Comments Off on Financial Planning for a Life with MS: Slides from the Rhode Island Spring Education Conference
It was my pleasure and privilege to participate recently as a presenter at the Rhode Island Spring Education Conference of the Greater New England Chapter of the National Multiple Sclerosis Society. My topic was entitled Adapting: Financial Planning for a Life with MS. You can view the slides from my presentation here:
The conference included valuable information for those with MS and their caregivers, including nutrition and MS; preparing for MS doctor visits; managing fatigue and bladder/bowel symptoms related to MS; and moving forward after an MS diagnosis.
Particular thanks and kudos to Meredith Sheehan, Program Manager – Community Programs, and her staff for an excellent program.
For more information on local programming for people living with MS, along with the latest MS research findings, first-person stories, advocacy updates, upcoming events, and fundraisers, you can subscribe to the MSConnection quarterly newsletter.
Comments Off on Announcing the Long Term Care Planning Blog
Counseling clients facing the prospect of $10,000 per month nursing home costs and other costs of long term care is perhaps the most challenging aspect of the practice of Elder Law. For in addition to knowing substantive law in areas ranging from public benefits to tax planning, the Elder Law practitioner must be aware of community resources such as geriatric care managers, client-centered financial advisors, and excellent providers of long term care services.
That is why I am delighted to announce the launch of a new blog devoted to long term care planning, The Long Term Care Planning Blog is hosted on the Law Professor Blogs Network. As an adjunct law professor at Roger Williams University Law School and a certified elder law attorney (CELA) I will be serving as the blog’s editor. The best part is that nationally known practitioners and other professionals whom I am known or admired for decades have agree to serve as contributing editors, including:
Maryland elder law and special needs attorney Morris Klein, CELA
We look forward to covering many more issues related to long term care planning over the coming weeks and months, and invite you to leave feedback and questions using the blog’s comment system, or directly to me or any of our authors via email, which you will find beside our pictures at the bottom of the blog homepage.
You can also sign up to receive new blog posts by email by clicking on “Subscribe” at the top of the blog homepage.
Comments Off on The Lady-Bird deed flies away, not to be missed by most Medicaid planning clients.
In the all the breathless hype over the past weeks regarding the demise of enhanced life estate—or so-called “Lady Bird”—deeds was lost a critical fact—that this technique was rarely the best option in Medicaid planning anyway.
First, the story known to some readers. After an unsuccessful attempt last year, this year the State agency which administers the Medicaid program was able to have legislation enacted which banned the future use of enhanced life estate deeds. Specifically, the legislation disallows an exemption of the home of a Medicaid recipient if it is titled to such an enhanced life estate deed recorded after June 30, 2014.
This pending date caused some attorneys to send mailings suggesting that action be taken before this “deadline” came and went.
I met with several of clients who had received these mailings. In each of these instances, I recommended that the clients not execute an enhanced life estate deed, but instead utilize a “traditional” life estate deed.
But how can this be? By definition, if the State is no longer allowing this technique, it must be most desirable, right?
Not necessarily. To understand why, the brief story not known to most readers—that of the approximately fourteen year life cycle of the enhanced life estate deed-will be helpful.
In August, 2000, the Rhode Island Department of Human Services (DHS), the State agency that administers the Medicaid program in Rhode Island, announced its intention to issue regulations which would prohibit the use of revocable living trusts holding title to a principal residence for Medicaid purposes. This was bad news, though expected, as DHS had been considering this for many years.
The reason: holding a principal residence in a revocable trust was a nearly ideal scenario. Since the trust was revocable, and the “settlors” of the trust (the property owners) were the only beneficiaries and were often trustees of the trust during their lifetimes, they essentially lost no control over their principal residence during their lifetimes.
Then why do it? Because it created, through the nomination of successor trustees, a smooth asset management technique in the event that one or both of the settlors/trustees became incapacitated. Even more importantly to clients, assuming proper titling of the property to the trust, it avoided the need for probate administration of the property upon the second of the settlors to die.
Probate in Rhode Island, assuming typical assets and a relatively intact family situation, is not the nightmare that clients have heard (or occasionally experienced as beneficiaries). Nevertheless, it turned out that this use of revocable trusts for holding title to a principal residence also had benefits for Medicaid planning. This is because, in the mid-1990s, the federal government forced Rhode Island and other states to institute so-called “estate recovery” techniques to seek to recover the cost of Medicaid following a Medicaid beneficiary’s death.
Rhode Island, like the majority of other states, opted to comply with the federal government’s requirement by limiting its estate recovery efforts to the probate estate. To expand the estate recovery to non-probate assets, Rhode Island and most states reasoned (and continue to reason), would require substantially greater expenditure of personnel and other state resources for potentially uncertain gains.
Thus, after the mid-1990s in particular, avoiding probate administration for a principal residence of a Medicaid recipient became particularly important. And since the use of revocable living trusts had all these other virtues, it became one more reason to consider their use for clients.
