News from Samuel, Sayward & Baler LLC for May 2016 includes the articles: Five Examples of DIY Estate Planning Gone Bad, Estimating and Planning for Health Care Expenses During Retirement, and Proposed Expansion of Medicaid Estate Recovery.
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Five Ideas to Consider when Leaving a Vacation Home to Heirs*
With full summer upon us, thoughts turn to vacationing. Whether you love the mountains, the beach, or fishing on the lake, everyone wants to take time to recharge during the carefree days of summer. Some people are fortunate enough to own a vacation retreat where family members are regularly invited to get away from it all. Whether it’s a cabin in the woods or a waterfront mansion, passing this beloved property on to future generations in a way that is fair and likely to result in years of happy memory building by generations of family members is a challenge. In fact, sometimes it is so challenging that the owners die without doing any planning for their vacation home, which can lead to serious conflicts among heirs.
Here are five ideas to consider when a vacation home is part of your estate.
- There’s no such thing as setting aside too much money to support the property. One of the primary areas of discord among co-owners of vacation property is money. When mom and dad bought the cabin, they factored in the costs of maintaining the property when making the decision to purchase it. However, for heirs who inherit a percentage of a property, there was no such consideration. It costs money to maintain the cabin, including paying taxes, insurance, utilities and repairs – and not all inheritors are of equal means. If you have a vacation home you want to leave to multiple inheritors, plan to leave funds to pay for the upkeep of the property for at least a few years following your death.
- Involve the next generation in the planning. When planning for the future of your vacation home, talk to your children about your plans and encourage them to be honest with you. Although you dearly love spending time at the cottage, your children may not feel the same way and they may be reluctant to tell you for fear of hurting your feelings. Even if your children also love the family vacation home, they may recognize that because of where they live or because of their personal financial circumstances, ownership of the property is just not realistic. As painful as this may be for parents to hear, knowing who wants to keep the property and who has no interest in owning a second home is vital information in planning.
- Consider tax reduction strategies. In some sad situations, the next generation would love to keep the vacation property, but the estate taxes payable at the parents’ deaths are so steep that they cannot afford to do so. These days, it is not uncommon to find that the humble lakeside cottage purchased 30 years ago for short money is now worth $2 million or more. If you are lucky enough to have one of those properties, consider undertaking planning to reduce the tax bite at your death. Common planning techniques include granting a conservation easement, charitable planning with part of the property, or using a Qualified Personal Residence Trust (QPRT) or other gifting vehicle to reduce the tax value of the property in the parents’ estates.
- Transfer during lifetime or at death? Many vacation home owners intend to remain as the sole owners of the property during their lifetimes and leave the property to their heirs at their deaths. They reason that by doing so, they remain as the sole decision makers and keep all of their options open: they could sell the property, rent it out, change their minds about who will inherit it, etc. However, transferring ownership to the next generation during the parents’ lifetimes can be good tax planning (see #3 above) or a good way to protect the property from having to be sold to pay for a parent’s long-term care expenses. Transferring interests to children during the parents’ lifetimes can also serve as a “practice-run” for management of the property. The parents can tweak their vacation house plan to address issues that arise during their lifetimes while they are still around to do so.
- The devil is in the details, or who gets the week of July 4th? In most cases, a vacation home is a seasonal use property. Even if the Cape house is winterized and can be used in February, not many seek out the beach in the dead of winter. Whether it’s skiing or beaching, there are usually a limited number of “prime” weeks during which everyone wants to use the property. Along with the money (see #1 above), deciding how to divvy up these weeks among the inheritors is a key element to planning for the vacation home. The challenge increases exponentially with the greater the number of people involved. By putting a system in place, parents can reduce the friction that may arise among children with competing interests who are trying to work this out after mom and dad are gone.
If you have a vision of your descendants enjoying your beloved cottage and building memories there for generations to come, take the necessary steps now to make your wishes a reality. Failing to plan and simply hoping that your children will “figure it out” is the clearest path to family discord. An experienced estate planning attorney can help you craft a plan that will have your heirs lounging lakeside or speeding down the slopes for years to come.
* Special thanks to my friend and colleague Attorney Timothy Borchers whose work and guidance in the area of planning for the family vacation home has been invaluable to many of us.
Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
Happy Anniversary to the Federal Estate Tax!
It may (or may not) interest you to know that the federal estate tax has been with us for 100 years, since it was enacted in 1916 by Congress to boost revenues in anticipation of the country’s participation World War I. Forms of inheritance or estate tax had been around for brief periods prior to 1916 to finance earlier wars, but unlike previous incarnations of the tax, this one stayed in place.
The estate tax is a tax paid at death, by the estate of the deceased, before assets are distributed to heirs. The estates of deceased Massachusetts residents are potentially subject to both the federal estate tax as well as a separate Massachusetts estate tax. Whether or not your estate will pay tax depends on the value of the assets you own or in which you have an interest on the date of your death.
Unlike 2016, the 1916 federal estate tax had a top rate of 10% and an exemption amount of $50,000. Today, the combined federal estate and gift tax “applicable credit amount” is $5.45 million per person (and is annually adjusted for inflation). This means that every U.S. Citizen can give away $5.45 million, either by making lifetime gifts or leaving assets to heirs at death, without paying a federal estate tax. If the value of your lifetime taxable gifts and assets left to your heirs at death exceeds this amount, the federal estate tax is imposed at the rate of 40% on amounts over the applicable credit amount. For a riveting, although dated, history of the estate tax, read the IRS Publication: The Estate Tax: Ninety Years and Counting.
Like 1916, today’s federal estate tax does not affect many people because the estate tax exemption is so high. In 2013, approximately 2.6 million people died in the United States, but only 4,700 of those people filed a federal estate tax return.
If you are among the lucky few to have an estate large enough to be subject to the federal estate tax, make sure you consult your estate planning attorney about what you can do to minimize the impact of the federal estate tax on your estate and your heirs, as well as ensure that you have a plan for how any estate tax due will be paid at your death.
Coincidentally, 2016 marks the 40th anniversary for the Massachusetts estate tax, which was enacted in 1976 as the successor to the previous Massachusetts inheritance tax. Stay tuned for a celebration of that anniversary with some interesting facts about the Massachusetts estate tax in my next blog post!
July 2016
Prince died without a Will – What?!
In of 2014 I wrote an article following the death Philip Seymour Hoffman expressing amazement about his failure to create a proper estate plan despite having a large estate and young children. Apparently Prince missed that post because rumor has it that he died without a Will! While it is apparently true that many adults do not have a Will, it still surprises me to hear about people who are surrounded by lawyers, financial planners and other advisors, as Prince was, who still manage to die without a proper estate plan in place. I imagine that at least some of these advisors suggested to Prince that he should do some estate planning. So I wondered, ‘why don’t people make a Will?’ In order to find an answer to this perplexing question, I Googled it of course. Here’s what I learned from various sites on the internet:
- People don’t like thinking about death. Ok, I get that – death is sad. But that is not a good reason to fail to make a Will. The point of making a Will is to make life easier for your family when you’re gone. If you die without a proper estate plan, including a Will, your family will not only be sad, they’ll be mad that you left them with a big mess.
- It’s too expensive to make a Will. While it is true that lawyers are expensive and estate planning can be costly, for many people the cost of not planning (taxes, probate costs and attorney fees) far outweighs what it would have cost to create a plan.
- My family knows what I want and I trust them to do the right thing. Really? I can’t tell you how many times two members of the same family have told me ‘what mom would have wanted’ and it’s two different things. Further, even if your family does know what you want, they may not be able to carry out your wishes if you did not grant them the legal authority to do so via your Will, or if you own assets in such a way that they are not consistent with those wishes.
- I don’t have young children so I don’t need a Will. If you have minor children, then making a Will is not just a good idea, it’s your responsibility as a parent. However, even people who don’t have young children should have a Will to designate the person who will be in charge of settling their estate (Personal Representative) and to direct how their assets should be distribute at their death.
Making a Will need not be terribly complicated or expensive. Taking care of this important ‘life task’ will not only mean that you have left your family with a roadmap to settling your estate, it will give you a deep sense of satisfaction and relief for having put your affairs in order. To read more about why you should make a Will as well as to find other articles on estate and long-term care planning, visit the Articles page of our website and schedule an appointment to make your Will!
