By Thomas D. Begley, Jr., CELA

When a personal injury victim receives a settlement, one of the biggest post-settlement problems is making the money last. If the plaintiff is receiving means-tested public benefits, the monies must be put in a Special Needs Trust. How long do the beneficiary and other family members need that money to last? When the size of the settlement is significant, best practices would dictate that a three-step process be followed:

1. Counseling Session.  A counseling session should be held with the person with disabilities, the family members, if appropriate, the trustee, the attorney drafting the Special Needs Trust and the Personal Injury attorney, if necessary. At that point. a discussion should be held as to what the immediate needs of the beneficiary arc. Typically these would include a home, a vehicle, a vacation and repayment of debt. During the counseling session a budget should be prepared for the plaintiff’s living expenses going forward. The budget could be broken into three sections: (I) shelter expenses. (2) transportation expenses. and (3) personal expenses. For each item of expense a determination should he made as to whether the expense will be paid by the plaintiff or by the trust. A professional trustee should always be used. At that point. the trustee should prepare a Monte Carlo analysis to determine how long the trust will last. The Monte Carlo analysis is complex, but essentially it is based on trust rates of return and trust distributions. The analysis will determine how long the trust will last based on various rates of distribution. It is helpful if the beneficiary can determine how long the trust should last. If it should last the beneficiary’s lifetime and if the plaintiff is healthy, this will likely be calculated on a life of 90 years. If the plaintiff is unhealthy. the life expectancy will be shorter.
2. The Depleting Trust. In most instances the plaintiff will tend to adopt a budget for a lifestyle he or she would like without consideration to how long the trust will last and what will happen when the trust is exhausted. If the professional trustee determines that the trust is beginning to deplete more rapidly than agreed upon, there is a five-step process. These include the following: notification, conversations, planning, documentation and continuous follow up.
   1. Notification. It is recommended that monthly statements of trust activity be sent to all persons required under state statute. These would include beneficiaries, guardians and generally all non-contingent rcmaindermen. If the trust is depleting, a letter should be sent at least annually, indicating:
      1. the current market value of the account:
      2. the amount dispersed over the past 12 months: and
      3. an estimate as to the time in which the trust will be depicted based 0n projected principal distributions for the coming year.
      4. The depiction letter should indicate that steps can be taken to extend the lifetime of the trust.
   2. Conversations. Face-to-face conversations should be held with the beneficiary and interested family members to determine if current budget expenditures can be reduced. If so, what can be reduced immediately and what can be reduced over time? The beneficiary, family and support system must understand that the trust will deplete and the time horizon over which it will deplete. There should be a discussion as to whether a different investment allocation strategy should be employed-either a more aggressive strategy to grow assets or a less aggressive strategy to protect current assets. Finally, there should be a discussion as to whether additional funds will he added to the trust such as payments from Structured Settlement Annuities or additions from family members. If the trust contains depleting assets such as real estate or non-liquid securities, such as LLCs, LPs, oil/gas mineral interests. etc., then there should be a discussion as to whether these assets should be liquidated.
   3. Planning. What is the plan when the trust is depleted? Will the beneficiary then rely solely on government benefits? Will family and friends contribute to care? Will family and friends fund a Third-Party Special Needs Trust to take the place of the Special Needs Trust? Will the Third­ Party Special Needs Trust be funded with life insurance or retirement plans? Is the beneficiary in a private pay facility? Does this facility accept Medicaid? What will happen to the beneficiary if the current caregiver dies? If the trust is depleted, final accountings must be filed for the trust.
   4. Documentation. Trustees should retain documentation of trust administration including:
      1. Monthly statements.
      2. Annual depletion letter.
      3. Other communications such as emails or letters. These communications would include discussions regarding a plan for non-liquid trust assets, beneficiary public benefit programs, discussions among interested parties for extending the trust, a final plan for the beneficiary after the trust ls depleted and final administration needs.
   5. Continuous Follow Up. During the course of administration of the trust, the trustee must ensure that the right benefits are in place, that living arrangements are made, that assets are sold off as required, that the necessary court approvals are obtained and that all steps related to final administration are taken.
3. Basic Principles. The third step in making trust assets last is to understand certain basic principles. Most trustees have a limit on what percentage of trust assets can be spent for the purchase of a home. This generally ranges between 15% and 25%. As a rule of thumb, a trust will last the lifetime of the beneficiary if distributions are limited to approximately 4.5% of trust assets annually.

by Thomas D. Begley, Jr., Esquire, CELA

CMS has released the Medicare and Medicaid numbers for 2017. They are as follows:

Medicaid

• Income Cap[1] $2,205
• Maximum Community Spouse Resource Allowance (CSRA)[2] $120,900
• Minimum CSRA[3] $24,180
• Maximum Minimum Monthly Maintenance Needs Allowance (MMMNA)[4] $3,022.50
• MMMNA (July 1, 2016 until June 30, 2017)[5] $2,002.50
• MMMNA (July 1, 2017 until June 30, 2018)[6] $2,030.00
• Excess Shelter Allowance (July 1, 2016 until June 30, 2017)[7] $600.75
• Excess Shelter Allowance (July 1, 2017 until June 30, 2018)[8] $609.00
• Maximum Resource Limit (Individual)[9] $2,000
• Minimum and Maximum Cap on Equity in the Home[10] $560,000 – $840,000

Medicare

Part A

• Medicare Co-Payment – Skilled Nursing Facility (SNF)[11] $164.50
• Hospital Deductible[12] $1,316
• Per day Co-Insurance – Day 61 -90[13] $329
• Per day Co Insurance – Day 91-150[14] $658

Part A Premium (for voluntary enrollees only)

• With 30-39 quarters of Social Security coverage[15] $227
• With 29 or fewer quarters of Social Security coverage[16] $413

Part B

• Medicare Part B Deductible[17]                                                                              $183
• Standard Part B Premium[18]                                                                                                                         $134

Medicare Part B – Single or Married and Filing Joint Return

Part B Income-Related Premium[19]

In addition, the monthly premium rates to be paid by beneficiaries who are married, but file a separate return from their spouse and lived with their spouse at some time during the taxable year are:

Standard Part D Cost-Sharing for 2017[20]

• Annual Deductible Maximum $400
• Member Pays 25% of the Next…                                        $3,300 (25% = $825)
• Initial Benefit Period Maximum                         $3,700 ($400 + $3,300)
• Donut Hole Threshold                                                                         $3,725

(Brand name drugs: 50% + 10% plan “subsidy,” Generic drug: 49% subsidy)

• Catastrophic Coverage             $4,950 ($400 + $825 + $3,725)

• Catastrophic cost-sharing:  Generic           $3.30/$8.25 or 5% (whichever is greater)
• Catastrophic cost-sharing: Brand        $7.40 or 5% (whichever is greater)

[1] 42 U.S.C. §1396a(a)(10)(A)(v); 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[2] 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[3] 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[4] 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[5] 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[6] 82 Fed. Reg. 8832 (Jan. 31, 2017).

[7] 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[8] 82 Fed. Reg. 8832 (Jan. 31, 2017).

[9] 20 CFR § 416.1205(c).

[10] 42 U.S.C. §1396p(f); 2017 SSI and Spousal Impoverishment Standards, www.medicaid.gov.

[11] 81 Fed. Reg. 80062 (Nov 15, 2016).

[12] 81 Fed. Reg. 80062 (Nov 15, 2016).

[13] 81 Fed. Reg. 80062 (Nov 15, 2016).

[14] 81 Fed. Reg. 80062 (Nov 15, 2016).

[15] 81 Fed. Reg. 80072 (Nov 15, 2016).

[16] 81 Fed. Reg. 80071 (Nov 15, 2016).

[17] 81 Fed. Reg. 80063 (Nov 15, 2016).

[18] 81 Fed. Reg. 80063 (Nov 15, 2016).

[19] 81 Fed. Reg. 80066 (Nov 15, 2016).

[20] http://www.medicareadvocacy.org.

by Thomas D. Begley, Jr., CELA

There are a number of alternatives to a Third Party Special Needs Trusts. These include the following:

• Disinherit a Child. The problem with this strategy is that one cannot be certain that public benefits, as we know them today, will continue forever. Many public benefits have been cut back in recent years and there is no guarantee that current benefits will not be reduced as well. Many parents who have severely disabled children, whose needs are covered by public benefits, will consider disinheriting the children, but they should be made aware that current public benefits may not be there when the child needs them in the future.

• Leave Money to the Child. The problem with this approach is that unless the funds being left to the child are very significant, they may not last long if the child’s needs, particularly medical needs, are great. It is usually better to maintain public benefits and establish a trust for needs or wants that will not be covered by public benefits.

• Leave Funds to Sibling. This is the common strategy that frequently backfires. The idea is to leave the share of the person with disabilities to a brother or sister with the understanding that the brother or sister will use that money to care for the child with disabilities. The problems occur when the child to whom the funds are left is sued by a creditor, is divorced, or simply says, “I want to use this money for myself, not in the Will says that I have to use it for my sibling with disability and I am not going to use for that purpose.” Sometimes it is the sibling that makes this decision, but frequently it is the spouse of the sibling who pushes for that result.

• Pooled Trust. A Pooled Trust is a good solution for relatively small amounts of money. If the trust is less than $100,000, Pooled Trust makes sense. If it is between $100,000 and $200,000, a Pooled Trust should be compared to a Third Party Special Needs Trust. If the amount involved is in excess of $200,000, a Third Party Special Needs Trust is almost always the best solution.

• ABLE Account. New Jersey has adopted legislation authorizing ABLE accounts. These accounts are expected to come into existence sometime in the Fall. A problem is that not more than the gift tax annual exclusion amount can be contributed to an account in any one year and no beneficiary can have more than one account. The annual exclusion gift tax exemption for 2016 is $14,000. So, if the inheritance is $14,000 or less, an ABLE account might make sense.

by
Thomas D. Begley, Jr., CELA

Below is a chart comparing an ABLE Account with a Third-Party Special Needs Trust.

by Thomas D. Begley, Jr., CELA

New Jersey has passed the Achieving a Better Life Experience ACT (“ABLE”). While the Act has passed, it will take some time to implement. Many commentators believe that by the end of the year accounts will be authorized.

Under the ABLE Act, people with disabilities and their families may set up special savings accounts similar to 529 Plans to be used for disability-related expenses. Earnings on these accounts are non-taxable. Generally, if the fund does not exceed $100,000, it will not be counted for Supplemental Security Income (“SSI”) purposes. If the fund exceeds $100,000 then SSI will be suspended, but Medicaid can be continued so long as the total amount in the account does not exceed the amount authorized for 529 Plans. To be eligible, an individual must become disabled prior to age 26 and be disabled. If the individual receives Supplemental Security Disability Income (“SSDI”) or SSI or files a Disability Certification under IRS Regulations, she will be considered disabled.

Funds can be used for education, housing, transportation, employment training, support, assistive technology, personal support services, health, prevention and wellness, financial management and administrative fees as well as legal fees and expenses for oversight and monitoring.

The total amount contributed to an ABLE account in any one calendar year by all contributors cannot exceed the amount of the federal annual gift tax exclusion, which for 2016 is $14,000. The drawback to these accounts is on the death of the account owner, any funds remaining in the account must be used to repay Medicaid for any funds advanced on behalf of the account holder. The best strategy seems to be to use these accounts for small gifts. Normally, these accounts would be used for gifts from parents. As long as the gifts are less than $14,000 per year and do not accumulate very much, these accounts might make sense. However, because of the Medicaid payback, it does not make sense to have these accounts grow. A Third Party Special Needs Trust is a much better option, if the amount involved is significant.

The advantages of an ABLE account are the tax-free income. However, realistically this is not a significant advantage because the income on small accounts is low and the other income of the beneficiary with a disability is usually low, so the tax saving sounds more attractive than it actually is. A second advantage is that there is a minimal cost to establishing the account when compared to establishing a Pooled Trust or a Third Party Special Needs Trust. A third advantage is that distributions from an ABLE account for the beneficiary’s food and shelter do not reduce the beneficiary’s SSI payment.

The disadvantages are the Medicaid payback and the possible loss of SSI. Because of the Medicaid payback, it makes little sense to build up a large account. The SSI benefit of approximately $750 per month is a significant benefit that should be protected.

Ideally, ABLE accounts appear to be useful if they are in the $25,000 to $50,000 range, but not for larger accounts. A Pooled Trust or Special Needs Trust would be more appropriate.

by Thomas D. Begley, Jr., CELA

Availability. Assets in a Self-Settled Special Needs Trust (“SSSNT”) are not considered available for Supplemental Security Income (“SSI”) or Medicaid eligibility purposes. The reason is that the trustee is given sole discretion with respect to distributions from the trust. The beneficiary cannot control distribution or revoke the trust. Special needs language should be included for guidance to the trustee with respect to distributions.

Transfer of asset penalty. There is no transfer of asset penalty for SSI and Medicaid, because there is a statutory exemption under 42 U.S.C. § 1392b and 42 U.S.C. § 1396p(d)(4)(A).

Payback. A payback to Medicaid is required by law. The payback is for all Medicaid benefits received by the beneficiary since birth. It is not sufficient to pay back Medicaid benefits received from the date of the establishment of the trust to date. In the case of a personal injury settlement, the Medicaid payback is not limited to medical assistance related to the personal injury. All medical assistance provided by Medicaid from birth, whether or not related to the injury, must be included in the payback.

Funding. SSSNTs are generally funded by personal injury recoveries, inheritances, equitable distribution, alimony or child support. However, any asset can be used to fund an SSSNT.

Tax considerations.

• An SSSNT is considered a grantor trust. Therefore, the income earned by the trust is taxed to the beneficiary at the beneficiary’s tax rates.

• Transfers to an SSSNT are not completed gifts.

