Category Archives: Elder Law

Your House is a Medicaid Money-Laundering Machine! (so maybe don’t give it away)

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Many clients come to me, sometimes even before retiring, asking me to help them give their homes to their children to “protect it from Medicaid.” They are the lucky ones who haven’t already done so through a friendly paralegal or attorney who did not ask important questions or give important advice.

There are some benefits and also a number of risks to giving away any real estate, but especially your home and especially if you do not keep a life use. I will discuss the practical and tax concerns of this in another article, but for the time being I would like to focus on one of the single biggest issues that folks are unaware of: if you have money you want to protect for yourself from Medicaid, owning a home can actually make it easier to do it!

You see, “money” is a dirty word for Medicaid: if you want help with your care, you have to be pretty much out of it (a healthy spouse can keep a bit, but not that much). But while you can’t have money, they will ignore your home, even a nice and pretty expensive one, so long as you or your spouse reside there. If you receive in-home care, an increasingly popular option, they don’t touch your house. If you go into your nursing home and your spouse remains at home, they don’t touch your house. You can even go into a nursing home for up to six months after Medicare Part A coverage expires, and Medicaid will give you an allowance to pay your mortgage, taxes, and insurance while you are away!

If you have money and need assistance with your care, Medicaid will ask you to spend that money (ideally on that care) before they’re willing to pay a penny. But if you also have a house, you can use the money to pay off your mortgage, make the house more accessible, upgrade the kitchen, add central air, or build an extension, and Medicaid will pay right away. You can also buy a house from not owning one at all to spend down that extra money, and save the cost of rent. Even more stunning, Medicaid’s definition of “your house” is much closer to “the plot your house is on and all of the land and structures you own that touch it.” There are actual recent examples of seniors who have used their savings on an adjacent plot of land, or have bought an apartment building and let their relatives occupy other units rent free. And the state HATES THIS. But they legally have to approve you for benefits.

While you can put money into your house, you can also take money out of it without being disqualified from benefits. So-called “reverse mortgages” often get a bad rap due to misunderstandings by consumers and also some bad practices that took place before the federal government began supervising and insuring the process. In reality, reverse mortgages are fair and useful vehicles in many circumstances, whether or not you have Medicaid. But if you do have Medicaid, the State of Connecticut offers you a bonus: if you take money out of the house through a reverse mortgage, they pretend you don’t have it, so long as you keep it in its own “segregated” bank account until you spend it.

So in summary: a man with $50,000.00, a house, and serious daily care needs have to pay for his care until only $1,600.00 of that money is left. But if the same man puts that money into home improvements, or a bigger house, or paying off a mortgage, he will be eligible right away. And if he borrows the same money right back out through a reverse mortgage, he won’t have to spend any of it on his care. Like the title says, it’s legal money-laundering.

To be clear, this is not a perfect solution. Nothing with Medicaid is. There are also caps, exceptions, and exclusions to many of the legal rules I have summarized in this article. At the very least, I hope by reading this you will understand that multiple considerations in protecting assets for your children as well as for your own use, and a conversation with a qualified elder law attorney is essential before making such a big decision so that you are fully informed of the different scenarios that could take place, and what these mean not just for your future wallet, but for your future care and quality of life.

Attorney Rosenberg practices throughout South-Central Connecticut. He can be reached at 203-871-3830 or by email at Scott@ScottRosenbergLaw.com.

Rosenberg Firm Wins Appeal; Case Selected for Publication

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We are excited to announce that Attorney Rosenberg has been selected to present a paper in the CT NAELA Practice Update based on his appeals court victory in Harborside Conn. Ltd. Partnership v. Witte earlier this year. Practice Update is the official journal for our state’s chapter of the National Academy of Elder Law Attorneys, the nations preeminent education and advocacy source for the practice of elder law.

In the Harborside case, the nation’s largest nursing home chain sued the widow of a former resident for her husband’s outstanding bill. Since neither of them had signed a contract, the nursing home claimed they were entitled to collect the debt directly from the widow because she had managed the family finances, paid the bills, and received insurance checks in the past. When this claim was thrown out of court without a trial, the nursing home appealed. In a split decision, the Appeals Court upheld the dismissal of the suit, siding with the brief of Attorney Rosenberg and lead appeal counsel Miguel Almodóvar. The court ruled that the nursing home only had a debt with the decedent, and could only recover it by filing a claim with his probate estate. Because this decision comes from the appellate court, other judges may now be required to throw out similar lawsuits in the future.

