Oct 5, 2015

Incentive trusts: Kindness and concern, or ruling from the grave?

Toddlers get gold stars when they clean up their rooms. Teens get to use the car if they get good grades. So why shouldn't your estate plan reward your heirs for good behavior? If this is your philosophy, you will need to establish a trust and think carefully about what provisions can nudge your heirs in the direction you'd like them to travel.  Common provisions include requiring a beneficiary to complete college, attain a certain age or hold a full-time job as a requirement for receiving an inheritance. One of my clients, concerned about her grandson's history of drug abuse, made his inheritance contingent on his being drug-free for ten consecutive years. 

All kinds of carrots and sticks can be built into a trust to encourage certain choices and discourage others. But moderation is the key. Too many carrots and sticks can be oppressive for the loved ones you leave behind.

Consider the estate plan of real estate magnate Maurice Laboz. Laboz died recently, leaving behind two daughters, ages 17 and 21. They are set to inherit $10 million each when they attain age 35, but Laboz has put many contingencies into his trust designed to keep his kids on a certain path - so many that some in the media have dubbed him "Daddy Dearest."  Among the provisions:
  • If either daughter is a stay-at-home mom, she will receive 3% of the trust's value each year. But if she has a child out of wedlock? Nothing.
  • Each daughter is to receive three times her annual salary when she begins working, to encourage them to establish lucrative careers. If one of them has a passion for a less lucrative profession? Too bad.
  • One daughter gets $750,000 when she graduates from an accredited university. But first she'll also have to write an essay, to be reviewed and approved by the trustees, explaining how she intends to use the money.
It would be very interesting to know how these young women have reacted to their deceased father's carrots and sticks. Do they see his plan as a reflection of his love and concern? Will they work towards achieving the standards he espoused? Or do they see him as a control freak manipulating them from the grave?

There is a fine line between encouraging positive behavior, and attaching so many strings to an inheritance that it embitters your loved ones. Only you can decide how much control you wish to build into your estate plan, and the impact - good or bad - it might have on your loved ones.

Sep 17, 2015

What happens to your home when you need Medicaid?

Clients who seek Medicaid nursing home benefits for a loved one are frequently  concerned, and almost always confused, about what will happen to the applicant's home. Common questions include, Must the applicant's home be sold in order to receive Medicaid benefits? Will Medicaid put a lien on the home and take it after the Medicaid recipient passes away? Can it be protected so that the children inherit it? What about the well spouse who is living there?

Below I provide some general answers to these questions. But a note of caution: General information is just that. The rules governing the treatment of the house are staggeringly complex, and each family's specific fact pattern will govern what can and can't be done with the house. Many factors must be assessed, including whether there is a spouse or someone else living in the home, whether it is homestead property, the family's finances, the home's value, whether there is a desire to keep it in the family, and much more.

Put another way, figuring out how to deal with the house is a like a chess game.  Every move relates to the prior move and affects the next, and all the moves have to be synchronized, in advance, to produce the desired outcome. That's where  a board-certified elder law attorney must assist you. This is one area in which you need a chess master to guide you!

One more caveat: The rules below apply to Florida Medicaid. If you move out of state or have property out of state, don't count on these same rules applying. 

Will Florida Medicaid force the sale of the house?

If the Florida home is the applicant's homestead property, it is considered exempt, and Medicaid benefits will be awarded to an otherwise qualified applicant so long as the following conditions are met:
  1. The applicant intends to return home. Medicaid presumes that the applicant intends to return to the homestead, even though doing so may be realistically impossible, physically and medically. That presumption stands unless the Medicaid recipient takes affirmative action that demonstrates otherwise - for example, renting the home. (I deal with this issue in greater detail later in this post.)                  
  2. One of these additional conditions must be met:
  • The equity in the house is $552,000.00 or less. (Effective Jan. 1, 2015 - the figure changes each January). Home equity is determined by subtracting any debt from the current fair market value of the home;  OR 
  • The residents of the home include one or more of the following: the applicant's spouse, the applicant's child under age of 21, or the applicant's blind or disabled child of any age.

Will Medicaid have a lien on the house after the Medicaid recipient passes away? 

