I will be speaking at the Arlington Council on Aging on May 13, 2013, at 10:30. I hope to see you there.

Several years ago, a friend of mine called me, furious and upset. Her son, who had just turned 18 years old, had gone off for his freshman year at an out-of-state college. That morning she had received a text message from him, saying he felt awful, and was going to the infirmary on campus. He said he would be in touch to let her know what was going on.

A couple of hours passed, and she heard nothing. She tried calling him, but he did not answer his cell phone. Now worried, she called the school infirmary to see what was going on.  She was stunned when the nurse would not confirm that her son was even in the infirmary. The nurse said that the law prohibited her from talking about her son’s medical condition, without written permission from her son. My friend tried the, “I pay the tuition” argument. It didn’t sway the nurse at all.

Finally, her son called and said he was fine – he had never actually gone to the infirmary because he felt better by the time he got there. So, he decided to go out to breakfast instead. Sorry for not calling her back, he just forgot.  When he came home for Thanksgiving, she brought him into the office and he signed a Health Care Proxy and Power of Attorney.

So, if you have a child who is turning 18, have them sign heath care documents and a financial Power of Attorney.

NBC News: Even Young Adults Should Start Estate Planning

 

There are three sizes available ranging from 288 – 605 square feet, although the size and design of each cottage is customizable. Each unit has a kitchen, bedroom, visiting area, and a handicapped accessible bathroom. Electricity and water connections are made to the homeowner’s utilities. The units also have an array of high-tech features to monitor medication, vital signs, and may be equipped with features found in most modern hospital rooms, including safety rails, lighted flooring, built-in cameras and a defibrillator machine.

According to Kenneth Dupin, the founder and CEO of N2Care, sometimes local zoning restrictions limit where the cottages may be placed. The Cottages, which can cost up to  $125,000, have generated a lot of interest as families look for alternatives to nursing home placement for an aging parent.

More Information on MEDCottages:

CBS Morning News Story: “Granny Pods: Inside Housing Alternative for Aging Loved Ones.”

Washington Post: “Pioneering The Granny Pod”

No reservation is required, but if you would like to make sure you have a seat, please call Atria Longmeadow Place at (781) 270-9008.

Atria Longmeadow Place Calendar (to RSVP on-line)

More Information on Aid and Attendance:

What Is Aid and Attendance and How To Qualify

Department of Veterans Affairs Booklet: Veterans Pension Program

The rehab facility would essentially tell the patient – or their family – that they had reached their maximum level, and any further stay would have to be paid for privately. With the high cost of care, this was devastating news.

In October, the Obama administration announced a proposed settlement to a class action lawsuit that would direct Medicare to pay for services if those services are needed to “maintain the patient’s current condition or prevent or slow further deterioration.”

This is a very different standard than the one previously used by Medicare, and should result more Medicare coverage for patients who need the additional care. The proposed settlement would apply to Medicare and private Medicare Advantage programs, and applies to in-home services as well as those provided in a re-hab or nursing home setting.

Additional Information:

New York Times: Settlement Eases Rules for Some Medicare Patients

AARP: Class Action Lawsuit Against the Federal Government Terminates Medicare Improvement Standard

What happens with joint accounts?

Joint Tenants With Rights of Survivorship (JTROS)

When there are two or more owners on an account, and one passes away, the surviving owner(s) automatically becomes the owner of whatever was once jointly owned. If that was the original intent of the joint ownership, then joint ownership for that asset may make sense. But, joint ownership will also trump the terms of a Will. For example, if your Will states everything is to be divided into equal shares for your four children, but all of your bank accounts are jointly owned with one child, that one child is legally entitled to all of the accounts.

The joint owner may be willing to actually share the accounts but there is no legal requirement that they do so. Even if the joint owner wants to divide everything equally, they may run into IRS gifting restrictions.

Trying to evenly distribute an estate with joint ownership, rather than using a Will or a Trust, becomes more difficult as people get older. At the beginning, it can seem like a good idea. Let’s say you have four children, and purchase four $25,000 CDs – each with one child as a joint owner. Everyone will get an equal amount, and there will be no probate necessary. But, what happens if one CD is used to pay for expenses – a new car, a new roof, or needed to pay for a medical emergency? Now, one child has no inheritance, the CD has been used. Further, getting to the bank to keep everything equalized may become a problem.

Convenience Accounts: some banks will allow accounts to be set-up as convenience accounts, meaning that if the “real” owner passes away, the other person listed is not entitled to what remains in the account. Check with your bank for their policies on convenience accounts.

