Some attorneys and others interested in the field of Medicaid Asset Protection may have been a bit worried about a recent case arising out of Wisconsin — Hedlund v. Wisconsin Dept. of Health Services (Wis. Ct. App., No. 2010AP3070, Oct. 13, 2011)

The basics of the case

In this case, the court affirmed a ruling that a Medicaid applicant who transferred assets to her children, who in turn put those same assets into an irrevocable trust for the Medicaid applicant’s benefit, is ineligible for Medicaid because the trust is a countable asset under state law,  despite the fact that the transfer occurred 17 years prior to applying for Medicaid.

Don’t Worry!

If you are an estate planning or elder law attorney offering pre-crisis Medicaid asset protection through the proper use of an irrevocable, income-only trust, it need not cause you any worry.

And if you are not an attorney but have created the right type of irrevocable, income-only asset protection trust, you, too need not worry.  The irrevocable, income-only asset protection trust I provide my own clients with is the Living Trust Plus™ — I’m happy to say the trust is just as effective as ever.

The opinion was released October 13^th and is a case-in-point example of how an improperly drafted irrevocable trust, along with a badly executed asset protection plan, will fail.  More information on the Living Trust Plus™ is available here.

The question before the court

The question for the court, based on its interpretation of a Wisconsin statute, was whether the trust was established by the children “at the direction or upon the request of” the Medicaid applicant.

Although the trust instrument in this case was irrevocable, the trust bore no relation to an income-only trust, but rather was a trust established by the children of the Medicaid applicant, using the exact assets previously gifted by the parents to the children.

This trust was apparently intended to be some sort of special needs trust because the trust instrument provided that the income and corpus of the trust were to be used only when no other funds are available and to supplement any funds the beneficiaries were entitled to receive as social security and medical assistance benefits.

However, though not addressed by the court, the trust was clearly defective as a special needs trust because the stated purpose of the trust was “to provide for the support and welfare of Clarence and Lucille Hedlund,” and a trust intended to provide for “support and welfare” is clearly not a special needs trust.

Why the court ruled the way it did

Most  importantly, the trust did not prohibit trust corpus from being distributed to the Settlors. On the contrary, the trust provided that the income and corpus of the trust were available to the Settlors.

So once the finding was made that the trust assets were “assets of the individual or the individual’s spouse” and “were used to form all or part of the corpus of the trust,” the finding that the assets were fully available to the Medicaid applicant was absolutely correct, because the trust allowed corpus to be used for the benefit of the Medicaid applicant.

A properly- prepared income-only trust, such as the Living Trust Plus™, would have avoided this result, because the Living Trust Plus™ is a trust that offers true asset protection in connection with Medicaid eligibility, as well as in connection with all other creditors.

For information on the Farr Law Firm’s service (Level 3) – The Living Trust Plus™ — follow this link and view the .PDF file. You may also notice other services you may need or have not thought of.  Planning for long-term care (whether for you or a spouse or a parent) is a difficult mental hurdle.  But the sooner you start, the more assets you can protect and the better quality and dignity of life loved ones can enjoy.

Image: David Castillo Dominici / FreeDigitalPhotos.net

Image: Salvatore Vuono / FreeDigitalPhotos.net

Image: Stuart Miles / FreeDigitalPhotos.net

Trust lawyers are well aware of the variety of online estate planning tools available to those in Virginia and beyond, such as Quicken WillMaker, LegalZoom and Rocket Lawyer. The variety of products available can create a false sense of security, however, when an individual believes he or she has made adequate plans for the estate.  Recent Consumer Reports findings determined that the tools they reviewed were not robust enough to plan for situations that were even slightly complex.

For example, the high divorce rate in the US means that many individuals wish to provide for children from multiple relationships.  Most of the software reviewed by Consumer Reports could not meet the hypothetical clients’ specific wishes when it came to this subject.  In these “blended family” situations, the estate planning tools were too rigid in their options. This can result in accidentally leaving out a child, or favoring them unequally and causing hurt feelings.