Not necessarily. Federal law requires each state's Medicaid department to recover assets from the estate of a deceased beneficiary. However, in Florida, Medicaid is treated like any other creditor and cannot have a lien against the homestead of a deceased Medicaid recipient, provided that both these conditions are met:
  1. The home is still legally homestead property when the Medicaid recipient passes away.                                                                  
  2. The property is bequeathed, through the deceased Medicaid recipient's will or trust, to one or more "constitutional heirs at law." Constitutional heirs at law include spouse, children, grandchildren, siblings, nieces or nephews, but not charities, in-laws or friends. 
To protect the house from Medicaid recovery, it's typically advisable for a family to hang on to the home while the Medicaid recipient is alive. Of course, this is not always feasible.

Can the home be rented without jeopardizing Medicaid benefits? 

A Medicaid recipient may not have assets over $2,000. Moreover, all of the Medicaid recipient's income, except for $105 per month, is considered the patient's responsibility toward the cost of care and must be turned over to the nursing home. As a result, many families don't have the means to continue paying property taxes, insurance and any mortgage on the homestead, notwithstanding the advantages of retaining the house until  the Medicaid recipient's death. In this situation, other strategies may be available.

One strategy many clients wish to explore is renting out the property. However, this can be a risky option if not properly handled. As soon as the home is rented on a long-term basis, the presumption that the Medicaid recipient intends to return home is negated. The homestead  loses its exempt status. On the other hand, since rental property is considered a non-available asset for Medicaid purposes, renting the property, if properly handled, need not impact on Medicaid eligibility. 

Two significant issues arise in the event the home is converted into rental income property: The status of the rental income, and potential Medicaid recovery, since the property is no longer homestead. 
  1. Rental income: All expenses related to the maintenance of the property, such as taxes, insurance, maintenance and repairs, condo or HOA fees, and interest on mortgages, may be paid out of the rental income. The remaining income is deemed net income, Medicaid would treat it as such, and the Medicaid recipient would have to pay it to the nursing home as part of his/her patient responsibility. Furthermore, if the net income causes the applicant's income to exceed Medicaid's allowable income cap ($2,199 per month effective Jan. 1, 2015), a Qualified Income Trust would have to be created.                                                                                                      
  2. Medicaid recovery: Medicaid is required to recover what it has paid out for the Medicaid recipient, from the deceased recipient's probatable assets (except for exempt assets, such as homestead). Thus, it is necessary to ensure that the rental income property does not pass through probate. The simplest way to avoid probate without impacting the Medicaid recipient's eligibility is  to create an enhanced deed, also known as a ladybird deed. Upon the death of the owner, the property automatically passes to the designated beneficiary or beneficiaries named in the deed, thus avoiding probate and eliminating Medicaid recovery of the rental property.  

Can the house be sold without jeopardizing Medicaid benefits before, or after the person receives Medicaid benefits?

The answer depends on whether there is a well spouse.

  1. If there is a well spouse prior to the Medicaid application being filed, the property can be transferred to the well spouse without penalty, even if it is transferred during the look-back period. The well spouse can then sell the house and retain all of the proceeds. If the proceeds put the well spouse's assets above the legal limit for Medicaid ($199,220.00 effective Jan. 1, 2015), the well spouse would have a number of options to protect those funds so as not to impact on the applicant's Medicaid eligibility. One option is a technique called spousal refusal.                                                                                 
  2. If there is a well spouse residing in the house when the applicant has already been approved for Medicaid, the same steps mentioned above can be used - if the spousal refusal technique was not used prior in order to obtain Medicaid approval for the applicant. If spousal refusal was used, other methods may be available to secure the Medicaid recipient's continuing benefits.                                                  
  3. If there is no community spouse, there are numerous options to protect the proceeds of the sale, so as to maintain the Medicaid recipient's benefits, or to obtain benefits for the applicant. Those options are too numerous and too complex to mention here. And, of course, the options also depend on each family's specific circumstances.

Can I give the house to my children?

Some people ask if deeding the house to their children can protect the house without jeopardizing Medicaid benefits. 

