In its most recent survey, the State of Connecticut determined the average monthly cost of a Connecticut nursing home is $9,464.00. This adds up quickly as some people put off implementing life savings protection for months or even years, and others put it off until it is just too late. There is a much less expensive alternative, but before we get to that we have to take a look at what many families are experiencing out there.

Connecticut nursing home costs are among the highest in the nation. Every day I see families stuck writing checks to nursing homes in amounts of $10,000 or more – with no end in sight. These families failed to plan ahead, and they are paying a costly price now. In many cases, these families lose all or a significant portion of their life savings to Connecticut nursing home costs. I wish there was more we could do, but when it is too late it is just too late.

Some families I see try to create their own life savings protection plan. I’ve never seen it work out the way they intend or think it will when people act without an experienced attorney. I see people all the time that have transferred their parent’s money to family members or themselves and for some reason many of these individuals think these transfers will not be a problem when they go through the 5 year look-back period while applying for Connecticut Medicaid nursing home benefits.

Every single financial transaction during the 5 year look-back period is subject to audit and assessment of a penalty if the State deems it a penalizing transfer. You may have the greatest rationale in your own mind , but if you have no evidence and no support in the regulations or case law you really have nothing except a big mess that will cost more to clean up than if you got professional help in the first place.

If what I described above sounds acceptable to you, then you may want to run down to casino and bet everything on black because you are quite the gambler. If you are not the gambling type, and want a strategy you can count on to protect your life savings, keep reading.

The other families I see are looking for solid protection for their hard earned life savings. I am proud to say that I help these families on a regular basis achieve their goals of protecting assets not only for children, but also for their spouse and themselves. It can be done.

You have options to protect your family against a Medicaid required “spend-down”. These options expire, and when they are gone they are gone for good. When you are within five years of needing Connecticut Medicaid nursing home benefits you will not be able to take advantage of these proven techniques. Nobody knows when their 5 year window will start, so most people choose to act sooner rather than later.

One popular option is The Connecticut Medicaid Asset Protection Trust which helps families protect amounts from $50,000 – $1,000,000.00. There are many other techniques that may or may not available depending on your unique situation. Together we can find a solution that works for your unique circumstance.

Doing nothing in July of 2008 just cost you $9,464 in lost asset protection. August is coming to add on another $9,464. See a trend here? The clock is ticking.

Related posts:

1. Estate Planning For Title 19
2. Title 19 Medicaid Protection Workshop
3. The Connecticut Medicaid Asset Protection Trust

There can be a lot of anxiety when a loved one is in a nursing home and your assets are dwindling at the rate of +$9,000 every month. Unfortunately this anxiety can also lead to poorly informed decisions. Some families I meet come to me with an estate plan that disinherits a loved one that is in a nursing home or on Connecticut Title 19 Medicaid. The logic of this plan is to protect the family assets from being wiped out. This is a knee-jerk reaction that creates more problems than it solves in my opinion.

What can go wrong?

Many times I have family members contact me because a parent has disinherited the other parent (living in a nursing home or diagnosed with dementia) with the understanding that one child or all the children would actually use the funds to provide care for the surviving parent.

The first issue is that such an arrangement is almost non-existent on the scale of enforceability. At best there could be an oral trust but one side of the oral contract is deceased and if there is a conflict it is obvious that the other side of the contract (the child who received the funds) is saying there is no contract. Where is the evidence? At worst, the funds received by the child or children are treated as they look, outright bequests with no strings attached.

A second issue is liability concerns. The funds you intend to care for the surviving parent are now exposed to the liabilities of the person chosen to hold the funds. Common liability risks include divorce, bankruptcy, or even a car accident.

A family with a loved one in a nursing home or on a government benefits program has a choice. Disinheritance is not the only option. Disinheritance is not the preferred option and the government even recognizes this fact by providing specific protection to specific estate planning strategies.

A Special Needs Trust allows you to leave a legacy of care for a loved one in a nursing home without handing over everything to pay nursing home bills. It is absolutely critical that this unique planning is done by an experienced Connecticut special needs attorney because these trusts are reviewed by government benefits agencies and in Connecticut they are usually reviewed by the Attorney General’s office. One mistake in the document and the assets of the trust could be used to pay for bills you did not intend to pay.

I have seen too many families torn apart by using disinheritance as asset protection. There is no need for it. You have a choice. Put your plan on paper and leave your family with some security.

