Single Parents: Protect Your Children with a Proper Estate Plan

Taking the time to formulate an estate plan can often seem like a daunting process. This is particularly true for the single parent. The single parent is likely struggling to balance the demands of taking care of the children, home and working a job outside of the home. With these struggles the mere thought of adding anything to their to-do list may seem overwhelming. However, taking the time to develop an estate plan will likely ease some stress since the plan can help ensure that their children are provided for according to their wishes in the event of their demise.

Some of the most valuable steps to consider implementing are:

  1. Drafting a Last Will: This document provides specific instructions to loved ones and family members on how assets should be distributed upon your demise, and can provide that assets not be distributed to your children until they have attained a specific age. A Last Will can incorporate that the assets being held in a trust for the benefit of your children. Within the Last Will you will be able to select who will handle the affairs of your estate and administer any trust for your children (act as Trustee(s)).
  1. Appointment of Guardians: Arguably, the most important step when creating an estate plan for the benefit of young children is to determine who will be the guardian of the children. It is often recommended to choose guardians that are in a similar age group to the parent, or younger. It is important to keep in mind that if the other parent is alive and willing, that individual will likely gain custody of the children regardless of who is nominated as a guardian.
  1. Drafting a Revocable Living Trust: A revocable living trust allows the creator of the trust to remain in control of the assets while he or she is alive. It can also manage assets in the event of one’s incapacity and also specify who is to receive the assets upon death. This legal tool can also help to ensure that children and young adults do not receive a large inheritance before they are ready to manage the assets. The revocable trust can have a continuing trust for the children until they have attained a certain age and/or for their life while permitting the trust assets and income to be used for the health, education, maintenance and support of the child.
  1. Utilizing a Special Needs Trust: If one has children with any incapacities or disabilities, it is most important to consider utilizing a third party special needs trust (SNT) for said child. This will help insure that the fund held in said SNT can be utilized for the special and supplemental needs of the child without impacting his or her eligibility for medicaid, SSI or any other federal or state program.

These are just four of the legal tools that can be used to help better ensure one’s children are protected. Other tools that can provide additional guidance are advance health care directives, which allow the creator to name an individual to make health care decisions on his or her behalf in the event of incapacity, and a power of attorney for financial affairs, allowing an individual to control bank accounts and other finances when you are unable to do so. It is also wise to review beneficiary designations on life insurance and retirement policies and update them if necessary.

Those who are putting together an estate plan are wise to seek the counsel of an experienced estate planning attorney. This attorney can review your situation and help guide you through the process, better ensuring a plan that is more likely to reflect your wishes.

Warning to Non-Attorneys: Florida Takes Major Step in Preventing the Unauthorized Practice of Elder Law

Over the last decade, numerous non-attorney controlled entities have cropped up nationwide offering Medicaid and elder law planning services. Many of these entities have branched into these services from traditional home care and geriatric care management services, while others are newly created. The services offered by these providers are varied, often including the preparation and filing of Medicaid nursing home and home care applications, drafting of personal service contracts and qualified income trusts (in some states), as well as rendering advice regarding Medicaid eligibility and how to obtain benefits.

When a non-attorney provides the aforementioned services the consequences are, in many cases, financially disastrous. Although the preparation and filing of a Medicaid application by a non-attorney is not considered the unauthorized practice of law, doing so without weighing all relevant legal factors and issues can be quite dangerous. All too often the services provided by non-attorney entities have pushed the envelope towards the unauthorized practice of law, and have resulted in non-attorneys providing what is legal advice in areas which they lack any knowledge or training.

For example, when filing a Medicaid application for a spouse, there are a number of issues that a non-attorney should not, in my opinion, provide advice about, such as the potential financial liability resulting from a spouse executing a spousal refusal or the estate and income tax consequences resulting from the transfer and restructuring of assets. He or she would also not be qualified to advise on a client’s ability to engage in a Medicaid crisis plan.

On January 15, 2015, in response to a petition by The Florida Bar’s Elder Law Section, the Florida Supreme Court ruled that non-lawyers who engage in various Medicaid planning activities are engaging in the unauthorized practice of law. The three specific activities included in the ruling are:

Drafting of Personal Service Contracts: Personal service contracts are agreements generally by and between an individual (applicant for Medicaid) and a third party (generally a family member) delineating specific care services to be provided and the compensation thereof. They are generally utilized so that the transfer of funds for the purported care to be provided is not deemed an uncompensated transfer gift, which creates the sixty-month look back period for Medicaid nursing home eligibility.