Five Things to Discuss With Your Elderly Parents
Last month was National Elder Law Month, which helps raise awareness about our growing senior population. Issues that affect our elders are getting more press recently, and for good reason. Here are some eye-opening statistics: In 2014, there were 46.2 million people in the United States age 65 and older, representing 14.5 percent of the total population and 3 million more than the year before. By 2060, 98.2 million people will be age 65 and older, nearly 25 percent of U.S. residents at that time! Of this number, 19.7 million will be 85 or older.
For most of us, the issues faced by seniors are brought into focus by our interactions with our own parents. This is particularly true with respect to issues related to health care and financial decision-making. Decisions regarding end-of-life care are particularly difficult, but also among the most important. I meet with elderly people every day who want to talk about this topic. Many have seen a spouse, friend or family member face the end of life, some with good experiences and some with bad, and have very clear ideas about what they want for themselves.
Here are five ways you can help your elderly parents ensure that financial and health care decisions will be made for them by someone they choose and trust, and that their wishes will be expressed clearly and carried out to the greatest extent possible.
- Sign a Power of Attorney. A Durable Power of Attorney is a legal document in which the maker (the principal) designates a person (the attorney-in-fact) who will have the authority to manage the principal’s financial affairs. It is used to address the possibility of future incapacity. Without a Durable Power of Attorney in place, you will be forced to pursue a conservatorship through the probate court if your elderly parent is in an accident or suffers a medical event that makes him unable to handle his own financial affairs such as paying bills, signing a tax return, managing investments, filing an application for long-term care benefits, or paying for assisted living, home care or long-term care.
- Sign a Health Care Proxy. A Health Care Proxy is a document by which your elderly parent can designate an individual to serve as her Health Care Agent. The Health Care Agent is the person who will make health care decisions for your parent if she is ill and unable to communicate with her doctor. An attorney can prepare a Health Care Proxy, or a form can be obtained from your parent’s physician or online – just be sure to use a Massachusetts Health Care Proxy as these documents are state-specific. The selection of a Health Care Agent is important. Your parent should choose someone with whom she can have frank discussions about her health care wishes, and who she can trust to carry out those wishes, even if other family members may object. Consideration should also be given to choosing someone who will be a good advocate within the health care system.
- Sign a Living Will. A Living Will is a document that expresses wishes about end -of-life care in general terms. In Massachusetts, Living Wills are not legally binding on the patient’s doctor or Health Care Agent. However, this document is another way to ensure an elderly parent’s wishes are known. A Living Will can be created by an attorney, or simply by your parent expressing her wishes in writing to family members.
- Talk to a Physician about MOLST. MOLST is an acronym for Medical Orders for Life Sustaining Treatment and is a medical document completed by a patient and her physician. If your elderly parent has a serious chronic or terminal illness, encourage her to meet with her physician to complete a MOLST form, which is a medical order confirming how certain aspects of a patient’s care should be handled. The form notes whether or not aggressive treatment should be employed to keep the patient alive under certain circumstances, and gives the patient and physician, after discussion, the ability to opt out of certain aggressive measures.
- Have a Conversation about End-of- Life Care. The most important thing you can do for your elderly parents is to encourage conversations about how they want to be cared for at the end of their life. It is important to encourage your elderly family members to express preferences for care to their family while they are still able to do so. Most elderly individuals have opinions about the care they wish to receive and want to make sure their family members know their wishes and will carry them out when the time comes. Although these conversations are not always easy, your parents will feel better after making their wishes known and you will also feel better after receiving guidance from them. A family is put in a difficult situation when an elderly parent becomes too ill to make decisions about his own care and his family has no idea what type of care he wants to receive. The Conversation Project is a local initiative that encourages conversations about end-of-life care. To get started, visit theconversationproject.org and download the “starter kit.”
One of the most important things you can do for your elderly parents is to help them get their affairs in order. This will give them peace of mind that their wishes have been clearly expressed and a plan is in place. It will also give you peace of mind that you will know what to do and have the tools you need to assist your parents when assistance is needed. It will also help siblings maintain good relationships while having confidence they have honored the wishes of their parents. So, in recognition of National Elder Law Month, take your favorite elder out to lunch and have a conversation about what they can do to ensure their wishes are carried out if they become unable to make decisions for themselves.
