Moreover, if one uses one of the form powers of attorney set forth in the statute and a financial institution refuses to accept the power of attorney, one could sue the bank and, contrary to the usual rules of court, get a court order commanding the bank to pay your legal fees.

However, the form documents provided by the statute are woefully inadequate for some purposes, particularly for those people who wish to ensure that appropriate asset protection planning can be accomplished should they ever require long term care in a nursing home.

While the statute allows for powers of attorney with added provisions to be considered statutory forms with the same benefits as the bare-bones form set forth in the law, Maryland estate planning lawyers have been struggling for months with how to devise powers of attorney with significant additional provisions that nevertheless comply with the new law.

The Gatesman Law Office has developed just such a Power of Attorney. For a limited time, we will offer to our existing clients a special discount to obtain the new power of attorney plus get a complimentary review of their estate plan in light of their current situations.

I am pleased to offer the same discount to readers of this website who contact us by October 31, 2010. Be sure to mention this offer when you call or email us. To reach us, simply click Contact Us for further instructions.

Recently, the Gatesman Law Office had been assisting a family in revising the distribution pattern under their estate plan. Husband and wife each had a revocable trust, which trusts held property in further trust for one of their children after both husband and wife died. The share for their other child was to be given to him outright, free of trust.

However, as time passed, the conditions that prompted the desire to hold property in trust for the couple’s now adult child no longer existed and they were in the process of revising their revocable trusts to eliminate the trust for such adult child.

Then, suddenly and unexpectedly, husband died. As a consequence, husband could no longer amend his revocable trust. While wife, who survived her husband, was now the trustee and beneficiary of husband’s trust, she did not have the power to amend the trust to change how trust assets would be distributed after her death.

Nevertheless, because legal counsel had been working with this family for years and knew the estate planning objectives of both husband and wife, and because husband had been in the process of revising his trust when he died, legal counsel devised a plan to validate that old saw, “there is more than one way to skin a cat.”

The plan worked like this. In addition to amending the distribution of his trust, husband was in the process of changing the designated successor trustees so that his children would serve as such successors. So, legal counsel prepared a contract between wife, acting as Trustee of husband’s trust, and the two children, whereby the two children would agree to serve as successor trustees under the trust should wife cease to serve, in exchange for which, the trust would distribute the property to the children at wife’s death in the manner that husband desired.

Because this was a valid contract, and there was a quid pro quo between the parties, the wife and her children were able to effectively change the distribution pattern in husband’s trust to meet husband’s objectives, even after husband had died. Such method of revising the trust, although unorthodox, is legal and effective.

In this and other ways, the Gatesman Law Office stands ready to provide you with creative solutions to any unusual or unique legal problems you may be facing.

For all adults, now is a good time to review your estate plan to make sure that your plan is in order to meet your changing needs.  Have you executed a Power of Attorney to ensure that a trusted agent can manage your financial affairs should you become incapacitated?  Do you have an advance health care directive to ensure that appropriate medical choices are made even if you cannot communicate those choices to your health care providers?

Are the individuals you have chosen to serve as your agents in those documents still the best choices, or have your or their circumstances changed significantly so that choosing other agents is appropriate?

Do you have a Will?  Does your will impose limits because your children were minors when you wrote it, limits that are no longer appropriate?

By asking yourself these and other questions, you will discover whether it is time to review your estate plan with your legal counsel.  This type of periodic review of your estate plan will ensure that your plan continues to meet your needs even as your needs change over the years.

Happy autumn from the Gatesman Law Office.

The practice with lawyers is different, however, and people may put themselves in peril if they do not periodically review their affairs with their attorney.

Occasionally, a client for whom I prepared estate planning documents 10 or 15 years ago will call on me to review their estate plan, but that is not typical.  Even less typical is a client who seeks a more frequent review of his estate plan.

Many changes have occurred in recent years, all of them likely affecting one’s estate plan to a greater or lesser degree.  Maryland’s Health Care Decisions Act of many years ago changed the list of situations in which one’s written end-of-life instructions would be applicable.  A “living will” created before this change in the law may not operate as intended in all of those situations.