• Estate tax. Assets in an SSSNT are included in the estate of the beneficiary.

Estate recovery. There is no Medicaid estate recovery against an SSSNT, but a payback provision has the same effect.

Elective share. Assets in an SSSNT would be considered subject to the elective share.

by Thomas D. Begley, Jr., CELA

Trusts for disabled individuals who have not reached age 65 and are funded with assets of the disabled person are authorized under OBRA-93.[1] The trust is for the benefit of disabled persons. The person must be under 65 at the inception of the trust. While the trust must be established and funded prior to the beneficiary attaining the age of 65, it may continue after 65. If the trust is funded with a structured settlement prior to the beneficiary attaining the age of 65, the trust remains viable even though payments from the annuity are received after age 65.

The trusts must be established by a parent, grandparent, legal guardian, or court.

Transfers to the trust are not subject to the transfer of assets rules. The trust should be drafted so that the resources are unavailable. This means that the trustee must have sole discretion with respect to distributions, and the beneficiary must not have any right to revoke the trust. The trust should be administered in such a way that the income is not counted as income to the beneficiary. Distributions can be made to third parties for the sole benefit of the beneficiary, or the beneficiary or a family member can obtain a credit card and send the bill to the trustee for payment so long as the charges on the credit card were for the sole benefit of the trust beneficiary.

The trust must provide that on death the funds remaining in the trust go first to reimburse Medicaid and then for the benefit of other beneficiaries.

[1] 42 U.S.C. § 1396p(d)(4)(A).

by Thomas D. Begley, Jr., CELA

A Third Party Special Needs Trust is usually used in a Medicaid context not for the benefit of the grantor of the trust, but for the beneficiary. The grantor of the trust is typically a parent, but could be grandparent, sibling, other relative or friend. The grantor uses the grantor’s assets to fund the trust. The assets of the beneficiary cannot be used to fund a Third Party Special Needs Trust. In order for the trust to be a Special Needs Trust, the beneficiary must be disabled. Disability is usually determined by the fact that the beneficiary has received a Determination of Disability from the Social Security Administration and is receiving either Supplemental Security Income (“SSI”) or Social Security Disability Income (“SSDI”). The trust is designed so that the assets are not counted for SSI or Medicaid eligibility purposes. The beneficiary is then able to take advantage of the continuation of public benefits including usually SSI and Medicaid, as well as use the assets in the trust to enrich the beneficiary’s life. The trustee is given complete discretion with respect to distributions, and special needs language is used in designing the trust. Provisions made for distributions to the beneficiary during the beneficiary’s lifetime and distribution of any remaining principal and accrued income upon the death of the beneficiary.

by Thomas D. Begley, Jr., CELA

The chart below is a brief comparison between a Disability Annuity Trust (“DAT”) and a Disability Annuity Special Needs Trust (“DASNT”).

by Thomas D. Begley, Jr., CELA

There are four main issues to be considered in drafting any trust involving a potential Medicaid recipient. These include:

• Availability;
• Transfer of asset penalty;
• Payback provision; and
• Tax considerations, including income, gift and estate taxes.

Let’s examine each of these issues in the context of a DASNT.

Availability. The assets in the DASNT would not be available, because the trust would be designed to give the trustee complete discretion with respect to distributions. Standard Third-Party Special Needs Trust language would be used in designing the trust. The standard DAT language would also be included. Because of the special needs provisions, the assets in the trust are not counted as assets of the beneficiary.

Transfer of Asset Penalty. There would be no transfer of asset penalty imposed upon the grantor, usually a parent or grandparent, by SSI and Medicaid, because there is a statutory exemption^[1] from the penalties for transfers of assets to or for the sole benefit of individuals with disabilities. For a child with a disability, there is no age limit. If the beneficiary of the DASNT is an individual other than a child, there is an age limit of 65.

Payback. Whether a “sole benefit of” trust is subject to a Medicaid payback is open to question. New Jersey takes the position that such a trust must include a Medicaid payback and this issue has not been litigated.

Tax Considerations

• Income. The income generated by a DASNT is taxed to the beneficiary.

• Gift. There would be a gift from the grantor to the trust for gift tax purposes.

• Estate tax. The assets in the trust would be excluded from the estate of the grantor, but included in the estate of the beneficiary.

[1] 42 U.S.C. §1396p(c)(2)(B).

by Thomas D. Begley, Jr., CELA

One of the trusts used in Medicaid Planning is a Disability Annuity Special Needs Trust (“DASNT”). A previous article discussed a Disability Annuity Trust (“DAT”). These trusts are designed so that an individual can establish a trust and transfer assets to the trust for the benefit of a disabled child of any age or a disabled individual under age 65 without incurring a Medicaid transfer of asset penalty. The problem with that trust is that the assets in the trust are considered available for public benefit purposes. Therefore, if a DAT were established for the benefit of an individual receiving Supplemental Security Income (“SSI”) and/or Medicaid, they would become ineligible for those public benefits because the assets in the trust would be countable. The solution would be to wrap a DAT inside a Special Needs Trust (“SNT”). In a Medicaid Planning context, the monies to be used to fund the trust would belong to the third party, usually a parent or a grandparent, so the SNT would be a Third-Party Special Needs Trust (“TPSNT”). In a typical situation, the parent would require long-term care and be applying for Medicaid. In order to become immediately eligible, from an asset standpoint, the parent would transfer the assets to a DASNT. The trust is exempt from the SSI and Medicaid transfer of asset penalties, and the assets in the trust would not be considered available because of the special needs provisions.

Generally, a family member, other than the trust beneficiary, would be the trustee of the DASNT, although a professional trustee could be utilized.

by Thomas D. Begley, Jr., CELA

A Disability Annuity Trust (“DAT”) can be established for a disabled child or any disabled individual.^[1] However, in considering the use of a DAT for a disabled person, care must be taken to examine the other government benefits currently being received, or which may be received in the future by the person with disabilities.

If the person with disabilities is receiving Supplemental Security Disability Income (“SSDI”), this is usually accompanied by Medicare. SSDI and Medicare are insurance-based programs, rather than means-based programs. Receipt of income from the DAT would not cause a loss of SSDI or Medicare. However, consideration should be given to other benefits that the person with disabilities may receive in the future. For example, will the person with disabilities be a candidate for group housing in the future? If so, the existence of the DAT may cause them to lose that benefit.

If the person is receiving Supplemental Security Income (“SSI”), that person also receives Medicaid. SSI is a means-based program. Both resources and income are considered in determining eligibility. If the person with disabilities receives distributions from the DAT, this may well disqualify that person from receiving SSI and cause a loss of Medicaid. The assets in the DAT would be “available” which would also disqualify the SSI recipient from both SSI and Medicaid, because the assets in the trust would be considered resources. If a DAT is designed as a Special Needs Trust, public benefits may be preserved.

[1] HCFA Transmittal 64 § 3257(B)(6).

by Thomas D. Begley, Jr., CELA

The key issue concerning trusts “for the sole benefit of” is availability. In a private letter, HCFA, now CMS, has taken the position that a trust established for the sole benefit of a community spouse under HCFA Transmittal 64 is an available resource.^[1] HCFA maintained that there is a material difference between a standard annuity and an “annuitized” trust. HCFA states:

a standard annuity can protect the funds used to purchase the annuity from being counted as resources in determining eligibility for Medicaid. However, there is a fundamental difference between a standard annuity and the “annuitized” trust you established. A standard annuity requires the actual purchase of a commodity; i.e., the annuity itself. A specific amount of money is given to the entity selling the annuity, in return for which the entity contractually agrees to provide an income stream for a specified period of time. Upon completion of the transaction, the buyer no longer owns the funds used to purchase the annuity. Instead, the buyer owns the annuity itself. If the annuity is irrevocable, as most annuities are, the buyer cannot reclaim ownership of the funds used to purchase the annuity. The buyer is only entitled to the income stream purchased and only for as long as the annuity stipulates. This is essentially the same as the purchase of any item or product where funds are exchanged for ownership of something else.

It is important to note that the letter from HCFA is not law or policy. It is an interpretation of policy as articulated in HCFA Transmittal 64. Under this letter, only the amount of the CSRA could be able to be placed in a “sole benefit of” trust. HCFA Transmittal 64 clearly compares the transfer of assets to a community spouse with the transfer of assets to a trust for the sole benefit of a community spouse.^[2] The document clearly states “when transfers between spouses are involved, the unlimited transfer exception should have little effect on the eligibility determination, primarily because resources belonging to both spouses are combined in determining eligibility for the institutionalized spouse.” Thus, resources transferred to a community spouse are still be considered available to the institutionalized spouse for eligibility purposes.

[1] Letter dated April 16, 1998, from Robert A. Streimer, Disabled and Elderly Health Programs Group, Center for Medicaid and State Operations, Health Care Financing Administration, to Jean Galloway Ball.

[2] HCFA Transmittal 64 § 3258.11.

by Thomas D. Begley, Jr., CELA

The Concept. A sole benefit of trust is a creature of HCFA Transmittal 64.[1] These trusts have traditionally been used in crisis planning. They can be established for the benefit of disabled persons—a Disability Annuity Trust (“DAT”).[2] The idea is that assets would be transferred to an irrevocable trust for the sole benefit of the disabled individual. The assets in the trust were then paid out to the beneficiary on an actuarially sound basis using the actuarial tables contained in HCFA Transmittal 64.[3] However, some states, including New Jersey, maintain that despite the clear language in HCFA Transmittal 64, the language in the statute “sole benefit of” means that a Medicaid payback provision is required. Because the assets were transferred to an irrevocable trust “for the sole benefit of” a disabled individual, the transfer is not subject to the Medicaid transfer penalty rules.

This is a particularly useful device where (1) there are highly appreciated assets and utilization of the trust makes it possible for a “step up” in basis to be obtained, and (2) advanced planning has not been done and the transfer of assets to children would result in significant periods of Medicaid ineligibility. There are two issues to be considered in utilizing “for the sole benefit of” trusts: transfer rules and availability.

Transfer of Asset Penalty. A sole benefit of trust is exempt from the Medicaid transfer of asset penalties. If the sole benefit of trust is established for a disabled child, there is no age limit.

Age Limit.

• Sole benefit of disabled child. The trust can be established for a disabled child age 65 or older.[4]
• Sole benefit of other disabled individual. If the sole benefit of trust is established for an individual other than a child, the other individual must be under age 65 years of age and disabled.[5]

Definition of sole benefit of. HCFA Transmittal 64 deals with transfers of assets and treatment of trusts.[6] For the sole benefit of is defined as follows:

A transfer is considered to be for the sole benefit of a spouse, blind or disabled child, or a disabled individual if the transfer is arranged in such a way that no individual or entity except for the spouse, blind or disabled child, or disabled individual can benefit from the assets transferred in any way, whether at the time of the transfer or at any time in the future. For a transfer or trust to be considered for the sole benefit of one of these individuals, the instrument or document must provide for the spending of funds involved for the benefit of the individual on a basis that is actuarially sound based on the life expectancy of the individual involved.[7]

Despite the clear definition of sole benefit of in HCFA Transmittal 64, many states, including New Jersey, require that the sole benefit of trust have a provision requiring a payback on the death of the beneficiary to the state Medicaid agency.      

Therefore, if the beneficiary is receiving Social Security Disability Income (“SSDI”) and Medicare, a DAT is appropriate. Beneficiaries receiving Supplemental Security Income (“SSI”) and Medicaid must utilize a Disability Annuity Special Needs Trust.

[1] HCFA Transmittal 64 § 3257.

[2] HCFA Transmittal 64 § 3258.9B.

[3] HCFA Transmittal 64 § 3258.9B.

[4] 42 U.S.C. § l396p(c)(2)(B)(iii).

[5] 42 U.S.C. § l396p(c)(2)(B)(iv).

[6] HCFA Transmittal 64 § 3257.

[7] HCFA Transmittal 64 § 3257(B)(6).

by Thomas D. Begley, Jr., CELA

Funding

Many clients who use Children’s Trusts as part of their Medicaid planning are non-crisis planning clients. They either have an early diagnosis or are elderly but in good health. They are doing advance planning and want a sense of independence. They do not want all of their assets in a trust. Good practice dictates that the lawyer have a discussion with the client and determine how much the client feels should be kept out of the trust to give the client a feeling of comfort. The client should understand that the funds retained outside the trust are at risk, unless they are transferred to children to be held pursuant to the terms of a Family Agreement. Ideally, the trust will be funded with the least amount of assets possible. In calculating how much to put in the trust, the client can carve out assets that can be used in the future for the following:

• Amount of Community Spouse Resource Allowance (CSRA);
• Amount of the anticipated spend down as set forth in the client’s Asset Protection Plan;
• Key money to gain admission to a facility; or
• Any amount of money the client is willing to lose. Typically, a single client will want to retain $50,000 – $100,000 of assets and risk losing that amount in order to preserve a sense of independence. To a certain extent, this will be determined by the medical condition of the client.

Ideal Assets

Ideal assets to fund a Children’s Trust would include appreciated real estate, such as a primary residence or a vacation home, or appreciated securities. There are significant tax advantages in utilizing trusts for these assets as opposed to transferring outright to children. Careful consideration must be given to rental real estate, because the parent would no longer be entitled to the rent after the property is transferred to the Children’s Trust.

Bad Assets

Bad assets to use in funding trusts include retirement accounts, deferred annuities, and government bonds with significant accumulated interest. The problem is the transfer of those assets would result in immediate income tax. To the extent possible, these assets should be left outside the trust.

Tax Considerations

Income Tax

A Children’s Trust can be designed as a grantor trust so that the grantor pays the tax on any income, or .a non-grantor trust where the income is taxed either to the trust itself or to the beneficiary, depending on the design of the trust.