Attorney Maria Baler is an estate planning and elder law attorney and a partner with the Dedham law firm of Samuel, Sayward & Baler LLC. She is also a director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
Estimating and Planning for Health Care Expenses During Retirement
Health care expenses are among the largest and most difficult costs to estimate and control during retirement. Even those of us doing a good job saving, investing and estimating our retirement expenses may be underestimating the cost of our health care. In the years approaching retirement, it may seem that switching from a private health care plan to Medicare will result in big savings. However, HealthView Services’ 2015 Retirement Healthcare Data Report, drawing data from 50 million households, provides eye-popping projections of health care costs for people approaching or in retirement. The full report is available at www.hvsfinancial.com. Here are some key findings.
A healthy couple, both age 65, retiring this year and covered by Medicare Parts B (physician) , D (prescriptions) and a supplemental (Medigap) policy should expect an annual cost of about $7,000. This amount is expected to rise steadily — from $8,000 to $10,000 annually when the couple is in their 70s, and from $12,000 to $14,000 annually when the couple is in their 80s. The total cost from age 65 to 85 for this couple, is estimated to be about $267,000. Remember that Medicare, even with a supplemental Medigap insurance policy, does not cover all dental, vision, co-pays and other out-of-pocket costs. If these additional costs are included, the HealthView study estimates that a 65-year-old couple retiring in 2016 will have paid a total of nearly $400,000 for their healthcare by the time they reach age 85.
Some people assume that Social Security benefits will easily cover their Medicare costs with room to spare. This is unfortunately not the case. This year, the average Social Security benefit is about $1,341 per month, before deduction of the Medicare premiums. HealthView estimates that a 65-year-old couple retiring today will pay more than 40 percent of their Social Security benefits to cover Medicare when they reach their 70s and that will increase to more than 80 percent in their late 80s.
Even large expenses, like those estimated above, can be managed for individuals and couples who start planning before retirement and manage their expenses well over decades of retirement. A good goal for addressing these large expenses is trying to follow the financial services industry rule of thumb of saving 15 percent of income annually, including employer-matching contributions to company retirement plans. While a 15 percent savings rate is especially difficult for people in their 20s, 30s and 40s when there are many competing needs for housing, family and education goals, making some contributions in those years, even well short of 15 percent is important. The varying amounts saved each year can be enough if combined with 15 percent or more annual savings in a person’s peak earning years in their late 40s, 50s and 60s.
For people who haven’t saved enough for the lifestyle and spending levels they hoped for, finding the least painful ways to reduce spending will not be easy. They should make some lifestyle and/or financial planning changes as soon as they can. For help with understanding how these issues will impact your life and well- being, consult a trusted advisor.
Samuel Financial LLC is located at 858 Washington Street, Suite 202, Dedham, MA 02026 and can be reached at 781.461.6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment advisor.
Five Examples of DIY Estate Planning Gone Bad
Self-sufficiency and resourcefulness are admirable traits – knowing how to change a tire, wallpaper a bathroom, or use duct tape to fix any number of problems can save both time and money. However, not all tasks should be tackled at home – dental work, anything to do with electricity, and getting bats out of the attic are examples of tasks for which most people should hire a professional. With the proliferation of DIY (do-it-yourself) kits and forms available online these days, estate planning may seem like one of those items that could be handled at home and save a lot of money. Beware – the consequences of not getting it right can be worse than a do-it-yourself root canal! Here are five real examples of DIY estate planning gone bad.
- DIY Power of Attorney resulted in the need for a court conservatorship. The children of an elderly woman who was in a nursing home contacted me to undertake planning to protect assets against complete spend down on long-term care costs. Because of this family’s situation, there was an opportunity to preserve the home by transferring it out of mom’s name even though she was already incapacitated and in a nursing home. Unfortunately, a few years earlier, the children had helped mom “save money” by having her sign a Power of Attorney form they found on the Internet. The Power of Attorney did not include the authority they needed to undertake the planning that would allow them to preserve mom’s $800,000 home against a lien for long-term care Medicaid benefits. Because mom no longer had the capacity to execute a new Power of Attorney, we had to file for a Conservatorship with the probate court. This took a long time, required a number of medical certificates from mom’s doctors, and was expensive. Further, the court appointed another attorney to represent mom’s interests, paid for by mom. All told, it cost more than $7,000 and took approximately eight months to accomplish what could have been done in less than a week for a fraction of the cost if there had been a comprehensively drafted Power of Attorney in place (which would have cost far less than $7,000).
