Massachusetts, along with 46 other states, now permits a trust to be created for the benefit of a pet, for the purpose of providing funds for the pet’s care and designating responsible individuals to care for the pet and manage the trust funds for the pet’s benefit.   To learn more, read Attorney Sayward’s article on Pet Trusts included in our May 2011 newsletter.  If you don’t feel the need to establish a formal trust fund to provide for the care of your pet after you are gone, you should still consider making provisions for your pet’s care in the event of your incapacity or death.  To learn more about other planning steps, read my article in our upcoming April 2014 newsletter.  You can also read an informative article about planning for pets at the website of the Humane Society of the United States.

Contact us to obtain a kit entitled Providing for your Pet’s Future Without You which includes wallet alert cards, emergency care instructions for your pets, window stickers to notify emergency responders that there are pets in the house, and an emergency contacts form that can be hung in a visible location inside your home.

Published April 2014

By Steven Joshua Samuel JD, MBA, AIF®

For those of us in or near our 60s, thinking about retirement brings up positive images as well as some anxiety about how to make important financial decisions, especially about Social Security benefits.

Fortunately, there are two excellent sources of information that will provide guidance and answer many of your questions:  www.socialsecurity.gov  and your local Social Security office if you prefer to meet with an expert. Many offices, in fact, will permit you to make an appointment. No, I’m not kidding. This is one area in which our government does a reasonable job of providing information. But until you get a chance to visit the website   or your local social security office, here are five answers to commonly asked questions about social security.

1.  Is it best to apply for social security benefits at the earliest age, 62, or wait until 66 or even 70?

A person retiring at age 62 during 2013 could receive a maximum of $1,923 monthly. The maximum this year for a 66-year-old is $2,533 monthly and for a 70-year-old, $3,350 monthly. Generally, each year a person delays applying for benefits will increase the benefit amount by eight percent.  You can find an estimate of what you would receive at various ages on the social security website by clicking on the social security benefits estimator tab.

About 75 percent of people who receive Social Security now started taking their benefits before age 66, according to the Wall Street Journal, probably because they needed the money for the basics of life expenses and did not have other savings. For a person with significant savings in an Individual Retirement (IRA) account, company 401k or other retirement account, waiting until age 66 or 67 is generally a better choice. Whether to wait even longer, to age 70, requires a more complex assessment. One consideration is that if a person is 66 and gives up four years of benefits to wait till 70 to get an increased benefit amount, the person would have to live as long as 20 years just to recover the amount she would have received in those four years. Another consideration is that while waiting the four years between 66 and 70, if the person needs to take big withdrawals from her   retirement savings and the investment markets don’t do well, her retirement savings may not last her lifetime.

2.  How do earnings affect Social Security retirement benefits?

What you earn from working does not affect Social Security benefits if you have reached “full retirement age.” Full retirement age is about 66 years old except for people born in 1960 or later; then it is 67. If you are not yet at full retirement age, earning up to about $15,000 a year does not affect your benefits but you’ll lose $1 of benefits for every $2 of income above $15,000. During the year you reach “full retirement age” you may earn about $40,000 with no reduction in Social Security, but you’ll lose $1 of Social Security benefits for every $3 over $40,000 of earned income.

3.  What Social Security benefit does a spouse receive?

A person married for 10 years or longer and of “full retirement age” is entitled to receive 50 percent of his or her spouse’s benefit amount. For example, if both spouses are at full retirement age at 66 and one is entitled to $2,500 monthly of social security benefits after a lifetime of work, the other may collect $1,250 monthly even if he or she never worked. A spouse collecting on the basis of his or her spouse’s record of work does not have any impact on the other’s benefits. However, if a person begins collecting benefits before full retirement age, the amount the person can collect based on the record of his or her spouse is reduced. At age 62, he or she may collect only 35 percent of what her spouse collects; at 63 only 37.5 percent; at 64 only 42 percent; and at 65 only 46 percent.