Gift Tax

A Children’s Trust can be designed so that the Grantor retains a limited power of appointment over the trust corpus. The limited power of appointment would enable the Grantor to appoint the remainder of the trust to a limited class of people. Limited power of appointment could be either testamentary or inter vivos.

Estate Tax

If the trust is designed as a grantor trust, then the assets in the trust will be included in the estate of the grantor for estate tax purposes. The Children’s Trust can be designed so that it is not a grantor trust and the assets in the trust would be excluded from the estate of the grantor for estate tax purposes. In determining how to draft the trust, the capital gain tax saving resulting from a step-up in basis must be weighed against any estate tax savings. Usually, payment of the New Jersey estate tax is the lesser of the two evils.

by Thomas D. Begley, Jr., CELA

A common Medicaid Planning strategy is to transfer assets to third parties, wait for the five-year lookback to expire and apply for Medicaid. If assets are transferred to children, there are certain risks to be considered. If the child is sued by a creditor, the assets transferred by the parent to the child are subject to the claims of the creditors. If the child is subsequently divorced, the son or daughter-in-law may be able to claim additional funds by virtue of the assets that were transferred by the parent to the child. Basic divorce law says that so long as the transferred funds were not co-mingled by the child and the child’s spouse they are not subject to claims for equitable distribution, but Family Law practitioners all advise that the judge will figure out something else to give the son or daughter-in-law and advise against this strategy. If the child to whom the assets are transferred dies, the parent’s assets can be left by the child’s Will to the child’s spouse or, absent a Will, the child’s spouse will normally inherit by intestacy.

An alternative would be to transfer assets to a Children’s Trust. Under the Children’s Trust, one or more of the children could serve as trustee. The parent would give up all access to the principal being transferred to the trust and any income earned by that principal. The trust could provide that distributions could be made to a child from the principal and/or income. After five years, the assets transferred to the trust would be out of the parent’s name and would not be counted for Medicaid eligibility purposes.

Ideal assets to fund a Children’s Trust are depreciated assets. A primary residence may be the best choice for funding the trust. A second home is also a good choice, particularly if it has appreciated in value.

Retirement accounts are never a good asset to fund a Children’s Trust, because the income tax on the retirement account would have to be paid when the funds are withdrawn to fund the trust.

by Thomas D. Begley, Jr., CELA

The following chart compares the advantages and disadvantages of an outright transfer of assets and putting assets in an Income Only Trust.

by Thomas D. Begley, Jr., CELA

An Income Only Trust can be designed as a grantor trust. The trust assets are unavailable for Medicaid, but there are some potentially significant tax benefits to the grantor. The Internal Revenue Code contains certain requirements for a grantor trust.[1] 

Income Tax. Income is taxed at the grantor’s individual tax rate, which is usually less than the trust’s compressed tax rate.

Capital Gains Tax. Capital gains tax treatment is maintained. This is particularly important if the trust is funded with a primary residence. The §121 exclusion from capital gains tax can be maintained. The trust must contain a provision that the trustee must allocate the gain on the sale of the home to principal and not to income.

The benefit of the capital gains tax can be achieved for non-home appreciated assets as well.

Gift Tax. An Income Only Trust can be designed in such a way that a transfer into a trust can be either a gift or not a gift. If the grantor desires that the transfer be considered a gift for tax purposes, a gift tax return would be filed based on the present value of the gift. This would be the value of the assets transferred, less the value of the grantor’s retained interest in the income stream.

Estate Tax. Since the trust is a grantor trust, the entire value of the estate would be included in the grantor’s estate for federal estate tax purposes.[2]

Because the assets are included in the estate of the grantor, the estate should receive a step up in tax basis as to trust assets to the fair market value of the assets as of the grantor’s death. To achieve the step up in basis, the trust should contain a limited power of appointment on death. In many cases, this is a significant advantage over outright transfers to children.

Estate Recovery. The assets in the Income Only Trust would not be subject to estate recovery in states having a probate definition of estate, but would be included in states having a broad definition of estate for estate recovery purposes.

[1] I.R.C. §§ 673–677.

[2] I.R.C. §§ 1014, 2036, 2038; Treas. Reg. §§ 1.1014-2(a)(3), (b).

by Thomas D. Begley, Jr., CELA

Separate Trust

A separate trust designed specifically to control the retirement account is recommended. It is best that the trust not be part of a revocable living trust or any other trust. A “standalone retirement trust” is preferred.

Professional Trustee

When an IRA is paid to a standalone retirement trust or any other trust, it is important to consider a professional trustee. The rules regarding inherited retirement accounts are complex and family member trustees are often unfamiliar with them. This could cause a loss of important tax benefits. Most family members do not understand the rules regarding required minimum distributions (RMDs), conduit trusts or accumulation trusts. This could cause loss of important tax benefits. If the retirement account is $500,000 or more, it usually makes more sense to name a professional trustee. The professional trustee understands the tax rules and has investment expertise.

A family member could be named as trust protector. A trust protector has the right to monitor the performance of the professional trustee and to remove and replace the trustee with another professional trustee, if the trust protector is not satisfied with the performance of the trustee.

Trust Protector

Under an IRA trust a trust protector can be appointed. The trust protector must be unrelated by blood to the trust beneficiary but may have a personal relationship, such as financial advisor, attorney, CPA, or friend. The trust protector can change a conduit trust to an accumulation trust.   This gives the trustee the discretion to accumulate funds.[1]

Conclusion

As Americans rely less on the availability of work-related pensions for their retirement, more of their wealth is found in the tax-deferred retirement accounts that they have funded over the years. As the estate tax exemption grows and becomes less of a concern for most Americans, it becomes increasingly important to understand and plan for minimization of the income taxes that are ultimately payable with respect to these tax-deferred accounts while at the same time maximizing family wealth transfer goals. The standalone IRA Trust is sufficiently flexible that it allows most people to balance their tax and family goals well, offering opportunities for creditor and other beneficiary protections, protection for special needs beneficiaries and spousal planning as well as the possibility of professional management to assist in investing and minimizing income taxes for the beneficiaries.

[1] P.L.R. 200537044; Harvey B. Wallace, II, Retirement Benefits Planning Update, Probate and Property, American Bar Association (May-June 2006); Wealth Preservation Update, Morris Law Group (Mar. 2007), www.law-morris.com.

by Thomas D. Begley, Jr., CELA

Introduction

The United States Supreme Court in a 9-0 unanimous ruling held that an inherited IRA is not protected in bankruptcy under federal law.[1] Heidi Heffron-Clark inherited an IRA from her mother in 2001 and filed for bankruptcy nine years later. The court held that the IRA was not shielded from her creditors, because the funds were not earmarked exclusively for retirement. The Supreme Court indicated that creditor protection does not apply to inherited IRAs for a number of reasons:

• Beneficiaries cannot add money to an inherited IRA like IRA owners can to their accounts;
• Beneficiaries of inherited IRAs must generally begin to make Required Minimum Distributions (RMDs) in the year after they inherit the accounts regardless of how far away they are from retirement;
• Beneficiaries can take total distributions of their inherited accounts at any time and use the funds for any purpose without a penalty. IRA owners must generally wait until age 59-1/2 before they can take penalty-free distributions.

The court held that inherited IRAs do not contain funds dedicated exclusively for use by individuals during retirement. As a result, the favorable bankruptcy protection afforded to retirement funds under the Federal Bankruptcy Code does not apply.

The court did not rule on whether a Spousal Rollover IRA is protected from creditors. Like other IRA owners, if the money is rolled into their own IRA, they may have to pay a 10% early-withdrawal penalty if money is taken before age 59-1/2. If the money is not rolled over into the Spousal Rollover account, then it would appear that the assets will not be protected in bankruptcy.

A way to safeguard IRA and other retirement account assets from creditors is to name a trust as beneficiary of the retirement account.

Trust as Beneficiary

• The best practice is to name a standalone retirement trust as beneficiary for IRAs and other tax-deferred retirement accounts. Naming a trust as beneficiary provides more control. A trust can be drafted to protect the assets from a beneficiary’s creditors.
• If retirement account monies are left directly to heirs, the funds may be squandered by the heirs defeating any benefit of the long-term tax deferral. The trust provides protection from premature withdrawal.
• If the heir is divorced, the retirement account funds may be subject to claims of the non-heir spouse, or if the IRA is in a trust, the non-heir spouse will not be able to attach them.
• Benefit of Beneficiary. If a parent names a child as beneficiary of the parent’s retirement account and subsequently the child dies, that child may name the child’s spouse as beneficiary and the child’s spouse may remarry naming the new spouse as beneficiary. The retirement account would no longer remain in the bloodline. The trust can be designed so that on the death of the child the account passes to other family members and is kept in the bloodline.
• Special Needs. If the beneficiary has special needs, the trust can be drafted to protect the beneficiary’s entitlement to government programs such as SSI, Medicaid or any other means-tested public benefits.
• Finally, if the funds are placed in a trust no guardianship proceeding is needed upon the beneficiary’s incapacity.

[1] Clark v. Rameker, 134 S. Ct. 2242 (2016).

by Thomas D. Begley, Jr., CELA

For many years a debate has raged as to whether Medicare’s interests must be considered with respect to future medical payments in the context of a third party liability settlement (“TPLS”). The issue is simple. If a plaintiff in a TPLS receives money to pay for future medical care, is he free to pocket that money and send the bill for the future medical care to Medicare? Under the Medicare Secondary Payer Act (“MSPA”), Medicare is prohibited from making a payment for future medicals to the extent that such payment has been made under liability insurance. Therefore, if a liability insurance company or self-insured defendant pays money to a plaintiff for future medical care, the argument goes that Medicare cannot pay for that care.

In 2013, the Centers for Medicare and Medicaid Services (“CMS”) issued a Notice of Proposed Rulemaking (“NPRM”), but then voluntarily withdrew it in 2014. As a result, parties have been left to their own devices in determining how to address this issue. Some commentators believe that absent enforceable regulations that identify the standards by which future medicals are to be measured in the liability context, the federal government has no right to claim an interest in future medicals as part of the settlement. On the opposite end of the spectrum, commentators observe that CMS interprets the MSPA so that it is applicable to TPLS as well as Worker’s Compensation claims. The correct position may lie somewhere in between. The real answer may be to develop an analysis of how much of the TPLS was for future medicals and how much for other elements of damages and to set the future medical money aside, so that Medicare is not billed until that portion of the settlement is exhausted.

Once a Medicare Set-Aside Arrangement (“MSA”) has been considered, the next question is how much is necessary to fund it. If future medicals have been plead or claimed and future medicals are specifically released in a Release signed in connection with the third party liability (“TPL”) settlement, then it is likely that Medicare’s interests must be considered. That raises the question as to how to calculate the amount of the settlement intended for future medical care. It is unlikely that CMS would accept a figure agreed upon by the parties absent court testimony and a court finding.

It is important to remember that in a TPL case, the award seldom pays 100 cents on the dollar for future medicals. Issues in these cases, such as disputed liability or causation, policy limits, statutory caps and derivative claims, often mean that TPL cases are resolved for less than the full measure of damages sustained. The Garretson Resolution Group recommends a starting point for a maximum amount may be identified through review of a plaintiff’s life care plan and other evidence of the dollar assigned to particular damages other than future medicals. These would include procurement costs, liens, past medicals, pain and suffering, loss of future earning capacity, etc. Garretson outlines a four-step process:

1. Were future medicals plead or released as part of the settlement, judgment or award?

2. Does the plaintiff require future injury-related care?

3. Does the settlement award “compensate” plaintiff for future medicals based on objective decisional future medical allocation methodology?

4. How much did the settlement award compensate based on objective decisional future medical allocation methodology?

By analyzing the settlement to figure out how much would be appropriate for future medicals and then determining the ratio of the plaintiff’s net proceeds to the total damages, a percentage for future medicals can be determined. This is the amount “compensated” for future medicals within the settlement or award. This would only be the amount necessary to set aside to satisfy CMS.

This approach is different from the traditional approach. The traditional approach to funding an MSA is to determine what the future medical costs to be paid by Medicare would be and set that money aside without regard to whether the plaintiff actually recovered that amount for future medicals. Under the Garretson approach, the only amount to be set aside would be the actual funds recovered by the plaintiff, which could be considerably less than the total future medicals.

Once the amount of the MSA has been determined, who shall administer those funds? One option is to use a professional custodian such as Medi-Vest. The advantage to the professional custodian is that they know the rules. They use the set-aside funds only to pay for medical care that Medicare would cover. The plaintiff may be receiving other medical care that would not be covered by Medicare and use of the MSA funds for payment of that care would be inappropriate. A professional custodian will also take advantage of the discounts offered to Medicare, rather than paying full retain prices. This makes the funds last longer. The other option is to turn over the MSA amount to the plaintiff to be self-administered. The advantage to this approach is that it avoids paying the professional custodian’s fees. There is usually a set-up fee and an annual maintenance fee. A disadvantage to a self-administered MSA is the plaintiff does not know the rules and often uses the funds for other purposes such as covering delinquent mortgage payments or payments on car loans. As a practical matter, if the Set-Aside is a $100,000 or more, it usually makes sense to engage the services of a professional custodian. If the settlement is less than $100,000, the cost of a professional custodian are not warranted and a self-administered MSA is more appropriate.

The next consideration for an MSA is whether or not a Structured Settlement should be considered. CMS requires that an MSA be funded with a lump sum sufficient to cover two year’s medicals plus the first surgery, but the rest can be funded with a Structured Settlement. Since most of the funds will not be needed right away, it often makes sense to use the Structured Settlement. Statistics show that where a Structured Settlement is used, the cost is only 52% of funding an MSA with a lump sum. This is because the Structure does not have to pay out for a period of time. The Structure can also take advantage of the plaintiff’s rated age.

by Thomas D. Begley, Jr., CELA

There are seven Trust that should be addressed in considering Medicaid. These are: Revocable Trusts, Income Only Trusts, Children’s Trusts, Disability Annuity Trusts, Disability Annuity Special Needs Trusts, Self-Settled Special Needs Trusts, and Third Party Special Needs Trusts.

