The “Secret Handshake” refers to that gesture known only by the select few who are allowed access to an exclusive club. I use that as the title to this post because the State of Maryland has adopted policies that make it hard for people who do not have “inside information” to make good informed decisions regarding their financial planning should nursing home care loom on the horizon.
For our younger readers, this time of year is heralded by the hustle-bustle of back to school activities. It is the time for parents of young children to double check that the kids have shoes that fit for gym class, warm clothes for the winter months, and pens, pencils, and rulers to stock the kids’ backpacks for the first day of school.
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.
Some lawyers belong to an association that provides them with form legal documents. One such form is the “Loving Trust”. Within such document, there is an indication that the term “Loving Trust” is a certified trademark. The trademark does not belong to the lawyer who “prepared” your trust. Rather, it belongs to the company that provides the trust form to the lawyer.
Loving Trusts can be problematical. A typical Loving Trust has provisions relating to “community property.” Community Property is a special class of marital property with respect to which spouses have certain statutorily defined rights — but such is the case only in so-called “community property states” such as California. Maryland is not a community property state, and a trust by a Maryland resident that has community property provisions at best is confusing and at worst could cause unintended consequences.
But there is a more serious problem with the Loving Trust. The Loving Trust is a joint trust created by a husband and wife. Only the husband and wife may modify or revoke the trust. The trust may not be modified or revoked by the agent under a power of attorney for either husband or wife. Moreover, once one spouse dies, the trust may not be revoked.
This is a problem because trusts can cause one to be ineligible for Medicaid. If the trust is revocable, and the trust beneficiary requires nursing home care, then the trust can be revoked and the problem resolved. If one is the beneficiary of a Loving Trust, however, and the spouse has died, then such trust may not be subject to revocation. As a consequence, such trust may cause Medicaid ineligibility, or may prevent the surviving spouse from preserving assets.
And for estate planning purposes, because estate tax law has been fluctuating in recent years, it does not make sense to draft a trust that will become irrevocable and unmodifiable after one’s spouse dies. Such trust cannot be changed to respond to changes in the estate tax law. As a consequence, using a Loving Trust may result in the payment of estate taxes that otherwise could have been avoided.
Beware the Loving Trust.
In Maryland, one is ineligible to receive Medical Assistance, or Medicaid, for long term care in a nursing home if one gives property away, or transfers property for less than full value. Since 2006, this period of ineligibility does not begin to run until the gift giver resides in a nursing home and is out of money.
The period of ineligibility is determined by dividing the amount of the gift (or the aggregate amount of all gifts) by the penalty divisor. The penalty divisor has been $4,300 for many years. For Medicaid applications filed on or after June 1, 2009, the penalty divisor will be $6,800. Using the new divisor, a gift of $68,000 will cause a Medicaid ineligibility period of 10 months, six months less than the penalty that would have been imposed using the old divisor.
Please contact the Gatesman Law Office to learn more about how this change may affect you.
I stumbled upon a blog written by Trevor Rosen that provides invaluable information for people seeking to do legal research in Maryland. For example, his May 2, 2009, blog post gives guidance on how to obtain legislative history for Maryland statutes. Lawyers use legislative history to ascertain the lawmakers’ intentions when passing legislation. Legislative history is important if a law is not clear, or if the meaning of the law is in dispute and the matter must be decided by a court. When courts interpret statutory law they frequently refer to the legislative history.
Rosen provides many other resources to assist lawyers and others who seek to research Maryland law. I have placed a link to Trevor Rosen’s blog in the Web Links section of this webpage. To see Rosen’s blog, click on the words “Researching Maryland Law” in our Web Links.
The Gatesman Law Office works with personal injury lawyers to assist their clients in protecting the assets they recover for their clients. Sometimes, it is prudent to utilize a special trust to protect any public benefits the injured party may be getting. If, for example, the client is eligible for Supplemental Security Income (SSI) and Medicaid, using such a trust is essential. Without the trust, the client will lose both SSI and Medicaid.
A lawyer who is doing Medicaid planning for a client asks: “The Medicaid caseworker has requested to see my client funds account records. Must I give her this information? Is this a problem?”
This inquiry reveals one of the many pitfalls of Medicaid asset preservation planning.
Traditional Medicaid Asset Preservation Planning enables the well spouse to protect some or all of the assets while allowing the spouse in the nursing home to obtain Medical Assistance to pay the cost of nursing home care. Post-Medicaid eligibility planning techniques enable the well spouse, should she predecease the spouse in the nursing home, to pass all of the assets to children without having to pay back any of the nursing home costs.
This type of traditional Medicaid planning, however, does nothing to preserve assets for the well spouse should the well spouse also require long term care in a nursing home sometime in the future. Indeed, many of the powerful asset preservation tools available to a married couple cannot be used to preserve assets for a single person seeking Medical Assistance benefits to cover nursing home costs.
Consequently, even where a couple has done asset protection planning when one of them enters a nursing home, after that individual has died, the well spouse remains at risk to lose all of her assets in the event she should require long term nursing home care.
William M. Gatesman has been a leader in developing asset preservation techniques for individuals and families facing the possibility of high long term care costs. Mr. Gatesman’s latest development in long term care asset preservation strategies is the Spousal Asset Preservation Trust.
In January, 2009, the Maryland Medical Assistance program revised it’s income and asset thresholds. For 2009, the maximum spousal resource allowance is $109,560, and the minimum allowance is $21,912. Remember, however, that the spouse whose partner is in a nursing home may not be able to retain the maximum resource allowance depending on how much money the couple had when one of them entered the nursing home. To see how one might take action to ensure that the spouse at home can keep the maximum, you can read the article I have written on the subject by clicking -HERE-.
Ever since the implementation of the Deficit Reduction Act of 2005 (“DRA 2005″) elder law advisors have been informing clients that Medicaid asset preservation planning using gifts to family members has become more complex. While many people believe that DRA 2005 was the death knell for such planning, in fact one may still preserve assets using a gift giving strategy.
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