4.  Does a divorced spouse qualify for benefits?

A divorced person can receive benefits based on a former spouse’s Social Security record if he or she was married to the former spouse for at least 10 years, is at least 62, is unmarried and is not entitled to a higher Social Security benefit on his or her own record. The former spouse must be entitled to receive his or her own retirement or disability benefit. If the former spouse is eligible for a benefit but has not yet applied for it, the divorced spouse can still receive a benefit if he or she has been divorced from the former spouse for at least two years.

5.  Does Social Security pay benefits to same-sex married couples and surviving spouses?

Social Security has begun processing some retirement, surviving spouse and lump-sum death payment claims for same-sex couples and paying benefits where they are due.

Of course there are many more than five things you need to know about Social Security and the many related health care and financial issues. Do pay a visit to www.socialsecurity.gov  or your local Social Security office and also consider consulting a trusted financial professional before you make important financial decisions during or near retirement age.

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 adviser. www.samuelfinancial.com

April 2014

Estate planning is all about protecting assets from perceived risks – sometimes referred to as “predators and creditors.”  Threats to your estate include taxes, long-term care costs, potential lawsuits, and divorce.  One statistic that is often bandied about asserts that 50 percent of first marriages end in divorce.  A divorce can impact the divorcing parties’ estate plan.  The divorce of a child can also have an impact on the estate plan of the parents of that child.    Here are five things to know about divorce and estate planning.

1. Trusts can protect assets.  A lot of my clients want to make sure that the inheritance they leave a child is protected in the event the child later divorces.  While nothing is certain when it comes to what a court may order in a divorce proceeding, leaving an inheritance to a child via a trust rather than outright is an excellent way to protect the inheritance from being subject to division in the event a child later divorces.  

2. Information about your estate plan is accessible to the spouse of your divorcing child.  Believe it or not, if your child is going through a divorce, the lawyer representing your soon to be ex-daughter- or son-in-law may issue a subpoena requesting information about your assets and copies of your estate plan documents, for which you will be required to provide that information.  In lieu of providing the information and documents requested, you can provide a so-called Vaughan Affidavit (named for the case that made this practice available to parents of a divorcing child)  that summarizes the information requested in general terms.   While a court cannot award your assets to your child or his or her spouse, the court can take into account information about your estate in deciding how to divide the couple’s assets between them.

3. In general, an inheritance is not vulnerable to claims of a prior spouse.  A bit of good news is that if your child is already divorced when he comes into his inheritance, it is unlikely that a court would award his former spouse any portion of the property or money he inherits.  Where your child is vulnerable in this regard pertains to the amount of child support or alimony he is required to pay a former spouse, especially if the ex-spouse is not self-supporting.  The best way to ensure this does not happen is to address it in the divorce agreement.

4. Your ex-spouse may still receive your IRA and your life insurance if you don’t file a change of beneficiary form.  Despite the fact that in Massachusetts a divorce terminates the interest of a former spouse with respect to beneficiary designations completed during the marriage, don’t count on that with respect to life insurance policies, IRAs, or employer retirement plans governed by federal pension law (ERISA).  If you die and your life insurance or IRA lists your former spouse as the beneficiary, your former spouse may very well be entitled to collect that money.  This is based on the fact that the beneficiary designation is a binding contract between the owner of the financial product and the insurance company that issued the policy, or the financial institution that serves as custodian of the IRA.  The best way to make sure this does not happen is to update your beneficiary designations without delay following a divorce.

5. A divorce will invalidate aspects of your Will and Trust, which you may not intend to be changed.  Massachusetts law also provides that any provision in a Will or Trust that  concerns or includes a relative of a former spouse is also revoked.  While this may be desirable in some circumstances, it is not necessarily desirable in all cases.  For example, if you and your former spouse selected her sister Janie as the best person to be guardian of your minor children should you both die, you may still want Janie as the guardian for your children even though you are no longer married to Janie’s sister.  Under Massachusetts law, this appointment would be revoked by your Will.  The best way to make sure your wishes are carried out is to meet with your estate planning attorney following a divorce to review and update your estate plan as necessary.