Preparation and Execution of Qualified Income Trusts: Qualified Income Trusts are utilized in Florida when an applicant for Medicaid has income over the limits permitted to qualify for Medicaid long-term care services (including nursing home care). These trusts must contain specific terms and must be irrevocable. The funds remaining in a Qualified Income Trust will be turned over to the state upon the applicant’s death. The income deposited into these trusts allows the applicant to retain income outside of the trust so that he or she can qualify for services.

Rendering of Legal Advice: The Florida Supreme Court has ruled that the rendering of legal advice regarding the implementation of Florida law to obtain Medicaid benefits is an unauthorized practice of law. This includes advising an individual on the legal strategies available for spending down and restructuring assets and/or the need for a personal service contract or Qualified Income Trust.

Although the preparation by a non-lawyer of a Medicaid application does not constitute the unauthorized practice of law, it would be extremely difficult to do so without rendering some legal advice regarding the implementation of Florida law to obtain Medicaid benefits. In essence, all that may be permitted by the non-attorney is the ministerial act of completing and filing the application.

Additionally, the court opined that non-lawyer entities that claim to have relationships with a lawyer are engaging in the unauthorized practice of law unless the client has established an independent attorney-client relationship with the attorney, and that the payment for services is made directly to the attorney. Furthermore, the court required that the legal documents or Medicaid planning recommended to the client was determined by the attorney and not by a non-lawyer.

The advent of non-attorney document production mills presents an insidious danger to the general public who unknowingly are misguided by these untrained entities. I urge all those who seek the aforementioned services to do so only with a qualified attorney and I am hopeful that similar regulations will soon be implemented in New York.

Effectively Utilizing Long-Term Care Insurance as Part of an Elder Law and Estate Plan

When recommending the purchase of long-term care insurance (“LTCI”) to my clients, the most often heard response has historically been, “I don’t want to have to pay the premiums for the rest of my life.” For many 55 to 70 year olds, a potentially lengthy premium payment period is a psychological obstacle they are unable to overcome in making the decision to purchase LTCI.

According to the U.S. Department of Health and Human Services, nearly 70% of people turning age 65 will need long-term care at some point in their lives. While realistically there is no way of predicting who will need to enter a nursing home or need in home care, the reality is that many will. The fact that less than one third of Americans aged 50+ have begun planning for long-term care in any fashion is cause for concern.

LTCI is designed to cover a variety of long-term services such as personal and custodial care either at home or in a nursing home. The insurance company pays out a daily amount based on the size of the policy (extent of coverage). The cost of individual LTCI policies range greatly depending on a number of factors including age, health, scope and length of coverage, etc.

During the last five years, I’ve noticed that a number of seniors have become significantly more receptive to the purchase of LTCI specifically as part of a comprehensive elder law plan, which include making transfers of assets to a Medicaid Asset Protection Trust. The transfer of assets to said trust would effectively create a five-year “look back” period for Medicaid nursing home (not home care).

Once the “look back” period has been established, an ideal opportunity exists for the purchase of LTCI as protection from the cost of a nursing home during this five-year period. Ideally, the purchase of LTCI should coincide with Medicaid planning to provide coverage in the event that nursing home care is necessary during the “look back” period. Once the five years have elapsed (and the individual has effectively protected his or her home and/or other assets), the decision can be made whether or not to keep the policy.

For those still reluctant to purchase traditional LTCI, another option to consider is a hybrid policy combining life insurance with LTCI. Still relatively new, hybrid products were introduced in the market about five years ago and continue to gain in popularity. While individual policies can vary greatly in terms of cost, benefits and potential restrictions, the most attractive aspect remains the same – the purchaser receives some benefit from their premiums even if long-term care is never needed. In such an event, death benefits would be paid to the purchaser’s beneficiary.

In my experience, LTCI is best utilized as part of an overall asset protection plan rather than as a stand-alone long-term care option. It allows the individual the comfort of knowing that there is a light at the end of the tunnel as to the payment of policy premiums, rather than placing them in the difficult position of choosing to purchase a policy that may never be used (with the possibility that premiums will have to be paid for a potentially lengthy period of time). Depending on the needs and assets of the individual, hybrid insurance may also be a viable alternative to traditional LTCI. Either approach, however, will require a coordinated effort between your elder law attorney and financial advisor or insurance agent.

How Do I Contest (Challenge) a Last Will & Testament in New York?

One question I am often asked is how to contest (or challenge) a last will & testament. While challenging a last will is not something to be done lightly, there are specific instances in which a will contest would be appropriate.