If a potential Medicaid recipient deeds his/her homestead to his children anytime during the look-back period (currently 5 years preceding application for benefits), Medicaid will consider the transfer to be a gift. That will result in a penalty period during which  an otherwise eligible Medicaid applicant will be denied benefits. The value of the home is used to calculate the length of the penalty period. For more on penalty periods, click here

If the family's loved one is already in a nursing home and receiving Medicaid and the homestead is transferred to the children, that constitutes a substantial change in circumstances, and Medicaid must be alerted. If there is equity in the home, the equity would be considered an uncompensated transfer, and would terminate the nursing home resident's Medicaid benefits. However, if there was a legal exemption for the transfer - for example, transferring the home to a disabled adult child - there would be no penalty.

I hope this information has been helpful to my readers. I suspect it has also raised many questions. As I noted, this information is just a general road map. The direction you must take to secure, and retain, Medicaid benefits can be circuitous, and is different for every family. Please consult your Florida board-certified elder law attorney.

For detailed eligibility rules and more information on Florida Medicaid benefits for long-term nursing care, click here

Sep 9, 2015

Florida law introduces ALF reforms, should keep some residents from having to move to nursing homes

A new Florida law is expected to prevent assisted living residents from having to enter nursing homes prematurely. The new law, HB 1001, gives ALF staff who have certain training the authority to help residents perform routine health-related tasks such as insulin monitoring, using nebulizers, connecting cpap machines, etc. In the past, otherwise healthy residents who were not capable of performing these tasks independently often have had to transfer out to nursing homes.

The law also directs the Florida Agency for Health Care Administration to provide consumers with more data about the state's assisted living facilities, allowing for more informed choices. HB 1001 went into effect July 1, a culmination of four years of legislative efforts to raise the quality of the state's 3,027 assisted living facilities. It imposes stricter regulations and empowers the Agency for Health Care Administration to levy tougher fines on facilities that don't measure up. 

Other features of the new law include:
  • Requires facilities to inform residents that any complaint lodged by a resident with the state's long-term care ombudsman is confidential, and imposes fines on facilities that retaliate against a resident who has made a complaint. 
  • Requires staff members to go through 2 hours of training before they may interact with residents.
  • Fines a facility $500 if it does not do a background check on a new hire.
  • Doubles fines on facilities that do not correct serious violations within six months.
  • Requires special mental health licensing for an ALF that is caring for one or more state-supported residents who is mentally ill.  

You can read the text of the law here.

Sep 8, 2015

Do-It-Yourself fine for some things - not for your estate planning!

A friend of mine likes to do - or more aptly, likes trying to do - his own home repairs. He enjoys the challenge. He enjoys saving money. And he reasons that if he messes up a project, he can always bring in an expert to fix it.

Doing it yourself is fine when it comes to painting, patching and plumbing. But it's a terrible approach to take to your estate planning, because any mistakes you've made will be discovered when it's too late to do anything about them. You won't be around to call in a professional to repair the damage. Your loved ones and the courts will be left to mop up the mess, and your "project" may turn quite differently, and unpleasantly, from what you envisioned.

The public should keep in mind the perils of do-it-yourself estate planning because downloadable, ready-made legal forms are increasingly available, and advertising for services like Legal Zoom have become ubiquitous. There's no question that it's tempting to save money on legal fees. I am all for frugality, but crafting an estate plan that conforms to the law and meets your goals is not like slapping up a new coat of paint. It's not a suitable do-it-yourself project because it's more complicated than most people think, and the stakes are too high. A recent story out of Minnesota illustrates the point:

Minnesota resident Esther Sullivan passed away in 2013, effectively leaving three wills - from 2006, 2008 and 2010. The courts were left to figure out which of them was legally valid, as well as interpret what Sullivan really wanted to accomplish.

The original will was signed January 19, 2006. It gave Sullivan's former employee half of her estate, and a lesser share to her grandson, Joseph. In 2008, Sullivan apparently changed her mind. She marked up a photocopy of her original will, modifying it to give Joseph half of her estate. She initialed her handwritten changes, signed and dated each page, and wrote at the top that the will "dated January 19, 2006 is void" and should be replaced "with this and all written changes."

In 2010, it appears Sullivan had another change of heart. She downloaded a generic will form from the internet, and filled in the blanks to indicate that Joseph was the sole beneficiary, cutting out her former employee entirely.