The bottom line is that divorce will have a significant impact on your estate plan.  If you terminate your marriage, meet with your estate planning attorney to review and update your estate plan sooner rather than later.  The best way to avoid a child’s inheritance being up for grabs in a divorce proceeding should you predecease your child is to make sure your child and his fiancée enter into a pre-nuptial agreement prior to their marriage.  If a pre-nuptial agreement is not in place and divorce is looming for your child, meet with your estate planning attorney to discuss its impact on your estate plan.

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. 

The tragic death of talented actor Philip Seymour Hoffman apparently from a drug overdose last month continues to make the news, most recently with the revelation that his ‘estate plan’ was woefully outdated and inadequate for his personal situation.  Even though Hoffman had minor children and scads of money, his estate plan did not include a Revocable Living Trust.  A Revocable Living Trust is a common and extremely useful estate planning tool.  A Revocable Living Trust would have allowed Hoffman to keep his private affairs out of the public eye by avoiding probate.  Along with probate avoidance, a Revocable Living Trust is an excellent way to manage assets for young beneficiaries and to provide creditor protection for inherited assets. 

On the plus side, Hoffman did leave a Will, which puts him out in front of many Americans. This was fortuitous for Hoffman’s long-time companion and the mother of his children, Marianne O’Donnell, especially since the two never married.  Had Hoffman failed to make a Will naming her as a beneficiary, Ms. O’Donnell would not have been entitled to anything from Hoffman’s estate.  On the other hand, Hoffman’s Will was more than 10 years old and had not been updated following the births of his second and third child.

Clearly, the first take away from this tragedy is ‘don’t do drugs.’ The second is, ‘prepare an estate plan that is appropriate to your situation and review and update it on a regular basis.’

Visit our Articles page to read more about the benefits of creating a Revocable Living Trust and tales of other celebrity estate plans gone wrong.

Published March 2014

Estate planning attorneys strive to educate their clients that estate planning is not an event, it’s a process.  Your estate plan is a project that requires review on an ongoing basis, and may require changes periodically to make sure it continues to meet your planning goals.  The new year is a good time to review the various aspects of your estate plan with an eye toward making things easier for you and your family in the future.

Here are five steps you should take now and every year to make sure your plan is up-to-date:

1.      Maintain a current asset list.  The starting point for a good estate plan is a list of assets, and it’s one of the first things your family will need after your death.  If such a list is not maintained, it can be difficult for families to identify assets in a timely way, especially if the deceased was not organized and/or maintained multiple accounts at different financial institutions.  Make things easier for your family by creating  a list that contains the description of each of your assets or accounts, where it is located, the account number (if any), how the asset is owned (individually, jointly, in trust, etc.), and its approximate value.  Then, keep this list updated by reviewing and revising it every six months or so.  Finally, keep the list in a place where it can be easily found by someone after your death – for example, in a file in your filing cabinet marked “Asset List.”  I can already hear your heirs thanking you.

2.      Check your Beneficiary Designations.  Life insurance policies and retirement accounts are often my clients’ largest assets after their home.  These assets (and others) allow you to name a beneficiary who will receive the asset at your death.  Beneficiary designations are a very efficient way to distribute assets after death.  However, in order to ensure that your wishes are carried out, you must review your beneficiary designations from time to time and update them as necessary. For group life insurance policies and employer retirement accounts, it may be as simple as logging in and reviewing your beneficiary designations online.  Otherwise, call the life insurance companies and financial institutions that maintain your retirement accounts and ask them to send you written confirmation of your beneficiaries.  If they are not correct, change them, and make sure you obtain written confirmation each time you change the beneficiary.  If circumstances change (for example, if you get divorced or if your spouse or child dies), make sure you review and change your beneficiary designations as appropriate.  Also make sure you have contingent beneficiaries designated in the event your primary beneficiary does not survive you.