A number of other problems were uncovered in this experiment, which is not a big surprise to most estate planning lawyers.  Each family and individual’s situation is highly dependent upon so many factors that it is nearly impossible for a computer program to anticipate them all.  Additionally, engaging with a live person means that there is a capacity for human understanding that the programs simply cannot replicate.

This interpersonal relationship is every bit as important as the documents that are created as a result.  From the lawyer’s extensive education and experience, he or she is able to guide clients into creating documents that are truly relevant to their particular circumstances.  In the world of estate planning, “one size fits all” simply doesn’t work.

One of the biggest problems with online estate planning tools is the fact that they seem to open so many estates up to the probate process.  As a result, families are left waiting for the courts to rule on decisions that the deceased believed had already been made.  Unfortunately, those decisions don’t always reflect the true wishes or spirit of the documents generated through the software.  Just as devastating is that fact that the probate process can be very expensive, thereby decreasing the amount of inheritance that beneficiaries do eventually receive.

It is commendable that so many people are now taking an interest in the estate planning process.  It is an unfortunate reality, however, that using online tools generally won’t be enough to plan for the actuality of your given situation.  Without a doubt, the best and safest approach is to develop a relationship with a trusted estate planning lawyer who can provide the expertise required to truly meet the needs of today’s modern families.

Learn more about Basic Estate Planning Here!

If you’re making New Years resolutions this year and still have minor children at home, don’t forget to add naming legal guardians to the list!

Statistics show that 69% of parents do not have legal guardians named who can raise their kids if something tragic happens to them.  Many assume a family member would step in, or that they can simply “tell” someone about their guardianship wishes, but unfortunately, our legal system does not work that way.

Instead, if you don’t legally document your choice of guardians, a judge (who does not know you or your wishes!) will have to step in and make this decision on your behalf.  That means your kids could be placed with someone you would NEVER choose if something happened to you.

I’m often reminded of the Barber family car accident in 1996.  Mel and Casey Barber were killed in a horrific crash, while their 3 small boys survived.   If that’s not terrible enough, the boys were forced into foster care because their parents did not have documents in place that would allow them to stay with another family member.  A lengthy court battle ensued, and eventually a judge (who didn’t know Mel or Casey Barber) made the decision as to who would care for the boys.  Was this the same person the Barbers would have chosen? We’ll never know because they didn’t put their wishes in writing.

But here’s the thing—naming legal guardians to care for your minor children is EASY!  There is simply no good reason to go another day, week or year without them.  Here are four easy steps to help you get started with the process:

1. Sit down and brainstorm all the people who could possibly raise your kids if you were killed or incapacitated in an accident. Don’t limit your choices to family either. Think outside the box and write down everyone who even remotely fits the bill.

2. Determine who you would NEVER want to raise your kids in your absence. You’ll need to tell the courts who you DON’T want raising your kids in the event that individual contests your wishes and seeks custody anyway (This can be kept private and only revealed if the need arises).

3. Weigh your values. Make another column and write down what is important to you and/or your spouse.  Do you value education?  Religious or spiritual training? The ability to live in a certain community?  Being raised in a two-parent family?  Whatever your values may be, be honest about them, write them down, prioritize them and eventually rank the top three.

4. The next step is to match your top guardian choices to your top values. This will give you a clear picture of who you can trust to raise your children with the values you hold near and dear to your heart.

Finally, get with your estate planning attorney and legally document your choice of guardians so there’s no question as to who you want to raise your kids if something happens to you!  It’s the only way to guarantee your kids will be physically and financially protected in your absence. The four steps above are a great way to start, but putting your wishes into a proper legal document is essential.

Another integral part of your child protection plan is THE Child Protection Plan of the Farr Law Firm. This document acts as a stopgap should you become incapacitated but not killed–a unique circumstance that is not covered by your Will! Read more about it here.

When we typically think of estate planning, we see grandma and grandpa putting together a will and possibly setting up some trusts for the following generations. It’s all about providing for our offspring, right?

Not necessarily. Even if you are single and/or have no children, a Virginia wills and estates lawyer should still be in your plans. Why? Because estate planning is really about YOU.

While it is absolutely advisable for married people or those with children to work with a wills and trusts lawyer, it is actually just as important for single adults, as well.

