San Jose Santa Clara Milpitas Estate Planning Business Law Attorney Blog

Monday, March 28, 2011

Estate Planning Basics

Friday, November 19, 2010

California Medi-Cal Program to Help with Nursing Home Bills

Medi-Cal is California’s Medicaid program, which is funded by both federal and state funds. It is overseen by the Department of Health Services. Medi-Cal has two divisions: one of them provides regular medical care for low-income individuals and the other provides assistance with paying for the high costs of nursing home care. This information is geared towards eligibility for the Medi-Cal Long Term Care program. To receive these Medi-Cal benefits, the applicant’s (and spouse’s, if married) assets must be within the Medi-Cal resource limits. If assets exceed the Medi-Cal resource limits, the excess must be “spent down” until the guidelines are met.

 The first and most important concept of understanding Medi-Cal Long Term Care eligibility is the way the state classifies assets into 3 categories: Countable Assets, Exempt Assets, or Unavailable Assets. (Exempt and Unavailable assets will not affect a person’s eligibility for Medi-Cal Long Term Care…in other words, these assets are not counted.)

A. Countable Assets.

1. Resource Limits: An applicant cannot have countable assets in excess of the applicable resource limits, which for the year 2009 are as follows:

Single Applicant: $2,000.00 In applicant’s name; no other assets

Married Applicant: $2,000.00 In applicant’s name

Applicant’s Spouse: $109,560.00 In spouse’s name

Both spouses in long term care: $2,000.00 in each spouse's name;no other assets

2. What Assets are Countable? These must be spent down and/or converted to Exempt or Unavailable assets prior to application:

Bank Accounts (Checking/Savings)

B. Exempt Assets.

 The home and home improvements

C. Unavailable Assets.

 Listed Real Estate

Treatment of an individual’s income is different than that of their assets. Once an applicant meets the proper asset resource requirements, the state will then look at their income to determine their Share Of Cost, or their contribution towards their monthly cost of care.

A. Income (monthly) – includes: social security, pension, interest, dividends, etc.

B. Income is used to determine SHARE OF COST (all income is counted, less a $35 personal needs allowance)

C. SPECIAL RULE FOR MARRIED APPLICANTS: The spouse remaining in the home must have a Minimum Monthly Maintenance Needs Allowance of $2,739.00 per month before the applicant spouse’s income will be counted towards his or her Share Of Cost.

D. If monthly income is GREATER than the applicant’s cost of care, the applicant does not need Medi-Cal Long Term Care benefits because the assets (principal) will not be exposed to spend-down.

 The Look-Back Period is a period of time during which Medi-Cal is allowed to inquire about an applicant’s financial history and question them about transactions and transfers made within the 30 months prior to application. THIS IS NOT A 30-MONTH BAR TO TRANSFERRING PROPERTY. In other words, an applicant can make transfers of their property during this time, however certain transfers may give rise to a period of ineligibility. (See Gifts/Period of Ineligibility below.) Furthermore, for transfers made to or from an irrevocable trust, the Look-Back Period is 60 Months.

 A. An applicant is allowed to make gifts of their property during the 30 months prior to application; however such gifts may cause a period of ineligibility to apply. This is simply a period of time during which an applicant is not allowed to apply for Medi-Cal Long Term Care benefits. Once this period of ineligibility expires, the applicant can then apply.

B. For every gift of $5,698, a one month period of ineligibility is created.

C. Example: A $20,000 gift divided by $5,496 equals 3.6 months. Medi-cal rounds down and reduces the period of ineligibility to the lowest full month. In this example, the ineligibility period assessed would be 3 months. In month 4, the applicant can submit an application.

Wednesday, November 17, 2010

Pay Close Attention to Beneficiary Designations

An often overlooked, but critical decision in estate planning is the completion and determination of your beneficiaries. This includes assets such as retirement plans, IRAs, life insurance policies, and annuities. 

One of the pitfalls in estate planning is not completing these forms properly, which has an adverse effect on your plan. Assets that have beneficiary forms are normally contracts, and a company is obligated to pay the funds to a beneficiary at the death of the owner of the account. These assets pass directly to your beneficiary, and not by your will, not to a trust, and perhaps not to the intended beneficiary of the account if you haven’t designated that person correctly.