There are seven considerations in drafting trusts. These are: availability of trust assets, applicability of a Medicaid or SSI transfer penalty, Medicaid payback provisions, good and bad assets for funding trusts, tax considerations (including income, gift and estate), estate recovery, and elective share issues. This chart is designed to address each of those issues with each of those trusts at a glance.

by Thomas D. Begley, Jr., CELA

Types of Trusts. Trusts established and funded after August 10, 1993, are governed by OBRA-93. The Medicaid-qualifying trust rules were repealed by OBRA-93, and new rules for revocable and irrevocable trusts created after August 10, 1993, were established. OBRA-93 also created special disability trusts, each of which has rules. These trusts include Self-Settled Special Needs Trusts and Pooled Trusts. OBRA-93 also established a Miller Trust, to be used when a potential Medicaid recipient has income in excess of the income cap. The fourth trust authorized under OBRA-93 is a sole benefit of trust.

The commonly-used trusts in Medicaid Planning include the following:

• Income Only Trust
• Children’s Trust
• Disability Annuity Trust
• Disability Annuity Special Needs Trust
• First-Party Special Needs Trust
• Third-Party Special Needs Trust

What Constitutes a Transfer. The key to understanding the transfer rules pertaining to trusts is to understand when the transfer has taken place. If there is a transfer from an individual then to a trust under conditions by which the trust assets are still available to the individual, for Medicaid purposes there has been no transfer. Therefore, where the trust is revocable, the assets are still available to the individual after the trust is funded so there is no transfer at this point. The transfer is considered to have taken place on the date of payment from the trust to a third party.

If the trust is irrevocable, the transfer is considered to have been made as of the date the trust was established and funded, or upon such later date that payment to the settlor was foreclosed. However, if the settlor can still benefit from the assets with which the trust is funded, those assets are still available so there is no transfer. If and when those assets are paid out to a third party, the transfer occurs. If the settlor places assets in an irrevocable trust and can no longer benefit from any of the trust corpus, there has been a transfer of assets when the trust is funded.[1]

Drafting Considerations for Trusts. There are seven main issues to be considered in drafting any trust involving a potential Medicaid recipient. These considerations are:

• Availability
• Transfer of asset penalty
• Payback provision
• Funding
• Tax considerations, including income, gift and estate
• Estate recovery
• Elective share

[1] 42 U.S.C. § 1396p(c)(1)(B); HCFA Transmittal 64 § 3258.4E.

by Thomas D. Begley, Jr., CELA

Once a Medicare Set-Aside Arrangement (“MSA”) has been considered, the next question is how much is necessary to fund it. If future medicals have been plead or claimed and future medicals are specifically released in a Release signed in connection with the third party liability (“TPL”) settlement, then it is likely that Medicare’s interests must be considered. That raises the question as to how to calculate the amount of the settlement intended for future medical care. It is unlikely that the Centers for Medicare and Medicaid Services (“CMS”) would accept a figure agreed upon by the parties absent court testimony and a court finding.

It is important to remember that in a TPL case, the award seldom pays 100 cents on the dollar for future medicals. Issues in these cases, such as disputed liability or causation, policy limits, statutory caps and derivative claims, often mean that TPL cases are resolved for less than the full measure of damages sustained. The Garretson Resolution Group recommends a starting point for a maximum amount may be identified through review of a plaintiff’s life care plan and other evidence of the dollar assigned to particular damages other than future medicals. These would include procurement costs, liens, pain and suffering, loss of future earning capacity, etc. Garretson outlines a four-step process:

1. Were future medicals plead or released as part of the settlement, judgment or award?

2. Does the plaintiff require future injury-related care?

3. Does the settlement award “compensate” plaintiff for future medicals based on objective decisional future medical allocation methodology?

4. How much did the settlement award compensate based on objective decisional future medical allocation methodology?

By analyzing the settlement to figure out how much would be appropriate for future medicals and then determining the ratio of the plaintiff’s net proceeds to the total damages, a percentage for future medicals can be determined. This is the amount “compensated” for future medicals within the settlement or award. This would only be the amount necessary to set aside to satisfy CMS.

This approach is different from the traditional approach. The traditional approach to funding an MSA is to determine what the future medical costs to be paid by Medicare would be and set that money aside without regard to whether the plaintiff actually recovered that amount for future medicals. Under the Garretson approach, the only amount to be set aside would be the actual funds recovered by the plaintiff, which could be considerably less than the total future medicals.

by Thomas D. Begley, Jr., CELA

For many years a debate has raged as to whether Medicare’s interests must be considered with respect to future medical payments in the context of a third party liability settlement (“TPLS”). The issue is simple. If a plaintiff in a TPLS receives money to pay for future medical care, is he free to pocket that money and send the bill for the future medical care to Medicare? Under the Medicare Secondary Payer Act (“MSPA”), Medicare is prohibited from making a payment for future medicals to the extent that such payment has been made under liability insurance. Therefore, if a liability insurance company or self-insured defendant pays money to a plaintiff for future medical care, the argument goes that Medicare cannot pay for that care.

In 2013, the Centers for Medicare and Medicaid Services (“CMS”) issued a Notice of Proposed Rulemaking (“NPRM”), but then voluntarily withdrew it in 2014. As a result, parties have been left to their own devices in determining how to address this issue. Some commentators believe that absent enforceable regulations that identify the standards by which future medicals are to be measured in the liability context, the federal government has no right to claim an interest in future medicals as part of the settlement. On the opposite end of the spectrum, commentators observe that CMS interprets the MSPA so that it is applicable to TPLS as well as Worker’s Compensation claims. The correct position may lie somewhere in between. The real answer may be to develop an analysis of how much of the TPLS was for future medicals and how much was for other elements of damages. Then set aside only the amount received for future medicals, not the total anticipated costs of what the future medicals will actually be.

by
Thomas D. Begley, Jr., CELA

Below is a chart comparing an ABLE Account with a Third-Party Special Needs Trust.

by Thomas D. Begley, Jr., CELA

New Jersey has now enacted the Achieving a Better Life Experience Act (“ABLE”). It is understood that by Fall this Act will be ready for implementation. The question will then remain: “What is the best option? Should the parent intending to set aside money for a child with disabilities establish an ABLE account or a Third Party Special Needs Trust?” Generally speaking, if the individual would be the beneficiary became disabled prior to attaining age 26, then an ABLE account might be considered, if the account will be small. There is very little point to establishing an ABLE account for a significant amount of money. There are two primary advantages to an ABLE account: (1) the income builds up tax free, and (2) the cost of establishing and administering the account is relatively small. The disadvantage is that on the death of the beneficiary any funds remaining in the account must go first to repay Medicaid for medical assistance paid during the beneficiary’s lifetime.

Therefore, it would seem that if the account is to be relatively small (i.e., $25,000), an ABLE account might make sense. However, once the account exceeds that amount it probably makes more sense to transfer the funds to a Pooled Trust Third-Party Subaccount. While there is a set-up fee and administrative costs, there are also benefits and there is no Medicaid payback. For accounts between $25,000 and $100,000, a Pooled Trust probably makes more sense. This is true even though the Pooled Trust does not enjoy the advantage of tax-free income. The truth of the matter is that on an account of $100,000, the income tax savings is minimal. The beneficiary is also usually in a low tax bracket.

Once the account exceeds $100,000, a Third-Party Special Needs Trust probably makes sense. Yes, there are costs of establishing and administering the trust, but there is no Medicaid payback on death. Once an ABLE account reaches $100,000, the beneficiary’s Supplemental Security Income (“SSI”) is suspended. If the funds are in the Third-Party Special Needs Trust, SSI remains in effect. Between the benefit of the SSI payment and the advantage of no Medicaid payback, the cost of establishing and administering the Third-Party Special Needs Trust probably makes the most sense.

by Thomas D. Begley, Jr., CELA

New Jersey has passed the Achieving a Better Life Experience ACT (“ABLE”). While the Act has passed, it will take some time to implement. Many commentators believe that by Fall accounts will be able to be opened.

Under the ABLE Act, people with disabilities and their families may set up special savings accounts similar to 529 Plans to be used for disability-related expenses. Earnings on these accounts are non-taxable. Generally, if the fund does not exceed $100,000, it will not be counted for Supplemental Security Income (“SSI”) purposes. If the fund exceeds $100,000 then SSI will be suspended, but Medicaid can be continued so long as the total amount in the account does not exceed the amount authorized for 529 Plans. To be eligible, an individual must become disabled prior to age 26 and be disabled. If the individual receives Supplemental Security Disability Income (“SSDI”) or SSI or files a Disability Certification under IRS Regulations, she will be considered disabled.

Funds can be used for education, housing, transportation, employment training, support, assistive technology, personal support services, health, prevention and wellness, financial management and administrative fees as well as legal fees and expenses for oversight and monitoring.

The total amount contributed to an ABLE account in any one calendar year by all contributors cannot exceed the amount of the federal annual gift tax exclusion, which for 2016 is $14,000. The drawback to these accounts is on the death of the account owner, any funds remaining in the account must be used to repay Medicaid for any funds advanced on behalf of the account holder. The best strategy seems to be to use these accounts for small gifts. Normally, these accounts would be used for gifts from parents. As long as the gifts are less than $14,000 per year and do not accumulate very much, these accounts might make sense. However, because of the Medicaid payback, it does not make sense to have these accounts grow. A Third Party Special Needs Trust is a much better option, if the amount involved is significant.

The advantages of an ABLE account are the tax-free income. However, realistically this is not a significant advantage because the income on small accounts is low and the other income of the beneficiary with a disability is usually low, so the tax saving sounds more attractive than it actually is. The other advantage is that there is a minimal cost to establishing the account when compared to establishing a Pooled Trust or a Third Party Special Needs Trust.

The disadvantages are the Medicaid payback and the possible loss of SSI. Because of the Medicaid payback, it makes little sense to build up a large account. The SSI benefit of approximately $750 per month is a significant benefit that should be protected.

Ideally, ABLE accounts appear to be useful if they are in the $25,000 to $50,000 range, but not for larger accounts. A Pooled Trust or Special Needs Trust would be more appropriate.

That last part is the most important thing.  I don’t pretend to know or dismiss things I don’t know enough about, I either learn them or accept that I don’t know.  That’s how I got into elder law in the first place. I was a pure estate planning attorney, focusing on what happens when you pass away.  But I was being bombarded with questions revolving around “what happens if I don’t pass away and continue to age, then what?”  I didn’t have the answer, didn’t pretend to have the answer, so I dove deep into the laws and strategies to become an expert on that answer.  Going on to become the second youngest attorney at the time to pass the Certified Elder Law Attorney exam in the nation and become the 15 CELA in the state of Michigan.  Then going on to write a book on the subject and then teach Elder Law at WMU Cooley Law School.

Who Do You Trust for Heart Surgery?  Heart Surgeon or Family Doctor?

If you are going in for heart surgery would you want the experienced heart surgeon or would you trust your family doctor when it comes to performing the surgery?

Likewise, I’m surprised when families get a second opinion from a financial planner or family lawyer when it comes to our recommendations.  We then end up having to educate the family lawyer or financial planner on Medicaid, Medicare, Tax Law, Veterans Benefits, Asset Protection rules, Trust rules, beneficiary designations, etc…

I’m happy to do it, but I just feel for the families who are often mislead when it comes to asset protection by lawyers and financial planners who know enough to be dangerous…and often are.

When it comes to planning to protect you legally from the devastating cost of long-term care are you going to have more faith in a Certified Elder Law Attorney (CELA), who teaches elder law to law students as an adjunct professor, written a book on the subject, teaches continued education to lawyers and financial planners on the topic or an annuity salesman or basic estate planning attorney?  I welcome the opportunity to educate the professional on the planning strategies–they often turn into wonderful referral sources.

Price Shop Your Heart Surgeon?  Documents versus Planning.

Would you price shop your surgeon?  Do you want the cheapest heart surgeon you can afford?  Probably not.  The difficult thing to understand with good legal estate planning is that not all documents are created equal.  If you call up 10 attorneys and ask how much a trust costs, you’ll get varying answers.  You can have a trust done online for probably $40 or you can have an estate plan done for free through UAW Legal Plan, if you’re a member.  But the age old lesson applies….you get what you pay for.  That applies to legal planning as well.

Having a trust or power of attorney isn’t enough.  It’s what that document says.  Better than that is how those tools are used.  If I asked you to get me a paint brush, would you know what type of brush to get me?  It’s all about the planning.

Their Ego Versus What’s Best For You

Sometimes, not all the time, there are financial planners or other attorneys who feel like that if they are not familiar with a strategy or haven’t heard of a certain type of trust, that it a) doesn’t work or b) isn’t right for you.  This is just their ego getting in the way of what is best for you.  You look up to them as a trusted advisor and they may feel that by having a new strategy (asset protection isn’t new, by the way…), it challenges their authority and the respect you may have for them.

This is very closed minded of the advisor and can be detrimental to your planning.

I love working with open minded lawyers and advisors.  In fact, just last week I was having coffee with an advisor at one of the Wall Street type financial planning firms and he said to me “Chris, this is amazing, can you come present to my group?”  Of course.  This is the point, share ideas for what’s best with your clients.  Not all planning is right for all clients, but at least know the options out there.

Sure, you can do a basic trust that avoids probate (if funded properly) and controls assets upon death.  But you can also build an asset protection trust that does all that PLUS protects you.  Get educated.  Know your options.  Choose a plan that works for you.