- DIY long-term care planning meant loss of home to Medicaid lien. I recently had a very sad situation where a family lost the home that had been in their family for more than 100 years because they did not seek the advice of an elder law attorney when the mother of my client went into a nursing many years ago. Although Medicaid imposes a period of ineligibility for long-term care nursing home benefits if assets are given away within five years prior to applying for benefits, there are exceptions to that rule. This family would have qualified for one of those exceptions and the home could have been transferred to my client without any penalty. Had that been done, the home would have belonged to my client free and clear of any claim by the state for the cost of the mother’s nursing home care. Unfortunately, I was not consulted until after the mother had passed away. At that point, the Commonwealth had a lien against the ancestral home for an amount that exceeded the value of the property. Once the mother passed away, the opportunity to transfer the home to the daughter under one of the exceptions to the transfer rules and free of the Medicaid lien was lost. The house was sold and the family received nothing – all of the proceeds went to the state.
- DIY estate planning meant loss of benefits for beneficiary with disabilities. I had a client contact me to help her settle the estate of her brother who had passed away at the age of 45 having never married and leaving no children. The brother had prepared his own Will leaving his estate to his two siblings. While it was good that he had the foresight to create a Will, it was not so good that he did not consult with an estate planning attorney. It turned out that one of the siblings was receiving needs-based governmental benefits because of a disability. Unfortunately, this sibling’s entitlement to an inheritance caused him to lose those benefits. While we were eventually able to requalify him for those benefits, we needed to go to court to do so. Further, the solution to the situation most likely means that a large part of the inherited wealth will be taken by the state when the disabled brother dies. With planning, the deceased brother could have created a trust that would have provided for his disabled sibling and ensured that any amounts remaining at his sibling’s death were distributed to his sister and not to the state.
- DIY Will Necessitated Court Permission to Sell Real Estate. I had a client who came to see me because he was named as the Personal Representative (Executor) of his aunt’s Will. The Will left everything to four nieces and nephews, including my client. It was a fairly simple estate – aunty had only her home and a bank account. However, the Will did not grant the Personal Representative the authority to sell real estate. That meant that in order to sell the house, we had to file a petition with the court seeking permission to sell the real estate. This delayed the process and cost the estate several thousand dollars more than it would have cost to have a proper Will prepared by a lawyer.
- DIY Realty Trust created defect in title to property. In the course of updating an estate plan for an new client whose husband had passed away and who had done all of their legal documents for them (no, he was not a lawyer), it was discovered that he had created a defect in the title to their home as a result of a series of transactions conveying their real estate in and out of trust. We had to engage the services of a real estate attorney to clear the title and record a variety documents with the Registry of Deeds. The cost of this was about $4,000 – far more than it would have been to engage an attorney to do it correctly from the beginning.
The above are just five examples of what I see in my practice on a regular basis. While it’s great to save money, be careful about being “penny-wise and pound-foolish” – getting it right the first time will usually save a lot of time and money in the long run. And remember, getting it right the first time requires seeking the assistance of an experienced estate planning attorney. Next to DIY documents, documents created by attorneys who do not practice primarily in this area can also create more problems than they solve.
Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
Irrevocable Trust Update—Favorable Decision from the Massachusetts Appeals Court is a Battle Won but Not the End of the War
My February 2016 blog post gave a bleak outlook across the battlefield of irrevocable income only trusts in a Medicaid context—it’s guerrilla warfare out there, there are no rules, and the Superior Court and fair hearing decisions are all over the map making it very difficult to advise seniors who want to protect their home from the high cost of long-term care. But on April 15, 2016, a significant battle was won and there was finally some good news. Actually, some really good news.