3.      Keep a Password List.  Many sources advise that you should never write down your passwords to online accounts to protect the privacy of the information in those accounts.  However, estate planning attorneys will tell you that for estate planning purposes it is important to keep a written record of your passwords in order to allow your family to get access to your online accounts after death, or in the event of your incapacity.  This includes financial accounts as well as websites where you store photos, Facebook, or other online accounts.  This is not a list that should be published or even discussed.  But make a list, keep it current, and keep it in a safe place.  Your estate planning attorney may be willing to maintain this document with your estate plan documents.

4.      Consider the Disposition of Tangible Property.  Families fight about the strangest things.  A deceased person’s tangible property (jewelry, furniture, photographs, knick knacks) are often the source of the most passionate disputes among family members, even (or especially!) if those items have no value.  Consider how you want your tangible personal property to be distributed after your death, and take steps to express those wishes while you are alive.  One of the best ways to do this is to create a memorandum separate from your Will on which you list specific items and who you would like to receive them.  Your estate planning attorney can advise you how to make such a memorandum binding after your death if you wish.  If you have items you no longer wish to keep, give them to your loved ones now.

 5.      Review Your Plan and Update if Necessary.  Creating estate plan documents is an important step to take to protect yourself and your family.  Keeping your documents up-to-date is equally important to ensure the plan you created continues to carry out your goals as those goals and your family’s circumstances change.   When clients complete their estate plan documents, they often feel a sense of relief.  Estate planning can be complicated, and clients may forget the details after the plan is complete.  Make it a point to sit down and review your estate plan documents at least once a year, either alone or with your estate planning attorney.  If changes need to be made, don’t procrastinate!  An up-to-date plan is the best way to ensure that family harmony is maintained and the administration of your estate occurs in a timely and cost-efficient manner.

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.

Given the high cost of long-term care and the increasing need for such care as people live longer, we find ourselves advising our clients more and more that long-term care insurance is an option worth exploring.  This insurance can provide a resource to help pay for the cost of care, not just in a nursing home, but at home or in an assisted living facility.  This is especially important as we see public benefits that pay for long-term care becoming more and more difficult to access as eligibility rules are tightened.  The younger you are when you purchase long-term care insurance the less expensive it is.  There are many policy options that impact the cost of the insurance.   The premiums on existing policies increase from time-to-time, and we are told by our insurance sources that increases are more common in older policies.  If you have a long-term care policy that you are considering discontinuing because of premium increases, do not act hastily.  If you are concerned about the cost of your long-term care policy, or have questions about the coverage it provides, we encourage you to get advice from a long-term care specialist.  Such a person can advise you whether there are steps you can take to reduce the cost of the policy while still leaving this important coverage in place.  If you would like the name of a long-term care specialist who can review your policy with you please contact us.

Published February, 2014

In my practice, I counsel clients about the various documents that comprise an estate plan such as Wills, Powers of Attorney, Health Care Proxies, and Trusts.  Many people are under the impression that there is no longer any reason to use a Trust since the recent change in the federal estate tax law means that only estates in excess of $5.25 million will owe federal estate tax.  Putting aside the fact that if you live in Massachusetts your estate may be liable for estate tax to the Commonwealth if it is valued at more than $1 million, there are a multitude of non-tax reasons to use a Trust as part of an estate plan.  Here are five of those reasons.

1.      You want to avoid probate.   Probate is the court process of transferring assets from a deceased person to the beneficiaries of his estate and giving the Personal Representative (formerly called executor) of the estate the authority to pay debts and taxes and distribute the estate assets.  The probate process can be costly and lengthy.  Further, probate is a public process, meaning that anyone can read the court file, including the deceased’s Will, the Inventory of probate assets, and the Personal Representative’s accounting of all of the estate revenue and disbursements.  Assets titled in the name of a Trust avoid probate and the related delay, expense, and lack of privacy.