Ordinarily, spouses are jointly responsible for their housing and necessary medical expenses, but both state and federal laws require a spouse to volunteer through a written document in the case of nursing home care.

The published paper, Anatomy of Harborside v. Witte, may be downloaded here.

What a Power of Attorney Actually Does

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Powers of Attorney are a major tool in every estate planner and elder law attorney’s toolkit, and the concept has been fairly well ingrained in our cultural lexicon. Perhaps it’s because of that that it never ceases to amaze me how frequently misunderstood they are. It shouldn’t be surprising that a properly informed client does not translate to properly informed children a decade or two down the road, and yet, when my colleagues and I then try to set the record straight for family members, they do not want to believe us.

I have given some thought to what the easiest, proper explanation of a power of attorney is, and if I was pressed to boil it down to a single sentence, I’d go with the following:

A power of attorney is a document that allows an individual to share with another person their own ability to manage their money and property and make legally binding agreements on their behalf to the extent specified in the document.

However, since my goal is to provide a well-rounded discussion in these blog posts, and there’s no shortage of space, I’d like to break down a few key parts of that definition for those who are interested.

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The Hidden Costs of Not Having a Basic Estate Plan: 3 Examples

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Estate Planning file tabPeople in unique situations, like family business owners, parents of children with special needs, and people with substantial net worth are often very proactive about enlisting attorneys to craft a comprehensive estate plan. Most others understand the benefit of such planning – stating how your property would be divided up with specificity, appointing decisionmakers for any future incapacity, naming alternate guardians of minor children – but are hesitant to contact an attorney to set their affairs in order. This is entirely understandable. People rarely find themselves excited to consult an attorney in general, and even less so when the purpose is to contemplate your own mortality. The prospect of death or incapacity may seem unlikely for your age, making it easy to put off, and spending money on a backup plan may not seem like the best use of limited resources in a tight economy. Notions of costs in the thousands rather than hundreds or the belief that an expensive “living trust” is needed to avoid probate doesn’t help much either.

But for all of the practical difficulties people know are possible with a lack of planning, few are aware that there can be significant financial consequences of improper planning, even for those modest means. In most cases, even basic estate planning will offset significantly higher hidden costs in the future. After the break, three extremely common examples of these costs.
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My Name’s on Mom’s Checkbook – What Does That Mean?

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It’s a common situation.  Your dad realizes he’s not getting any younger, so he adds your name to his bank account “just in case.”  Or mom offhandedly tells you she “put you on [her] annuity,” though your name’s not on the statements.  Maybe Mom’s not as sharp as she once was, and after requesting copies of her statements and faxing over your power of attorney as they asked, you find your name added to the account.  Perhaps a decade ago your parents put away some college spending money for your son, and you’re listed as “Custodian under UTMA” on the bank statements.

If you have elderly parents, it’s likely you’ve come across one or more of these scenarios, and they tend to bring with them a bunch of questions, like:

  • Does that mean it’s my money?  Does half this interest go on my taxes now?  Does all of it?
  • Can I take out money if I want to?
  • Does this mean I have to do anything?  Will I get in trouble if I leave things as they are?
  • Is this a gift?  Can I take out money if I want to?
  • What happens when they pass away?  Can I just withdraw the money, or does it have to go through probate, or what?

The answers are fairly easy, yet it is a subject on which even veteran accountants and policy reps get their wires crossed.  However, if you understand which of the three reasons has placed your name within your parent’s records, it’s easy to understand what is actually going on.

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Home Renovation Choices That Will Help Later in Life

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The Life Alert Lady - she's fallen and she can't get up.

Life Alert is good, but a few tweaks to your home renovation plan can actually prevent falls later in life.

A little over a year into The Estate Planning Ticker, I’ve come to find that articles can be inspired by just about anything. Some are obvious – a new law, a sage or misleading news story, a cautionary tale manifested in a recent client; some less so. In this case, I was inspired by two consecutive life experiences.  First, watching my mother put her insight as a geriatric nurse into practice as she renovated the family home, and second, helping to move her mother out of her home of 40 years because it had become unsafe.