The post What Your Financial Planner or Family Lawyer Doesn’t Know, Hurts You! appeared first on Michigan Estate Planning.

by Thomas D. Begley, Jr., CELA

Historically, a member of the military could arrange for a pension and provide a survivor’s benefit to a spouse or child. A problem arose where the child had a disability and was receiving means-tested public benefits such as Supplemental Security Income (“SSI”) or Medicaid.   If the child with disabilities receiving those benefits or other means-tested public benefits received the pension, they would lose the benefits. This is because any income received from any source reduces the SSI income dollar-for-dollar, and if the pension exceeded the amount of SSI income, SSI would be completely lost. Medicaid is frequently linked to SSI, so that if SSI is lost, the Medicaid would be also be lost. What follows is a story of the Power of One.

An Elder and Disability Law attorney in Virginia, named Kelly Thompson, took up the cause of these beneficiaries with disabilities. Kelly enlisted help from the Special Needs Alliance, which is a national organization of lawyers practicing in the disability field and also the National Academy of Elder Law Attorneys. After several years of hard work, in late 2014 Congress enacted the Disabled Military Child Protection Act in the 2015 National Defense Authorization Act. This legislation allows military retirees and service members to designate their survivor benefit to a Special Needs Trust for the benefit of their disabled child or children.

By having the survivor pension benefits irrevocably paid into a Special Needs Trust, those funds are not counted in determining the financial eligibility of the disabled child. The net result is that the military member’s or retiree’s children with disabilities are able to benefit from the pension as well as maintain their vital public benefits.

Part of the requirements under the Disabled Military Child Protection Act is that an attorney certify that the child has previously applied for, or may in the future apply for, SSI or other benefits, and that the Special Needs Trust is compliant with all applicable state and federal laws. A template is provided for completion and signature

by Thomas D. Begley, Jr., CELA

In an important case arising in South Dakota, the parents of Stephany Draper established a Self-Settled Special Needs Trust into which Stephany’s personal injury settlement was to be deposited. Prior to that case, this had been a common procedure used all over the country. However, the Social Security Administration (SSA) contended that Stephany’s parents did not deposit any of their own money into the trust, but simply arranged for Stephany’s personal injury settlement funds to be deposited. Therefore, SSA held that since Stephany’s money was used to fund the trust, then Stephany was the person who established the trust and under federal law an individual is not permitted to establish a Self-Settled Special Needs Trust.

What is the solution to this dilemma? SSA is now taking the position that where a parent establishes a Self-Settled Special Needs Trust for a child, the parent must deposit some of the parent’s money into the trust. This could be a token amount (i.e., $10). The rationale is that the person who “first funds” the trust is the establishor. Some lawyers are simply attaching a $10 bill to the trust and sending a copy of the trust with a copy of the $10 bill to Social Security. Better practice would be for the parent to deposit $10 into a trust bank account before the personal injury settlement proceeds are deposited into the account. Copying a $10 bill does not mean that the $10 was used to actually fund the trust. The parent could take the $10 bill out of their wallet, photocopy it, send it to Social Security, and put the $10 bill back in their wallet. Depositing the money into a trust bank account is evidence that the $10 was actually deposited into the trust.

by Thomas D. Begley, Jr., CELA

It is always difficult to move from one state to another, but when a family member has disabilities there are a number of considerations that should be addressed as early as possible.

• Health Care. Establish a “safety net” well in advance. Research the doctors, therapists and other service providers available in the new location and reach out to local advocacy organizations for referrals. Be sure your medical insurance serves the area to which you are moving. Otherwise, it may be necessary to obtain other medical insurance. Most medical insurance policies have geographic limitations.

• Special Education. If a child is receiving special education, it may be necessary to negotiate a new Individual Education Plan (IEP) and/or a 504 Plan prior to moving in order to avoid an interruption in services. The existing IEP should be forwarded to the new school district as a starting point.

• Guardianship does not automatically transfer from one state to the other. If the new home state has not signed a reciprocity agreement with the state you are leaving, transferring guardianship can be complex. Legal counsel in the state you are leaving and the state to which you are moving should be consulted to coordinate the process.

• SSI/SSDI. Simply supply the Social Security Administration with the new address on a timely basis and there should be no interruption in payments.

• SNAP (Food Stamps). SNAP is a federal program, but each state has variations. Verify the new state’s guidelines.

• Social Service Agencies. Do research and identify local providers of day care, in-home services, social programs, career assistance, and other supports.

• Estate Planning Documents. Review and update, if necessary, Wills, Special Needs Trusts, Living Trusts, Living Wills, and Powers of Attorney. Confirm that beneficiary designations are still correct.

• Motor Vehicle. Apply for a handicap vehicle permit, if required.

by Thomas D. Begley, Jr., Esquire, CELA

Wills are designed to transfer property on death. If there is no Will, the State writes a Will for the deceased individual. While those Wills make sense for many people, they do not make sense for everyone. Assuming a client has mental capacity, the first step would be to review any existing Wills and bring them up to date, or, if there are no Wills, then to put them in place. Wills can contain appropriate tax planning techniques. Typically, the beneficiaries of Wills include a spouse, children, and other family member, friends or charities. In most states, the requirements to make a Will are that the individual must be 18 years of age or older and of sound mind. This is why it is important to make a Will before the individual diagnosed with Alzheimer’s deteriorates. The Will disposes of the individual’s property on death and appoints Executors and Trustees, if a trust is established in the document. Absent a Will, an Administrator must be appointed. While there is a statutory pecking order, this often leads to disputes among children and additional costs in the form of posting a bond.

If children are young, it often makes sense to include a Trust in the Will holding the child’s share of the estate to a certain age. The child must be at least 18 years of age to inherit, otherwise, the funds are placed in an account with the Probate Court and distributions are supervised by the Court. It often makes sense to hold the money in trust for a longer period of time, such as age 30. While the money is in trust, a Trustee, who is often another family member, distributes the money to or for the benefit of the child for health, education, maintenance and support, or even to buy a home. Therefore, all of the child’s real needs are provided for. Normally, the Trust will contain withdrawal rights giving the child the right to take the money for any purpose upon a certain age, typically 30, or if the child is inheriting a large sum of money, it might be withdrawn over two or three ages such as 30 and 35 or 30, 35 and 40. Care should be taken in selecting a Trustee. A sibling is sometimes not a good choice, because the child who is the beneficiary of the Trust may want money for things that are inappropriate and this may cause conflict between the children. Perhaps siblings or friends of the parents making the Will would be more appropriate choices.

by Thomas D. Begley, Jr., Esquire, CELA

A Health Care Power of Attorney simply appoints a Health Care Representative to make medical decisions without giving any direction to the representative. The Advance Directive gives instructions for end-of-life decision-making. A Health Care Power of Attorney can be combined with an Advance Directive/Living Will. There are essentially four choices:

1. Terminate Life. This provision would instruct the health care providers to terminate life, if there was no reasonable hope of recovery or regaining a meaningful quality of life. The state Living Will statute spells out conditions that must be met before life can be terminated.

2. Treat Aggressively. Some people do not want to entrust end-of-life decision-making to others. They feel that no matter how hopeless the situation may appear, they could improve. For these people the “treat aggressively” option makes sense. The Health Care Provider is directed to treat the individual aggressively no matter how hopeless the situation, and the Health Care Representative is not authorized to override these instructions in the document.

3. Medical Power of Attorney Only. Some people do not feel comfortable in thinking about end-of-life decision-making. They would rather let someone else make that decision when the time comes. A Medical Power of Attorney appoints the Health Care Representative and leaves the end-of-life decision-making to that individual.

4. Court Appoints Guardian. Ignore the problem, do not sign a Health Care Power of Attorney or Advance Directive, and have a guardian appointed by a court to make medical decisions.

The first three options make sense, the fourth option does not.

Choosing a Health Care Representative is not easy. A married couple typically selects their spouse. Individuals also tend to select children. The appointment of a Health Care Representative puts a heavy burden on that person. No one looks forward to terminating the life of a loved one. Some people would find it very difficult to implement the individual’s decision to terminate life. In selecting a Health Care Representative, the personality of the proposed Representative should be considered.

It is also possible to include a consultation clause in the document whereby an individual appoints a Health Care Representative and instructs that Representative to consult with others prior to making a final decision. Avoid selecting two or more individuals as Health Care Representative. If there are two people, there could be conflict at the time a final decision is to be made. Appoint one person and have them consult with the other, but give the person originally appointed the right to make the final decision after consultation.

by Thomas D. Begley, Jr., Esquire, CELA

A revocable Living Trust is designed to avoid probate on the death of the individual. If the individual owns real estate in more than one state, the real estate can be transferred to a Living Trust to avoid probate in multiple states. Some states have very difficult and expensive probate procedures, and a Living Trust can be used to avoid the process entirely. In these cases, the Will simply leaves everything to the Trust, and the Trust spells out to whom the assets are to be distributed. The Trust can be funded during the individual’s lifetime. A Trustee is appointed to administer the Trust. During the lifetime of the individual establishing the Trust, the individual is his own Trustee. Provision should be made for a Successor Trustee in the event of the disability of the individual establishing the Trust. The Trust can be revocable during the lifetime of the person establishing it. Tax planning can be done in the Trust document. The Trust could be designed to save federal or state estate taxes. The advantages of a Revocable Living Trust are as follows:

• Avoids probate;

• Saves Executor’s commissions;

• Reduces, but does not eliminate, attorney’s fees;

• Often ensures greater privacy;

• Provides disability protection, if the person establishing the Trust becomes disabled; and

• Provides for asset management during disability.

While Living Trusts are often oversold, they do have some benefits and should always be considered where the individual owns out-of-state real estate. Without the Living Trust, the individual would have to probate his Will in the state of residence and again where the out-of-state real estate is located. Care must be taken to be sure that beneficiary designations and the Living Trust work together to achieve the individual’s estate planning goals.

by Thomas D. Begley, Jr., Esquire, CELA

The Financial Power of Attorney is also known as a General Durable Power of Attorney. The principal designates an individual to serve as an Agent to transact financial decisions on the individual’s behalf. The document should be state specific, because laws in different states vary. It should also be detailed as to exactly what powers are included. Some states have statutory forms of powers of attorney, but these are generally not as effective as individually-customized documents.

If a Power of Attorney is not in place, a guardianship may be required in order to make medical and financial decisions. While the procedure for appointment of a Guardian varies somewhat from state-to-state, generally, two physicians must certify that the individual lacks capacity to conduct their affairs. Physicians perform an examination, and a commonly-used tool by physicians is a Mini Multi-State Examination. Proceedings must be filed in court. Notice must be given to all interested parties. There are frequently challenges as to whether or not the individual has capacity and also disagreements as to who should be appointed guardian. A contested guardianship can be expensive and execution of a power of attorney is always preferable.

Typical powers conferred include:

• Power to Sell, Mortgage, Lease, Gift or Transfer Real Estate
• Disposal of Proceeds of Sale
• Use Credit Cards
• Power to Invest
• Securities and Brokerage Accounts
• Power to Exercise Rights in Securities
• Power to Execute Further Powers of Attorney
• Power to Exercise Rights in Governmental Securities
• Power to Demand and Receive
• Compromises and Discharges
• Exercise Elective Share Rights/Right of Dissent
• Power With Respect to Employment Benefits
• Power With Respect to Banks
• Power With Respect to Legal and Other Actions
• Power to Borrow Money
• Powers With Respect to Trusts
• Power to Exercise or to Renounce and Resign From Fiduciary Positions
• Power to Disclaim, Renounce, Release or Abandon Property Interests
• Power With Respect to Insurance
• Power With Respect to Taxes
• Power to Make Loans
• Power to Make Gifts
• Apply for Public Benefits
• Managing Agency Accounts
• Employ Consultants
• Power to Operate Business
• Partnership
• Power to Provide Support
• Pets
• Deal With Environmental Hazards
• Closely Held Business Interests
• Providing for Principal’s Incapacitated Children
• 529 Plans
• Digital Assets
• Creation of Interest in Principal’s Property
• Power with Respect to Annuities
• ABLE Accounts

by Thomas D. Begley, Jr., CELA

Settlement Protection Trusts can be very useful tools in the settlement of a personal injury case. A Settlement Protection Trust is very flexible. However, it cannot be used where an individual is receiving means-tested public benefits. A Settlement Protection Trust is essentially a Support Trust designed to provide for the health, education, maintenance and support of the trust beneficiary.

A budget is prepared and the trustee can often simply write a monthly check to the beneficiary, so that the beneficiary can pay all of his or her monthly bills. In other cases, the beneficiary will simply obtain a credit card and send the credit card bills to the trustee for payment, so long as the expenditures are within the agreed-upon budget. The budget should be designed so that the money will last as long as the plaintiff lives, if that is possible.

When to Use a Settlement Protection Trust

Minor or Incapacitated Person—Plaintiff Not Receiving Means-Tested Public Benefits

In these situations, a Settlement Protection Trust is ideal. If there is a minor or incapacitated person, the monies can be deposited into the Settlement Protection Trust rather than the probate court.

In cases involving a minor or incapacitated person, the establishment of the Settlement Protection Trust must be approved by the court.

Competent Adult Not Receiving Means-Tested Public Benefits

Where a competent adult is not receiving public benefits, both New Jersey and Pennsylvania allow distributions to be made from income and principal without court approval. The beneficiary enjoys the advantages of the Settlement Protection Trust, and the trust serves to protect the settlement from being squandered by the injured plaintiff or being coveted by family members and friends.

