasks can involve a lot of work, so it makes sense that trustees are compensated for their time.

The terms of the trust may explain exactly what compensation the trustee is entitled to, but many trusts don’t provide specifics. With no guidance from the trust document, the laws in most states usually require that trustee compensation be “reasonable,” without giving more details. What is considered reasonable is going to depend on the type of trust. Things to consider include the following:

  • The amount of time needed to administer the trust.
  • The complexity of the trust.
  • How many beneficiaries are involved.
  • What type of assets need to be managed.

Often family members and friends serve as trustees without compensation. If their duties are modest — simply distributing trust assets, for example — that might be fine.

With a more complicated trust, however, some compensation is expected. Professionals usually charge an annual fee of between 1 percent to 2 percent of assets in the trust. So, for example, the annual fee for a trust holding $1 million could be between $10,000 and $20,000. Often, professionals charge a higher percentage of smaller trusts and a lower percentage of larger trusts.

A non-professional trustee usually charges less than a professional. However, if the non-professional trustee is doing all of the work for a trust, including investments, distributions and accounting, it may be appropriate to charge a similar fee. On the other hand, if the non-professional trustee is paying others to perform these functions or is acting as co-trustee with a professional trustee, charging this much may be seen as inappropriate. A typical fee might be a quarter of what the professional trustee charges, or .25 percent (often referred to by financial professionals as 25 basis points). If taking a percentage of the trust assets would deplete the trust, non-professional trustees may also charge an hourly rate for their work.

In addition to compensation for their work, trustees are also entitled to reimbursement for any expenses that they might incur in the course of performing their duties, including travel, storage, insurance, or taxes.

If the beneficiaries are unhappy with the fees the trustee receives, they can challenge them in court. And if trustees think they are entitled to more compensation, they can also appeal to court to receive higher payment.

Whether you are setting up a trust or have been appointed trustee and want to know what fees are reasonable, reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

What Happens to a Medicaid Recipient If the Community Spouse Dies First?

When one spouse is in a nursing home and applying for Medicaid, planning has to take into account the possibility that the spouse who is not in the nursing home (called the “community spouse”) may pass away first. This is because the community spouse’s death may make the spouse in the nursing home ineligible for Medicaid.

In order to qualify for Medicaid, a nursing home resident can have only a limited number of assets. Careful planning can allow the resident’s spouse to maintain some assets. However, if that community spouse passes away first and leaves those assets to the nursing home resident, the resident suddenly would be over Medicaid’s asset limit.

While the community spouse can write a will that disinherits the Medicaid resident, most states have laws that allow spouses to claim a portion of their deceased spouse’s estate regardless of what the will says. This is called the elective or statutory share. The amount the spouse can claim varies from state to state.

A spouse can disclaim his or her elective share, but if a Medicaid recipient disclaims the inheritance, it is considered an uncompensated transfer of assets and the recipient may receive a period of Medicaid ineligibility. To avoid this, the community spouse will most likely need a will that addresses this issue. One option is for the community spouse to create a will that leaves the nursing home spouse exactly the amount of the elective share. Another option may be to create a special trust that contains the elective share.

Reach out to the MSW team to determine the best course of action for you and your spouse: contact Amy Stratton or Kristen Prull Moonan.


Worsening Nursing Home Staffing Crisis Taking Devastating Toll on Residents-Families-Hospitals

Overwhelmed by the stress of long hours, low pay and exposure to the COVID-19 virus, nursing home workers are quitting in record numbers. The labor hemorrhage has turned what was already a chronic staffing problem into a full-blown crisis in many facilities and entire states as understaffed nursing homes struggle to care for patients, accommodate family visitation, and admit new patients waiting in hospitals to be discharged.

The crunch has even forced some states – including New York, New Jersey, Minnesota, Maine, New Hampshire and Indiana — to deploy the National Guard to empty bedpans, give baths and distribute meals.

“It’s beyond a crisis,” Katie Smith Sloan, the president of LeadingAge, an association of nonprofit long-term care facilities, told The New York Times. “For many providers across the country, it’s a collapse.”

‘No One Would Come’

According to the U.S. Bureau of Labor Statistics, 425,000 employees, many of them of them nursing assistants, have left the nursing home workforce since February 2020. Certified Nursing Assistants (CNA), provide 80 to 90 percent of direct care for long-term care patients and make up 40 percent of nursing home employees.