You can guess what happened when Sullivan died. Her former employee contended that the 2006 version of the will, giving the employee half of the decedent's estate, was the valid one. Joseph argued that his grandmother had obviously changed her mind and her most recent will, the 2010 will making him sole beneficiary, was the valid one.

The court concluded that Sullivan probably did want to revoke the 2006 will. Nonetheless, the 2008 marked-up photocopy was not a valid way to revoke it. Plus, the photocopy was not even properly executed. As for the 2010 will, it did not conform to the state's requirements for a legally valid will. The issue made its way through the court system, and eventually to the Minnesota Appeals Court. Ultimately, the 2006 will was deemed to be the valid one. Joseph got less than it appears Sullivan intended. And also more: A slew of legal bills. You can read the Minnesota Court of Appeals decision here.

So please, folks: Save the do-it-yourself projects for the patching, painting and plumbing. Leave your estate planning in the hands of a capable estate planning lawyer.

Sep 5, 2015

Founder of Florida elder law and estate planning firm featured in Treasure Coast News

Tooting my own horn today! I was recently interviewed by Treasure Coast newspapers, and shared some of my personal and professional history and my philosophy behind helping clients. To read the interview, click here.

To all my readers, a restful Labor Day. 

Sep 4, 2015

In the end, Brooke Astor's grandsons get nothing, money goes to hated daughter-in-law

If you're like most people, you have definite ideas about who should get your assets after you're gone. Meticulous estate planning is needed because so many situations can imperil your desires. For example, many of us will face protracted periods of incapacity when we can no longer manage our own assets, and may be vulnerable to exploitation. Our plans can also be affected by our loved ones' divorces, remarriages, and family rivalries.  

All of those factors came together with respect to the estate of New York socialite Brooke Astor, who I first told you about in 2012. The most recent chapter in the Astor estate saga unfolded just a few months ago. But before I update you, here's some background: Astor died in 2007 at the age of 105 after suffering from Alzheimer's Disease for many years. Her only son, Anthony Marshall, was her agent under her power of attorney. He allowed his mother to live in squalor and isolation during her years of incapacity. He also stole millions from her, buying gifts for himself such as a $920,000 yacht. He sold one of his mother's paintings, valued at $30-$40 million and promised to a museum, for a mere $10 million, taking a $2 million commission for himself. Ultimately Marshall was convicted of elder abuse, and when all was said and done, the court awarded him just $14.5 million of his mother's estate - a pittance compared to her overall wealth estimated at $200 million. The rest went to charity.

Interestingly, it was Marshall's own sons who blew the whistle on the elder abuse. Philip and Alex had a close relationship with their grandmother, so what happened earlier this year would surely have dismayed her: Marshall's will, filed in June following his 2014 death, disinherited her grandsons. Philip and Alex will not get see a penny of their grandmother's money. Instead, Marshall left "any such property which I received from my mother, Brooke Russell Astor, either by lifetime gift or inheritance" to his third wife, Charlene, a woman Astor was known to abhor and who she referred to as "that b---h." Anything left over when Charlene dies is to go to Charlene's children from her prior marriage - not to Marshall's own sons, Astor's own grandsons.

There's a lesson here. It doesn't take millions to derail your plans. Planning for incapacity must always be a consideration as you plan your estate. And middle class families are as likely to fight over $10,000 as the wealthy are to fight over $10 million. 

You may not have Astor's millions, but you have a right to make sure your hard-earned assets go to the people you care about most. Good planning can help ensure that your hard-earned money stays in your own family. One tool we often recommend to clients to achieve this goal is a Heritage Trust, but other strategies also exist. Contact us for assistance!

Sep 2, 2015

Florida Treasure Coast Alzheimer's film, symposium free for caregivers and professionals

Attention dementia caregivers and professionals:

Dementia caregivers and professionals are invited to see the film, His Neighbor Phil - A Story of Love, Devotion and Alzheimer's Disease on Sept. 17 from 1:30 to 4:00 pm at The Grace Place in Stuart. The film will be followed by a symposium the following day, Sept. 18, at the Kane Center featuring guest speaker Lori La Bey, founder of Alzheimer's Speaks. 