The Federal privacy law known as HIPPAA has imposed restrictions on who can access your medical information.  If your medical power of attorney does not grant your agent access under HIPPAA, he or she will be locked out, potentially unable to obtain the information needed to assist you in making a decision if a medical crisis should arise.

Federal estate tax law has changed dramatically.  I still see wills and trusts which employ formula language that is outdated and may result in adverse unintended consequences for people who die in 2010 or later.

Maryland and D.C. estate tax law likewise has changed so that now it is not sufficient to rely on formula estate planning language based only on Federal law.  Before the recent changes, because the state and Federal estate tax systems were unified, such reliance was proper.  Now, unless your will or trust contains provisions that specifically address state law, after you die your estate may have to pay state estate tax that otherwise could have been avoided.

Are you still making gifts of $10,000 per year per person, having been advised by your attorney or accountant some years ago that this “annual exclusion” is the sheltered amount, the amount you may give to any one person without worrying about gift tax consequences?  The law has changed and you may now give larger gifts free of gift tax consequences.

Also, did you know that you can give more than the annual exclusion amount, up to one million dollars or more and still not pay any gift taxes?  Many people do not know this even though there are many estate planning and elder law strategies that will enable you to preserve assets for your family that are based upon this gift tax credit.

For example, making a large gift of assets may enable you to keep all of your assets available for your spouse, or to preserve your children’s inheritance, should you ever require nursing home care.  Often, the best time to do such planning is after one enters a nursing home, and you may have set up your estate plan intending for your agent under your power of attorney to take the necessary steps to shelter your resources.  Many powers of attorney prepared by estate planners who are not well versed in elder law, however, limit the power of your agent to make only annual exclusion gifts.  This may not be in your best interests, and a review of your power of attorney by a qualified elder law attorney would enable you to change your estate plan before you lose the ability to do so.

Medicaid law, too, has undergone radical changes.  While it is still possible to ensure that one’s spouse can keep all of the assets if one enters a nursing home, or to set up your affairs to shelter the assets you intend to pass on to your children after you die, it has become much harder to do so.  In some instances, it may be necessary to change your will, or to convert a revocable trust-based estate plan into a plan that relies on wills as your primary post-death estate planning vehicle.

While people are not in the habit of doing so, a regular review of your estate plan with your estate planning lawyer every few years would enable you to keep abreast of the changes in the law that may affect your plan and allow you to make any changes in your plan to ensure that it will operate as you intended in light of such changes.  Moreover, seeking the advice of an estate planner who is well versed in elder law would enable you to better plan for the future.

Making the small investment in such a regular legal check-up would ensure that you do not suffer a more costly consequence should your estate plan not take into account the current state of the law.

Maryland law not only allows one to appoint a Health Care Agent, the statute provides forms one may use to do so. While I have always recommended that one seek experienced legal counsel when appointing a Health Care Agent – one of the statutory forms curiously omits a significant provision – such advice is even more compelling in light of a new ruling by Maryland’s Attorney General.

Maryland’s Health Care Decision Act enables a person both to appoint a Health Care Agent to make Medical Decisions for you in the event you are unable to do so for yourself, and to state your intentions concerning end of life treatment in certain circumstances: if death from a terminal condition is imminent, if you are in a persistent vegetative state or coma, or if you are in an end stage condition as a consequence of a terminal disease.

There are forms in the statute to effectuate both of these purposes, designated Parts A and B of the statutory advance directive form. In the typical circumstance, an individual will complete both forms, even if the individual intends that the determination of his health care agent, whether it be that individual’s spouse, adult child, or other appropriate individual, will prevail notwithstanding the choices made in Part B, the end of life health care instructions.

For example, one may check the boxes on the form requesting that treatment be provided in the three circumstances discussed above, while at the same time relying on her spouse or other chosen agent to make the decision when “enough is enough” and authorize removal of life support. Nobody wants to become the next Terry Schiavo, the woman who lived in a permanent coma for 15 years while a legal battle raged between her husband and her parents over whether or not to remove her feeding tube.

