William M. Gatesman, Attorney at Law

William M. Gatesman assists clients in Maryland and D.C. in the areas of elder law and Medicaid planning, asset protection planning, special needs planning, estate planning, probate and estate administration, wills, trusts, powers of attorney, and health care decision making documents.  Mr. Gatesman is available to meet with clients in his offices in Rockville, Baltimore, Columbia, Frederick and Hagerstown, Maryland, and is available to make house calls as needed in those locations and in other areas of Maryland and the District of Columbia.

Call 301-260-0095 for more information or to make an appointment.

Scroll down to read articles Mr. Gatesman has written to educate consumers and their advocates regarding legal developments that may affect their lives.

Contract Under Seal

Did you ever notice that many legal documents, such as contracts, trusts, powers of attorney, and Wills, have the word “SEAL” printed following the signature line. Some people assume that this means that a Notary Public must place a seal in that space, but that is not what that word means.

If a person signs a document, and the document has a signature line followed by the word “SEAL”, or something similar, under the law of most states the effect of that word “SEAL” is to impose a longer statute of limitations for the enforcement of that legal document.

For example, if one signs a contract in Maryland, and it is not signed under seal, the statute of limitations for the enforcement of such contract is three years, whereas the statute of limitations for a contract under seal in Maryland is 12 years. In other words, one would have 3 years within which to enforce a contract not signed under seal and 12 years to enforce a contract signed under seal.

In days of yore, to sign a contract under seal, one would first sign the document, then drop hot wax on the paper next to one’s signature and press his signet ring into the hot wax before it cooled. Or a corporate officer might apply the corporation’s seal stamp onto the document next to the signature of that corporate officer. In today’s world, the word SEAL printed on a document next to the signature line is the modern day equivalent the signet ring seal or the equivalent of affixing a corporate seal on a written instrument.

Not knowing the implications of the word SEAL next to the signature line of a legal document could have significant consequences for the person signing such document. William M. Gatesman stands ready to assist clients with all aspects of the legal documents that they sign, including advising them regarding the implications of the words in such document.

Supported Decision Making Becomes Law in Maryland

Supported Decision Making is a new concept gaining favor in the community of people working to better the lives of people with disabilities. Maryland recently enacted legislation authorizing individuals to use Supported Decision Making.

Supported Decision Making typically would involve a person with limited personal capacity agreeing and communicating to other parties that such person wishes to have another trusted individual involved with communications with third parties such as banks, medical care providers, and so on, and that such person wishes to obtain the trusted individual’s input and guidance. Nevertheless, the person with limited capacity retains the right to make all her decisions.

Supported Decision Making often is implemented by means of a Supported Decision Making agreement or other legal document memorializing the relationship between individuals that could be presented to third parties for the purpose of enabling the trusted person to be involved with communications between the third party and the person of limited capacity. Such document serves the purpose of notifying third parties of the trusted person’s advisory role and can be used to open doors to enable the trusted person to participate in conferences which usually are attended only by the person of limited capacity and the third party.

A power of attorney, unlike the supported decision making agreement, establishes a legal relationship recognized under state law in which the person of limited capacity empowers the trusted individual to act in her place, as her agent. An agent under power of attorney (i.e. the trusted person) always is subsidiary and subservient to the principal (the person with limited capacity). With a power of attorney, the agent typically would be able to act alone even if the principal is not present or not personally involved in the interactions with the third party. Power of Attorney has been recognized by the Maryland law for a very long time.

A Supported Decision Making arrangement may be beneficial in some circumstances to provide a person with limited capacity a greater sense of autonomy and control while still enabling the trusted individual to be involved with her affairs and it could open doors to allow the trusted individual to be involved in situations in which privacy laws or other restrictions otherwise may keep the trusted individual on the sidelines. The person with limited capacity may desire to appoint the trusted person as her agent under power of attorney, as well, so that if the person with limited capacity became unable to manage her affairs, then the trusted person would have the authority to act on her behalf.

William M. Gatesman stands ready to assist clients who may have heard about Supported Decision Making and would like to learn more about it or who think that Supported Decision Making is a tool they may wish to employ in their estate planning.

The Maryland Judiciary has created a very fine video explaining the purpose and uses of Supported Decision Making. You may view that video by clicking here —-> https://mdcourts.gov/video/courthelp/supported-decision-making

Are You Paying Too Much to Apply for Medicaid?

The requirements imposed upon individuals seeking Medicaid benefits to pay nursing home costs have become less onerous in recent years.  For many years, Medicaid applicants were required to submit monthly statements for every bank and investment account for every one of the 60 months preceding the filing of the Medicaid application.  Under that regime, someone with only 4 bank accounts would have to submit 240 individual account statements.  Then, once those statements were submitted, they were reviewed by a Medicaid caseworker who was on the lookout for any “questionable” transactions.