Related posts:

1. Critical Medicaid Mistake #1
2. The Special Needs Trust – How to Secure the Future for Your Disabled Child
3. Critical Connecticut Medicaid Mistake #3

I am proud of what this site accomplished in 2007. Starting with no visitors as all sites do and moving up to 600 visitors a month is great, and exceeded my expectations. I appreciate everyone that stops by and takes the time to get educated about Connecticut estate planning and elder law issues. I hope you find the information here valuable and will visit again.

The most popular posts of 2007 were:

1. Estate Planning for Title 19;
2. 9 Questions to Ask BEFORE Entering a Nursing Home;
3. Revocable Trusts and Connecticut Medicaid;
4. Title 19 Penalties and Gifts;
5. Myths and Realities of Living Trusts in Connecticut.

Five is enough. I won’t bore you with a top ten.

I’m already working on making 2008 a great follow-up to what we accomplished in 2007. Stay tuned for details. Have a happy and healthy new year.

Related posts:

1. FY 2007-2008 Medicaid Numbers
2. Estate Planning For Title 19
3. Title 19 Medicaid Protection Workshop

Rome v. Wilson-Coker (Ct. Super. Ct., No. HHBCV064012367S, Oct. 24, 2007).

Marjorie Rome is bipolar with a history of institutionalizations. She needs help and a certain level of benefits to receive treatment for her condition. Presumably with good intentions and a desire to help Marjorie, her father created a trust for Marjorie in his will. The trust was based on the model of a discretionary trust which vested discretion in the trustee to make or refuse distributions for Marjorie’s benefit.

Unfortunately, for some reason which I fail to comprehend, the trust language directed the trustee to make distributions as necessary for Marjorie’s “interest and general welfare, even to the extent of exhausting the entire Trust estate.” This is a big blunder if you want to include asset protection in your estate plan or trust and it cost the Rome family.

So eventually Marjorie entered a nursing home and applied for Medicaid. The Department of Social Services denied her application based on their determination that her father’s trust was available to Marjorie as an asset. The Trustee thought it was a good idea to deny distributions to Marjorie for nursing home costs, mistakenly believing that he actually had real discretion to do so.

Marjorie Rome later pleads her case to the Superior Court claiming that the trust is not available because the Trustee is refusing to make distributions to her. The court recognizes that the flawed language in her father’s trust gives Marjorie a right to compel distributions from the trust even if the Trustee refuses.

Her father made a mistake in his estate plan, and Marjorie had to pay for it. If you are looking for asset protection, do everything you can to make sure it works.

Related posts:

1. The Connecticut Medicaid Asset Protection Trust
2. Medicaid Asset Protection Questions
3. Reminder – Medicaid Asset Protection Workshop

There is a specific portion of the pension program which is of particular importance. This program is “Aid and Attendance” (A and A) and is available to a veteran who is not only disabled, but has the additional requirement of needing the aid and attendance of another person in order to avoid the hazards of his or her daily environment (in other words, someone needs to help you to prepare meals, to bathe, to dress and otherwise take care of yourself).

Under this program, a veteran can receive a maximum of $1,801.00 per month in benefits and a widow or widower can receive up to $976.00 as a maximum benefit for A and A for the year 2007. The applicant must be determined to be “permanently and totally disabled”. The applicant does not need to be helpless he/she need only show that he/she is in need of aid and attendance on a regular basis. Someone who is housebound or is in an assisted living facility and over the age of 65 is presumed by the Veterans Administration to be in need of aid and attendance.

This particular program has limitations related to the income and assets that are held by the applicant. However, in computing the income of the applicant, certain items can be deducted. Specifically, unreimbursed medical expenses (UMEs) paid by an individual may be used to reduce the applicant’s income. Home attendants or aides are an allowable medical expense deduction, as long as that attendant is providing some medical or nursing services for the disabled person. The cost of an assisted living facility, and even part or all of the cost of an independent living facility, can also be an allowable medical deduction to reduce your gross income to a much lower net countable income that may qualify you for veterans’ benefits.

Simplified Example: Bill Robert is a 66 year old veteran and, due to his health needs, has caregivers coming to his home for several hours each day. His income is $1800/month and he is paying caregivers $3300/month. Rather than deplete his savings of $45,000, he applies for a service pension through the VA. The VA considers the $3500/month he is paying to his caregivers unreimbursed medical expenses and subtracts the amount from his income. In other words, when calculating his pension, the VA considers his income to be negative $1500. He applies for benefits and is eligible for $1500/month to help him with his bills!