In a June 2021 survey by the American Health Care Association and the National Center for Assisted Living, 94 percent of nursing home providers reported a shortage of staff, and 58 percent were limiting admissions because of the shortages.

With fewer nursing assistants working in short-staffed facilities, residents don’t get as much one-on-one interaction with their caregivers as they need, don’t get as many showers, and don’t get turned as often in bed to prevent bedsores from developing.

One North Carolina woman witnessed it first-hand with her 74-year-old mother, according to an Associated Press report. When visitors weren’t allowed inside the nursing home, she saw through her mother’s window that sometimes she sat for hours in a soiled diaper, with matted hair and a bedsore the size of a fist. Unable to use a phone by herself, the mother would cry for assistance.

“She would call out for help and no one would come,” her daughter said. “There was no one around.”

Meanwhile, although nursing homes contain less than one-half of 1 percent of the U.S, population, they account for 2 percent of the COVID-19 cases and 25 percent of the deaths, according to a report by the advocacy group U.S. PIRG.

Admissions Backlog Hurting Hospitals

Faced with the loss of employees during the pandemic and the difficulty in recruiting replacements in a competitive market economy, nursing home administrators have been forced to limit new admissions and close off whole floors in their facilities.

This has caused hospitals to keep patients longer who are waiting to be discharged to long-term care after surgery or illnesses and has resulted in fewer beds being available for COVID-19 cases flooding hospital emergency rooms.

While the pandemic has made the staffing crisis in nursing homes more acute, the problem isn’t a new one. It’s a systemic failure in the nursing home industry that’s been neglected for years, according to long-term care experts.

Nursing home workers are among the lowest paid employees in the U.S. economy, earning near-poverty wages, the Paraprofessional Healthcare Institute reported in 2016. With a median salary of $19,000 a year, more than a third of nursing home workers relied on public benefits like food stamps, housing subsidies and cash assistance. Given the low wages, long hours and stressful work, keeping and recruiting nursing home workers when other jobs are available and less demanding is a challenge.  Before the pandemic, CNAs in nursing homes had an average annual turnover rate of 129 percent, according to the journal Health Affairs, with some facilities reaching a 300 percent replacement rate.

Nursing home owners are aware of the problem but claim that they can’t raise wages for workers due to the funding that’s available to them. While some long-term care patients pay their own way, most nursing home funding comes from Medicare and Medicaid. Medicare reimburses facilities for short-stay patients coming from hospitals for rehabilitative services, while Medicaid’s reimbursements are determined by the states, and the program pays for the majority of long-stay patients in nursing home populations.

On average, Medicaid pays half as much per day for long-term care as does Medicare ($206 v. $503), according to a 2018 analysis by the non-profit National Investment Center for Seniors Housing & Care.

“Everyone knows that Medicaid underpays,” David Gifford, chief medical officer for the American Health Care Association (AHCA), which represents assisted living and long-term care facilities, told CNN. “Salaries are about 70 percent of our revenue overall and so we just can’t offer competitive salaries compared to hospitals and other settings.”

Some nursing home providers as well as federal, state and local governments are taking steps to address the staffing crisis. An October 2020 U.S. Department of Health and Human Services report found that increased wages and augmented benefits like child care, transportation, housing and food support, were being offered to retain staff in some facilities and localities.  Hard-hit Minnesota recently announced a plan to train 1,000 new CNAs.

Meanwhile, the Biden Administration’s Build Back Better plan would provide funding for higher wages, tuition assistance and other incentives for nursing homes to attract qualified staff, and would help reduce waiting lists for Medicaid-funded alternatives to nursing home care by giving state home and community-based service (HCBS) programs an additional $150 billion over 10 years.  The proposal would also make permanent a program called Money Follows the Person to help nursing homes return younger residents and some older adults to their homes.

To learn more, reach out to the MSW team: Amy Stratton or Kristen Prull Moonan.

You Can Now Compare Nursing Homes on Staff Turnover Rates and Weekend Help

The Centers for Medicare and Medicaid Services (CMS) announced that it will add data on staff turnover rates and weekend staffing levels to its Care Compare website, giving consumers another tool when choosing a nursing home.