The Rhode Island Department of Human Service, has had been (and continues to be) fair-minded when it comes to considering people who made plans under the rules then in effect. For example, in response to comments by me and others, it “grandfathered” revocable trusts created on or before December 1, 2000, the effective date of its regulation.
Seeking an alternative, a technique known as the Lady Bird deed was imported from Florida. (Ironic, isn’t it, since most Rhode Islanders mostly mitigate in the opposite direction!) It was called a Lady Bird deed because a Florida attorney describing it used Lady Bird Johnson as a character in hypothetical fact situation.
I have always preferred to describe it by its proper name—an enhanced life deed—because it is easier to explain to a client. I find that clients generally can understand the concept of a “life estate deed”—that is, when you transfer property to a third party and reserve the ability to live in, use, enjoy, rent and do pretty much whatever you want to do with the property while you are living. (I generally prefer that the third party to whom the property is transferred is an irrevocable trust, but that’s a topic for another day.)
The modifer “enhanced” means that those rights transferred—to keep a portion of the proceeds of the property if it is sold during the life estate holder’s lifetime, or even requiring the third party’s permission for such a sale—are in fact not given away.
Got it? Well, it’s more complicated and generally took longer for clients to get their minds around than a “traditional” life estate. However, in limited situations–generally crisis planning involving single people–it was an excellent tool and hence we recommended and utilized it on a number of occasions.
However, what made it work in crisis planning—that effectively no transfer for Medicaid purposes occurred—also made it generally ill-suited to non-crisis planning. Take for example a widow—let’s call her Hope–in her early 80s in relatively good health, with no near turn plans to sell her home and with a modest amount of other assets. If Hope transfers title to her home using a traditional life estate, that transfer is subject to a potential five year “lookback period” for Medicaid eligibility should she require nursing home care.
However, if Hope utilized the enhanced life estate deed, that transfer is not subject to any potential penalty period for Medicaid eligibility purposes. That’s better, right?
Well, assume that Hope three years into the five year lookback period sells her home and moves to an assisted living facility for which she is paying privately. And then two years later, Hope suffers a stroke and requires nursing home care.
Had Hope utilized the enhanced life estate deed, 100% of the proceeds of that sale would be exposed to spenddown for nursing home costs. Conversely, had she utilized a traditional life estate—one in which she transferred an interest in the property to an adult child as trustee of an irrevocable trust—a substantial portion of the sale proceeds would be protected in the irrevocable trust from exposure for nursing home costs.
I will miss reaching into my Medicaid planning toolbox and pulling out the enhanced life estate deed to solve a problem created by a single person with little or no chance of making through a five year lookback period, and with limited non-home assets capable of getting him or her through the five year period. However, in many other circumstances—for example, a married couple or a relatively healthy single person like Hope—there were always better alternatives.
Fortunately, those alternatives still exist even after the Lady Bird deed technique flies away. However, the lack of being able to pull this tool out when needed puts more of a premium on clients, particularly single persons, to initiate planning in advance in order to get a jump on the five year lookback period for Medicaid eligibility.
Comments Off on Case Study: How an Irrevocable Trust Protects Assets from Nursing Home Costs
Last week I met with “Jennifer”, whose mother “Sally”, a long-time client of our office, had entered a nursing home several years ago. (Their names have been changed.) Two months ago, Sally died. Though always a sad occasion when a parent passes away, I told Jennifer that she should take comfort in knowing that she was there for her mother when she needed her most.
One of the ways that Jennifer had made Sally’s final years more comfortable was having urged her years ago to engage in estate planning, an important element of which involved taking actions to prevent all of Sally’s life savings from being spent on the nursing home. The technique that I had recommended to Sally, and which she implemented, was the transfer of a portion of her assets to an Irrevocable Trust.
When Sally eventually required nursing home care, the assets in the Irrevocable Trust did not need to be spent down in order for her to qualify for Rhode Island Medicaid benefits. Instead Jennifer was able to use the protected assets to pay to hold Sally’s bed in the nursing home during those times when Sally needed to go to the hospital for an extended period. And since Sally, like most Rhode Island Medicaid recipients in nursing homes was only allowed $50 per month for personal needs, Jennifer was able to pay for those extra things which Sally wanted but which she could not otherwise afford.
At our meeting, Jennifer reported that there was still some money—not a fortune, but some–remaining in the Irrevocable Trust. I advised Jennifer that, as Sally had specified in the Trust, that balance could be divided between herself and her sister. Jennifer was pleased with this, not so much for herself, but because she knew her sister could use some extra money with a child in college.
In the 25 years in which I have been privileged to represent clients like Sally and counsel their adult children like Jennifer, I have seen this result many times. It provides a significant measure of consolidation—and justified satisfaction– to sons and daughters like Jennifer to know that because they encouraged their parent to do planning, that not all of their father or mother’s life savings needed to consumed by nursing home costs.
And it is never too late to do this planning. At initial consultations, clients often lament that “we should have do this years ago”. I discourage this thinking, because I have seen many times positive outcomes like that of Sally’s which have occurred even when the planning has begun later in life.