Both events are presented by the Southeast Florida chapter of the Alzheimer's Association and are free to caregivers and professionals. RSVP's are required. To reserve your seat and for more information, call Donna True at 800-272-3900, ext. 501, by September 10.

Florida Medicaid divisor increases

Effective September 1, 2015, the Florida Medicaid penalty divisor is $8,346.00. (It was $7,995.00). If an otherwise eligible applicant for long-term care Medicaid benefits has made uncompensated transfers during the look-back period (currently five years), the total value of the transfers is divided by the penalty divisor to determine the penalty period - i.e., the number of months that the applicant will be denied benefits.

To learn more about eligibility for long-term care Medicaid benefits in Florida, including the penalty period and look-back period, click here.

Aug 25, 2015

Breakfast workshops cover HIPAA, changing Medicaid and VA rules, managed care and more

The Karp Law Firm had a great turnout at the three August breakfast workshops we conducted for social workers and health care workers! Attendees heard updates about several important topics: Attorney Joseph Karp discussed the health care community's liability in the wake of Florida's criminalization of Medicaid planning by non-lawyers. Attorney Genny Bernstein brought attendees up to speed on proposed changes to V.A. Aid and Attendance eligibility rules. Guest speaker, Attorney Jacqueline Bain of the Florida Health Care Law Firm fielded attendees' questions about their obligations and liabilities under HIPAA. Nancy Partin and Connie Heffelfinger of the Florida CARES unit, and Kim Clawson and Rosa Bruno of Your Aging and Disability Resource Center, provided updates on Florida's Medicaid managed care system. 

Thank you to our friends who hosted the events: Kathy Kalck, Debbie North and the staff at Harbor Place in Port St. Lucie; Sue McCracken and her team at Allegro Senior Living in Jupiter; and Ina Zimmerman and staff at the just-opened Allegro Senior Living in Boynton Beach. All are lovely facilities - with delicious food! We are fortunate to enjoy fine working relationships with so many caring professionals in the community. Supporting one another enhances our effectiveness and ultimately benefits the families we serve.

Last, a shout-out to our own law firm staff who arrived very early in the morning to prepare for the events: Case Manager Supervisor Deeanna Farrington; Assistant Case Managers Zamara Rosete and Angela Olsen; and Executive Assistant Julie (McKeon) Dobson. And Debbie Karp, who could not attend the events this year but coordinated the details from start to finish.

Photos from the events:

Attorney Karp discusses the Florida Supreme Court ruling criminalizing Medicaid planning by non-lawyers

Attorney Jacqueline Bain of the Florida Health Care Law Firm explains the responsibilities of health care workers under HIPAA

Nancy Partin of the CARES unit discusses the Florida Medicaid managed care program
Some of our guests. Front and center is Paola Wierzbicki, director of the PACE program

Kim Clawson, director of Your Aging & Disability Resource Center

Aug 16, 2015

Medicare patients will now be told when their hospital stay is "observation" status

Medicare will pay for up to 20 days of skilled nursing care only if it follows a three-day qualifying hospital stay. But any day in the hospital classified as "observation status" does not count toward the three-day requirement. Without meeting the requirement, you are responsible for the cost of any skilled nursing care you may require post discharge. You may also incur co-payments for doctors' fees and other hospital services.

In the past, many Medicare beneficiaries did not even know they had been admitted under observation status until after they were discharged and the bills began arriving. That's about to change: Under a new law, the Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE), hospitals must alert Medicare beneficiaries when they are admitted under observation status for more than 24 hours, within 36 hours of admission, or upon discharge if it occurs sooner. The hospital must also explain the financial implications. The law goes into effect August 2, 2016.

The law is a step in the right direction, but it has limitations, to say the least. The new law does NOT change the three-day qualifying stay rule. Nor does it allow a day spent as an observation patient to count toward a qualifying stay. The law merely ensures that you are told that you are not considered an inpatient.

Just what can you do with that knowledge? Not all that much. You can try to convince your doctor to reclassify your stay. But even if you are successful, the status change will only apply to future days, not to any days you have already spent in the hospital. That leaves you only one option: appealing after your discharge, which is exceedingly difficult. 

Read the text of the NOTICE Act here.
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