The official Medicare website includes a nursing home rating system. Care Compare (previously called Nursing Home Compare) offers up to five-star ratings of nursing homes based on health inspections, staffing, and quality measures. Users can search for nursing homes by location and directly compare how they measure up.

Nursing homes have been plagued by chronic understaffing and high turnover rates for years, and this problem has been exacerbated by the COVID-19 pandemic. A study by the journal Health Affairs found that the turnover among nursing staff was 94 percent in 2017 and 2018 and mean turnover rates were as high as 140.7 percent among registered nurses, 129.1percent among certified nursing aides and 114.1 percent among licensed practical nurses. In addition, CMS found that lower turnover is often correlated to high nursing home ratings.

Recognizing the problem, CMS announced that it would begin posting the following information for each nursing home on its website:

  • Weekend Staffing: The level of total nurse and registered nurse staffing on weekends provided by each nursing home over a quarter.
  • Staff Turnover: The percent of nursing staff and number of administrators that stopped working at the nursing home over a 12-month period.

CMS will begin adding the information to the Care Compare website in January and it will be incorporated into the rating system in July 2022.

In adding the information, CMS noted in a memo that the correlation between nursing home quality and turnover may be because “facilities with lower nurse turnover may have more staff that are familiar with each resident’s condition and may therefore be more able to identify a resident’s change in condition sooner.” The staff may be better able to prevent the resident from falling, getting an infection, or requiring hospitalization, all of which affect a nursing home’s quality rating. The staff’s familiarity with the facility’s policies and procedures as well as more steady leadership and direction may also affect staff turnover and nursing home quality.

With regard to weekend staffing, CMS acknowledged that consumers may not realize that nursing home staffing levels can vary on weekends. CMS hopes to encourage facilities to hire more weekend staff by adding weekend staff numbers to the nursing home rating system.

To read CMS’s announcement about this new policy, click here.

To learn more, reach out to the MSW team: Amy Stratton or Kristen Prull Moonan.

When Can Someone Be Declared Legally Incompetent?

If a loved one is experiencing memory loss or suddenly making poor decisions, you may want the court to appoint a guardian, which requires a declaration of incompetence. Determining whether someone is incompetent to make their own decisions is a complicated process.

If a loved one is unable to make decisions for him or herself, the court may appoint a substitute decision maker, often called a “guardian,” but in some states called a “conservator” or other term. A guardian is only appointed as a last resort if less restrictive alternatives, such as a power of attorney, are not in place or are not working.

The standard under which a person is deemed to require a guardian differs from state to state. In some states the standards are different depending on whether a complete guardianship or a conservatorship over finances only is being sought. Generally, a person is judged to be in need of guardianship when he or she shows a lack of capacity to make responsible decisions or decisions that are in their best interests.

The court usually looks at a number of factors in determining the need for a guardian or conservator, including the following:

  • Comprehension of important medical or financial information
  • Appreciation of the importance of medical and financial decisions and understanding the effect of those decisions
  • Ability to make reasonable decisions using the information available
  • Capacity to communicate decisions in a consistent manner
  • Ability to maintain a safe environment

A person cannot be declared incompetent simply because he or she makes irresponsible or foolish decisions, but only if the person is shown to lack the capacity to make sound decisions. For example, a person may not be declared incompetent simply because he or she spends money in ways that seem odd to someone else. Also, a developmental disability or mental illness is not, by itself, enough to declare a person incompetent.

Keep in mind that the standard for whether someone is legally incompetent to care for themselves is not always the same as whether they have the capacity to make legal decisions. Proper execution of a legal instrument requires that the person signing have sufficient mental “capacity” to understand the implications of the document.

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

You Can ‘Cure’ a Medicaid Penalty Period by Returning a Gift

Anyone who gifted assets within five years of applying for Medicaid may be subject to a penalty period, but that penalty can be reduced or eliminated if the assets are returned.

In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return.

This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.

However, Congress has created a very important escape hatch from the transfer penalty: the penalty will be “cured” if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned (although some states do not permit partial returns and only give credit for the full return of transferred assets).

Partially curing a transfer can be a “half a loaf” planning strategy for Medicaid applicants who want to preserve some assets.  In this case, a nursing home resident transfers all of his or her funds to the resident’s children (or other family members) and applies for Medicaid, receiving a long ineligibility period. After the Medicaid application has been filed, the recipients return half the transferred funds, thus “curing” half of the ineligibility period and giving the nursing home resident the funds he or she needs to pay for care until the remaining penalty period expires.