Large Settlement—Client Receiving Means-Tested Public Benefits

In many large settlements, the client may be receiving SSI and Medicaid. In some cases, the Medicaid benefit may be modest and, therefore, unnecessary. In other cases, the Medicaid benefit may be significant, but can be replaced by insurance under the Affordable Care Act or a combination of Medicare and private insurance. In these cases, it is often beneficial to consider giving up the public benefits in exchange for greater flexibility in administration and avoiding the Medicaid payback.

by Thomas D. Begley, Jr., CELA

Victims of Crime Compensation

In New Jersey, certain victims of crime are entitled to compensation under the Criminal Injuries Compensation Act of 1971.[1] The Act covers individuals injured or killed by any act or omission of any other person, which is within the description of offenses listed within the Act.[2] The state has a right of subrogation against the person responsible for personal injury or death, and a lien after entry of judgment.[3]

State Workers’ Compensation Claims

When there is a state Workers’ Compensation (WC) claim and also a third party liability case, and the third-party liability case settles, there is a WC lien against the third-party liability proceeds.[4] Frequently, the WC lien is negotiable, because the WC carrier may be motivated to get the plaintiff off its books.

If the amount recovered from the third party is greater than the WC lien, no attorneys’ fees or costs are permitted. If the sum recovered against the third party is less than the WC lien, there is a pro rata reduction for attorneys’ fees and costs.[5] Expenses shall not exceed $750 and attorneys’ fees shall not exceed 33⅓%.[6]

Federal Employee Compensation Act

The Federal Employee Compensation Act (FECA) is the federal equivalent of the state Workers’ Compensation law.[7] The United States has a statutory lien for recovery against the third party liability case.[8] The lien attaches to the entire recovery.

[1] N.J.S.A. 52:4B-1.

[2] N.J.S.A. 52:4B-10.

[3] N.J.S.A. 52:4B-20.

[4] N.J.S.A. 34:15-40.

[5] N.J.S.A. 34:15-40(b) and (c).

[6] N.J.S.A. 34:15-40(e).

[7] 5 U.S.C. §§ 8131 and 8132; 20 C.F.R. § 10.705-719.

[8] 5 U.S.C. § 8132.

by Thomas D. Begley, Jr., CELA

Medicare Advantage and Prescription Drug Plans

Medicare Part C, commonly known as Medicare Advantage, is a Medicare substitute program operated by private health insurance companies as a managed care plan. Medicare Part D similarly provides prescription coverage to eligible beneficiaries through private insurance plans. To the extent a reimbursement right may be created under a specific MAO plan, the Part C statute itself limits any recovery from a beneficiary to the amount actually received from a third party as payment for plan-covered expenses.[1]

Veterans Administration and TRICARE Claims

The Veterans’ Benefits Act[2] and the Armed Forces Act[3] establish the Veterans Administration and TRICARE/CHAMPUS healthcare programs, respectively. Neither the VA nor TRICARE/CHAMPUS statutes allow for a lien or reimbursement claim against a beneficiary’s personal injury recovery. The government does have a subrogation right if it chooses to pursue its own claim against a third party; however, the statutes specifically governing the programs have a very narrow definition of “third party” that does not include a tortfeasor, but is specifically limited to public and private healthcare payors.[4] Moreover, applicable regulations spell out that a beneficiary only has a duty to cooperate with the government’s third-party claim, and the extent of that cooperation itself is rather limited, merely obliging a beneficiary to provide necessary information for the government’s third-party claim.[5] Moreover, the government’s claim is expressly limited by both statute and regulation to the extent of liability under state tort law, so federal preemption of state liability rules does not apply.

Welfare Liens

In New Jersey, there is a lien against real and personal property of a person who has been assisted by or received support from any municipality or county. This is true whether a person has been in a county facility or at home.[6]

[1] 42 U.S.C. § 1395w-22(a).

[2] 38 U.S.C. § 1729.

[3] 10 U.S.C. § 1095.

[4] 38 U.S.C. § 1729(i)(3) and 10 U.S.C. § 1095(h)(1).

[5] 32 CFR §§ 199.12 and 220.9.

[6] N.J.S.A. 4:4-91.

by Thomas D. Begley, Jr., CELA

Mental Health Liens

In New Jersey, a person with a mental illness who is over age 18 and is being treated in a state psychiatric hospital shall be liable for the full cost of his treatment, maintenance, and all necessary related expenses.[1] Although this statute does include a repayment obligation, it does not appear to impose a lien, particularly with respect to personal injury claims.

Traumatic Brain Injury Fund

The New Jersey Traumatic Brain Injury Fund is the payer of last resort for costs of post-acute care, services, and financial assistance provided to survivors of traumatic brain injury, particularly with respect to rehabilitative and long-term care needs not covered by private insurance or public benefits programs.[2] The fund provides up to $15,000 a year in benefits, not to exceed a total expenditure of $100,000 per eligible person. The fund has a first-priority claim to any monies received by the person with traumatic brain injury as the result of a settlement or other payment made in connection with the traumatic brain injury.[3]

Catastrophic Illness in Children Relief Fund

As its name suggests, the Catastrophic Illness in Children Relief Fund is a New Jersey program that provides assistance to children and their families whose medical expenses extend beyond the families’ available resources.[4] In the case of an illness or condition for which the family, after receiving fund assistance, recovers damages for the child’s medical expenses pursuant to a settlement or judgment in a legal action, the family is required to reimburse the fund for the amount of assistance received, or for the portion of assistance covered by the amount of the damages, subject to a credit for the expenses of obtaining the recovery.[5] The Fund administrators have the authority to negotiate settlement of its reimbursement claims.[6]

[1] N.J.S.A. 30:4-60(c)(1).

[2] N.J.S.A. 30:6F-1 et seq.

[3] N.J.S.A. 30:6F-6(b).

[4] N.J.S.A. 26:2-148 et seq.

[5] N.J.S.A. 26:2-154(b).

[6] N.J.S.A. 26:2-154.1.

by Thomas D. Begley, Jr., CELA

Hospital Liens

Generally, every hospital, nursing home, licensed physician, or dentist may assert a lien for services rendered by way of treatment, care, or maintenance to any person who has sustained personal injuries in an accident as a result of negligence or alleged negligence of any other person.[1] The lien attaches to the proceeds of any settlement, award, or judgment an injured person may obtain from a third party as a result of the injuries for which services were provided.[2] Hospital liens may be difficult to negotiate; however, such liens are subject to strict filing and notice requirements[3] and failure to comply with the statute is fatal to the lien claim.

Child Support

New Jersey imposes liens for child support against any proceeds recovered from a personal injury settlement.[4] The lien shall have priority over all other levies and garnishments against the net proceeds of any settlement, judgment, or award, unless otherwise provided by the Superior Court, Chancery Division, Family Part. The only exception is unpaid income taxes.

Division of Developmental Disabilities (DDD)

The Division of Developmental Disabilities asserts liens for many of its programs. Before settling a case, it is important to check with DDD if plaintiff has been receiving those services.

[1] N.J.S.A. 2A:44-36.

[2] N.J.S.A. 2A:44-37.

[3] N.J.S.A. 2A:44-41.

[4] N.J.A.C. 2A:17-56.23(b).

by Thomas D. Begley, Jr., CELA

Federal Employee Health Benefit Act

The Federal Employee Health Benefit Act (FEHBA) provides group health insurance for federal employees.[1] Although there is no statutory right of subrogation or reimbursement, FEHBA contains a preemption provision under which the terms of insurance contracts issued by its private carriers purportedly preempts state and local law.[2] However, the Supreme Court has held that FEHBA does not provide contract insurers with a federal cause of action or federal jurisdiction in a subrogation/reimbursement claim, leaving the matter to the state courts, and it further called into question whether a FEHB plan may assert any contractual recovery right at all against a beneficiary where such claims are prohibited by state law; the Court was “not prepared to say” that a carrier’s contract with the government “would displace every condition state law places on that recovery.”[3]

Federal Medical Care Recovery Act

The federal statutory scheme provides several independent bases for recovery of medical costs expended on behalf of government personnel and their dependents for injury or disease not connected to their military or other government service, but the Federal Medical Care Recovery Act (FMCRA)[4] establishes standards generally applicable to claims of all federal departments and agencies. Significantly, while the government may exercise its recovery rights under the statute by making claims directly against third-party tortfeasors, the statute authorizes no such claims against a beneficiary. The statute provides, inter alia, that in any case in which the United States furnishes or pays for medical or dental care and treatment under circumstances creating third-party tort liability for such expenses, the United States shall have a right to recover from the third party the reasonable value of such care and treatment.[5] The United States also has an independent right to recover from the third party the total amount of pay for a member of the Uniformed Services for any period in which the member is unable to perform his or her duties as a result of the injury or disease and is not assigned to perform other military duties.[6]

[1] 38 U.S.C. § 1725(a)(1).

[2] 5 C.F.R. § 890.

[3] Empire HealthChoice v. McVeigh, 547 U.S. 677 (2006).

[4] 42 U.S.C. § 2651.

[5] 42 U.S.C. § 2651(a).

[6] 42 U.S.C. § 2651(b).

In some of these specialties, you can receive certification; in others you do not. But is it really that important to be certified in a particular specialty?

In some areas of law, the certification is nice but not always necessary because that type of law is so commonly practiced that everyone who practices it for some amount of time can become very competent and trusted.

But in the area of elder law, that area geared toward seniors in terms of estate planning, long-term care and issues involving assisted-care or nursing home facilities – is a very different animal. As more mature adults tend to become more targeted, more susceptible and are more vulnerable to unscrupulous characters, getting certified as an elder-law attorney can be very important. Not only does it build a strong foundation for serving clients well, but the certification means that potential clients will be able to trust an attorney with the certification to do the very best work for the clients’ best interests.

The certification is not easy. Not just any attorney who has happened to do some elder law can apply for the certification, and even fewer of them get accepted.

So if you or a family member is reaching that “senior” age (which starts around 50) and you may or will be in need for some elder-law assistance, you can know why a certified elder law attorney (CELA) would be the right choice for you.

Why choose a CELA ahead of any attorney who happens to practice elder law? Here are some criteria for a CELA to meet before even applying for the certification

• Be a member in good standing with the bar association for all states in which you are licensed to practice.
• Be a practicing lawyer (actively) for at least five years. (Again, this is before applying for certification.)
• Must have at least 45 hours of elder law legal education in the previous three years before applying.
• Must have spent at least 16 hours per week and conducted at least 50 elder-law cases during the three years prior to the applying.
• Must be evaluated favorably at last five elder-law attorney specialists.
• Pass a full-day certification exam.

Once the certification is in place, CELAs must then get re-certified every five years. And again, the criteria above are just to get the application approved for consideration!

With this in place, you can now know that a certified elder-law attorney is the one to trust with your elder-law needs. This person specializes in elder-law issues, knows the law better than anyone and has gone through rigorous training to back it up.

For many, it’s a matter of confidence and trust. With a CELA, confidence and trust is baked right into the certification. Find your nearest CELA today and get the care, compassion and legal advice you need.

The post Elder Law Certification: More than Just Paper appeared first on The Elder Care Firm.

In some of these specialties, you can receive certification; in others you do not. But is it really that important to be certified in a particular specialty?

In some areas of law, the certification is nice but not always necessary because that type of law is so commonly practiced that everyone who practices it for some amount of time can become very competent and trusted.

But in the area of elder law, that area geared toward seniors in terms of estate planning, long-term care and issues involving assisted-care or nursing home facilities – is a very different animal. As more mature adults tend to become more targeted, more susceptible and are more vulnerable to unscrupulous characters, getting certified as an elder-law attorney can be very important. Not only does it build a strong foundation for serving clients well, but the certification means that potential clients will be able to trust an attorney with the certification to do the very best work for the clients’ best interests.

The certification is not easy. Not just any attorney who has happened to do some elder law can apply for the certification, and even fewer of them get accepted.

So if you or a family member is reaching that “senior” age (which starts around 50) and you may or will be in need for some elder-law assistance, you can know why a certified elder law attorney (CELA) would be the right choice for you.

Why choose a CELA ahead of any attorney who happens to practice elder law? Here are some criteria for a CELA to meet before even applying for the certification

• Be a member in good standing with the bar association for all states in which you are licensed to practice.
• Be a practicing lawyer (actively) for at least five years. (Again, this is before applying for certification.)
• Must have at least 45 hours of elder law legal education in the previous three years before applying.
• Must have spent at least 16 hours per week and conducted at least 50 elder-law cases during the three years prior to the applying.
• Must be evaluated favorably at last five elder-law attorney specialists.
• Pass a full-day certification exam.

Once the certification is in place, CELAs must then get re-certified every five years. And again, the criteria above are just to get the application approved for consideration!

With this in place, you can now know that a certified elder-law attorney is the one to trust with your elder-law needs. This person specializes in elder-law issues, knows the law better than anyone and has gone through rigorous training to back it up.

For many, it’s a matter of confidence and trust. With a CELA, confidence and trust is baked right into the certification. Find your nearest CELA today and get the care, compassion and legal advice you need.

The post Elder Law Certification: More than Just Paper appeared first on The Elder Care Firm.

by Thomas D. Begley, Jr., CELA

Generally, employer-sponsored benefits plans are governed by the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA.[1] However, certain employers and their benefits plans are not subject to ERISA. These include governmental plans;[2] church plans;[3] plans maintained solely for the purpose of complying with applicable Workmen’s Compensation, unemployment compensation, or disability insurance laws;[4] a plan maintained outside of the United States primarily for the benefit of persons who are virtually all non-resident aliens;[5] or an excess benefit plan.[6] ERISA preempts state law that “relates to” an ERISA-governed plan;[7] however, ERISA does not exempt or relieve any person from complying with any law of any state that regulates insurance, banking, or securities.[8] Neither an employee benefit plan nor any trust established under such a plan shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company.[9]

As a result of this statutory framework, any self-insured employee benefit plan regulated under ERISA enjoys federal preemption of state law, but an insurance company insuring such a plan does not. Such insurance companies are regulated by state law, including laws concerning subrogation and reimbursement.[10] If an ERISA plan is insured, the insurance company is subject to state law and the plan is bound by state insurance regulations insofar as they apply to the plan’s insurer. ERISA itself is silent with respect to subrogation and reimbursement, neither requiring a welfare plan to contain a subrogation clause nor barring such a clause or otherwise regulating its content.[11]

[1] 29 U.S.C. § 1003.