“Questionable” transactions include unexplained deposits and substantial expenditures.  Therefore, unless the source is obvious from the account statement, any deposit showing up on those 240 statements would be questioned by the Medicaid caseworker seeking to ascertain the source of the funds deposited, and any payment of $1,000 or more likewise would be called into question.  The problem is magnified if the applicant or the applicant’s spouse had any additional bank or investment accounts.

That being the case, in order to be prepared to address a Medicaid caseworker’s questions, lawyers assisting Medicaid applicants under the old system would review all of the bank statements and seek explanations from the applicant or applicant’s family for any transactions that likely would be questioned.  That process could be time consuming, and, if the law firm performing such review billed the client on an hourly basis, then the legal fees to pursue the Medicaid application would be high.

In recent years, however, the Medicaid application process has been streamlined.  No longer is a Medicaid applicant required to submit 60 individual account statements for each of the 60 months preceding the month the Medicaid application is filed.  Now, applicants need only submit a few statements for the most recent months, and then a single statement for a particular month for each of the preceding five years.  Hence, under current practice, rather than submitting 60 statements for each account, an applicant only has to submit 8 statements, and it is only those 8 statements that will be scrutinized by the Medicaid caseworker.   Thus, for a Medicaid applicant with four accounts, the number of statements needed to be submitted for scrutiny was reduced from 240 to 32.

If one were to continue to operate under the old system and submit 60 monthly statements for each account, and then spend the time to closely scrutinize each of those statements and any transactions that might be called into question, then such person would  be doing extra work for little or no added benefit.

Continue reading “Are You Paying Too Much to Apply for Medicaid?”

Medicare Savings Programs and Estate Recovery

Questions, even among experienced elder law lawyers, are (i) whether Medicare savings programs are subject to estate recovery after the program beneficiary dies, and (ii) whether making gifts causes ineligibility for Medicare savings programs.

The Medicare Savings Programs are:
1.  Qualified Medicare Beneficiary (QMB)
2.  Specified Low-Income Medicare Beneficiary (SLMB)
3.  Qualifying Individual (QI) [known as SLMB II in Maryland]
4.  Qualified Disabled and Working Individuals (QDWI).

At one time, States were allowed to recover Medicare Savings Program benefits through estate recovery, however, since 2010, when the Medicare Improvements for Patients and Providers Act MIPPA of 2008 went into effect, States are not allowed to recover for payments made for Medicare Savings Programs. States are, however, allowed to collect for Medicaid benefits other than Medicare Savings Program benefits.

For Medicaid benefits (other than Medicare Savings Program benefits) paid on behalf of an individual after such individual turned age 55, estate recovery is allowed for Medicaid payments that cover nursing facility services, home and community-based services, and related hospital and prescription drug services. In addition to estate recovery, the State can put a lien on the real property of a recipient of such benefits, however, there is a judicial process involved with placing a lien. Maryland generally relies on estate recovery and does not often place liens on real property in this context.

Regarding the implications of making a gift of one’s property, for Supplemental Security Income (SSI) benefits and for all Medicaid benefits other than Medicaid Savings Programs and for health insurance under the Affordable Care Act, a penalty is imposed when one gives away her assets, the penalty being a period of ineligibility for the benefit program as a consequence of the gift transfer. However, the rules to qualify to receive Medicare Savings Program benefits are silent regarding asset transfers, hence, there is no such transfer penalty with respect to Medicare Savings Programs.

William M. Gatesman assists clients in obtaining public benefits for their care needs, and advises clients concerning the implications of their actions with respect to their benefit eligibility.

Hidden Cost to Sell Leisure World Property

Lawyers who assist clients with Medicaid planning sometimes work with clients to sell their real property in an interfamily transaction. One example of this is where a family member wishes to provide a disabled parent with liquid funds to enable the parent to continue to live at home with in-home caregivers. While doing so may delay the parent’s need to move to a nursing home, such a move may become necessary if the parent’s liquid funds are exhausted.

Few children of disabled parents have the wherewithal to simply give their parents large sums of money. That being the case, a child of the disabled parent may provide liquid funds to the disabled parent in exchange for the parent’s real property. In essence, the child buys the parent’s home, and allows the parent to live in the home and use the funds the child paid to buy the property to pay for in home care givers.

Then, once the parent dies or runs out of liquid funds and goes into a nursing home, the child can sell the parent’s home (which the child purchased and now owns) to recover the funds the child paid to her disabled parent to facilitate the parent staying home with a care giver.

