November 17

Things To Consider When Estate Planning

Estate Planning Papers

What exactly is an Estate Plan? Isn’t it only for the wealthy?

An Estate Plan is designed not only to pass assets at your death, but also to provide management of your personal and financial affairs while you are living. Wealth is only one factor when considering whether to do an estate plan. A properly devised estate plan is intended to avoid a probate at death, avoid the potential for a conservatorship during life, provide clear instructions on how to manage your affairs while living, how to distribute assets at death, and how to care for spouses, minors, or disabled heirs, all in a manner that minimizes expenses and tax implications to the greatest extent possible.

What exactly is “Probate?”

Probate is a court supervised administration of a deceased person’s estate. It is a lengthy public proceeding that follows strict procedural formalities as mandated by the California Probate Code. A typical probate lasts about a year, but could last longer. The expense of a Probate is broken down into attorney’s fees, executor’s fees, and costs (costs include court filing fees, publication fees, recording fees, etc.). Fees for the attorney and executor are statutorily based on a percentage of the gross value of the Probate Estate (“gross” meaning the value of the estate is not offset by any debts or mortgages owed). By way of example, the combined attorney’s and executor’s fees to probate a $300,000.00 home (even if the home is encumbered) would be $18,000.00 plus additional costs averaging $1,500.00. These fees and costs do not include any other expenses such as taxes.

What is some basic terminology I should know about Estate Planning documents?

A typical trust-centric estate plan includes a Revocable Living Trust, Pour-Over Will, Durable General Power of Attorney, and an Advanced Health Care Directive.

Revocable Living Trust: This document is a legally binding contract wherein the creator of the trust (called the Settlor/Grantor/Trustor) enters into an agreement with the Trustee (or manager of the assets) to manage the Settlor’s assets according to the terms of the contract for the benefit of the Beneficiary (the person receiving the benefit of the assets). Typically, the Settlor may also be the initial Trustee and initial Beneficiary of the Trust.

PourOver Will: If you have a trust-based estate plan, then your Last Will and Testament will be used to transfer certain assets into your trust at the time of your death. It will “pour over” certain assets into the Trust that you did not transfer into your Trust prior to your death. The creator of the Will is called the Testator. The Testator nominates an Executor to administer the Will, however, only the Probate Court appoints the Executor to administer the Will.

Durable General Power of Attorney: This document, also known as a Financial Power of Attorney, allows the Principal (the person creating the document) to appoint an Agent or Attorney-in-Fact to manage assets held in the Principal’s individual name such as retirement accounts, vehicles, or life insurance policies. It typically does not allow the agent to manage or access assets held in the Revocable Living Trust (only the Trustee of the Trust can manage Trust accounts). A Springing Durable General Power of Attorney only goes into effect once the Principal becomes incapacitated, whereas an Immediate Durable General Power of Attorney becomes immediately effective once the Principal signs it.

Advance Health Care Directive/Power of Attorney for Health Care: This document allows the Principal to designate an Agent to make health care decisions on the Principal’s behalf if he or she is unable. It also contains a written set of instructions or guidelines about the Principal’s wishes regarding life-sustaining treatment.

filing trust papers

What information should be included in my Trust?

As stated above, a Trust is a legally binding contract and is therefore unique. A Revocable Living Trust should contain detailed instructions covering three important periods of your life:

  1. What happens while you are alive and well;
  2. What happens if you become mentally incapacitated; and
  3. What happens after your death

It should define all the players of the Trust (Settlor/Trustee/Beneficiary); it should nominate successor Trustees; it should clearly define how a Trustee can resign or be removed and what authorities a Trustee has; it should state who gets the Trust’s income and principal and in what manner; it should provide clear instructions on what happens at the death of the first spouse (i.e. does the Trust require a division into two or more sub-trusts at the spouse’s death); it should provide clear instructions on where the assets go at the Settlor’s death and in what manner. Finally, the Trust must be properly funded with assets (this requires formal retitling of certain assets, transfer deeds, etc).

What should I do to prepare for my Estate Planning appointment?

