The Internal Revenue Service will no longer routinely issue estate tax closing letters when it finishes satisfactorily processing an estate tax return. In an online Notice published -HERE-, the IRS states that “estate tax closing letters will be issued only upon request by the taxpayer.” That Notice sets forth the procedure whereby a taxpayer or tax preparer may obtain a Transcript in lieu of a closing letter to ascertain that an estate tax return has been accepted by the IRS.
It is a well established principle of the Maryland Medicaid rules that certain jointly owned assets such as stocks or real property will not be counted as available resources to a nursing home resident who applies for Medicaid benefits if the other joint owner refuses to participate in a sale of the property.
For decades, such assets have been disclosed by nursing home residents on their Medicaid applications and such assets have been valued at zero for purposes of determining Medicaid eligibility.
Recently, however, a Medicaid applicant was denied Medicaid coverage for nursing home care because the applicant owned stock, in certificate form, with her son in joint ownership, even though the son had refused to participate in a sale of the stock. Ordinarily, such a denial by a Medicaid caseworker would be overturned when the case was appealed to an Administrative Law Judge, but in this case, the Administrative Law Judge ignored the specific regulation in the Maryland Medicaid Manual that explicitly states that jointly owned stock should not be a countable asset where the joint owner refuses to sell.
Such denial has implications, not only for the particular individual whose Medicaid application was denied, but for Medicaid applicants statewide. Indeed, this case has been appealed to the Circuit Court of Maryland where a senior Assistant Attorney General, representing Maryland’s Medicaid authority, the Department of Health and Mental Hygiene, essentially has requested the Circuit Court to issue a decision that radically revises the long standing Medicaid policy concerning such jointly owned assets.
If the Circuit Court were to uphold the decision of the Administrative Law Judge in this particular case, then it would shroud the process of dealing with jointly owned assets in a cloud of uncertainty. No longer would Medicaid applicants and their advisers be able to act with certainty regarding jointly owned assets, as there would exist the possibility that Medicaid caseworkers could arbitrarily ignore the applicable rule on the strength of judicial precedent.
This is not the proper way for the Medicaid authorities to change their policy. The proper way is to propose rule changes, either by changing the Code of Maryland Regulations, or by changing the Maryland Medicaid manual. Simply leaving a rule in place that exempts joint assets from consideration, but then attacking such an arrangement by imposing Medicaid ineligibility on a case-by-case basis on unsuspecting Medicaid applicants is bad public policy.
The State’s efforts to deny benefits in the case under discussion in this article is an example of such bad public policy.
William M. Gatesman is following the progress of this case closely and will inform the readers of this website of any new developments as they arise.
In the meantime, Mr. Gatesman stands ready to assist clients with prudent Medicaid eligibility and asset protection planning in the context of a changing landscape.
Some workers who have received judgments in their favor from their former employers for work related disease or injury, such as asbestos related injuries or coal mining related diseases, find that the judgments are paid out over time, sometimes in the form of small amounts paid now and then over a period of many years. Some of these individuals have died and their probate estates have been wrapped up and closed. Then, out of the blue, another check arrives with a payment on the injury or disease settlement.
Once such check arrives, notice must be given to the Register of Wills in the county in which the estate had been opened, a supplemental inventory and account filed, and distribution made (with the payment of an additional probate fee in some circumstances). If a lawyer assists with this process, there will be legal fees as well. This is a cumbersome and costly endeavor, sometimes for a very small amount of money.
This continuous process of reopening the estate each time a settlement check arrives can be avoided with the proper assignment of future settlement payments to the beneficiaries of the estate when the final estate administration account is filed and the estate closed. Such assignment can grant the Personal Representative of the estate continuing authority to transact checks to make the distributions to the beneficiaries.
The Gatesman Law Office assists clients with the process of simplifying life for estate beneficiaries by arranging for the distribution of such settlement awards that might be received after an estate is closed without the necessity of continually filing supplemental inventories and accounts year after year.
In general, a Personal Representative of a decedent’s estate may not pay legal fees out of the probate estate without first getting approval from the Orphan’s Court overseeing the estate administration. A Personal Representative has to be careful about this rule. For example, if the Personal Representative hires a lawyer to prepare a deed, oftentimes, the deed preparer will simply send a bill for services without notifying the Personal Representative of his or her duty to get court authorization to pay that bill. It would be improper for the Personal Representative to simply pay that bill without obtaining court authorization to do so.
Similarly, a Personal Representative should get court authorization to pay any legal fees incurred before death. There are two exceptions to obtaining such prior authorization. Some might argue that such authorization would not be required if the lawyer whose fees are being paid files a claim in the estate for such fees, and the Personal Representative pays the claim, which payment is reflected on an estate administration account (the argument being that such payment is the payment of a claim and not payment of legal fees, per se); however, the conservative way to do so would still be to obtain court authorization, or to pay such amount using the method discussed in the paragraph below.
Another method for paying legal fees incurred by the decedent before death is for the Personal Representative to provide all interested persons and all unpaid creditors with a Notice of the Personal Representative’s intention to pay such legal fees. That notice will provide the interested persons and unpaid creditors with a time period in which such persons could object to such payment, and if such objection is properly and timely made, the Orphans Court will hold a hearing to determine how much of such fee is to be paid using estate funds. If no objections are made within the allowable time, however, then the Personal Representative may pay such legal fees incurred before death with no further court action. There is a particular rule of court that allows legal fees to be paid in this manner.