The person who returns the money needs to be the same person who received the gift; otherwise, it is not really a return of the original gift. But many people will have spent the gifted assets and no longer have any money to return. If the person who received the transfer no longer has the funds to cure, other family members could give or loan that person the funds to do so.

Returning the funds will likely mean the Medicaid applicant will have excess resources that will need to be spent down before the applicant will qualify for Medicaid. States vary on how they handle returns. Some states may consider payments made directly to the nursing home on behalf of the Medicaid applicant to be a return of funds; others require that the payments go directly to the applicant.

For help navigating Medicaid’s complicated rules and application process, reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Medicaid’s Benefits for Assisted Living Facility Residents

Assisted living facilities are a housing option for people who can still live independently but who need some assistance. Costs can range from $2,000 to more than $6,000 a month, depending on location. Medicare won’t pay for this type of care, but Medicaid might. Almost all state Medicaid programs will cover at least some assisted living costs for eligible residents.

Unlike with nursing home stays, there is no requirement that Medicaid pay for assisted living, and no state Medicaid program can pay directly for a Medicaid recipient’s room and board in an assisted living facility. But with assisted living costs roughly half those of a semi-private nursing home room, state officials understand that they can save money by offering financial assistance to elderly individuals who are trying to stay out of nursing homes.

As of 2019, 44 states and the District of Columbia provided some level of financial assistance to individuals in assisted living, according to the website Paying for Senior Care, which features a “State by State Guide to Medicaid Coverage for Assisted Living Benefits” that gives details on each state’s programs. According to the website, the Medicaid programs of Alabama, Kentucky, Louisiana, Maine, Pennsylvania, and Virginia are the only ones that provide no coverage of assisted living, although non-Medicaid assistance may be available.

Nevertheless, the level and type of support varies widely from state to state. Prevented from paying directly for room and board, some states have devised other strategies to help Medicaid recipients defray the cost of assisted living, including capping the amount Medicaid-certified facilities can charge or offering Medicaid-eligible individuals supplemental assistance for room and board costs paid for out of general state funds. States typically cover other services provided by assisted living facilities. These may include, depending on the state, coverage of nursing care, personal care, case management, medication management, and medical assessments and exams.

In many states, this coverage is not part of the regular Medicaid program but is delivered under programs that allow the state to waive certain federal rules, such as permitting higher income eligibility thresholds than regular Medicaid does. To qualify for one of these waiver programs, applicants almost always must have care needs equivalent to those of nursing home residents. These waiver programs also often have a limited number of enrollment slots, meaning that waiting lists are common. In some states, the support programs may cover only certain regions of the state. And one state’s definition of “assisted living” may differ from another’s, or other terms may be used, such as “residential care,” “personal care homes,” “adult foster care,” and “supported living.”

If your state does not cover room and board at an assisted living facility, help may be available through state-funded welfare programs or programs run by religious organizations. If the resident is a veteran or the surviving spouse of a veteran, the resident’s long-term care may be covered.

For Paying for Senior Care’s page on assisted living benefits, including its state-by-state guide to Medicaid’s coverage of assisted living facilities, click here. Or, reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

The Difference Between Elder Law and Estate Planning

Elder law and estate planning serve two different — but equally vital — functions. The main difference is that elder law is focused on preserving your assets during your lifetime, while estate planning concentrates on what happens to your assets after you die.

Elder law planning is concerned with ensuring that seniors live long, healthy, and financially secure lives. It usually involves anticipating future medical needs, including long-term care. Elder law attorneys can help you develop a plan to pay for future care while preserving some of your assets. They can also assist you with qualifying for Medicaid or other benefits to pay for long-term care. In addition, elder law planning can ensure that you are protected from elder abuse or exploitation when you get older or become incapacitated. Finally, elder law covers assistance with guardianship and conservatorship, if needed.

While elder law is focused on older adults, estate planning is for everyone of all ages. Estate planning attorneys help you determine what will happen to your assets after you die. Estate planners use wills and trusts to make sure your wishes are carried out after you are gone. Your estate plan can also include naming a guardian for your young children or provisions for pets. In addition, estate planners can help you avoid probate and save on estate taxes.