In fact, there are times when it’s almost more important for singletons. After all, when a married person suffers a major illness, it’s usually pretty clear who will take on medical and financial responsibility. The water gets a bit murkier for unmarried individuals.

If you were to suddenly become incapacitated, who would make your medical decisions for you? If you haven’t worked with an estate planning attorney, the answer to this question becomes quite complicated. Possibly your parents would be called in to determine how your medical care should proceed. Maybe it would be a sibling. Most likely, it would not be your best friend or your significant other or whomever you would choose. Even if your parent or sibling would be your first choice, that doesn’t mean that the courts would agree without having your express wishes legally documented.

And what about your finances? If you are unable to take care of your finances for a period of time, who do you think will do so? The answer to that is: whomever the courts say. Again, it could be a parent, a sibling, some other relative, or even a court-appointed individual.

Finally, what will become of your things if you should unexpectedly pass away? Who would have legal rights to your belongings, to your home, to your pets? You may think you know the answers, but without clearly outlining your wishes with an estate planning attorney, you have very little control over the matter.

A single adult without children does not need to worry about creating guardianships and trusts to provide for his or her offspring, but it’s certainly a good idea to look out for yourself. Some of the basic legal documents any single person should have include:

• A will to determine what will become of your assets in the event of your death.
• A power of attorney for healthcare (or Advance Medical Directive) to name the person you want making medical decisions on your behalf.
• A living will to clearly explain your wishes regarding medical procedures and life support.
• A power of attorney for financial matters to name the person you feel should be responsible for your money if you are incapacitated.
• A revocable living trust to centralize management of assets if you become incapacitated and keep your assets out of probate if you should pass away.

These five documents are crucial in ensuring that your wishes are met and that you have control over your future. A wills and trusts attorney in Virginia can easily get you on the path to having these affairs in order.

Wills and Basic Estate Planning

Financial Powers of Attorney

Medical Powers of Attorney

If you and your family are fortunate enough to go on that well-deserved resort vacation this year, then there is a good chance you’ll find yourself listening to the all-too-familiar ‘timeshare marketing pitch.’   Most people are familiar with the concept of a timeshare, but there is more to it than meets the eye.  The repercussions of owning a timeshare can vary tremendously depending on many things, including whether it is a real property interest, a mere right to use the property, or some other arrangement. Read on for more.

#1 – Timeshares are not Inherently Bad Investments. If a timeshare really interests you (and they are legitimate and worthwhile investments for many families), you can plan in advance to take ownership the right way and avoid legal traps and snares down the road.  Most people do not realize the thicket of possible legal ramifications inevitable to owning one (or more).  Timeshares are typically sold in a high-pressure environment, chock full of free food, gifts, and even vacations; these tools are all part of an intentional business model designed to encourage vacationers to make impulsive buying decisions.

#2 – Type of Ownership is Critical. If you own real property outside of Virginia and die without proper estate planning documents in place (no, a simple Will is not enough!) then the representative of your estate must appear in every state where such property is located.  This means that even if you live in Virginia but you own a timeshare for one week in Florida, if it is considered “real property,” then the Florida courts must determine how it is disposed. Combine that inconvenience with the fact that each state has slightly different estate administration laws and the representative of your estate could have a messy complication on their hands.

If a timeshare is in the form of a deeded contract, it is considered ownership of real property.  As you may know, real estate may be sold, rented, and gifted among other things.  And as you may have guessed by now, also incident to ownership are real estate taxes and probate.  Usually, taxes are included in the timeshare maintenance fee, but probate is another issue.  If you die without a trust to dispose of your assets, then the court system will “probate” the Will, or follow the statutes of the state if there is no Will.  In any event, dying without a trust and with real property can cause major headaches for your executor.  Luckily this can all be avoided.

If the deed to your current or prospective timeshare is a “leasehold deed,” then it means ownership only lasts for a specified period of time.  A “right to use” contract means what it sounds like – the purchaser acquires a right to use and enjoy the rights of the property owner (usually a resort).  However, the pitfall of a “right to use” contract is the fact that it is possible for “other” benefits you may not care about, like a club membership, to be included.  The “right to use” form of timeshare acquisition is used heavily overseas and in Mexico, because the ownership of foreign real property interests opens the door to many more legal issues.