In order for a last will to be deemed valid and legally enforceable in New York State, it must first be admitted into probate by the Surrogate’s Court where the deceased resided. Once this process begins, individuals with a pecuniary interest (those who stand benefit monetarily from the last will) have the opportunity to formally challenge the document’s validity. This includes named beneficiaries in a previous will and/or heirs at law.

Once it has been established that an individual does have a pecuniary interest, he or she may formally challenge the last will by filing an objection with the Surrogate’s Court. In New York, the grounds for objecting to the admission of the last will & testament to probate are:

Lack of Testamentary Capacity – Testamentary capacity is a legal term used to describe a person as being of sound mind and memory when signing a will. To contest a will for lack of testamentary capacity, one must prove that the decedent was incapacitated due to senility, loss of memory, infirmity or insanity during the will’s execution and did not have a ‘lucid moment’ at the time of signing.

Due Execution – In order to be valid, a last will must be prepared following a number of strict technical rules. If the will was not duly executed by the decedent according to the laws of the state (“Due Execution”), the document can be rendered invalid.

Undue Influence and/or Fraud – If the last will was the product of undue influence and/or fraud practiced upon the decedent it may be challenged during probate. Illness or frailty may have left the decedent susceptible and, if it can be proven that the influencer took advantage of him or her and benefited, the last will could be invalidated. It should be noted that successfully proving undue influence is often a difficult matter. The court must rely on third party witnesses (health care providers, lawyers, family and caregivers) who knew the decedent well to make a decision.

A last will & testament is often among the most important legal documents that a person creates in his or her lifetime. For those considering a will contest, it is advisable to first consult an elder law attorney. The circumstances surrounding each case are unique. An attorney experienced in probate matters can best advise on how (or if) to proceed.

Revocable or Irrevocable Trust: Which is Better for Me and My Family? (Part 2)

Irrevocable and Revocable Trusts are excellent estate and elder law planning tools that, depending on your objectives, can both be of significant value when used as part of your planning. Here we’ll take a closer look at the Irrevocable Trust and its most common uses and benefits.

Irrevocable Trust
There are various types of Irrevocable Trusts, each with differing purposes and objectives. For example, if you would like to gift assets during your lifetime for the benefit of your children and/or grandchildren, an Irrevocable Trust might be an appropriate vehicle. If you have a disabled child and/or grandchild an Irrevocable Special Needs Trust is often utilized. If you have significant life insurance assets and don’t want the assets to go outright to the beneficiary (and also don’t want the life insurance death benefit to be part of your taxable estate), an Irrevocable Life Insurance Trust is often utilized.

Perhaps the most common Irrevocable Trust utilized by seniors today is the Irrevocable Medicaid Asset Protection Trust (also referred to as an Irrevocable Income Only Trust). Unlike a Revocable Living Trust, this Irrevocable Trust cannot be amended and/or revoked by the creator, and neither the creator nor his or her spouse should be appointed as trustee of said trust.

The primary purpose of the Irrevocable Medicaid Asset Protection Trust is to shelter assets so that if one needs home care and/or nursing home care services in the future, the assets titled in the name of the trust are not counted as available resources for purposes of Medicaid eligibility and are not resources against which Medicaid has a claim and/or lien against for the value of the services they have provided.

The transfer of assets to the Irrevocable Trust will disqualify the creator of the trust and his or her spouse from eligibility for nursing home Medicaid (not Medicaid home care) for five years (known as “the look back period”). Once the five years have elapsed, however, the assets in the trust are no longer available resources for purposes of Medicaid eligibility and Medicaid cannot file a claim and/ or lien against the trust assets.

An Irrevocable Medicaid Asset Protection Trust is ideal for individuals wanting to protect their home and a portion of their life savings against the ravages of the cost of long-term care. With the average cost of a nursing home in the New York Metropolitan area being in excess of $15,000 per month, failing to do so can have dire consequences.

Unlike the Revocable Trust, an Irrevocable Trust does not allow the trustees to distribute the trust principal to or for the benefit of the creator(s). However, the trust creator(s) can receive any income generated by the trust assets and have the right to reside in and utilize any real property transferred to the trust during their lifetime. The trust creator will continue to be able to utilize any tax exemptions available such as STAR, Senior Citizen and Veterans, and can also take advantage of the personal residence exclusion for income tax purposes in the event the residence is sold.

Revocable or Irrevocable Trust: Which is Better for Me and My Family? (Part 1)

My clients are always asking me which is better – an Irrevocable Trust or a Revocable Living Trust. Much to their dismay, the answer is that one is not better than the other. Irrevocable and Revocable Trusts are excellent estate and elder law planning tools that, depending on your objectives, can both be of significant value when used as part of your planning.