Moreover, because the Medicaid rules allow for various methods of determining fair market value, a transaction such as the one described above may be part of an asset preservation strategy with the added benefit that the disabled parent gets to stay at home for a longer period of time than otherwise would be the case.

When considering any such plan, however, one has to take into account hidden costs. An example of a hidden cost is provided by the Leisure World homeowner association. Leisure World is a large senior community in Montgomery County, Maryland. When a homeowner sells a property in Leisure World, the homeowners association requires that a buyer contribute to the “resale improvement fund” an amount equal to 3% of the gross sales price.

For the sale of a $300,000 condo in Leisure World, this charge would amount to $9,000.

It is wise to be aware of any hidden charges that might come to bear when doing Medicaid planning that involves an interfamily real estate transaction.

The Secret Handshake – How Do I Find Out What Rules Apply?

The “Secret Handshake” refers to that gesture known only by the select few who are allowed access to an exclusive club.  I use that term in the title to this article because there are times when only those lawyers who closely follow Medicaid rule changes are aware of rules that impact clients. Everyone else is left in the dark.

One example relates to the use of a certain type of special needs trust. A person under age 65 who has high medical costs that would overwhelm that person’s income and assets may use a type of trust that allows such person to put his or her limited resources into the trust to enable such person to obtain Medicaid benefits to pay that person’s medical costs. This type of trust is useful where the amount of that person’s own assets cause such person to not be eligible for State medical care benefits, but which assets and the person’s income are too low to cover that person’s medical costs. I will call such person the “Beneficiary” for purposes of this article.

For many years, this special type of trust could only be created by the Beneficiary’s parent or guardian or by a court. If the Beneficiary’s parents were not living and the Beneficiary had no court appointed guardian, then there was an added cost, the cost of petitioning a court, to establish such a trust. It would be so much easier and less costly to the Beneficiary if the Beneficiary herself could be the person who created the trust.

And then, about 5 years ago, the rules changed, such that the Beneficiary could create such a trust and it would qualify to shelter the beneficiary’s assets so the beneficiary could obtain State benefits to pay for the Beneficiary’s high care costs.

But who knew? Who was privy to the fact that this rule had changed? Is it clear even today that this rule has changed? Consider this: Today, as was the case five years ago, the Maryland Medicaid eligibility manual, available online to anyone and the rule book used by public benefits case workers to evaluate applications for benefits, states at Section 800-16(c)4 that only those trusts that are created by a parent, guardian, or a court (and otherwise meet the special requirements for such trusts) are sufficient to shelter the Beneficiary’s assets.

Notwithstanding that the Maryland Medicaid manual no longer had accurate information after the rule changed, and still, to this day, has inaccurate information as to who may create such a trust, those lawyers who knew the “secret handshake,” that is, those lawyers who were privy to the discussions about Medicaid policy became aware of such rule change. This rule change was communicated to a select few Maryland lawyers by means of an email from the Office of Eligibility Services of the Maryland Department of Health. That email is reproduced below at the bottom of this article.

For a long time after the rule changed, even the Code of Maryland Regulations was not accurate, which regulations stated, like the Maryland Medicaid manual, that only those trusts that are created by a parent, guardian, or a court (and otherwise meet the special requirements for such trust) are sufficient to shelter the Beneficiary’s assets. The State of Maryland finally got around to updating its regulations, so that the regulation set forth at the Code of Maryland Regulations, Section C, now correctly states that the Beneficiary herself may create the trust and it would qualify for the favorable treatment to enable such Beneficiary to obtain state benefits to pay high medical care costs.

But for years, the only guidance as to the issue in Maryland from the Maryland regulators was the obscure email shown below. And even today, the Maryland Medicaid manual, which is the rule book used by Medicaid caseworkers to evaluate applications for public benefits, is incorrect as to the issue of who may create such a trust.

Skilled public benefits lawyers bring a lot to the table to assist persons in need to enable them to participate in public benefits programs, not the least of which is such a lawyer’s access to timely and relevant information regarding the current state of the law and regulations that impact persons in need.

Free Trust Forms

A client recently asked me to review a trust form she was considering using, which was a form she obtained for free from the internet. Her objective was to set property aside in the trust so the assets would be protected and she could get Medicaid to pay her care costs should she ever require long term care in a nursing home.

I discourage people who are not lawyers from using legal documents that they obtain from the internet. Doing so could result in serious problems.