2.      You have young children.   Most parents shudder at the thought of their 18-year old son or daughter being given more than $1,000 to spend as the child sees fit.  Yet if these same parents die without having created a Trust to manage funds for the benefit of their children, those children will have unfettered access to their parents’ assets, including the house, life insurance, and retirement funds at age 18.  Creating a Trust is an excellent way to ensure that assets are wisely managed for the benefit of children until they reach an age at which the parents believe they will have sufficient experience and maturity to manage their inheritance.  While a child’s inheritance is held in Trust, the Trustee will have discretion to use the Trust funds for the child’s benefit, including paying for the child’s education, helping the child to buy a house or start a business, or for any other reason the Donor/parent may specify.

3.      One or more of your beneficiaries needs assistance managing money.  Even if your intended beneficiaries are all adults, there may be good reasons for restricting their access to funds. These reasons could include a shaky marriage, substance abuse, tax problems, poor money management skills, a risky business, creditor problems, an over-generous nature, or a history of bad judgment in relationships.   By creating a Trust that identifies the purposes for which a beneficiary’s share may be used, you can ensure that your beneficiary has a safety net.  The Trust money could be used to pay for housing, health insurance, car insurance, or medical care that a beneficiary is unable to afford.  By stipulating that funds are to be held in trust, you can prevent the money from being spent foolishly or from being subject to the claims of your beneficiary’s creditors.

4.      You have a child with disabilities.  Families who have a child with special needs must have a plan in place to ensure the child’s needs will be met when the parents are no longer around to do so.  In addition, many people with special needs are eligible for public benefits that provide medical care or income for food and shelter.  Qualification for those benefits can be adversely affected if the person receives an inheritance outright rather than in trust.  It is not necessary to disinherit a special needs child to protect her eligibility for public benefits.  A Trust can maintain a child’s eligibility for benefits after the parents’ deaths.  Such a “Special Needs” or “Supplemental Needs” Trust can also provide long-term management of the child’s inheritance and additional resources to meet the child’s needs that are not addressed by the public benefits she may be eligible to receive.  These types of Trusts provide an important safety net for a child with disabilities so that the child is not dependent on the goodwill or good fortune of siblings or other family members.

5.      You want to ensure that your assets are properly managed for your benefit if you become incapacitated.  An effective estate plan includes planning for how you will be cared for and how decisions will be made in the event you become incapacitated.  By creating and funding a Revocable Living Trust of which you are the beneficiary during your lifetime, you provide a mechanism for your assets to be managed and used for your benefit during any period of incapacity that occurs during your lifetime by a Trustee that you choose.  This type of planning may avoid the need for a guardianship or conservatorship proceeding in the Probate Court while protecting your privacy.

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. 

I can’t let January go by without a reminder that along with resolutions to eat healthy and go to the gym more often, resolving to make sure your estate plan is up to date is an important 2014 goal.   Here are some worthy resolutions for 2014:

• Resolve to make a Will (or update your old Will).  A 2012 study found that more half of all Americans with minor children do not have a Will in place (Yahoo).  Further, 41% of adults without minor children do not have a Will in place. If you don’t currently have a Will, resolve to make a Will in 2014.  If you have a Will, but have not reviewed it with your lawyer in more than 5 or 6 years, plan to do so in 2014.
• Resolve to learn about long-term care planning options.  Long-term care, whether it is provided in the home, in an assisted living facility or in a nursing home, is expensive.  A Genworth study of long-term care costs in Massachusetts found the annual cost of such care to be between $55,000 and $133,000.  If you are 60 years of age or older, resolve to educate yourself about long-term care issues and learn about the options that are available.  Waiting too long can mean that some of those options could be lost to you.
• Resolve to check your beneficiary designations.  Many people are under the mistaken belief that the distribution provisions of their Will or Trust will also control the distribution of their IRAs, 401ks, life insurance, and annuities.  This is generally not the case.  The beneficiary designation form that it is on file with the financial company, insurance company, or your HR department will determine who receives these benefits at your death.*  Many a court battle has been waged by a former or current spouse, or children from a first or second marriage, about outdated beneficiary designations.  Even if your situation is not likely to result in litigation, outdated beneficiary designations can mean the need to probate assets which would otherwise avoid probate or adverse income tax consequences for your beneficiaries. For more information on when to update your beneficiary designations, check out Attorney Baler’s article here.While Samuel, Sayward & Baler LLC can’t help you with your healthy eating and gym-going resolutions, we can help with your estate plan.  Give us a call and best wishes to all for 2014!