Jointly Owned Account May Be Subjected to Other Owner Problems

            Having a joint owner means that the joint asset is as much the other owner’s as it is yours. If the joint owner runs into financial problems, and needs to file for bankruptcy, the asset is at risk. A divorce may also place the asset at risk. And, there is always the possibility that the other owner can simply take all of the money from the joint account.

Are Joint Accounts Ever A Good Idea?

There are circumstances where it may make sense to have a joint owner. Most spouses have joint accounts. If you only have one child, it may make sense to have joint accounts. Just remember that if that child is married, or having any financial difficulties, your asset may become a part of any divorce or bankruptcy process.

If you want the other owner to get that asset at your death and do not want a public record, joint ownership may be the right decision. Since jointly owned assets are not controlled by the Will, they do not pass through the probate process. Therefore, no accounting or public record will show that the joint account was received by the surviving owner.

For estate planning purposes, assets owned with any person other than a spouse can present enormous difficulties. Joint ownership can create hard feelings between children, may present IRS gifting problems, and may go against the distribution terms of your  Will or Trust. It is easier to have a single document – a Last Will and Testament or a Trust – that controls the distribution of all of your assets, than trying to juggle multiple jointly owned assets.

The probate process does not have to be difficult or expensive, but for some clients, it is something they wish to avoid. “What is Probate?” (This was written in 2010, before the laws changed. I will be updating this next month.)

There are several categories of assets that will be transferred without the need for probate.

1. Beneficiary Designations: These types of assets – IRAs, 401Ks, Life Insurance, Annuities, – will be given to the person or people designated on the account at the death of the account owner. There are two things to keep in mind when designating a beneficiaries: 1) Make sure you have designated BOTH primary and alternate beneficiaries; and 2) Make sure the designations reflect your actual distribution wishes. For example, if you want the account to be distributed to all of your children, make sure that they are all listed as beneficiaries. Particularly with retirement funds, there will be income tax consequences if one child is named, but then wants to share the funds with other siblings.
2. Jointly Owned Assets: Any asset on which there is a joint owner will automatically belong to the survivor. For some married couples, this ease of transfer at the death of the first spouse makes sense. However, for single people, jointly owned assets may not reflect their distribution wishes. For example, if there are two children and one child is added on to bank accounts, that child will become the owner of any account on which they are named. It may be possible to overcome this presumption of ownership by designating the account as a “Convenience Account” at the bank, and by including a statement in your Will that these joint accounts were never intended to belong to the surviving owner.
3. Create and FUND a Trust: By far, the best way to avoid having your estate go through the Probate process is to establish a trust. A trust replaces a Will as the primary after-death transfer document. BUT, the second step – after creating a trust – is to make sure that the proper assets are re-titled and placed into the trust. That step is called “funding the trust.”

Only those assets actually in the trust at the time of death pass without Probate. If an asset is not re-titled into the trust, it will have to go through Probate. Since most people want a trust to avoid Probate, the planning is incomplete without this final step.

How an asset gets placed into the trust depends on what it is. For example, re-titling a bank account can usually be done easily by going to the local branch and telling them you have created a trust. The bank may want a copy of the first and last page of the trust, but will then simply re-name the account. The account is now in the trust. For real estate, a new deed should be prepared transferring the property to the trustee of the trust. That deed is then recorded at the proper Registry of Deeds – and the real estate is in the trust.

As a general rule, retirement accounts should be left alone. Do not make the trust the beneficiary of retirement accounts without first consulting with your attorney and tax advisor.

 Additional Information:

Most Common Mistakes in Naming Beneficiaries, Wall Street Journal (2011)

Potential mistakes made in a do-it-yourself estate plan have the potential to cost your heirs much more than you might have saved yourself in legal fees. If there is a chance that someone may challenge the will or trust, you do not want to make it easier for them to succeed because of a mistake that could have been avoided.

Even simple estates are ripe with “oddball” things that can go wrong. Especially with wills and trusts, there are many details that a layperson simply wouldn’t think of. A recent article in Forbes chronicles one story of a layperson who ran into trouble after making a simple clerical error in creating his do-it-yourself living trust.

The man used a pre-made form to set up a living trust in 1984. When he deeded his house to the trust, however, he dated it 1983 (one year before the trust was created). In 2009 the mortgage on the house was fully paid off and the man, now 75 years old, wanted to borrow against it. Due to the mistake he made 25 years earlier, the bank wouldn’t provide a loan because the man didn’t have a clear chain of title to his home.