Revocable Living Trust
A Revocable Living Trust is a trust agreement that is amendable and revocable during one’s lifetime. The creator(s) of the trust can be both the creator and the sole trustee, though alternate trustees can be appointed. This gives him or her full, unfettered control over the assets transferred to the trust during his or her lifetime. He or she can also specify to whom (and in what amounts/percentages) the assets titled in the trust are to be distributed to upon his or her demise.

At death of the creator(s), the Revocable Trust becomes irrevocable, and thus, the assets titled in the name of the trust will not be subjected to probate. The named trustees of the trust will be able to make payments of the decedent’s bills, taxes and expenses and make distributions to the named beneficiaries of the trust without the court intervention that would be required with the probate of a Last Will & Testament. In essence, the Revocable Trust can accomplish all that is accomplished with the use of a Last Will while avoiding the necessity of probate.

To effectively utilize a Revocable Trust, it is absolutely essential that one’s assets, such as bank accounts, stocks, bonds and real property (house, condo, co-op), must be titled (re-titled) in the name of the trust. The trust does not control assets that are not titled in its name.

The Revocable Living Trust is not the vehicle to utilize if your goal is to protect assets from the cost of long-term care (in home care and/or nursing home), however. The assets titled in the name of the trust will be considered available resources for purposes of Medicaid eligibility, and Medicaid can impose a lien/claim against these assets.

The primary reason for the use of a Revocable Living Trust remains the avoidance of the probate process and the associated legal fees, costs and delays. It also has the added advantage of allowing the alternate named trustees to manage the trust assets in the event the creator becomes incapacitated or disabled.

In my next entry I will outline the various purposes and objectives for utilizing an Irrevocable Trust.

What is the Difference Between Medicare and Medicaid in New York?

It is important to know the distinctions between Medicare and Medicaid. With more than 70 million “baby boomers” coming of age, a growing number are now asking the question. Here’s a brief explanation:

Medicare is a program administered by the federal government that is available to persons who are sixty-five years of age and older, as well as certain disabled persons. Presently, Medicare provides health care for approximately 40 million elderly and disabled Americans. Since the passage of Title XVII of the Social Security Act in 1965, Medicare has basically been the health insurance component of Social Security. Medicare provides health insurance without any asset or income requirements.

There are three separate components of Medicare:

Medicare Part A – covers the costs of in-patient hospital care, home health care, hospice care and some “skilled” nursing care. The hospital care must be determined to have been medically necessary.

Medicare Part B - covers part of the cost of physician services and other medical services and supplies. For example, if an individual is hospitalized, the hospital bill would be covered by Part A; however, the patient’s physician services would be covered by Medicare Part B.

Medicare Part C (Medicare Plus Choice) - this portion of Medicare was enacted to provide those eligible for Medicare to have the option of having physicians’ services provided to them by various health care providers such as HMOs.

For purposes of nursing home planning, it is important to remember that Medicare only covers a maximum stay in a skilled nursing facility for one hundred days, if the admission to the nursing home is within thirty days of the hospital discharge. The patient must require skilled nursing or skilled rehabilitative services on a daily basis. Of said one hundred days, Medicare will cover the first twenty days in full, and for the next 80 days Medicare will pay everything except $109.50 per day. Medicare does not provide any coverage for custodial care, which is generally most of the care a nursing home patient receives. This is where the need for Medicaid eligibility is of importance.

Unlike Medicare, Medicaid, which was enacted in 1964 by Title XIX of the Social Security Act, is a “means tested” entitlement program that is jointly administered by the federal and state governments. As a “means tested” entitlement program, Medicaid has income a resource limits as a pre-condition to eligibility. In order to participate in the Medicaid program, in 1965 New York State enacted the enabling legislation to effectuate the availability of Medicaid in New York.

In addition to the income and resource requirements for eligibility for Medicaid, residency is an additional prerequisite to eligibility. For purposes of Medicaid eligibility, residency is defined as the location where the applicant has his permanent home. Generally, to be eligible for Medicaid in New York, an individual must be a resident of the state. Although New York has no durational residency requirement, physical presence within the state and the intent to remain are all critical factors in establishing residency. Also, while it is not necessary that one be a citizen, it is necessary that one be a legal resident.

Finally, to be eligible for Medicaid it is necessary that an individual be under the age of twenty-one or over the age of sixty-five. Those between the ages of twenty-one and sixty-five can become eligible for Medicaid only if they are blind, disabled, eligible for public assistance, or recipients of Supplemental Security Income.