* Note that federal pension laws could supersede a beneficiary designation for a married employee as to his or her employer retirement plan.

Published January, 2014

By Attorney Maria Baler

As an elder law attorney, I often refer clients to geriatric care managers to assist them with the non-legal aspects of planning for current or future care needs.  When I discuss the role of a geriatric care manager (GCM) with my clients, many of them are unfamiliar with this profession.   GCMs are an important member of the team of advisers that elders and their family members should call upon when an elder begins to need care or assistance.

Here are five ways a geriatric care manager can help:

1. You or your spouse needs assistance finding resources to help you stay in your home and maintain independence.  Many elders prefer to remain in their home as they age.  There may come a time when staying at home requires outside assistance with certain tasks such as housekeeping, cooking, bathing, dressing, grocery shopping, and transportation.  A GCM can help elders and their families evaluate the type of help needed to allow an elder to remain in her home, and then help the elder and her family locate and implement that assistance.
2. You have decided that it is time to leave your home, but you are not sure what type of senior living community is right for you.  There are many different types of senior living options.  Elders move from their home for many different reasons – for a more social and collegial environment, to obtain needed care or assistance, or to be closer to family members.  GCMs are familiar with the different types of housing options available and can help you weigh the pros and cons and decide what’s right for you.
3. Your loved one is being discharged from a hospital or rehabilitation center and needs to move to a nursing home for a short- or long-term stay.  GCMs spend a lot of their time talking with nursing home staff and visiting facilities to check on their clients.  They are familiar with the facilities in their communities and the strengths and weaknesses of each.   One of the most valuable things a GCM can do is evaluate an elder’s needs and make recommendations for nursing homes tailored to those needs.  This is much more useful to a family than ratings on a website or the recommendation of a friend or neighbor, whose loved one may have had very different needs.
4. You are a child who lives far away from your parents.  GCMs fulfill a much needed role in assisting elders whose family members do not live nearby.  A GCM can check in on the elder periodically and report back to the family about the elder’s status.  A GCM can accompany the elder to routine doctor’s appointments or can be on call to accompany the elder to a hospital or emergency room if an unexpected crisis occurs.  Following such appointments, a GCM can help implement next steps (i.e. medication supervision, further testing, etc.), and communicate with family members and agencies to keep everyone on the same page.  A GCM can monitor caregivers that assist the elder at home or in a facility and make changes as needed.  In short, a GCM can be the eyes and ears of the family, providing monitoring, follow-up, and advocacy for an elder.
5. You or your family members need support and guidance.    When a family member needs care or assistance it is often a confusing and difficult time for the family.  The person who needs assistance may not agree that assistance is needed.  Family members may have limited time, resources, or expertise, or live too far away to provide regular assistance. The process of locating and maintaining caregivers or other assistance can be confusing and overwhelming to family members.  A GCM can provide professional guidance in these areas, recommending appropriate services or housing options and helping the family implement those recommendations.  GCMs can also provide emotional support to families and assist with complicated family dynamics and emotions around changing circumstances.

Geriatric care managers are a wonderful resource for professionals, their elderly clients, and family members of elders.  GCMs can smooth the way through difficult transitions, find solutions and resources, and become a trusted advisor, both in crisis and everyday situations.  To find a GCM near you, consult the Directory on the website of the New England Chapter of the National Association of Professional Geriatric Care Managers at www.gcmnewengland.org.

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.

Clients often tell me they want to put all their assets in a trust to protect them in case they need to go to a nursing home.  Given the high cost of long-term care, this is a valid concern and there are situations when an irrevocable trust for asset protection purposes makes sense.  However, using an irrevocable trust can be one of those situations where the “cure” is sometimes worse than the disease. Here are five reasons to tread carefully when considering transferring assets to an irrevocable trust for long-term care protection purposes.