Heyn vs. Director of the Office of Medicaid (formerly known as the Roche case) was overturned by the Massachusetts Appeals Court, the second highest court in the Commonwealth. Eligibility for Medicaid benefits was initially denied by the Office of Medicaid, Board of Hearings and Worcester County Superior Court, each maintaining that the assets held in Everlenna Roche’s irrevocable trust were countable because the trust contained certain problematic provisions. For the most part, these were innocuous provisions that have been historically acceptable. MassNAELA submitted an amicus curiae brief in support of the applicant’s position that the trust was noncountable and the provisions in question did not make the trust principal available to Mrs. Roche. The Appeals Court decision came down in favor of the applicant, thus overturning the prior denials—a significant victory for Massachusetts seniors.
So what does the Heyn case mean for the future of irrevocable income only trusts? First, as mentioned above, while exciting, this is merely a battle victory and unfortunately the war wages on across the Commonwealth. Every day, irrevocable trusts are denied for random, narrow, misconstrued provisions and clauses. Second, the Commonwealth may file an appeal with the Supreme Judicial Court (SJC) challenging the Heyn decision. If it does, and if the SJC hears the case and agrees with the Medicaid agency, this will sound the death knell for the use of some types of irrevocable trusts for long-term care planning and protection. So, the verdict is still out. In the meantime, perhaps (fingers crossed), the decision will begin to have positive effects on the lower court and fair hearing decisions that are pending. Time will tell as it will take several months before we start to see the implications of the Heyn decision beyond its own facts. For now, more waiting, more uncertainty…
If you would like to read the Heyn decision, click here. And if you would like to discuss your own trust or estate plan, please call or email Jennifer Poles at 781/461-1020 or poles@ssbllc.come to schedule an appointment.
May 2016
Five ‘Don’t-leave-home-without-them’ Estate Plan Documents
When it comes to long-term planning, everyone’s family and financial situation is unique. There is no “one-size-fits-all” formula that applies to the masses, which is why it is so important to obtain advice from an experienced estate planning attorney about your particular circumstances. However, there are some basic estate plan documents that every adult should create and update every three to five years, or whenever a major life change occurs. I often refer to these documents collectively as “the-don’t-leave-home-without-it” plan. Here are the five essential estate plan documents.
- Durable Power of Attorney. A durable Power of Attorney is used to appoint a person to act on your behalf with respect to your financial affairs. The person who creates the Power of Attorney is called the “principal,” and the person who is appointed to serve is called the “attorney-in-fact.” The term “durable” means that the Power of Attorney will remain in effect even if the principal becomes incapacitated. The purpose of a durable Power of Attorney is to authorize someone to handle tax matters, sign checks, access financial accounts, sell a car, make decisions about investments, manage retirement accounts and enter into contracts on behalf of the principal most often in a situation where the principal is ill, injured or incapacitated. In situations where a person is incapacitated and has not created a durable Power of Attorney, family members must file a petition with the Probate Court and ask to be appointed as the incapacitated individual’s conservator in order to obtain authority over financial assets and decision making. This is expensive, time consuming, and requires a public proceeding. Plus, the Court may appoint someone who you would not have wanted to serve in that position.
- Health Care Proxy. A Health Care Proxy is the legal document used in Massachusetts to appoint a person to make health care decisions on behalf of another. The person signing the Health Care Proxy is called the “principal.” The appointed person is called the “Health Care Agent.” It is a good idea to appoint one or more alternate health care agents to serve in case the primary agent is unavailable. The Health Care Proxy is by law a “springing” document. That means that the authority of the Health Care Agent does not arise until the principal’s attending physician determines that the principal lacks the capacity to make or communicate health care decisions. Once that determination is made, the Health Care Agent will have the authority to confer with doctors, nurses and other caregivers, have access to medical records, and will be able to make all medical decisions.
- HIPAA Authorization. As noted above, the authority of the Health Care Agent to make decisions about your care, gain access to your medical records, or obtain information from your doctor or other caregivers arises only after your physician has made a determination that you are not able to make or communicate health care decisions yourself. While it makes sense that no one should be able to make health care decisions for someone who is capable of making his own decisions, when someone is ill or elderly, it can be helpful if family members are able to consult with doctors and other caregivers. However, the federal Health Insurance Portability and Accountability Act (HIPAA) imposes monetary fines on caregivers who disclose medical information without authorization to do so. While this sounds like a good idea, unfortunately it can result in family members being denied any information about a loved one’s status. A HIPAA Authorization is used to list the people you would want your doctors to speak with in the event you are ill.