To file a claim for this benefit, it is wise to seek the involvement of an experienced elder law attorney who is familiar with estate planning, disability, Medicaid and veterans’ benefits. An attorney skilled in elder law can provide a veteran and the veteran’s family with appropriate pre filing consultations to determine the appropriate steps that must be taken to be able to determine if it would be right to apply for this VA benefit.

Related posts:

1. Connecticut Special Focus Facility Nursing Homes 2008
2. 9 Questions You Must Ask If You or a Loved One is Going Into a Nursing Home
3. Critical Connecticut Medicaid Mistake #3

Congress recently opened the door to allow a non-spouse beneficiary to rollover an IRA or 401(k) and stretch distributions over the beneficiary’s lifetime. 2007 was interesting because this new option was not required by all retirement plan administrators, it was optional. At the end of the day, there was confusion and to answer the question if it was even possible for a non-spouse beneficiary to qualify for a rollover you would have to check with each plan administrator.

In 2008 the IRS is attempting to put an end to the confusion and requiring that all plans provide the option for a non-spouse beneficiary to rollover an IRA. This is great news and a great opportunity for those families positioned to take advantage of it. For families that are not prepared, it is simply another sand-trap.

So what is the big sticking point?

Designated Beneficiary. Those two words are critical to how the IRS treats and taxes the transfer of an IRA or other qualified retirement account from the account holder to the beneficiary(ies). You may be thinking, well, as long as I have a beneficiary I am in good shape. That would be wrong, the IRS has dedicated volumes of paperwork to making it perfectly clear to those who are listening that not every beneficiary qualifies as a designated beneficiary.

The biggest example of a beneficiary that is not a designated beneficiary is if your IRA goes into your probate estate either on purpose or by accident. The IRS absolutely hates it when an IRA goes into a probate estate and will almost certainly treat the event as a transfer to a non designated beneficiary and your family would not be able to take advantage of the rollover option without jumping through a lot of costly hoops.

But I went to an attorney and setup a complete estate plan including a living trust etc.

That’s great. I’m glad you’ve embraced personal responsibility for your estate plan rather than run from it like a lot of people according the surveys over the last 10 years. However, all trusts are not the same. Some come from old books in a law library (I’ve seen trust documents reference King George in the Rule Against Perpetuities language. I don’t know if I’m more surprised that the attorney presented it to their client with a straight face or that the client did not think twice about who drafted the trust when they saw it.), some come from computer drafting assembly programs written in imprecise language by people that may or may not be experienced tax attorneys, and some are even drafted by competent attorneys that get it right. Simply having a trust or having an estate plan does not automatically mean your family will qualify for the new rollover benefits.

How can I qualify for rollover treatment?

The IRS has very specific rules for how a trust can qualify as a see through trust and treated as a designated beneficiary. The top level bullet point requirements are:

1. The trust must be valid under state law;
2. The trust must be irrevocable or become irrevocable when the IRA owner dies;
3. The trust beneficiaries must be identifiable from the trust instrument;
4. Proper documentation must be provided to the IRA custodian.

Seems simple enough right? Remember, this is the IRS we are dealing with and they take income tax deferral very seriously because they think they are losing money. They have regulations on top of regulations on top of Private Letter Rulings and court decisions defining each one of those bullets in extensive detail. There is enough material to write a book on those four issues, and people have. I can’t get into detail on all of them here because it would take forever.

The most common stumbling block for inexperienced drafters is the requirement that beneficiaries be identifiable from the trust document. Many trust documents I’ve seen coming in to my office do not contain adequate restrictive language to achieve compliance with this rule. If you don’t have this language or if the people administering your estate handle the IRA or retirement funds incorrectly you have a big flashing sign to the IRS saying your family does not qualify for rollover treatment.

Rollover treatment is a privilege, not a right. Your family will not qualify for rollover treatment if you do not follow the rules in your estate plan. Make sure you and your attorney understand the requirements and that your estate plan doesn’t fall apart on this critical issue.