Two weeks and $2,000 in legal fees later, the man was able to take out a loan against his house. Had he hired a law firm to draw up the original trust in 1984 it would have been much less stressful and only cost him about half the amount he eventually paid in legal fees.

Additional Resources:

Farrell v. McDonnell, 81 Mass.App.Ct. 725 (2011) (Will execution was proper despite the fact testatrix did not verbally acknowledge her signature in the presence of witnesses).

Flynn v. Prindeville, 327 Mass. 266 (1951) (Will execution was not proper because testatrix did not acknowledge her signature or identify document as her Will  in the presence of witnesses).

Article about the Battle over artist Thomas Kinkade’s Estate 

The battle centers around two hand-written notes presented by the artist’s girlfriend – Amy Pinto-Walsh – that appear to give her Mr. Kinkade’s house and $10,000,000. Mr. Kinkade’s estranged wife, and the mother of his four children, disputes the validity of both notes.  Ms. Pinto-Walsh was not included in any of Mr. Kinkade’s other estate planning documents.

Many people have some type of Individual Retirement Account that should be reviewed as part of the estate planning process. Since an IRA is part of the ultimate distribution, it is a good idea to contact the company managing the IRA account and confirm that the beneficiary designations are up to date, and accurately reflect your wishes.  This is especially important if a spouse has passed away since the original form was filled out – you want to make sure that contingent beneficiaries are designated.

[Note: This is also a good time to check all beneficiary designations, including life insurance and annuities.]

Naming a Trust Beneficiary of an IRA

If I am preparing a trust for a client, they frequently ask whether their trust should be named the beneficiary of the IRA. The answer is, “No, No, No.”  The reason for this is that if a person is named as a beneficiary of an IRA, they get to stretch out the remaining funds over their lifetime, resulting in lower taxes. However, since a trust is not a “person” it has no life expectancy. Thus, the entire amount remaining in the IRA is distributed, and all taxes are due immediately. It may be possible to convince the IRS that the trust was simply a conduit, and the real beneficiaries are people, but trying to do that would cost the estate legal fees that can be completely avoided.

Naming Charities as Beneficiaries of an IRA

If a client has charitable intent, naming one or more charities as beneficiaries of an IRA can work out very well. Unlike individuals, a charity will probably be able to avoid any tax on the distribution, and the estate will be able to take full advantage of the charitable contribution if estate taxes are required.

Naming One Person as Beneficiary, But Wanting Something Else

 Name the people you actually want to receive the IRA. If you name one person, but tell them that you actually want them to distribute it to other people is a bad idea. First, the person named will have to cash out the entire IRA to follow your wishes. The will have to pay the taxes on the entire amount. Second, if they are the sole listed beneficiary, they do not have to cash it out at all. Finally, if they do cash in the IRA and pay the taxes, they may have trouble actually making the distributions. The IRS allows any person to gift $13,000 per year, so if the distributions are more than that, they person designated will have to file a Form 709 Gift Tax Return with the IRS.

IRAs can be an important part of the legacy handed down to children and grandchildren. If designated properly, payments from an inherited IRA may be made for decades to the listed beneficiaries. To ensure this happens, check that the current designations reflect your wishes, that they are up-to-date, and if you have named your trust as the beneficiary, contact your estate attorney for a review of your planning.

Additional Information:

Five Rules for Inherited IRAs (forbes.com)

What is an Inherited IRA?  (money manager.com)

One of the things that makes elder law so different from other areas of practice is that elder law attorneys are often trying to put plans and solutions in place for their clients. Offering a client a complete plan frequently means putting together a team of people all focused on achieving the client’s goals. I am pleased to have been asked to join a presentation with such a team. We will be presenting a panel discussion on June 7, 2012 at 6:00 P.M., hosted by Maria Reid of Atria Maplewood Place, Malden, MA. There will be a light supper served, and the panel will offer their expertise in planning for senior living and care. Seating is limited, so please let Maria know if you wish to attend by June 1, 2012. You can reach her by calling (781) 324-4999.

We hope to cover as many issues as possible, including: how to safely remain in the home; how to transition to an assisted living facility; how to pay for the cost of an assisted living facility; the best way to prepare your home for sale; and whatever question you may have.

I hope to see you there!

On the panel are:

Karen Hurwitz: Visiting Angels, Medford, MA

Mary Lou Bigelow: Senior Real Estate Specialist at Bowes Real Estate.

Joy M. Camp, Ph.D.: C&Z Transitions, Melrose, MA

Dale Tamburro, Esq., Belmont, MA