Estate plans can change as your circumstances change, so it is important to keep revisiting your estate plan over the years. For example, marriages, divorces, births, and deaths, as well as changes in finances, can all call for updates to your estate plan.

To get started on your estate plan or elder law planning, reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

Annual Gift Tax and Estate Tax Exclusions Are Increasing in 2022

The amount you can gift to any one person without filing a gift tax form is increasing to $16,000 in 2022, the first increase since 2018. The federal estate tax exclusion is also climbing to more than $12 million per individual.

The IRS’s announcement that the annual gift exclusion will rise for calendar year 2022 means that any person who gives away $16,000 or less to any one individual (anyone other than their spouse) does not have to report the gift or gifts to the IRS. Any person who gives away more than $16,000 to any one person is required to file Form 709, the gift tax return.

The basic federal estate tax exclusion amount for the estates of decedents dying during calendar year 2022 will be $12,060,000 for individuals and $24,120,000 for couples, up from $11.7 million and $23.4 million for calendar year 2021. The increase in the estate tax exclusion means that the lifetime tax exclusion for gifts should also rise to $12,060,000, as should the generation-skipping transfer tax exemption.

This $12,060,000 million lifetime gift tax exclusion means that even if you are required to file Form 709 because you gave away more than $16,000 to any one person during the year, you will owe taxes only if you have given away more than a total of $12,060,000 million in the past. As a result, under current rules the filing of Form 709 is irrelevant for most people because the vast majority do not have $12,060,000 million to give away.  Still, Congress could change the exclusion limit, and the lifetime exclusion is slated to drop in half in 2026, causing some additional estates to be taxable.  To stay within the IRS’s rules without the bother of filing a gift tax return or the (small) risk of a much lower threshold, consider gifting up to the $16,000 limit to multiple family members or other individuals.

For details from the IRS on many of these and other inflation adjustments to tax benefits, go to:

Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.

A Way to Lock in the Current Estate Tax Exemption to Benefit Your Spouse

With the fate of the estate tax exemption uncertain, you may want to use the current large exemption to transfer assets to a trust to benefit your spouse. A spousal lifetime access trust (SLAT) can help transfer assets outside of your estate.

The current federal estate tax exemption is $11.7 million for individuals and $23.4 million for couples (in 2021). That means that as long as your estate is valued at under the exemption amount, it will not pay any federal estate taxes. The lifetime gift tax exclusion – the amount you can give away without incurring a tax – is also $11.7 million. However, if no action is taken in the meantime, in 2026 the exemption is set to drop back to the previous exemption amount of $5.49 million (adjusted for inflation).

Now may be a good time to take advantage of the large exemption by moving money from your estate into a trust. A SLAT is an irrevocable trust where one spouse (the donor) makes a gift to a trust for the benefit of the other spouse (the beneficiary). There can also be additional beneficiaries, such as children or grandchildren. While a gift to a trust would normally be taxed, the donor spouse can use the federal gift and estate tax exemption to transfer the funds to the trust tax-free. Once the funds are transferred to the trust, they are no longer in the donor spouse’s taxable estate, and the SLAT is also excluded from the beneficiary spouse’s taxable estate as well.

One of the benefits of a SLAT is that the funds in the trust can appreciate over time without the appreciation being included in your estate. While a SLAT is designed to let assets appreciate, the beneficiary spouse can take distributions from the trust as necessary, allowing some indirect access to the funds. Because a SLAT is irrevocable, it also protects the funds from your creditors, and, depending on how the SLAT is set up, it may protect the funds from your spouse’s creditors as well.

The downside of a SLAT is that once the funds are transferred, they are out of your control. If your spouse dies or you get divorced, you will no longer have any access to the funds. The funds will also not receive a “step-up” in basis when the donor spouse dies. In addition, a SLAT is a grantor trust, which means the donor spouse must pay income tax on any appreciation of the funds in the trust.

In order to take advantage of the benefits of a SLAT, it must be set up properly. Care must be taken when choosing a trustee—the donor spouse cannot be the trustee, and the beneficiary spouse can only serve as trustee if his or her power to make distributions is limited. If both spouses want SLATs, the trusts have to be structured to avoid being reciprocal trusts, which would add them to the spouses’ taxable estates.

Talk to your attorney to determine if a SLAT is a smart estate planning tool for your family. Reach out to the MSW team: contact Amy Stratton or Kristen Prull Moonan.