For example, you may be single and have a minor child who is selected as your beneficiary. This basically means that your child has a right to receive the assets. However, since they are a minor, they are not able to collect the assets upon your death, and the insurance company may require a formal guardianship or conservatorship proceeding within the Probate Court. This process could be expensive, time consuming, and public. 

In addition, the guardian will have to account annually to the court, based on the requirements of that particular court system, and the annual accountings are also public and often expensive to produce and file. To further complicate the issue, once your child turns 18, they are no longer deemed to be a minor, and they have the right to receive all of the assets in a lump sum. It is likely that you prefer to have those funds held by a trustee, invested, managed, and distributed at other times, such as possibly one-half at twenty-five and one-half at thirty, or for upon graduation from college.

There are larger and more significant problems though when a beneficiary of a retirement plan is not completed properly. While life insurance is normally not income taxable, (although it may be included in the estate for estate tax purposes,) most retirement plans are assets that have been tax-deferred but are not tax-free. This means that your beneficiary will be receiving those assets outright and also be subject to income taxes. There are several retirement plan options where your beneficiary may make an election to either have the funds distributed over a period of years, within a five-year waiting period, or in a lump sum. There may also be a means of having those taxes minimized and stretched out over a period of years that will allow more funds to be invested, rather than having the tax paid initially and your beneficiary receiving a significantly smaller amount of assets. 

An additional significant problem comes in when you’re divorced, whether you’re remarried or not, and the initial beneficiary of your plan or policy is your divorced spouse. Since this is a contract, many state laws and courts have taken the position that those assets will pass to the ex-spouse even though that is clearly not the intention set forth in a separation agreement or judgment of the court. 

Therefore, whenever there is a life cycle change such as a birth, death, divorce, adoption, etc., all beneficiary forms should be reviewed to be sure that the beneficiary is stated correctly. Also, if you have created a trust, and that trust is no longer in existence, this may affect your overall estate plan and how your assets are distributed. Likewise, it is important to be sure that all existing beneficiary forms are coordinated with any new trust or will. 

Wednesday, November 17, 2010

Finding a Caregiver

Finding the right home care employee is very similar to choosing the right professional - it takes time to be sure that the selection process is proper, and sometimes the only way that you know you have done a good job and selected the right person is after the fact, through experience. However, the proper process is important. 

If an elder loved one is in need of homecare services, normally the first action is to search for candidates. The best ones will often come through word of mouth. If another client of an agency is satisfied with the care and support provided, this is normally a good reference point. If a personal reference is not available, then contacting a local discharge planner at a facility, or contacting the local senior citizen group, such as a council on aging, senior center, or social service agency may be the most appropriate means of finding the right agency. 

The next step is to interview the caregiver candidates you find through your search. Keep searching and interviewing until you find the most appropriate person to serve. Make sure that that person has the requisite ability, experience, and compassion to attend your loved one at home. For instance, the proposed caregiver may have significant experience with a person regarding bathing, dressing, feeding, etc., but perhaps they have not dealt with a person with a memory disorder such as Alzheimer’s. 

If the caregiver is merely providing light housework, cooking, and companionship, then would he or she also have the ability to transition into a higher level of care if and when the elder needs those services? If the caregiver needs to administer medication, do they have a license to do so? Also, the caregiver should be questioned as to whether they are available for additional hours if needed. 

Most agencies have pre-printed agency agreements, and it is very important to review these contracts before signing them. Sometimes the agency is willing to negotiate a change in the contract, and other times they are mandated through a parent company to not adjust the standard agreement. In most agreements there are provisions that the termination of the employee may be at will, without any advance notice or pre-payment.

On the other hand, there may be a provision that if the family wishes to engage the services of the caregiver privately, then there is a significant “buyout” fee that the family must pay to the agency. Also, provisions regarding whether the caregiver is expected to use their own automobile for transportation to doctor’s appointments, sporting events, and activities such as movies, lunches, etc. should be outlined. Most reputable agencies are licensed and bonded, and if desired, these certificates of insurance and liability should be provided to the family prior to the contract’s completion. 

The family should clearly define what they need and want for their loved one prior to the signing the contract. It is important for both parties to understand their duties, responsibilities, and the anticipated care prior to the signing of the contract to prevent problems in the future if the services are not provided as expected.
But in getting back to the process of finding the right caregiver for your loved one, your gut reaction is rarely wrong. Do your homework and don’t be hasty.