Here are some tips to help you get organized and prepared for your first meeting with an Estate Planning Attorney:

  1. Make a list of all of your assets and approximate values of those assets. You may wish to locate your real property deeds, property tax bills, life insurance policies, bank and investment accounts, etc.
  2. Decide who will be in charge of your financial and personal affairs if you are unable to do so yourself. Think about alternates or successor decision makers as well.
  3. Decide who will inherit your estate, how they will inherit, and when they will inherit. Consider their ages and any disabilities they may have as well.

What does an Estate Plan normally cost?

To help put this question into perspective, you should also ask yourself “what would it cost me not to have an Estate Plan?” The cost to prepare an Estate Plan depends on many factors, such as the client’s needs/wants (i.e., does the Trust divide into multiple sub-trusts for the beneficiaries), types of assets (i.e. are there several pieces of real property), the sophistication of the estate plan (are there business interests to address), tax implications, etc. In our area, most attorneys charge hourly for the initial consultation ($275-$375 per hour) and may charge a flat rate for the preparation of the Estate Plan ($1,500.00-$3,500.00+). Some may charge hourly for the preparation of the Estate Plan. You should ask the attorney what their billing practices are prior to retaining their services.

Nicole R. Plottel Certified Elder Law AttorneyNicole R. Plottel, Certified Elder Law Attorney is Managing Partner of the Firm. She is also a Certified Specialist in Estate Planning, Trust and Probate Law by The State Bar of California Board of Legal Specialization. Ms. Plottel is further accredited by the Department of Veterans Affairs to represent and present veterans’ claims and focuses her practice in the areas of Estate Planning, Medi-Cal/Veteran’s benefits, Probate and Trust Administration. She is a longstanding member of National Academy of Elder Law Attorneys (NAELA) and also volunteers on the Incapacity Subcommittee of the Executive Committee of the Trust & Estates (TEXCOM) Section of the State Bar of California. Ms. Plottel actively serves the local community as a Board Member for the Enloe Hospital Foundation and the Gateway Science Museum Community Advisory Board, and the Chico Community Scholarship Association. She is also a longtime advocate for the Alzheimer’s Association.

 

May 11

Veteran’s Pension Benefits: Aid & Attendance

Veterans saluting flag at VA Aid & Attendance meeting

What is the Aid and Attendance Pension Benefit?

The Veteran’s Administration (VA) Aid & Attendance (A&A) Pension provides benefits for eligible veterans and/or their surviving spouses who require the regular attendance of another person to assist in eating, bathing, dressing and undressing or taking care of the needs of nature.  Individuals who are blind or are in an Assisted Living Facility may also qualify.  This is a non-service connected program, meaning the veteran does not need to be disabled as a result of his/her wartime service.  The Aid & Attendance Pension can provide up to:

  • $25,525 per year ($2,127/month) to a qualified married veteran
  • $21,531 per year ($1,794/month) to a qualified single veteran
  • $13,836 per year ($1,153/month) to a qualified surviving spouse

Basic Eligibility Criteria:

  1. Active Duty: ninety days of active service, one day of which must have been during wartime
  2. Wartime:  WWI, WWII, Korean War, Vietnam War and Gulf War
  3. Discharged:  Other than dishonorable
  4. Medical Evaluation:  Physician’s evaluation of medical issues
  5. Financial Limitations:  Limited income and assets available; Demonstration of unreimbursed medical expenses

Qualifying for the Aid & Attendance Pension:

The growing popularity of the Aid & Attendance program has created an unfortunate opportunity for individuals and organizations to prey on our elderly veterans and provide misinformation. Exercise caution in the counsel you receive. Rely on accredited Veteran’s Service Officers, accredited attorneys, and legitimate Veteran’s Affairs websites. Check credentials and accreditations prior to divulging private information. Qualifying for this program should be part of a comprehensive long term care plan. Understand that you DO NOT need to purchase an annuity in order to qualify. Repositioning assets or purchasing an annuity to qualify for A&A, without proper advice from a qualified elder law attorney, may create severe tax implications and/or other penalties, may adversely affect your existing estate plan, and may disqualify you for other public benefits such as Medi-Cal.

March 13

Is My Home Really Protected Under Medi-Cal?

