Medicaid Planning with Augmented Estate

There is a new law in Maryland that, effective October, 2020, will allow a surviving spouse to elect to take a portion of property passing as a consequence of a spouse’s death under an augmented estate formula. What does this mean?

Before the new law, a spouse only could elect to take a portion (one-third or one-half depending on the circumstances) of the estate that passed through probate. Lawyers who assist clients with Medicaid asset preservation planning took advantage of that by assisting couples to preserve all of their assets when one of the married couple needed nursing home care. The plan worked like this (and until October, 2020, will still work like this): If Husband is in a nursing home and Medicaid is paying for all of his care, then Wife could arrange to have all the assets to be titled in her name and pass outside of a probate estate.

Tools one may use to pass property outside of probate are bank and investment accounts that are designated “Pay on Death,” beneficiary designations, and life estate deeds. Before the new law takes effect next year, property passing by such tools will not be subject to an elective share by a surviving spouse.

That being the case, a husband and wife could set up their estate planning so that, if one them needs nursing home care in a nursing home for which Medicaid is paying the bill, and the spouse at home dies first, all of the couple’s assets could be protected rather than having those assets pass to the spouse in the nursing home causing Medicaid ineligibility.

Under the new augmented estate rules, however, all property held by the spouse at home would be subject to the elective share. Hence, in a case where Husband is in a nursing home and Medicaid is paying for all of his care, if Wife dies first, then it would appear at first blush that she no longer could shelter assets with”Pay on Death” accounts, beneficiary designations, and life estate deeds, because, under an augmented estate law, all of those assets are available for the spouse to elect to receive a portion.

Such is not the case with the Spousal Protection Wills that I have been using to do Medicaid planning for married couples, however. If a married couple employs the Spousal Protection Wills that I recommend, coupled with “Pay on Death” accounts, beneficiary designations, and life estate deeds that direct assets to the trust under the Will of the deceased spouse at home, which Spousal Protection Trust is for the benefit of the Husband in the nursing home in the example discussed above, then, under the new augmented estate law, the spouse in the nursing home only would be able to elect to take 11% of the property.

That being the case, if Husband is in a nursing home, and Husband and Wife own property (including the value of the house) worth $600,000, then, if Wife dies first, only $66,666 would have to be paid to the Husband in the nursing home under the new augmented estate legislation. Indeed, the administrators of the Medicaid program will insist that the spouse in the nursing home elect to take the spousal share or risk losing Medicaid benefits.

In this way, even after October, 2020, a married couple with $600,000 worth of assets, following a Medicaid asset preservation plan facilitated by this office, can preserve $533,334 even if the spouse at home dies before the spouse in the nursing home.

But doing a Medicaid asset preservation plan with this office would not stop at preserving all but 11%. There still are ways to protect all of the assets even under the new augmented estate law. That law provides other levers one could pull to effectively preserve all of the assets, just like a married couple can do now under current law. Those levers include: (i) spousal consent when the plan is put in place, (ii) judicial review under which a court may take into account, among other things, the degree to which the estate planning arrangement provides a benefit to the surviving spouse in the nursing home (which surviving spouse would be the beneficiary of 100% of the assets when using a Spousal Protection Trust), and, (iii) when an agent under a power of attorney or guardian must exercise the spousal election to comply with the Medicaid rules after the spouse at home dies, there is a mechanism by which a court order may be obtained to recognize that the interests of the spouse in the nursing home are much better served when he remains the beneficiary of 100% of the couple’s assets (albeit as beneficiary of a trust) as opposed to taking only 11% of those assets and losing Medicaid benefits for a period of time as a consequence of doing so.

William M. Gatesman has studied the new augmented estate statute well in advance of its October, 2020, effective date, and already is adjusting the estate plans for new clients to prepare for future asset preservation planning.

If you wish to review your estate plan with these thoughts in mind, please call us at 301-260-0095.

Resolving Trust Matters Without a Court

Until recently, resolving issues relating to trusts where the governing instrument of the trust was silent concerning the matter was a complicated process. Generally, clients had to petition a court to interpret confusing terms in a trust, or to modify a trust, or to change a Trustee if no successor Trustee was named, or to do other things not spelled out in the trust agreement.

Since Maryland adopted the Maryland Trust Act, however, Trustees and beneficiaries can resolve matters without having to go to court. There are a number of statutory provisions that apply, including Estates and Trusts Code Section 14.5-111 which allows interested persons to enter into non-judicial settlement agreements.

A non-judicial settlement agreement may even be useful in cases where clients are unable to locate the trust document itself. Indeed, there are circumstances in which a non-judicial settlement agreement may be used to recreate the lost trust document so that property held in a trust bank account can be dealt with without the necessity of going to court, thereby saving clients time and money.