Wednesday, November 17, 2010

What You Need to Know About Elder Abuse in California

WHEN IN DOUBT, CALL ADULT PROTECTIVE SERVICES.  BETTER TO BE SAFE THAN SORRY!

Huguette Clark and Brooke Astor have a lot of things in common. They both were wealthy beyond wildest imagination, they both enjoyed their 104th birthday, and they both seem to have suffered elder abuse at the hands of the people they entrusted with their care. 
 
In 2009, Brooke Astor's son and attorney were convicted of stealing $10 million from the socialite's $100 million fortune. Today, investigations into the actions of the advisors (attorney and account) for104-year-old Huguette Clark, a reclusive heiress worth half a billion dollars, are being conducted by the New York District Attorney’s Office.  
 
It begs the question, who would steal from your grandmother? The answer unfortunately is far too common. In the Astor case, Brooke’s own son was convicted of grand larceny and in Huguette’s case, the lawyer and accountant are being investigated. Sadly,  the issues surrounding the handling of the money of these two women are not unique.   
 
It is estimated that near half a million elderly people are being abused by family, friends, and/or advisors, potentially taking $2.6 billion from infirm older Americans. The crime is known as elder financial abuse. Financial expert and consumer advocate, John Wasik has called it "the crime of the 21st century."
 
How does it happen? Many of these elderly people are too sick or infirm to know that abuse is taking place or to be able to report the abuse. If a person has dementia or alzheimer’s disease they are not going to know that their money is being squandered. For those that suspect there is an issue, fear of abuse, abandonment, and retribution also play a role in keeping them from reporting their concerns. 
 
Commonly, the tool used by the criminals who steal from the elderly is the power of attorney document, which enables a designated person to make the financial decisions on behalf of another. The decisions of the person exercising the power of attorney are rarely reviewed, and the document has been called a "license to steal." Even though there is a fiduciary responsibility on the part of the person appointed, if no one is holding them accountable, they can get away with the crime.  
 
In order to protect the elders in your life, it is of the utmost importance to get involved and stay involved in their lives. The crimes are often unreported or not pursued because relatives or friends are not involved in an elder’s life or assume that someone else is looking out for them. People are reluctant to get involved because they do not want to be perceived as a trouble-maker or greedy. The concern that they will be regarded as only looking out for their own interests in an inheritance also often keeps people from speaking up. 
 
Remember that this is abuse, and if there is financial abuse, there is likely other forms of abuse occurring as well. Having as much information as possible is helpful. Ask questions, lots of them. Get documents like bank statements and investment records. Keep in mind you are not alone, every state has an Adult Protective Services agency. Find the one that serves your area, and make a report. The new healthcare reform package has a provision called the Elder Justice Act, which set aside nearly $800 million to expand efforts to investigate elder financial theft over the next four years. This is a growing problem and elder care professionals are working to stem this type of fraud and abuse. 
 
But make no mistake, the power of attorney is not the problem itself. It is a good and very useful document, and as estate planners and elder law attorneys, we do recommend executing one and will continue to do so. However, the power of undue influence is so great that if a family member, or friend, or advisor is entrusted to care for an elder, they are often trusted to the point they can drive that elder to the bank and stand by while money is withdrawn and turned over to them. You would be surprised often this happens. You would also be pleasantly surprised to know that on numerous occasions, very astute and well intentioned bank tellers report the incidents. They get involved and by doing so are thankfully able to thwart a theft or prevent a future abuse. 
 
Do not be confused, just because Susie is going to inherit all of her mother’s money when she dies, this does not mean that Susie can help herself to part, some, or all of her mom’s money during her mother’s lifetime. Susie is not entitled to it until she actually inherits it at the time of mom’s death. Susie may be paying for kid’s college education, trying to save her own house from foreclosure, or heading for a lavish vacation on Mom’s money, however, not one of those reasons is justification for taking mom’s money. Hey Susie...its not your money! Mom still has to pay for her healthcare, housing, and living expenses. And what if mom needs a vacation?. Once its gone, the money is gone, and that can happen pretty quickly these days. Do not be afraid to get involved.
 
If you suspect an elder is being taken advantage of by a family member, friend or anyone else. Do not sit idly by. If it were you, your grandmother or grandfather, wouldn’t you want someone to help?