Related posts:

1. Another Lost Asset Protection Opportunity
2. Estate Planning Beyond the Documents – Annuities
3. Trouble With Joint Property

A Power of Attorney is one of the most important legal documents a person can have. Without a comprehensive power of attorney, many people are neither able to handle their loved ones financial matters nor make health care decisions without seeking court intervention (Conservatorship). I often have clients come into my office assume that, just because their assets are titled jointly with their spouse, parent or partner, they are able to liquidate accounts to pay bills, hire attorneys, sell their jointly titled real estate, etc. Unfortunately, that isn’t the case.

In fact, a spouse who has a jointly titled investment account with their significant other in many cases does not have authority over the entire account. This can cost a family hundreds of thousands of dollars in lost asset protection opportunities when nursing home care costs begin. In a case like that, the healthy spouse has to petition the court to become the Conservator of the institutionalized spouse and probably spend tens of thousands of dollars on her nursing home care when he could have, had she had a proper power of attorney, transferred the account into his name, alone, and done some Medicaid Title 19 asset protection planning.

What is a Power of Attorney?

A power of attorney is a legal document where one person (the principal) authorizes another (the agent) to act on their behalf. There are financial powers of attorney which allow your agent to make decisions regarding your property and healthcare powers of attorney which allow your agent to make decisions regarding your health care needs.

Your power of attorney can be broad in scope, giving your agent the ability to make any and all financial and personal decisions for you (a General Power of Attorney) or you can limit your agents authority by specifying the types of decisions you would like them to make on your behalf (a Limited Power of Attorney).

You also have a choice whether you would like your agent to have the ability to make decisions both now and if you become incompetent (a Durable Power of Attorney) or your agent can be limited to make decisions only when you become incompetent (a Springing Power of Attorney).

What is a Conservatorship?

Conservatorship of the Person is a legal relationship whereby the Probate Court gives a person (the Conservator) the power to make personal decisions for another (the ward). A family member or friend initiates the proceedings by filing a petition in the Probate Court in the district where the individual resides. A medical examination by a licensed physician is necessary to establish the condition of the individual. A Court of law then determines the individual is unable to meet the essential requirements for his or her health and safety and appoints a Conservator to make personal decisions for the individual. Unless limited by the court, the Conservator has the same rights, powers and duties over his ward as parents have over their minor children. The guardian is required to report to the court on a regular basis.

A Conservatorship of the Estate is a legal relationship whereby the Probate Court gives a person (the Conservator) the power to make financial decisions for another (the ward). The Court proceedings are very similar to those of a Conservatorship of the Person except the Court of law determines an individual lacks the capacity to manage his or her financial affairs and appoints a conservator to make financial decisions for the individual. Often the court appoints the same person to act as both Conservator of the Person and Estate for the individual. Like the Conservator of the Person, the Conservator of the Estate is required to report to the court on a regular annual basis.

The Differences

A power of attorney is a relatively low cost and private way to decide which family member or trusted friend will have the legal authority to carry out your wishes if you can no longer speak or act for yourself. If you do not have a power or attorney or if your power of attorney is not drafted properly, and something happens that results in your inability to make decisions, your family/friends may later face court proceedings and court supervised Conservatorship. A court proceeding is not only costly, but the person appointed as your Conservator may not be the person whom you would have chosen yourself. And, as stated above, not having a properly drafted power of attorney could significantly limit financial and/or Medicaid planning that could be done on behalf of the principal.

Related posts:

1. All Powers of Attorney Are Not Created Equal
2. Planning for Disability & Incompetence
3. The Special Needs Trust – How to Secure the Future for Your Disabled Child

This is an important issue because the ultimate question of domicile for the purpose of probate and trust administration is not conclusively determined until a person passes away. There are some steps a person can take during life to tip the scale in the direction they want; however, a result can not be guaranteed until it is too late to change it ironically enough.

My first choice when I am confronted with a living trust case that spans two or more states is to create a living trust that works in both states. With this approach, at least my client’s goals will be carried out regardless of where the site of administration is determined. An important part of this approach is involving local counsel from the other state to review and contribute to the Connecticut living trust I have prepared. For example, if there is a possibility that my client’s estate plan may be administered in Florida, it is important that recent changes in Florida’s laws are included in the will or revocable trust I prepared.

Do you have to work with a local attorney to make sure your estate plan works in a different state than where you created it? In most cases the answer is no. This is because competent drafting will establish the site of the trust as the state where it was created. This means that even if there are judicial proceedings in Florida, the court will interpret the revocable trust according to the law of Connecticut. In my opinion this is a band-aid approach and I do not recommend relying on the court of another state to apply Connecticut law.