William M. Gatesman is skilled in the various methods of paying legal fees from a probate estate and assists clients with the proper administration of estates, including the payment of legal fees using estate assets. As stated elsewhere on this website, these article are of general interest and readers should not consider these articles to constitute legal advice. William M. Gatesman stands ready to give legal advice to particular clients in jurisdictions where he is licensed to practice law. Please contact Mr. Gatesman if you would like to obtain legal advice regarding the matters addressed on this website.
The Maryland legislature once again has tinkered with the law governing powers of attorney in Maryland. That law includes Power of Attorney Forms, which if used, or if one’s power of attorney is “in substantially the same form” as one of the form documents, then the law bestows certain rights on the holder of the power of attorney, namely, the right to obtain payment of one’s legal fees from the person or institution who refuses to honor the power of attorney where a legal action is taken to compel acceptance. This right to legal fees differs from the general “American rule” of jurisprudence which holds that each litigant in a legal action must pay his own legal fees.
Unfortunately, the forms in the statute are generally not sufficiently comprehensive and lack certain important provisions.
There are several new laws affecting probate in Maryland that became effective October 1, 2012. This article will address those statutory changes.
Several lawyers have been pondering whether it is illegal for a Personal Representative to bring a legal action without a lawyer because doing so would be considered the unauthorized practice of law.
This office was involved in a case a few years ago in which the Maryland Court of Special Appeals ruled that a Personal Representative (who was not also an estate beneficiary) may not pursue a legal action in Circuit Court without a lawyer. The Appellate Court ruled that doing so constitutes the unauthorized practice of law. The Court ruled also that an estate is not a person who can pursue a legal action “pro se”.
When an individual goes to court without a lawyer, such person is said to be acting “pro se”. Only individuals are allowed to pursue legal actions in court on a pro se basis. Parties who are not individuals, such as corporations, may not do this, but rather, must be represented by a lawyer.
According to the Court of Special Appeals in this unpublished opinion, an estate likewise must have a lawyer to pursue a legal action in Circuit Court.
You may click here to read the case.
William M. Gatesman and the Michael G. Day Law Office recently assisted a client in the following situation. During her husband’s lifetime, the client and her husband transferred their real estate to various trusts using deeds that identified the trust as the recipient or grantee of the property, specifically using the name of the trust without including the name of the trustee.
Deed to Trust Must Name Trustee
Under current Maryland law, such a deed would be effective to convey the property to the trust. However, at the time the deed was signed, Maryland law required that the trustee of the trust (i.e. an actual person) be listed as the grantee in order for the deed to be effective. Listing the trust itself as grantee without also listing the trustee by name was ineffectual. Consequently the client’s deeds were not effective and there was a “cloud on title”, meaning that the property could not be sold until the problem was resolved.
In this case, because the original deeds to the trusts were not effective, we needed husband and wife to sign confirmatory deeds that included the name of the trustee as grantee. However, because husband had died, he could no longer sign a confirmatory deed. And even though his wife held his power of attorney, a power of attorney is no longer effective when the principal dies.
To complicate matters further, while the real property is located in Maryland, the couple had since moved to another state. Since all of their other property had effectively been conveyed to the trusts, no probate proceeding was necessary in such other state even though their wills were on file with the court in that state.
Typically, in cases were an individual is domiciled in another state and dies owning real property in Maryland, one first opens an estate in the state of residence and then undertakes a streamlined “ancillary administration” in the Maryland probate court.
No Clear Procedure
While our office resolved this matter some time ago, it is evident from inquiries by other probate lawyers in an email discussion forum that some lawyers wonder whether a Maryland probate can be opened to address such an issue if there is no probate in the state of domicile.
In fact, Maryland’s rules of procedure and the statutes addressing the jurisdiction of Maryland’s probate court do allow a family member to open a probate estate in Maryland in such circumstance. On that basis, we were able to have a Personal Representative appointed in Maryland for husband’s estate for the sole purpose of executing the confirmatory deed which wife also signed. In this way, we were able to remove the cloud on title that affected the marketability of the properties.
This is one example of the type of complex situation we are called upon to resolve on behalf of our clients on a day to day basis.
In January, 2008, I wrote an article on the Maryland Court of Special Appeals Case, Battley v. Banks (Md. App. December 20, 2007). In that case, the Court ruled that, upon the death of the disabled person (a disabled person under a guardianship is called the “ward”), the ward’s assets become the property of the personal representative of the ward’s probate estate, or if none is appointed immediately, then the guardian must hold the property to be transferred to such personal representative when appointed. Moreover, the Court ruled that the guardian may not pay himself compensation for services or pay any legal fees even after the guardianship court approves such compensation and fees. Instead, the guardian and the lawyer, once the guardianship court approves such fees, must file a claim in the ward’s probate estate to be paid by the Personal Representative of such estate.
That rule, however has been changed by the Maryland legislature, such change to be effective October 1, 2010. The new legislation changes the Annotated Code of Maryland, Estates and Trusts Section 13–214(c)(3).
After October 1, 2010, the relevant statutory provision will read as follows:
When a minor or disabled person dies, the guardian shall deliver to the appropriate probate court for safekeeping any will of the deceased person in his possession, pay from the [guardianship] estate all commissions, fees, and expenses shown on the court-approved final guardianship account, inform the personal representative or a beneficiary named in [the will] that he has done so, and retain the balance of the estate for delivery to an appointed personal representative of the decedent or other person entitled to it.
In the meantime, the strictures of Battley v. Banks shall apply.
You’ve heard the old saw: “There is more than one way to skin a cat.” Such folk wisdom can inspire estate planners to dream up creative solutions to thorny legal problems.
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.