1. For married couples, there are better ways to protect assets.   When I represent a married couple for estate and long-term care planning, my goal is to make sure they are able to take care of themselves and each other.  In Massachusetts, if a member of a married couple requires nursing home care and needs to qualify for Medicaid benefits to pay for that care, there are protections in place that allow the spouse who is living in the community to keep all or most of the couple’s assets.  However, those protections can be forfeited if the couple transfers assets to an irrevocable trust (or to children) within the five-year period preceding the need for care.  That is because there is a five-year  ineligibility period for long-term Medicaid benefits following the transfer of assets to an irrevocable trust (or to any person other than a spouse).  For many married couples, it is far better not to transfer assets to an irrevocable trust so that if one spouse does need long-term nursing home care, the spouse at home can take full advantage of the laws that  offer financial protections to the community spouse.
2. There’s no guaranty the trust will accomplish your goals.  Federal and state laws,  state regulations, and agency policies govern Medicaid eligibility.  These rules change frequently, usually with no “grandfathering” for planning undertaken prior to the change.  When considering whether to transfer assets to an irrevocable trust to preserve those assets from having to be spent down on long-term care costs, it is important to remember that the law in effect today is unlikely to be the law in effect after the five-year ineligibility period has expired.  A person who is applying for Medicaid benefits must disclose the existence of an irrevocable trust on the application,  Currently, many Medicaid applications that report such trusts are being routinely denied by MassHealth, the agency that administers the Medicaid program in Massachusetts.
3. Despite what you hear on the radio, you  do give up control.   We have all heard the advertising on the radio claiming that a person can retain control over her assets while still protecting them from the high cost of a nursing home.  In order to effectively protect assets in Massachusetts, an irrevocable trust that  is intended to preserve assets from having to be spent down on long-term care costs must not allow for any distributions of principal from the trust to the person whose assets are funded into the trust, including distributions that might pay for home care or assisted living.  In addition, when the intent is to preserve the assets from having to be spent down on long-term care costs, it is prudent to name someone other than the person creating the trust as the trustee.  The trustee is the person who is in control of determining how to invest the trust assets, when to sell trust assets (including real estate held in the name of the trust), and is the only  one with access to the trust accounts.
4. Things change.   Although there are not too many things you can rely on in life, one thing you can be certain of is that things will change.  I can’t count the number of times clients have made statements like, “We’re never going to sell the house” or “I know I can count on my daughter Mary to be there for me,” only to call me a few years later to tell me they are selling their home or that Mary had a mid-life crisis and has moved to Australia to farm sheep!  The point is, no one knows what the future holds and positioning yourself to maximize your options is prudent.  Unfortunately, the provisions which estate planning and elder law attorneys have traditionally used to build flexibility into irrevocable trusts are the very provisions  that MassHealth is now using to claim that the trust assets are available to be used to pay for long-term care.
5. The best way to ensure you end up in a nursing home is to have no money.  One of my favorite sayings to clients is “money buys you options.”  If a person has savings, CDs, retirement accounts, investments, or real estate available to her, she can choose to remain at home and pay for help to allow her to remain there, she can choose to go to assisted living and pay for additional assistance if she needs it, she can choose to modify her home to accommodate her needs, etc.  A person who has no resources usually has only one option — go into a nursing home.  The reason for this is that Medicaid will pay for 24/7 care for a person with no assets who is a nursing home resident.  Medicaid does not pay for assisted living or round-the-clock care at home for (most) elders who need such care.  Most of my clients would rather be at home than in a nursing home, and for this reason transferring assets out of their ownership and control and into an irrevocable trust in order to “protect” them often results in the client ending up in a nursing home rather than at home where they would prefer to be.

While there certainly are situations where transferring assets to an irrevocable trust for long-term care planning purposes makes sense, it is never a good idea to rush into this type of planning without having a complete understanding of the consequences.  An experienced elder law attorney can advise you about the pros and cons of using an irrevocable trust for long-term care planning in your particular circumstances.

November 2013

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.