Falls are among the most prominent health risks facing elderly Americans. They can cause serious injury, make you feel defeated and embarrassed, and terrify your adult children.  That last bit explains why it’s one of the most frequently cited reasons for children to pressure their parents out of the home and into some form of managed care facility.  What makes it that much worse is the simple fact that most falls, as well as other physical difficulties around the home, are completely preventable.

If you’re fortunate enough to have a home where you intend to spend your later years, and are planning renovations big or small, there are some simple considerations which, for an extra few hundred dollars, may save you from aggravation, injury, or additional contractors later in life. After the jump, a checklist of the more important considerations of elder-living architecture.

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A Few Words on Disinheritance

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Fight Over MoneyAn article last week in the local lawyer’s trade paper, The Connnecticut Law Tribune, discussed the increasing prevalence of wills being delayed in the probate process through complaints, objections, and full-out challenging of wills admitted to probate.

It’s not surprising, given that the economy is at the lowest point most of us have ever and will ever see.  There will always be maligned siblings looking for their fair share and suspicious later-in-life will changes, but in these tight times staying silent to keep the peace may not be the option it normally would be for some left-out relatives.  At the same time, there’s likely a surge in opportunists who suspect (accurately, as it happens) that most legit beneficiaries would rather pay a small, quick settlement than see their own inheritances delayed and diminished by a protracted lawsuit.

It’s an unfortunate situation for those looking to plan for when they are no longer around.  It’s also a good example of why it’s so important to have your will done by an attorney, in particular one who handles a great deal of wills and probate work.

If you’re looking to cut someone off because you question their responsibility or they have significant debts, several different types of trusts can be employed to address those concerns without completely disinheriting the person.  If you just want someone out, the wording must be carefully chosen to meet legal standards.  Depending on the situation, it may be better to employ a “carrot and stick” tactic, where the ousted person is actually given a small legacy under the will, but which is forfeited if he or she challenges the will in court.

Later-in-life will changes are particularly susceptible to challenge in court, as relatives may claim the author was not competent to make the will, or had been subjected to the manipulation and pressure of an overbearing child or confidante.  An experienced estate planning or elder law attorney can take steps to help ensure the will will be upheld in court, such as careful selection of the location and people present at the execution ceremony (will signing), choice of witnesses, and videotaping the ceremony as future evidence.

For more information, feel free to call me at (203) 871-3830 or email scott@scottrosenberglaw.com for a free consultation.

Healthcare Planning: Why Not to Wait

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How a $75 piece of paper can save you a boatload of trouble.

I was recently hired by a gentleman who found himself in a difficult circumstance.  Not all that long after he and his wife had cashed their first Social Security checks, his wife had begun to show signs of forgetfulness, and in the span of just a few months had descended into moderate dementia.  I was consulted to help get her affairs in order while she was still able to participate in the process, and I recommended all of the things I would recommend to any senior: a Durable Power of Attorney, Appointment of Health Care Representative, Living Will, and Last Will, but I made one more suggestion that threw him for a bit of a loop:

I suggested that getting his own health care plans in order was more important.

That’s not to say that this was the more pressing issue, but a healthy spouse’s plan does have broader consequences than a sick one’s, and it’s not hard to see why.  In my client’s case, once the wife becomes unable to manage her finances and care, everyone – the hospitals, the family and the courts – will be looking to him for answers, and he’s more than capable of giving them.  Should the husband have an automobile accident, or a fall, or a serious illness, however, he’s asking for an express ride down the rabbit hole in the healthcare decision process.
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New Research on Comas, and What It Means for Living Trusts

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An article in Time Magazine this week tells the story of a man who was presumed brain-dead for nearly a quarter century, but as it turned out, had been alert and listening the whole time.

Rom Houben, a Belgian engineering student before his accident, was suffering from total locked-in syndrome, a condition which paralyzes all intentional body movement. His body could breathe, pump blood, and digest; he could watch, listen, and think just fine, but he did not have the ability to respond. It wasn’t until a neurologist on a quest to find misdiagnoses with an experimental new type of brain scan saw Rom that they discovered his mind was intact.