Wednesday, November 17, 2010

What is a Special Needs Trust?

Providing support for people with disabilities requires special estate planning. If you have a disabled child, relative or friend, there is some essential information you should have regarding special or supplemental needs trusts. A special needs trust is a legal document that is created for a person who, because of physical or mental disability, or chronic or acquired illness, at under age 65, is receiving federal and state government benefits for medical care and daily living needs, such as Supplemental Security Income (SSI.) 

An individual who qualifies for SSI is limited to countable resources in the amount of $2,000. In the event that a recipient of SSI receives an inheritance directly from a parent or another, which bumps up their assets over $2,000, they will be disqualified from receiving SSI benefits. As such, special or supplemental needs trusts have become the preferred method to provide a source of funds, such as those that are inherited or received from litigation recovery, without disqualifying the beneficiary from receiving these government benefits. The trust funds are used for supplemental care, over and above what the government benefits provide. 

There are three main types of special needs trusts: the first-party trust, the third-party trust, and the pooled trust. All three name the person with special needs as the beneficiary. A “first-party” special needs trust holds assets that belong to the person with special needs, such as an accident settlement. A “third-party” special needs trust holds funds belonging to other people, such as a parent or grandparent, who want to help the person with special needs. A pooled trust holds funds from many different beneficiaries with special needs.

Special or supplemental needs trusts are designed to provide for comforts and luxuries that could not be paid for by public assistance funds. Appropriate legal and financial planning can ensure that your loved one with special needs will have an opportunity to enjoy a better life than that provided solely by government assistance. The drafting of special or supplemental needs trusts is a specialty, and only attorneys who have significant experience in these types of trusts should be engaged. 

Tuesday, November 16, 2010

What Happens if I die without a Will?

Dying without a will is called dying '"intestate."  Actually, some surveys show that a majority of people die without a will!  What happens is that your estate will go to your immediate family, but state law determines who gets what. In California, if you had no spouse and no children, your estate would go first to your parents, if they survived you, and if not, to your brothers and sisters. Your heirs will also need to open a probate proceeding and petition to be named administrator or personal representative (the person with legal authority to settle the estate).

Tuesday, November 16, 2010

When To Distribute Trust Assets After Death

You have to wait until the survivorship period is over before you can distribute any property to anyone. This will be in the trust--it is usually thirty (30) days, but can be longer. A person has to survive at least that long after there's been a death to inherit anything. This is to prevent property going to someone, and then having them die and leave the property to someone else entirely. You can transfer the house the day after that period ends. But settling an estate takes time. Please don't distribute anything until you're sure you know what the bills and debts there are to pay off and whether there will be income taxes due for the last year of the decedent's life. Beneficiaries are often in a big hurry to inherit, but prudent trustees take their time and let beneficiaries know that debts and bills come first.

Tuesday, November 16, 2010

Where Do I File My Living Trust?

SHORT ANSWER - NOT AT THE COURT, JUST SOMEWHERE SAFE.  During your lifetime your trust just lives in a fireproof safe, or a safe deposit box, or somewhere safe where people will be able to find it, if they need to. After one, or both of you, die, then a copy of the trust will get sent to the county so that names can be changed on your house's title, and sometimes financial institutions and banks will also want to see it--just to make sure that 1) it exists and 2) the successor trustee is clearly identified in the document. So, keep it safe and let your family and successor trustees know how to find it.

Tuesday, November 16, 2010

How to Get a Loan on Trust Property (Personal Home)

To Get a Refi on a Trust Property: Go ahead and let the bank know you'd like the new loan. They will do a title search on the house and they'll discover that it's legally owned by your trust.  If they care, and some lenders don't, they'll tell you to take the house out of the trust to do the new loan. Ask them if they'll do that--most of the time they're happy to do this because it's a simple thing to record a deed transferring the house from the trust back to you and your wife as individuals, and they want to sell the new loan. If they won't do it, ask the person who put the house into the trust in the first place (probably a lawyer) to take it out for you. Then, after you get the new loan, make sure to put the house back into the trust. This is just like what you had to do to get the house out of the trust: this time you'll record a deed transferring the house from you as individuals to you as trustees of the trust. Again, the lender will usually do this for you at the end of the transaction, but make sure to check to make sure that they follow through.