“Is My Home Really Protected Under Medi-Cal?”

by

Neil A. Harris, Certified Elder Law Attorney (CELA)

Harris & Plottel, LLP

Perhaps one of the most misunderstood concepts in Medi-Cal is the principal residence exemption.  Unfortunately, discovering the limitations of that exemption often occurs too late for corrective action.  The following is a brief overview of Medi-Cal’s treatment of a principal residence both during life and subsequent to death.

As many of you already know, in determining Medi-Cal eligibility, the Eligibility Worker will divide your assets into two general categories, exempt and non-exempt.  While, under current law, there is no value limit on your exempt assets, the total value of all of your non-exempt will be limited.

In most cases, the most valuable and important exempt asset is your principal residence.  The principal residence is defined as a dwelling, fixed or mobile, located on land or water.  While many people believe that the principal residence is restricted to a house, the exemption is much greater than just a dwelling.  It includes all of the land on which the dwelling is located as well as all of the land and/or buildings that surrounds, is contiguous to or adjoins the land on which the dwelling is located.  The principal residence can be a single family house, a duplex, a ranch or farm of many acres, an apartment complex, the house next door or even the house across the street as long as the residence and house across the street are only separated by a public thoroughfare.  Under current law, there is no principal residence value limitation.  When the yet to be promulgated new Medi-Cal regulations are enacted, the value of the principal residence will be capped at $750,000.00 as determined by the most recent property tax assessment bill.

The principal residence will be considered exempt as long as the Medi-Cal applicant or recipient resides in the residence.  If the applicant or recipient is not able to live in the residence, the residence exemption will continue if the applicant or recipient’s spouse, dependent (under 21 years of age), disabled (as determined by the Social Security Administration) or legally blind child resides in the residence.  If none of the above is possible, the residence will remain exempt as long as the applicant or recipient subjectively intends to return to the residence.  The subjective intent to return is simply a willingness to return if and when the applicant or recipient is able.  The actual ability to or the likelihood of return to the residence is not relevant to continued exemption.  This is an extremely important issue in applying for or maintaining continued eligibility when a person is in a skilled nursing facility.  In almost all cases, when asked if the applicant or recipient intends to return to the residence, the response should be yes even if return is unlikely or impossible.

Even though many people understand that the principal residence is exempt even if the applicant or recipient is not physically living in that residence, some fear that Medi-Cal will impose a lien on the principal residence upon eligibility for Medi-Cal.  In actuality, the State of California is prohibited from placing a lien on the exempt principal residence.  The State may impose a lien where a person is placed in a skilled nursing facility and that person declares that s/he does not intend to return to the residence.  The applicant or recipient may change that declaration at any time and the State is required to remove the lien upon the applicant or recipient’s declaration of intent to return or when the applicant or recipient actually returns to the residence.

While the principal residence exemption exists as long as the applicant or recipient maintains a subjective intent to return, that same exemption does not survive the death of the applicant or recipient’s death.

At the death of the Medi-Cal recipient, the State must be given actual notice of the death by sending a copy of the recipient’s death certificate to the Sacramento office of the California Department of Health Care Services (DHCS).  The State is mandated to recover the Medi-Cal payments made on behalf of any person who received such services after reaching age 55 or for any benefits paid on behalf of any resident of a skilled nursing facility regardless of his/her age.  The State is authorized by federal law to recover the amount paid of Medi-Cal benefits on behalf of a recipient or the value of the assets owned by the recipient at death, whichever is less.  Since the most valuable of the exempt asset allowed to a Medi-Cal recipient is usually the principal residence, most recovery actions are tied to the value of the principal residence.

The State is prohibited from recovery while the deceased Medi-Cal recipient’s spouse is still living.  At the death of the recipient’s spouse, however, the State must be formerly notified of the surviving spouse’s death.  Thereafter, the State will seek recovery of the value of the deceased recipient’s assets (usually an interest in the principal residence) passing to the surviving spouse by Will, Trust, joint tenancy or any other form of succession.  Again, this recovery is limited to the value of the recipient’s assets passing to the surviving spouse not all of the assets owned by the surviving spouse at his/her death.  If the recipient did not own an interest in any assets at his/her death, the State is prohibited from recovery against the surviving spouse at his/her death.

The State is prohibited from any recovery where the Medi-Cal recipient is survived by a dependent, disabled or blind child even if that child does not receive any of the recipient’s assets.