The trust my client obtained from the internet, dubbed a “Maryland Irrevocable Trust,” was defective in a number of ways. While some of the provisions of the trust would not necessarily be problematic, those same provisions could cause problems depending on the client’s objectives and the intended purpose of the trust. A lawyer who is skilled in the area of estate and trust law, and in this case, Medicaid law, is able to craft a trust that would meet the client’s objectives, and in doing so, would not include certain trust provision that might be acceptable in other circumstances.

For example, in my client’s case, the trust form contained a provision that instructed the Trustee to add any income that was not distributed to the beneficiary in a particular year to the principal of the trust. While this type of clause often is used by lawyers who prepare trusts, in light of my client’s objectives, such clause could be problematic. Every time income is not distributed in a particular year and added to the principal of the trust, such action will be treated as a gift for Medicaid eligibility purposes which causes a period of Medicaid ineligibility thereby defeating the purpose of the trust.

Another problem with the trust form my client wanted to use is that the trust did not give the trustee the authority to distribute principal to the beneficiary thereby locking the funds away so they would never be available to my client during her lifetime. Because my client was planning to put all of her assets into this trust, she may have found herself in dire straits were she to encounter a situation in which she needed to use more than just her income during her lifetime. While it is possible to create a trust that meets the client’s objectives without locking away the majority of the client’s assets, the trust form my client wanted to use was not sufficient for such purpose.

The trust form also prohibited beneficiaries from serving as trustees. However, my client wanted her children, who would be future beneficiaries, to serve as the trustees, and in fact named one of her adult children as the trustee. Setting up the trust in that manner might put the trust at risk of being deemed not to be effective for my client’s intended purpose at some future time should she ever apply for Medicaid benefits expecting the trust to be in force to protect her assets. Indeed, such fact may have made the trust defective from day one so that the property would be treated as not having been held in trust in the first place.

In addition, while the trust stated that, after the client’s death, the trust assets would be distributed to her children, the trust was silent as to the disposition of the assets should one of her children die before she does. Would all of the property go to her surviving child? Or would her deceased child’s descendant take her deceased child’s share? This type of uncertainty could cause serious family problems in the future.

There were other problems with the trust form as well. One paragraph simply did not make sense. While I, as a lawyer, could come up with a reasonable interpretation of such language, it is possible that the paragraph could be misconstrued.

Also, the signature page of the trust had spaces for the creator of the trust to sign and spaces for each of the trustees to sign, but there was only one notary jurat, the space on the form in which the notary acknowledges that the person signed the document. It was unclear whose signature of the three persons who signed the document the Notary Public was to certify.

This case is but one example of several in which clients have come to me with legal documents they obtained from the internet, which documents were more of a problem than a solution to meet the client’s needs. Because of this, I warn clients to resist the siren’s song of free legal forms available on the internet. Often those forms create more problems than they solve.

The Gatesman Law Office offers economical solutions, including legal documents appropriate to the circumstances, to meet our client’s needs. Please contact us at 301-260-0095 to learn more.

Obtaining Medicaid with a Beach House

In general, for a married couple, if one of the couple needs long term care in a nursing home, the couple can engage in asset preservation planning that enables the couple to keep all of their assets and still get Medicaid to pay for the nursing home care. Included among the property that the couple can keep is the family home.

The matter can be complicated if, in addition to the family home, the couple owns a beach house. Specialized planning must be employed to protect the beach house.

For example, it may be possible to title the beach house in the name of the spouse at home, (not the nursing home spouse), and make it a rental property, if only temporarily. By doing so, the beach house can be characterized as a source of income for the spouse at home rather than being a countable resource which might cause Medicaid ineligibility. By doing so, the beach house would not be counted as an asset that would cause Medicaid ineligibility.

Another strategy can be employed where the beach house is owned with others. If a joint owner provides an affirmative declaration that he or she would refuse to participate in a sale of the property, then the property can be valued at zero for Medicaid eligibility purposes. Done properly, such strategy would pave the way to allow for Medicaid eligibility.

A third possibility is to list the property for sale. As long as the property is listed for an asking price that Medicaid will consider to be “fair market value,” if no offers to purchase are received, then the beach house can be valued at zero. For example, if the family owns a beach house that is in poor condition, and it is listed for sale at its assessed value, if no third party would be willing to pay that amount in light of the condition of the property, then this strategy may be employed to protect the beach house.

There are other strategies that may be employed, as well. The bottom line is this: don’t be dissuaded if you are faced with a challenging circumstance that complicates your Medicaid asset preservation plan. It still may be possible to engage in planning to preserve all of the family’s assets and get Medicaid to pay for care in the nursing home.

William M. Gatesman specializes in “thinking out of the box” to come up with creative solutions to assist clients with their asset preservation objectives.