However, according to Maryland’s Attorney General, once you make your choices on Part B of Maryland’s advance directive form, you will be locked in to those choices even if your advance directive explicitly states that your chosen Health Care Agent may override those choices.

Consequently, some respected elder law attorneys not only recommend foregoing implementation of the Health Care Decisions section (Part B) of Maryland’s statutory advance directive, but refuse to assist clients in appointing a Health Care Agent altogether. While both appointing a Health Care Agent and also completing Part B of the Advance Directive may be problematic, refusing to assist with the appointment of a Health Care Agent seems to be a cure worse than the ill.

Instead of such a drastic response, the Gatesman Law Office recommends that you have a frank discussion with your attorney and that you consider all the implications of your future health care choices. We recommend that you employ legal documents that will enable you to achieve your objectives without tying the hands of those you have appointed to assist you.

Now more than ever, it is important that you seek the guidance of knowledgeable legal counsel when deciding whether to employ the health care decision-making forms provided by Maryland’s Health Care Decisions Act.

The Maryland Court of Special Appeals, in a seismic shift to the estates and trusts law of Maryland, issued an opinion on December 11, 2007, imposing augmented estate rules on the State of Maryland. This decision has significant consequences affecting Medicaid asset preservation planners, estate planners, family law practitioners and CPAs.

Prior to this decision, the Maryland legislature, despite years long advocacy by some members of the Estates and Trusts section of the Maryland State Bar Association, refused to add augmented estate rules to the estates and trusts law of Maryland.

Under the statutory law of Maryland, property passing outside of probate, by way of a revocable trust or a transfer on death account, for example, is not included in the probate estate, and more importantly, is not counted when determining whether a disinherited spouse may elect to take some of that property. The statutory right of election enables a disinherited surviving spouse (i.e. one to whom his or her deceased partner leaves nothing in the will) the power to take a specified share of the deceased spouse’s estate notwithstanding the attempt at disinheritance.

In Schoukroun v. Karsenty, et. al., the Court of Special Appeals has ruled, under the theory of fraud on the marital rights, that a surviving spouse may elect to take a portion of, not only property passing under the will in a probate estate, but property passing by means of a revocable trust and property passing through a bank account Transfer on Death (TOD) designation. In essence, the court has imposed an augmented estate regime in Maryland. Under an augmented estate regime, the assets subject to the rights of others allowed by the probate code will include assets passing outside of probate.

The Schoukroun case, by imposing augmented estate rules on revocable trusts and TOD accounts, extends the previous Court of Appeals decision in Knell v. Price, which caused property passing by means of a life estate deed to be available for elective share treatment (at least in certain circumstances if not across the board).

While Schoukroun deals specifically with the issue of a surviving spouse’s right to elect to take a portion of the decedent’s estate, this case may have far reaching consequences, making the standard post Medicaid eligibility spousal protection planning obsolete, for example.

Before Schoukroun, it was standard practice for Medicaid asset preservation planners to recommend that a client whose spouse was in a nursing home and receiving Medicaid benefits set up his or her affairs so that assets passed outside of probate. Otherwise, if that person died before the spouse in the nursing home, the nursing home spouse either must take the elective share and thereby become ineligible for Medicaid, or if the spouse (or an agent of the spouse) did not claim elective share, then Medicaid eligibility was terminated in any event.

The Gatesman Law Office and other elder law practitioners employed strategies to prevent the loss of Medicaid benefits in that event. However, those strategies may no longer succeed in light of the Schoukroun decision. Consequently, the Gatesman Law Office has devised a strategy to overcome the constraints of Schoukroun and allow married couples to obtain the benefits of post eligibility asset preservation planning without having to rely on passing property outside of probate.

The Gatesman Law Office has undertaken the task of simplifying our legal documents. However, we must exercise great care to ensure that our more simple language does not result in a document that fails to cover all the bases. After careful review, we have created a five page, easy to understand Will to accomplish sophisticated estate tax planning that replaces our more archaic fifteen page document.