- Last Will and Testament. It may be surprising to readers that I did not list a Will as the number one “don’t-leave-home-without-it” document. The fact is, for many people, a Will is not the most important estate plan document. Don’t misunderstand me – I definitely advise clients that they should create a Will as part of their estate plan. However, a Will only controls the distribution of probate assets, which are accounts or property titled in a person’s name alone and for which there is no designated beneficiary. Many married couples have no probate assets when one spouse dies because all of the assets are either jointly owned, held in a trust, or the surviving spouse is named as the beneficiary of assets such as IRAs, life insurance and annuities. Even if you plan to leave no probate assets, a Will is still recommended, as you may not be able to control whether you have probate assets. For example, your employer may owe you salary or vacation pay, your estate may receive a refund on your car insurance or health insurance premiums, you may be owed money on a contract, etc. Also, your Will is the document used to appoint the Personal Representative (formerly called Executor) of your estate. Your Personal Representative is usually charged with the task of distributing your tangible personal property and filing final income tax returns. Lastly, if you have minor children, you would name the individuals who you want to serve as guardian and conservator of your children in your Will.
- Living Will. A Living Will is the document used to express a person’s wish that no extraordinary measures or artificial means be used to prolong life in circumstances where the individual is suffering from a fatal or terminal illness and where such measures would not improve the quality of life. We do not have a Living Will law in Massachusetts, meaning that your physician will not act on the wishes you express in your Living Will, but will only take direction from your health care agent named in your Health Care Proxy regarding these types of decisions. Despite that, many people choose to sign a Living Will because they want to give their health care agent and other family members guidance regarding end-of-life decisions if they are not able to make those decisions for themselves.
While no one likes to think about these types of situations, it’s important to keep in mind that creating or updating these documents now will help alleviate worry later on and allow you to focus on your loved ones — not unfinished administrative work. Everyone’s situation is different and your estate plan is no doubt very different than your neighbor’s or your sister’s plan. Consult with a qualified estate planning attorney to make sure these documents are reflective of your own needs, wishes, and goals.
Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
May 2016
Proposed Expansion of Medicaid Estate Recovery
Have you ever wondered how you would pay for long-term nursing home care (at a cost of $350 to $500 a day or more)? Medicaid, also known as MassHealth in Massachusetts, pays for nursing home care for those who do not have assets to pay for their care. An individual applicant can have no more than $2,000 of countable assets to qualify for Medicaid benefits. A married individual’s spouse who lives in the community may own up to approximately $120,000 of countable assets. The home of a Medicaid applicant is considered a non-countable asset, and may be owned by an individual, or a married couple, without impacting eligibility.
Under current law, if a Massachusetts resident over the age of 55 receives Medicaid benefits, whether for care in the community or to pay nursing home costs, the Commonwealth may recover those costs from the recipient’s probate estate at death. This is called “estate recovery.” Probate assets do not include assets that are owned jointly with another person, or are owned by a trust, or a home in which the Medicaid recipient may have a life estate interest.
Governor Baker’s Fiscal Year 2017 budget includes a proposal that would expand estate recovery to allow Medicaid claims to be made against any asset in which the deceased owned an interest at the time of death. This would include jointly held bank accounts, real estate owned jointly by the deceased and the surviving spouse, and real estate in which the deceased owned a life estate interest or which was held in an irrevocable trust. This proposal is a serious and significant departure from previously settled Medicaid law and will have wide-ranging impact on surviving spouses and families of Medicaid recipients. The proposed law would apply to any Medicaid recipient who becomes eligible for benefits after July 1, 2016, even if planning was done years ago.
Governor Romney made a similar proposal in 2003, which was enacted but repealed a year later after attempted implementation resulted in recognition that the law was seriously flawed and had significant unintended consequences. More recently, New York State had a similar experience. For more information about this proposal and how to reach out to your state legislators to register your objection, visit our Proposed Changes to MassHealth Estate Recovery Rules page.