[2] 29 U.S.C. § 1003(b)(1).

[3] 29 U.S.C. § 1003(b)(2).

[4] 29 U.S.C. § 1003(b)(3).

[5] 29 U.S.C. § 1003(b)(4).

[6] 29 U.S.C. § 1003(b)(5).

[7] 29 U.S.C. § 1144(a).

[8] 29 U.S.C. § 1144(b)(2)(A).

[9] 29 U.S.C. § 1144(b)(2)(B).

[10] FMC Corp. v. Holliday, 498 U.S. 52 (1990).

[11] Ryan v. Federal Express Corp., 78 F.3d 123 (3d Cir. 1996).

Mature man reading old book surrounded by heaps of books

SO WHAT IS ELDER LAW?

As you can see on the banner and even in the URL address for this website, we are all about elder law. But perhaps after reading some of this you might be asking, what is elder law anyway?

It sounds like it should be pretty specialized, right?

Well it is, to a point. The specialty is the clientele – those who are older and thus will likely be involved in matters of estate planning, Medicare and Medicaid, Social Security and the like.

No, it is not the legal doctrine of TV lawyer/radio personality Larry Elder.

There are all kinds of attorneys who dabble in various categories of elder law, including those that actually have clientele of varying ages. But there are very few elder law “specialists,” those who at least know a lot about every area of elder law. Elder law can cover the gamut, from estate planning to probate to long-term care to insurance to wills and powers of attorney to nursing home neglect/abuse to Social Security to Medicare and Medicaid.

There are about 13 categories under the umbrella of elder law, and it will be important if you are looking for an elder-law attorney, to understand the right questions to ask to find the attorney who will be the right fit for you. Often it is personality that plays a role, but also it is more about the expertise of that attorney in the particular area of concern that you may have.

What Does an Elder Law Attorney Do?

An elder law attorney can serve as a very important adviser for a senior citizen and/or his or her family in legal and financial matters pertaining to elderly people. Whether it’s planning the estate to setting up long-term care options to powers of attorney, wills and trust – even end-of-life and real-estate issues – an elder law attorney can navigate you and your family through the various issues that will arise at some point.

There are many attorneys who at least dabble in some aspects of elder law, but there are certified elder law attorneys (with the CELA designation) who have a broader and deeper knowledge of the various areas of elder law.

Some people do hire a financial planner and an elder-law attorney for financial and legal matters, respectively, and the two professionals can often work together in consultation. However, if you can only afford to hire one, an elder-law attorney might be the wiser move since many financial issues do have legal guidelines and regulations that an attorney can help interpret – and the attorney would know enough about financial details to be a sound adviser in getting your affairs in order.

If you are in the market for an elder law attorney, try to ask these questions to find the right fit for your particular need:

• How long have you been practicing law (in general)?
• What percentage of time do you dedicate to elder law matters?
• Do you have a specialty within elder law?
• What would I need for our first meeting?
• What is your fee schedule?

No matter what specific need you might have within elder law, a certified elder law attorney can help you with any topic. As many elder law situations involve differing state laws and regulations, it is best to hire an elder law attorney who practices in the state where your elderly family member lives so as to not create confusion and legal troubles later.

Having an elder law attorney, at least on a retainer basis, can be a very sound investment for you and your family for when the inevitable happens, and the transfer of the estate goes on harmoniously and with little to no hassles.

The post What is Elder Law and Elder Law Attorney appeared first on The Elder Care Firm.

Mature man reading old book surrounded by heaps of books

SO WHAT IS ELDER LAW?

As you can see on the banner and even in the URL address for this website, we are all about elder law. But perhaps after reading some of this you might be asking, what is elder law anyway?

It sounds like it should be pretty specialized, right?

Well it is, to a point. The specialty is the clientele – those who are older and thus will likely be involved in matters of estate planning, Medicare and Medicaid, Social Security and the like.

No, it is not the legal doctrine of TV lawyer/radio personality Larry Elder.

There are all kinds of attorneys who dabble in various categories of elder law, including those that actually have clientele of varying ages. But there are very few elder law “specialists,” those who at least know a lot about every area of elder law. Elder law can cover the gamut, from estate planning to probate to long-term care to insurance to wills and powers of attorney to nursing home neglect/abuse to Social Security to Medicare and Medicaid.

There are about 13 categories under the umbrella of elder law, and it will be important if you are looking for an elder-law attorney, to understand the right questions to ask to find the attorney who will be the right fit for you. Often it is personality that plays a role, but also it is more about the expertise of that attorney in the particular area of concern that you may have.

What Does an Elder Law Attorney Do?

An elder law attorney can serve as a very important adviser for a senior citizen and/or his or her family in legal and financial matters pertaining to elderly people. Whether it’s planning the estate to setting up long-term care options to powers of attorney, wills and trust – even end-of-life and real-estate issues – an elder law attorney can navigate you and your family through the various issues that will arise at some point.

There are many attorneys who at least dabble in some aspects of elder law, but there are certified elder law attorneys (with the CELA designation) who have a broader and deeper knowledge of the various areas of elder law.

Some people do hire a financial planner and an elder-law attorney for financial and legal matters, respectively, and the two professionals can often work together in consultation. However, if you can only afford to hire one, an elder-law attorney might be the wiser move since many financial issues do have legal guidelines and regulations that an attorney can help interpret – and the attorney would know enough about financial details to be a sound adviser in getting your affairs in order.

If you are in the market for an elder law attorney, try to ask these questions to find the right fit for your particular need:

• How long have you been practicing law (in general)?
• What percentage of time do you dedicate to elder law matters?
• Do you have a specialty within elder law?
• What would I need for our first meeting?
• What is your fee schedule?

No matter what specific need you might have within elder law, a certified elder law attorney can help you with any topic. As many elder law situations involve differing state laws and regulations, it is best to hire an elder law attorney who practices in the state where your elderly family member lives so as to not create confusion and legal troubles later.

Having an elder law attorney, at least on a retainer basis, can be a very sound investment for you and your family for when the inevitable happens, and the transfer of the estate goes on harmoniously and with little to no hassles.

The post What is Elder Law and Elder Law Attorney appeared first on The Elder Care Firm.

by Thomas D. Begley, Jr., CELA

Situations requiring probate counsel include:

• Wrongful Death Cases

• Plaintiff Dies During Litigation

• Settlements for Minor or Incapacitated Persons

• Guardianship

• Multijurisdictional Litigation Involving Probate

The Executor/Administrator’s job is to perform certain legal obligations. An Executor/Administrator can be held personally liable for failure to administer the estate properly. Administration of the estate includes the collection and management of assets, paying taxes, distributing any assets or making distributions of bequests, whether personal or charitable in nature, as the deceased directed under the provisions of the Will or as provided for in the Intestate law. Important steps in probate include the following: Probate of the Will or Application for Letters of Administration, preparation and filing of a Notice of Probate, compilation of an inventory of all estate assets, obtaining appraisals of real and personal property, obtain date of death values of all estate assets, obtaining an employer identification number, investment of estate assets during the course of administration, analysis of retirement plan assets, filing claims for life insurance, and preserving and managing estate assets. The Executor/Administrator must also file federal and state income tax returns (Form 1040) for the year of the decedent’s death. The Executor/Administrator can file these returns or arrange for the decedent’s usual tax preparer to do so. Form 1040 Estimated Tax Returns must also be filed, where appropriate. These returns must be filed by April 15 of the year following the decedent’s death. New Jersey estate tax and inheritance tax returns must be filed. The New Jersey estate tax return must be filed within 9 months of the date of the decedent’s death, and the New Jersey inheritance tax return must be filed within 8 months. Federal estate tax returns (Form 706) must be filed where required. This return must be filed within 9 months of the date of the decedent’s death. Income tax returns (Form 1041) must be filed for any estate or trust. Gift tax returns (Form 709) must be filed where appropriate. In addition, if the decedent owned real estate out of state, the Executor/Administrator must file ancillary probate in that state, and file non-resident tax returns in that state. The Executor/Administrator must also determine whether any beneficiary has outstanding child support obligations. Finally, the Executor/Administrator must file an accounting for all of the funds that were handled during the administration of the estate.

by Thomas D. Begley, Jr., CELA

Assignment to State of Rights against Third Parties

As a condition of Medicaid eligibility, a Medicaid applicant is required to assign to the state any rights to payment of medical care from any third party.[1] This is essentially a statutory right of subrogation. Federal law further requires that each state Medicaid program have procedures for determining the legal liability of third parties to pay for medical assistance provided by the state’s Medicaid plan, and for reimbursement of the cost of medical assistance provided, whenever recovery is feasible.[2] In New Jersey, the Attorney General is responsible for enforcing any rights against third parties or recovery of liens.[3] When an individual brings an action for damages against a third party, written notice must be given to the director of the Division of Medical Assistance and Health Services. In addition, such individual must promptly notify the Division of any recovery from a third party. The recipient of a third-party recovery must immediately reimburse the division from the proceeds of any settlement, judgment, or other recovery.[4]

Extent of Lien

A Medicaid lien applies only to the extent of medical assistance related to the injury and only to payments made from the date of the injury to the date of the settlement.

Reduction of Lien

There are two ways to reduce a Medicaid lien.

• Procurement Costs. The Medicaid lien is subject to an automatic reduction for a pro rata share counsel fees, costs, or other expenses incurred by the recipient or the recipient’s attorney.[5] It is important not to overlook costs. If the attorney’s fee is 33% and the costs of the case represent 5% of the recovery, the procurement-cost reduction is 38%, not 33%.
• Ahlborn Reduction. The United States Supreme Court has held that a state Medicaid agency may recover only from that portion of a settlement earmarked as compensation in respect of medical expenses, and where there is no such allocation, the agency may only recover a proportionate share of its claim, determined by the ratio that the settlement amount bears to the reasonable value of the total claim.[6]

[1] 42 U.S.C. § 1396k(a)(1)(A); N.J.S.A. 30:4D-7.1(c).

[2] 42 U.S.C. § 1396a(a)(25)(A), (B), (H).

[3] N.J.S.A. 30:4D-7.1(a).

[4] N.J.S.A. 30:4D-7.1(b).

[5] N.J.S.A. 30:4D-7.1(b).

[6] Arkansas Dept. of Health and Human Servs. v. Ahlborn, 126 S. Ct. 1752 (2006).

by Thomas D. Begley, Jr., CELA

Types of Liens

Prior to making distribution in the settlement of a class action or mass tort lawsuit, a number of lien issues may need to be addressed, depending on the nature of the case, the elements of the recovery, and the population of claimants. These issues may include reimbursement claims asserted by Medicaid, Medicare, Medicare Advantage and Prescription Drug Plans, ERISA Plans, Federal Employee Health Benefits, Federal Medical Care Recovery Act, Veterans Administration and TRICARE Claims, Welfare Liens, Mental Health Liens, Traumatic Brain Injury Fund, Catastrophic Illness and Children’s Relief Fund, Victims of Crime Compensation, State Worker’s Compensation Claims, Federal Employee Compensation Act, Hospital Liens, Child Support and Division of Disabilities (DDD).

Subrogation/Reimbursement

It is important to understand the differences between these two related concepts.

• Subrogation. Subrogation is the substitution of one party (an insurer) for another party (the insured) in the assertion of rights against a third party. It allows the insurer to assert the rights and claims of the insured. Subrogation rights may arise from contract (“conventional” subrogation), from legal principle or doctrine (“legal” or “equitable” subrogation), or from legislation (“statutory” subrogation).
• Reimbursement. Reimbursement allows the insurer to seek repayment from the insured when the insured receives funds from another party. Reimbursement rights arise from contract, with their scope and enforceability determined by the contract’s terms, subject to applicable limiting law.

Derivative Claims

Liens are generally enforceable against the settlement of the injured party on whose behalf benefits are paid, but it is unlikely they are enforceable against proceeds of derivative claims of others arising from the incident.[1] For example, wrongful death claims would not generally be subject to liens because they are property of persons other than the decedent; in contrast, a survival claim, as property of a decedent’s estate, may be subject to a lien.[2] Similarly, allocation of loss of consortium claims to those who do not have responsibility for medical bills, such as a spouse or child of an injured party, may in some circumstances serve to reduce the amount attachable by a health care lien.

[1] Admin. Comm. of Walmart Stores, Inc. v. Gamboa, 479 F.3d. 538 (8th Cir. 2007).

[2] Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010).

And to be well-thought-out means that it doesn’t just happen. You have to take steps to create the plan. The plan has to be specific to your estate and your situation, so when you meet with a financial planner or certified elder-law attorney to discuss the plan, you should have our estate pretty much laid out.

Once you do that, you then have to make sure you have all the documents you could possibly need to secure every bit of that estate without the need for a probate judge.

Here is a basic estate planning checklist for doing your estate plan:

• First, take inventory. This involves looking over everything you have that is valued at $100 or more. Look through your house and mark down everything of value – power tools, jewelry, televisions, vehicles, the house itself. Next, look through your various money accounts – savings, checking, CDs, IRAs and the like. Next, make notes of all your insurance policies – medical, home, auto, life, etc. Make note of any and all beneficiaries of these policies and accounts, as well as any death benefits and premiums.

• Find a professional. This work can’t be done by yourself, unless you are a professional planner – and even then, your emotional or sentimental side may cloud your judgement. It’s always a good idea to find a quality financial planner or a certified elder-law attorney (CELA designation) to take your inventory and work with you to develop all the legal documents you need.