While there has been a movement in the legal profession that supports the use of “plain language” documents, it does not appear to have caught on with most lawyers. We are doing our best to promote the plain language ideal to simplify matters for our clients.

While revocable trusts can be good estate planning tools, they are not for everyone. Any advertisement that implies this is misleading. Indeed, by using a revocable trust, seniors can lock themselves out of a powerful asset preservation strategy. Before reviewing that strategy, however, lets take a closer look at revocable trusts.

Trust as asset management tool.

A revocable trust, like a power of attorney, can be a good asset management tool. If one becomes incapacitated, her agent under a power of attorney can step in to manage her financial affairs, or, if the individual has a revocable trust, the person she has designated as her successor trustee likewise can step in to manage her affairs.

It is important in the latter instance, however, that all of her assets are titled in the name of the trust. Sometimes people attend the revocable trust seminars, and like pilgrims to a revival, they walk away as believers and quickly establish a trust for themselves but then take no action to retitle their assets. In that instance, the trust will be ineffectual.

Avoiding probate.

If one does retitle his assets so they are owned by the trust, then a revocable trust will be effective in avoiding probate. This is one of the top reasons trust lawyers give when suggesting that everyone should use such a trust. However, probate typically is a simple and straight-forward procedure, often no less complicated than retitling one’s assets into a trust in the first place, and often at a cost that is similar to the costs associated with setting up a revocable trust.

Thus, avoiding probate as an end in itself may not be a sufficient cause to use a revocable trust. In certain circumstances, however, avoiding probate can be very beneficial. For example, if you own real estate in more than one state, then you will have to undergo probate in both states when you die. In that instance, using a revocable trust can be an effective means of avoiding two probate proceedings. Even so, a trust may not be the only way to avoid probate in the second state. For example, you often can change your deed so that the property passes outside of probate instead of using a trust for this purpose.

Losing an asset preservation strategy.

The problem with using a revocable trust often overlooked by planners who recommend them is that by employing such a trust the individual will lock in a five year Medicaid lookback period. What does this mean?

When an individual requires nursing home care it often is possible to set aside assets to pass to one’s heirs and have Medicaid pay for the nursing home. One method of doing so is to make a gift to one’s adult children and then waiting for three years before entering a nursing home. This is possible because there currently is a three year “lookback period”. The lookback period is the period of time preceding one’s entry into a nursing home for which the individual must disclose any gifts. If the gift took place before the lookback period, then it will not cause the individual to lose Medicaid eligibility.

Five year lookback period with a trust.

The reason a revocable trust can cause problems is that if one put his assets into such a trust, then the lookback period will be five years, making it much harder to do advance gift planning in anticipation of requiring future nursing home care.

Estate planners need to be aware of elder law issues.

As people live longer thereby increasing the likelihood that they may need nursing home care in the future, it becomes more important that their estate planning advisors also have a firm grasp of the rules and regulations governing their eligibility for public benefit programs.

William M. Gatesman has been a leader in educating professionals in how to do estate planning and Medicaid asset preservation planning without overlooking either of those areas. A good planner will know public benefits law and estate planning principles and will have a firm grasp of income and estate tax rules and regulations.

DURABLE GENERAL POWER OF ATTORNEY

One of the fundamental components of any estate planning program is a Durable General Power of Attorney. With a Durable General Power of Attorney, you appoint another person, most likely your spouse if you are married (sometimes acting together with another person), to transact your financial affairs in the event you are unable to do so. A good power of attorney has the following characteristics.

Durable Power of Attorney
It is important that such power of attorney be durable. That is to say that the power of attorney itself should contain language that enables the powers conferred therein to be in force after you become disabled and unable to act for yourself. Maryland, like some other states, has changed its law to create a presumption of durability for any new power of attorney, however, in order to ensure that the power of attorney will be valid in any state, the Gatesman Law Office recommends that one’s power of attorney contain language of durability. Such language often takes the form “This power of attorney shall survive my disability.” If you have a power of attorney that does not have such language of durability, we recommend that you review your estate plan with a qualified attorney.