This might seem like a far-fetched aberration, but recent studies in the British Journal of Medicine and elsewhere show that incorrect diagnoses of a persistent vegetative state (or PVS) occur at an alarming rate – about 40-45 percent of the time. The reasons are several. Brain-scanning technology has not reached a level where it can clearly diagnose conscious from unconscious; the methods for diagnosis by observation all have serious flaws, and doctors can’t agree on which is best or how to make a better one; and reviews after an initial diagnoses are often too cursory to notice signs of improvement after the brain has had time to heal.

This reality creates a serious problem for the typical living will. The lion’s share of clients have them drafted to ensure they have a quick and peaceful passing instead of getting “Terry Schiavo’d,” and living wills often mention a PVS diagnosis by name as one of the triggers for the removal of life support. The result is that a person who could live a fulfilling life with quadriplegia (body paralysis) as so many others do may inadvertently be euthanized. Almost all misdiagnosed patients are completely paralyzed, and many suffer some loss of cognitive ability, so it is understandable that these new revelations may not prompt older clients to change their plans. For everyone else, though, it should be an important consideration in laying out your advanced healthcare directives.

Going forward, estate planning attorneys should keeping abreast of new developments in PVS diagnostics, to know the what/how often/for how long combination that best ensures a PVS diagnosis is accurate, and clients should strongly consider having those standards incorporated into the document itself.

Why Estate Planning is as Much Art as Science

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I recently had a colleague contact me for some advice about a client. He didn’t need help with the legal aspects – redoing a trust – but he called because my parents grew up with the client and I know the whole family.

The situation was as unfortunate as it was typical. Client Cathy’s mom had retired to Florida, and though very self sufficient and active for a woman in her eighties, her mind was starting to slip, in particular when it came to sending gobs of money to the various cons and fake contests that prey on the elderly population of Ft. Lauderdale, and she was bouncing checks and overcharging her credit cards to do it. The family agreed that a conservatorship (called a limited guardianship in Florida) was not the best move, but that’s where the agreement ended. Cathy was willing to play a role in reviewing her mother’s finances, but thought her brother Joe in Florida would be better. Joe had the access and acuity, but didn’t want the responsibility. Sister Susan already had a power of attorney and was eager to take point as trustee of everything, but was a notorious meddler and bickerer and was liable to fight her mother tooth and nail over every indulgent expense. Rounding out the family tree was older brother Bert, who wanted to “put her in a home up North” to be safe.

Ultimately, the mom’s living trust, which contained the condo and her long-term investments, were put in a Medicaid planning trust with Susan as trustee, which was the bulk of the mother’s estate, but had minimal day-to-day responsibilities. Joe was given a power of attorney so he could open a new checking account for his mom’s pension and social security deposits, funnel a small allowance into the account she used, and buy her supermarket gift cards, while Cathy and her husband got the passwords so they could monitor her purchases and pay her bills online.

Cathy’s situation illustrates the realities of the impact that family dynamics can have on the crafting of estate plans. Planning for infirmity or drafting wills and trusts to maximize tax saving can be tricky, but they usually follow common, well-defined schemes. At the same time, the very meaning of “trust” can be a bit antithetical, as it is often a lack of trust that precipitates it. When deciding how to organize your estate, it is something you must consider carefully:

  • “Do I trust my daughter to give my diamond earrings to my granddaughter, or do I need to put that in my will?”
  • “Do I trust Bobby to use his college money wisely, or should I have his father hold it for him?”
    “Am I ready to give up control of my money, and can I trust my daughter to let me to still do what I want with it until I’m really unable?”

  • “If I die and my wife remarries, do I know that she’ll leave what I’ve earned for our children?”

Along with that, it’s important to consider the hurt feelings, anxiety, and jealousy that can occur when you make the decision to trust, not trust, or trust one person over another, and to decide whether it’s worth the risk to keep the peace. These are things I reccomend anyone consider when weighing the options as they document out their future, and it is something any competent estate planning attorney ought to ask you about.

While the law can be a science, blending it with a financial picture and family situation requires a bit of artistry. It’s also why my retainer agreement says that well-rounded estate planning does not necessarily guarantee a minimum tax burden…in bold, capital letters.