William M. Gatesman has worked with numerous clients to assist them in resolving trust problems by means of non-judicial settlement agreements.

Praise from an Old Client

I recently received the correspondence below.

Dear Mr. Gatesman,

I just wanted to reach out to you to  thank you for a case you worked on and won for my fiance, Althea’s mother, Beatrice, in about 2005

Beatrice was the widowed, unmarried partner of a man who died intestate in DC in 2004. I can’t remember the exact ownership of the real estate they held together , but it was not the typical joint, with survivorship held by most married couples.

Anyway, my fiancé and I are Long Term Care executives, and had previously encountered another elder law lawyer (on the opposite side of the bench) and found him to be a worthy opponent. So, when this situation arose I told my fiance to call the other lawyer, who was either unavailable or didn’t do real estate cases in DC. Anyway, what a stroke of luck for us that the other lawyer referred us to you to be our counsel!

I remember Althea telling me that you listened to the case details and remembered a similar case decided in 1924 in favor of the unmarried survivor widow, I think it may have been Campbell v District of Columbia.

So, it turned out Beatrice was the rightful owner of the real estate due to how the ownership was structured. She lived until her death in 2014 in the house. Her ability to live out her years in her home was due to your capable and competent representation. I remember Althea and I spoke to several 5 star DC Martindale lawyers at the time in 2005, and none of them gave us any encouragement about her retaining her home in the estate battle.

So , Mr. Gatesman, after all these years I wanted to reach out to you to thank you for your capable representation of Beatrice, who would likely have lost her home and been quite destitute but for your advocacy and representation.

Thank you for helping us get through that difficult period and helping Beatrice retain ownership of her home.

Appointing a Successor Trustee when the Trustee Dies

The governing documents for trusts often designate who will serve as successor Trustee if the office of Trustee becomes vacant. However, sometimes the trust documents are silent concerning this issue, or sometimes none of the designated successors are able to fill a vacancy in the office of Trustee. What can you do in such a circumstance?

In the past, the only recourse a trust beneficiary had was to incur the time and expense of obtaining a court order to appoint a new Trustee. Now however, under Maryland’s recently new Trust Code, beneficiaries can take action to install a successor Trustee without going to court.

In order to do so, the law requires the beneficiary to identify all of the “qualified beneficiaries,” which includes beneficiaries currently eligible to receive income and/or principal distributions, and those who would be able to receive such amounts if the current beneficiaries cease to be eligible.

One provision of the Maryland Trust Code allows for appointment of a successor Trustee by unaimous agreement of the qualified beneficiaries. Another provision allows for persons who have an interest in the trust to enter into a non-judicial settlement agreement, which agreement, among other things, can provide for the appointment of a successor Trustee.

While these avenues of appointing a Trustee are less onerous than having to petition a court, it still is important that one follow all of the procedures set forth in the relevant statutes.

William M. Gatesman works with clients to appoint successor Trustees using these streamlined non-judicial methods, thereby enabling such clients to save time and money.

Funeral Services on a Budget

While many people take into consideration social or religious considerations when choosing what funeral services to utilize, and such considerations may preclude those from seeking out cremation services, there are others who do not take those considerations into account and desire to know what inexpensive services exist for dealing with one’s bodily remains after death. One such service provider in Maryland and surrounding areas is the Going Home Cremation Service, the website for which company is http://www.goinghomecremation.com/.

Obtaining Medicaid for Prior Month’s Nursing Home Costs

William M. Gatesman frequently assists clients or their families to obtain Medicaid benefits to cover the long term care costs in a nursing home. In order to qualify for such benefits, the nursing home resident must meet certain medical and financial eligibility requirements, and Mr. Gatesman helps clients to meet those requirements. Often, the strategies employed allow for maximum asset preservation, allowing spouses or families to retain accumulated wealth while still qualifying for Medicaid benefits.

Sometimes, an individual has outstanding unpaid nursing home costs, or other unpaid medical bills, when they finally take action to satisfy the Medicaid eligibility requirements. Fortunately, the law allows for reimbursement for such pre-eligibility medical expenses through the Medicaid program.

That being the case, sometimes the best strategy is to refrain from paying an outstanding nursing home bill in order to qualify for Medicaid, and instead to make a payment that will be more beneficial, such as prepaying funeral and burial costs. Then, when a Medicaid application is filed, the applicant can request that such unpaid nursing home costs be paid with Medicaid dollars.

There are certain restrictions and there is a particular approach one must take in order to secure Medicaid coverage for past due medical bills. William M. Gatesman assists clients in obtaining this benefit which is a benefit over and above securing Medicaid benefits to pay current nursing home costs.

To learn more, you may call William M. Gatesman at 301-260-0095 to find out if you or loved one can benefit from this additional payment option.