A power of attorney without such language, if it was signed before Maryland changed its law, or if it is presented for use in a state where there is no presumption of durability, will not be effective once the individual who signed the power of attorney becomes incapacitated. In all cases, the authority of an agent under a power of attorney ceases upon the death of the principal.

Springing Power of Attorney
While the Durable General Power of Attorney can be drafted in such a way that it becomes effective upon your disability (known as a “springing power of attorney” because it “springs” into effectiveness upon the happening of a certain event such as the written certification by your doctor that you are incompetent), it is better to draft the power of attorney such that your agent’s authority begins when you sign the document. Otherwise, you effectively appoint the medical community as gatekeepers to the exercise of power by your attorney-in-fact because any institution such as a bank to which the power of attorney is presented has the right, and is likely to require irrefutable proof from your doctor or doctors that you are, in fact, incapacitated.

Some people desire to employ a springing power of attorney because they are uneasy that their attorney-in-fact may usurp their authority over their assets. If that is the case, then the proper inquiry should not be: “When does my power of attorney become effective?” Rather, the question should be: “Have I made a wise choice as to the person who will serve as my agent?” If you are nervous about such person taking improper action while you are around to oversee your affairs, such person is the worst possible choice to be the one to manage your affairs in the event you lose the ability to do so yourself.

Gift Giving Power
Gift giving can be an important estate planning and long-term care planning tool because inter-family asset transfers often will enable one to preserve wealth that otherwise will be wasted on taxes or will be used for long-term care costs that otherwise would be paid for by insurance or government benefits. Thus, it may be in your best interest that your attorney-in-fact make gifts in order to effectuate those estate planning and long-term care planning goals. In Maryland and D.C. as in many other states, an attorney-in-fact is not authorized to make gifts unless one’s Durable General Power of Attorney gives express authorization for such gifts. Therefore, your Durable General Power of Attorney should include express gift giving authorization if that is appropriate to your circumstances.

Real Estate Transactions Under Power of Attorney
Your power of attorney should be notarized so that it may be used to transact your real estate if that is your desire, otherwise it cannot be recorded in the land records, a requirement if your attorney-in-fact is to be able to sign a deed on your behalf. Also, if you own real estate in the District of Columbia, your power of attorney must contain special language at the top of the first page in order to give your attorney-in-fact power over your real property. Without the proper language and typeface required by the D.C. code, your agent will not be able to transact your real property in the District of Columbia even if your power of attorney provides such authorization in the body of the document.

ADVANCE HEALTH CARE DIRECTIVE

Every individual should have in force the fundamental estate planning document known in Maryland as an Advance Directive and Appointment of Health Care Agent. The purpose of this document is to appoint an individual whom you trust to make medical decisions on your behalf in the event that you become disabled and are unable to communicate your desires to your medical care providers. In addition, this document can be drafted in such a way that it serves as a Living Will in the absence of a qualified decision maker allowing the document to communicate your choices regarding end of life care.

Access to Medical Records after HIPAA
It is important that the person you appoint to make medical decisions have access to your medical records. The Health Insurance Portability and Accountability Act, commonly referred to as HIPAA, severely restricts a third party’s access to your medical records and your Advance Directive should contain specific language recognized under the statute to enable your agent to obtain such information. Otherwise, your agent may not be allowed access to your medical records thereby defeating the purpose of appointing such agent in the first place.

Who should use these estate planning tools?
While a durable general power of attorney and an advance directive serve as building blocks for even the most sophisticated estate plans, every person should employ these tools to ensure that appropriate personal and financial decisions are made in the event they become unable to make such decisions for themselves. If you already have such estate planning documents, we urge you to review them to ensure that they have the characteristics discussed in this article.

If you have any questions about the estate planning strategies discussed in this article or elsewhere on this website, please contact William M. Gatesman using the contact information at the bottom of this page or by sending email to wmglaw@att.biz.