In addition to the potential difficulties of applying another state’s law, there may also be missed opportunities. Some states have more favorable trust laws than Connecticut (we still have not adopted the uniform trust code by the way). Working with local counsel to provide a complete estate plan gives you an opportunity to take advantage of special provisions that may not be available or less attractive than the law in Connecticut.

An effective estate plan for dual residency is a challenge and an opportunity. Multi-state estate planning can be a can of worms for the ill-prepared and can have unintended or unforeseen consequences to an estate plan that worked perfectly fine in one state. However, if you act carefully you can not only preserve your existing estate plan, but possibly enhance it as well.

Related posts:

1. Myths & Realities of Living Trusts in Connecticut
2. The FTC on Living Trust Seminars & Scams – How Not to Be a Victim
3. Know Your Estate Plan – Executor and Trustee

What if it was your spouse on Medicaid and the state has paid over $70,000 in benefits?

Will they attempt to recover benefits upon your spouse’s death?

After a Connecticut Title 19 Medicaid benefits recipient dies, the state has the right to recover any assets remaining in order to reimburse itself for Medicaid benefits paid out. This process is called estate recovery. Certainly, it makes sense from a public policy standpoint—-if the state is going to help pay for a resident’s care while they are living, then the state should be reimbursed, as fully as possible, by any assets remaining at the resident’s death. But while this policy may make sense, families are never happy to learn that the state may put a lien on your/your parent’s home after your spouse/parent dies.

At one time, states were only pursuing certain real and personal property the Title 19 Medicaid recipient had titled in their name, alone. But now states are taking advantage of the Federal laws expanded definition of “estate” that allows the states to recover most assets in which the Medicaid recipient has an ownership interest including jointly owned property, property held in trust, life estates, and life insurance proceeds. The states also have the right to recover assets conveyed at the Medicaid recipient’s death through transfer on death deeds or beneficiary designations.

In addition, states are now placing liens on the Title 19 Medicaid recipient’s home. This is a way for the state to secure a debt against the Medicaid recipient’s property, meaning that the property can not be sold or transferred until the lien is satisfied. However, the state will only place a lien on the home if Medicaid has paid for at least six months of nursing home care. The state would then inform the Medicaid recipient or the family before a lien is imposed and the family would have the chance to appeal the action.

Fortunately, the state will not place a lien on the home if the Title 19 Medicaid recipient’s spouse, minor child, or disabled child is still living in the home. Nor will the state place a lien on the home if the Medicaid recipient’s doctor thinks he or she may be able to go home. In fact, the federal government requires states to waive recovery all together if recovery would cause undue hardship (as determined by the state).

There are still, in certain circumstances, perfectly legal ways of avoiding estate recovery. For example, if mom is the Title 19 Medicaid recipient, and she has a child with a qualifying disability, she may be able to give her home to that child penalty free and avoid estate recovery at her death. Also, if mom has a child who moved into her home with her, cared for her, and that care kept her out of a nursing home for at least two years, then mom can transfer her home to that child, penalty free, and avoid estate recovery. This is called the caretaker/child exception. There may also be other strategies to consider for avoiding estate recovery including purchase of the home by family members or, perhaps, even using a reverse mortgage.

Connecticut Title 19 Medicaid estate recovery rules are complicated and change frequently. You should consult an Elder Law Attorney who practices in the area of Medicaid before drafting your estate plan with the intent of qualifying for Medicaid with the hopes of avoiding estate recovery. Plan today to protect yourself tomorrow.

Related posts:

1. Critical Medicaid Mistake #2
2. How Good is Connecticut Medicaid?
3. The Special Needs Trust – How to Secure the Future for Your Disabled Child

I am afraid the discussion of providing a secure future in case things do not go according to everyone’s own life plan happens all too infrequently based on the number of conversations I have had myself recently with families unaware of how critical it is to implement a plan to provide quality of life to a special needs child if the unexpected should happen.

What is the plan for educational needs?

Who will pay the medical bills if your child is no longer on your health insurance?

Will your child only survive with the bare minimum from government benefits programs or will you put in place a plan for the same quality of life you would provide?

Update: The original article “Providing for a Special Needs Child” is no longer available from the original site.

Related posts:

1. Critical Medicaid Mistake #2
2. ERISA Reimbursement v. Special Needs Trust
3. Estate Planning For Title 19