• The will. This is probably the most important instrument in your estate plan, and it sets the tone for everything else. Be as specific as you can in terms of who gets your assets upon your death, and who would be the guardian for your children if they are under age 18. Know that this can and should always be updated every few years or as needed when something in your life changes (spouse dies, you get divorced, a child dies, you have a falling out with a family member, etc.).

• A living trust. If done correctly, a living trust can be a great way for your assets to be transferred to family without the hassle of probate.

• Advance Health Care Directive. This is actually two documents, a living will and a power of attorney for health care. These help you with medical decisions if you are unable to make them for yourself due to physical or mental incapacity. You can designate a person to make these decisions for you; and it’s a good idea to let this person know what you want before you make the document.

• Financial power of attorney. Similar to the healthcare directive, a financial power of attorney allows you to designate a person to handle your financial affairs should you become physically or mentally unable to make those decisions yourself.

• If you don’t have beneficiaries named on any accounts, or if you need to change them, this is a good time to do that. It’s a good idea to have your beneficiary forms match with your will, because in the case of confusion, the beneficiary form will prevail in most cases.

• Your children’s property. If your children are under 18, name a person to manage any inheritances or money from your estate. The person you designate as guardian in your will could be this person if you want. You can always change this once all your children reach adulthood.

• Life Insurance? Not everyone needs it, but it could be good if you may have substantial debt r if you own a home or have young children.

• Estate taxes. As long as your estate is not more than $5 million, you won’t have to pay estate taxes. Your estate planner can help you determine your taxable worth and help you with strategies to ensure you don’t get hit with the death tax.

• Pay for the funeral. You could set up an account that is payable on death, which has enough money to cover expenses regarding funeral, burial, memorial services and the like.

• Final wishes. Let your loved ones know if you are willing to donate organs and if you want a burial or cremation. Not securing these details will cause headaches and will delay the mourning.

• Business moves. If you own your own business, have a succession plan in place. If you are part of a partnership, have a buyout plan or some other arrangement once a partner passes.

• Safe storage. Once you have all your documents, make copies. Have a copy in a safe deposit box or safe place in your home where spouses or children can access it when needed. Also have a copy to your executor and any legal guardians; and of course, to your estate planner. Keep a copy for yourself as well, so you can remember he forms and when it is time to update them.

The post 14-point Estate Planning Checklist to Secure Your Estate appeared first on The Elder Care Firm.

by Thomas D. Begley, Jr., CELA

In settling of a personal injury case, commonly called a third party liability case (TPL), a Medicare Set-Aside Arrangement (MSA) should frequently be considered. Many Lawyers and Structured Settlement Brokers believe that if the client is not currently receiving Medicare, an MSA need not be considered. However, the Regulations require consideration of an MSA even if there is a “reasonable expectation” of receiving Medicare within thirty months. Individuals receiving SSDI or RRD are eligible for Medicare within twenty-four months of their Determination of Disability. Therefore, an MSA should be considered if:

• Plaintiff is receiving Medicare
• Plaintiff is receiving Social Security Disability Insurance (SSDI)
• Plaintiff is receiving Railroad Retirement Disability (RRD)
• Plaintiff has applied for SSDI
• Plaintiff has applied for RRD
• Plaintiff is appealing an SSDI denial
• Plaintiff is appealing an RRD denial
• Plaintiff suffers from End Stage Renal Disease (ESRD)
• Plaintiff suffers from ALS
• Plaintiff requires ongoing treatment related to the injury that is not covered by other insurance

Plaintiffs’ attorneys might want to consider putting this checklist inside each file to determine whether or not an MSA is appropriate.

by Thomas D. Begley, Jr., CELA

ABA Commission

The American Bar Association has appointed a Commission on the future legal services. Legal services are expensive and are beyond the reach of many poor and even middle class individuals. Technology is becoming a game-changer and non-legal entities are engaged in providing legal services. The ABA Commission is holding a series of grassroots meetings to gather information and propose new approaches for the delivery of legal services. The Commission will look at data regarding what percentage of a lawyer’s time is actually spent practicing law as opposed to administrative, marketing, fundraising, etc. The Commission wants to get the highest and best use of a lawyer’s time. It may be that non-lawyers will be trained to perform certain functions the way nurse practitioners and physician’s assistants do.

Non-Traditional Service Providers

There is already a considerable amount of legal process outsourcing (LPO). Law firms obtain legal support services from outside support service companies. Sometimes these companies are located overseas and the practice is referred to as outsourcing. Other companies, such as UnitedLex Professional Services, serve the needs of corporations and law firms who seek a skilled variable labor pool. The company hires and trains attorneys and other legal and technical professionals who have the ability to bring technology to bear on legal solutions. Axiom is a similar company that provides legal services support to financial services industries, technology, media and telecom industries, and life science industries. Axiom is not an LPO or a high-end temp firm or a law firm.  It is a mixture of seasoned business professionals, process engineers, lawyers and technologists.

Georgetown Law Report

The 2015 Report on the State of the Legal Market, issued by Georgetown Law: Center for the Study of the Legal Profession, states that there have been significant changes in the practice of law since the beginning of the Great Recession. According to the report, most leaders of law firms of any significant size recognize that fundamental change is needed in the way their firms deliver and price legal services, but in practice there remains an astonishing lack of urgency in moving on these issues. Even the demand for litigation has fallen off. The report indicates there has been a proliferation of new non-traditional service providers that has been quite dramatic over the past few years. For example, Ernst and Young, operating through its legal arm EYLaw, hired over 250 lawyers in 2013, increasing its total lawyer headcount almost 30% to 1,100. The market is now awash with new, non-traditional competitors that over time are likely to change the dynamics of the legal services sector in significant ways.

Virginia Bar Association/Capital Funding

At a recent meeting of the Virginia State Bar Association Committee to Study the Future of Law Practice, a consultant named Gary LeClair, addressed the committee. He maintained that traditional law firms are begin replaced by such companies as Axiom, Riverview, Legal Zoom, etc. These firms have access to capital funding, which enables them to access the best technology and best legal and non-legal talent.

Conclusion

It would appear that change in the legal profession will be sweeping. Initially, the effect of companies like Axiom will be felt mostly by large firms. Companies like Legal Zoom already affect mostly smaller firms. If non-lawyers are permitted to own law firms, then providers such as Walmart would be able to control law firms. Overall, since the purpose of the changes being studied is to provide greater access to low and middle income individuals, it would seem that the largest effect will eventually be felt by smaller firms.

A Campaign to Educate Clients in Their Mid 50s of the Need for Estate Planning

A majority of adult Americans lack the legal documents that would protect them and their families from the serious legal complications that can arise in a health or other emergency or death. The Elder Care Firm of Christopher J. Berry, CELA has joined the 5@55 campaign which is being launched to get the message out that neglecting to get one’s legal paperwork in order can have unforeseen and serious consequences. Elder Law firms around the country are leading this effort to inform the public of the importance of obtaining legal protection no later than the age of 55. The 5@55 Campaign offers a solution to this failure to plan with the following essential legal documents which everyone should complete by age 55.

The 5@55 basic documents are:

The Health Care Proxy
The Living Will
The Power of Attorney
The Will
The Cyber Will/Digital Dairy

To support this campaign Elder Law attorneys, Judith Grimaldi and Joanne Seminara have written a simple guide called , 5@55 : The Five Essential Legal Documents You Need by Age 55 (Quill Driver Books) The book which will be available in June 2015 offers the reader enlightening and often surprising case histories that illustrate the pitfalls that can arise when one has not effectively planned for such life emergencies and is not protected by these five legal documents.
Age 55 has been determined to be the optimum time to begin estate planning. Most individual family responsibilities to support children have decreased. The focus can now turn to establishing a life plan for the individual’s later years. The need to plan for the future and take precautionary steps, to make decisions affecting possible retirement and, unfortunately, provide for the possibility of major health changes reaches a higher level of urgency in people reaching their mid fifties. The 5@55 campaign chose 55 as the age marker to enter this important planning phase similar to the way 65 is accepted as the age to retire.
Every day lawyers see clients who need to spend their hard-earned savings to repair the damage caused by being unprepared to face the challenges that life can unexpectedly deliver. We have come to accept using insurance to protect against fires, automobile crashes, health emergencies The 5@55 campaign offers a kind of legal insurance to protect against other potential personal emergencies such as a health emergency, a family crisis or even death, . Most people hold their financial lives close to the vest, therefore the consequences that arise because of poor legal planning usually play out behind closed doors. We are trained not to speak about our money. This is to be kept private. This “secrecy” has lead to family problems. As a result, families are forced to scramble to learn about their loved ones legal and financial needs when an emergency hits. Bills need to be paid, decisions need to be made and assets need to be protected. Life continues and the needed resources may be frozen. The campaign will bring out into the open the risks that exist and need to be addressed, in the face of such crisis especially as one grows older and the risks multiply.
The Forward to 5@55 : The Five Essential Legal Documents You Need by Age 55 was written by a retired and noted New York City Surrogates Judge who for many years oversaw the trials and tribulations of people who had not adequately protected themselves. The ultimate irony is that this 72 year old jurist admits in her Forward that she does not have this necessary paperwork! This demonstrates both the level of unpreparedness of the public and how vital this campaign is in overcoming this failure of individuals to get their legal house in order. The resistance is surprisingly strong even among people who know the risks, Media coverage about the 5@55 campaign will hopefully play an important role in awakening the public to the legal and health dangers they face.
For more information or to arrange an interview with 5@55 attorney Christopher J. Berry, CELA about 5@55 or to receive information about this easy to read guide contact The Elder Care Firm of Christopher J. Berry, CELA at 888-390-4360.

The post The Five at Fifty Five- Legal Tools for Mid-Life Planning appeared first on Estate Planning Lawyers | Elder Law Attorneys | Brighton | Novi | Livonia Elder Law Attorneys.

By: Bernard A. Krooks, J.D., CPA, LLM (in taxation), CELA, AEP® (Distinguished)

Maybe you’ve been named guardian (of the person) for a family member, colleague, or friend. Maybe you’ve been listed as an agent in a health proxy. Maybe you’re a family member with authority to make health care decisions (New York, like a number of other states, permits family members or others to make most health…

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What is a Certified Elder Law Attorney?

A Certified Elder Law Attorney is lawyer that has earned the CELA designation.  Elder law attorneys who have their CELA have the enhanced knowledge, skills and experiance to be properly identified to the public as Certified Elder Law Attorneys.  The National Elder Law Foundation (NELF) has developed and published rules and regulations regarding certification and has been around since 1993.

In Michigan, there are currently 15 CELAs in all of Michigan.  There is only one in Livingston county–that’d be me.

What is the Criteria for CELA Designation?

The following are the requirements for the CELA designation.

• Licensure – Attorney must be licensed to practice law in at least one state or the District of Columbia
• Practice – Attorney must have practiced law during the five years preceding their application and must still be practicing law.
• Integrity/Good Standing – Attorney must be a member in good standing of the bars in all places in which they are licensed.
• Substantial Involvement – Attorney must have spent an average of at least 16 hours per week practicing Elder Law during the three years preceding their application. In addition, they must have handled at least 60 Elder Law matters during those three years with a specified distribution among subjects as defined by the Foundation.
• Continuing Legal Education – Attorney must have participated in at least 45 hours of continuing legal education in Elder Law during the preceding three years.
• Peer Review/Professional References – Attorney must submit the names of five references from attorneys familiar with their competence and qualifications in Elder Law. These persons must themselves satisfy specified criteria.
• Examination – Attorney must pass a full-day certification examination administered by NELF which is designed to demonstrate their specialized Elder Law knowledge and skills

How Do You Know Your Michigan Elder Law Attorney is an Expert in Wills, Trusts, and Estate Planning?

Any attorney can say they are an expert in any area of law.  However, the CELA designation is truly the only designation that is peer reviewed and tested where the elder law attorney needs to prove his or her worth.

The best way to Michigan lawyers specializing in wills, trusts, elder law, and estate planning would be to find a Michigan Certified Elder Law Attorney

The post Michigan Lawyers Specializing in Wills, Trusts, and Elder Law appeared first on Estate Planning Lawyers | Elder Law Attorneys | Brighton | Novi | Livonia Elder Law Attorneys.

Michigan Certified Elder Law Attorney, Christopher J. Berry, JD, VA Accredited, will host The Elder Care Chat where he will cover the Six Ways to Pay for Long-Term Care Costs.

The call can be access as follows:

Title: The Elder Care Chat 6.24.13
Time: Monday, June 24th at 2:00pm Eastern
Listening method: Phone + Web Simulcast
Phone number: (206) 402-0100
PIN Code: 670087#

To attend via the web, visit:
http://InstantTeleseminar.com/?eventID=42786354

The Elder Care Chat, is a weekly teleseminar that occurs Monday at 2pm where Christopher J. Berry, CELA, one of the premier Elder Law Attorneys in the nation, chats about various topics in Elder Care for the benefit of those in need of elder care services, such as caregivers and their loved ones needing care, and those who provide elder care services, such as home care providers, social workers, elder care communities and other senior service professionals.

In addition to VA Accredited, Certified Elder Law Attorney, Adjunct Professor, Author, Christopher J. Berry, J.D., there will occasionally be other experts featured in elder care for the benefit of those who are caregivers, concerned about elder care for themselves or provide services to those who are in need of elder care services.

The Format of the chat is that Certified Elder Law Attorney, Christopher J. Berry will speak on a topic for 10-20 minutes relevant to The Elder Care Journey and elder law. After that, he will then open it up to questions. Keep in mind, the chat is recoded every week, so do not ask any personal questions you do not want to be heard and replayed.

The chat will be less than 30 minutes, and will be every Monday at 2pm Eastern. This will be the cheapest time you’ll ever spend with an attorney!