As should be noted from the above discussion, exempting the principal residence is an eligibility issue but that exemption does not normally extend to the recovery process following the recipient’s death.  Good long term care planning should include options for eligibility as well as asset protection from recovery.  Knowledge is the first step in good long term care planning.

July 26

Domestic Partners and Long Term Care Planning

DOMESTIC PARTNERS AND LONG TERM CARE PLANNING

By Neil A. Harris, Certified Elder Law Attorney

While most of us are familiar with the term “Domestic Partners,” many believe that Domestic Partnerships are available only to same sex couples.  Actually, both same sex and older heterosexual couples can take advantage of Domestic Partnerships.  In fact, many older persons find entering into a Domestic Partnership with their later-life partner easier and more advantageous than the more traditional formal marriage.

In 2003, the California legislature passed Assembly Bill 205 (AB205) which provides for the same rights, protections and benefits of spouses to Domestic Partners.  Domestic Partners are defined  as, “two adults who have chosen to share one another’s lives in an intimate and committed relationship of mutual caring.”  The actual Partnership can be established when both persons file a Declaration of Domestic Partnership with California’s Secretary of State and at the time of filing, meet all of the following conditions:

  • Both persons share a common residence
  • Neither person is married to someone else or is a member of another Domestic Partnership
  • The two persons are not related by blood or in a way that would prevent them from being married to each other in California
  • Both persons are at least 18 years of age
  • Both persons are capable or consenting to the Domestic Partnership
  • Either of the following:
    • Both persons are of the same sex, or
    • Each person is of the opposite sex of the other and one of the two is over the age of 62 years at the time of filing

Once the Partnership is established, both Partners are treated in the exact same manner as traditional married spouses under California law.  In fact, most existing California law has been amended to include Domestic Partners in the statutory definition of “spouses.”

Termination of a Domestic Partnership is a formal process, but may not require the filing of a proceeding of dissolution as in the more traditional marriage.

While many same sex couples consider Domestic Partnerships as the only available option to marriage  in California following the California Supreme Court’s recent Proposition 8 decision, a growing number of elderly heterosexual couples view Domestic Partnerships as a more practical solution to traditional marriage.  Since a California Domestic Partnership only effects State law, it is possible that older couples can live in a relationship sanctioned by their State government without adversely affecting any federal benefits earned by either Partner or the previous spouse of either Partner.

While the above State/Federal law distinction may protect the federal benefits belonging to each Partner, that same distinction may serve as a disadvantage should either of the Partners require Medi-Cal Long Term Care benefits.

Since the Partnership is not recognized under federal law, Domestic Partners are considered unmarried individuals and, therefore, subject to the asset transfer and limitations imposed on a single person.  For example, while married persons may freely transfer assets between each other without subjecting those transfers to a Look Back Period or Penalty Period, with few exceptions, the transfer of Medi-Cal non-exempt assets between Partners will result in the imposition of a transfer penalty should either Partner require placement in a skilled nursing facility within thirty (30) months of the transfer.

As to assets limits, a married couple may protect up to $109,560.00 of Medi-Cal non-exempt assets should one of the spouses be placed in a skilled nursing facility (Community Spouse Resource Allowance).  In addition, the non-institutionalized spouse (Well Spouse) is entitled to retain a monthly income allowance of, at least, $2,739.00 from all of the income of both spouses (Minimum Monthly Maintenance Needs Allowance).  All of an institutionalized Partner’s monthly income, with the exception of $35.00 for personal needs and the monthly cost of the ill Partner’s Medicare supplementary insurance, is paid to the skilled nursing facility as the ill Partner’s share of cost.

And finally, in a more traditional marriage, the Well Spouse can seek a Court ordered increase to his/her Community Spouse Resource Allowance where the fixed income available to that Well Spouse alone is less than his/her Minimum Monthly Maintenance Needs Allowance.  No such increase is available to the non-institutionalized Partner.

Obviously, the issue of Domestic Partnership offers both advantages and disadvantages to the participating Partners.  As same sex Partners do not have a current option, this is especially true where an elderly heterosexual couple are the Partners.

As with most complex issues, it is always advisable to seek legal counsel prior to entering into any partnership.

 

For more information, please visit: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0601-0650/ab_641_cfa_20110421_172524_asm_comm.html