#3 – You Do Not Have to Decide Then and There. Do not sign anything before you leave, unless you have a revocable living trust and have already met with your lawyer regarding the timeshare you are considering.  The concept of a timeshare is attractive, but before saying “yes,” it is absolutely imperative to speak with a good estate planning attorney.  For those who own timeshares already, it is still equally as important to not purchase another one until you have consulted an attorney, and also equally as important to talk to a good estate planning attorney if you own a timeshare but do not intend to purchase another.

Revocable Living Trusts Explained

Consult an Estate Planning Attorney Now!

You may be aware that October is National Breast Cancer Awareness Month. However, fewer people realize that before October, is September: National Ovarian Cancer Awareness Month.  More than 15,000 women will die from ovarian cancer this year, slightly less than half the number who will die from breast cancer (about 39,000).  The prevalence of all forms of cancers reminds me to remind my readers of the importance of Incapacity Planning and Asset Protection Planning.

According to HealthNews.com citing the American Cancer Society, “every year almost 22,000 American women are diagnosed with ovarian cancer and more than 15,000 die from the disease.”  According to government statistics, 207,090 women are diagnosed [with breast cancer annually] . . . and 39,840 die [from the disease].

Ovarian cancer affects women in their middle-to-later years.  9 out of 10 women who get ovarian cancer are over the age of 40, and the greatest numbers of ovarian cancers are discovered in women aged 60 years or older, according to the Centers for Disease Control and Prevention.

Asset Protection Planning and Incapacity Planning are the vital legal services where an Elder Law attorney guides the individual (or couple) through the complex Medicaid qualification, application, and approval processes.   It may be necessary to employ a complex set of asset protection strategies, saving hundreds of thousands of dollars in many cases.

Proper planning can protect the assets from nursing home creditors, allowing Americans from all walks of life to legally and ethically qualify for Medicaid and Veterans Benefits, passing on an inheritance if they so choose, and enjoy the standard of living and quality of life they prefer.

This September and October, remember the acronym, “RAP:” Recognize the risks, including your family history; Abstain from cancer-causing behavior like smoking and chronic inactivity; and Plan for the future, regardless of your current state of health.

More ovarian cancer articles you may be interested in:

Breakthrough in Ovarian Cancer Research Brings Hope
Do all contraceptives lower ovarian cancer risk?
National Ovarian Cancer Coalition
Advance Care Plan Explained

Many of us are so caught up in the here-and-now of the present that we fail to consider our distant future. We may get around to it later in life, after we have lived awhile–wondering what we might be remembered for, or what we will leave behind. Others are born with this innate sense of purpose, this desire to create a lasting legacy for themselves, or perhaps their children.

Whichever group you fall into, August is “What Will Be Your Legacy?” month and should spur you to ponder that question for yourself. While we can’t control what others think of us after we’re gone, we can make sure that we lay the groundwork for a lasting legacy. Proper estate planning can be key to many of your goals. Is there a charity or cause that you believe can change the world? Charitable gifting from a trust can ensure that you play a vital part in its mission even after you’re gone. Do you have children? Planning ahead to give them the ultimate gift of a good education will change their lives, and you don’t have to wait until the end of your life to do it!

Choose to ignore this, and your legacy could turn into a nightmare you never dreamed of. Do you want your loved ones to have to go through “the nightmare of probate” after you’re gone, because you didn’t have the right documents in place? Is that the final impression you want to leave with them? Probably not. This month gives us a prompt to make the right choices in our lives, for ourselves and our loved ones. You might think this approach only applies to the here and now, but you can make the right choices for what you leave behind you as well. After all, isn’t that what a legacy truly is?

What is Probate?
What is a Revocable Living Trust?
How Does a Revocable Trust Avoid Probate?
What About Irrevocable Living Trusts?
Choosing a Trustee
Protect Assets from Lawsuits PLUS Divorce PLUS Nursing Home Creditors

If you have minor children at home, you can expect an emergency card to arrive in just a few weeks from your child’s school or day care facility. The point of this card is to allow you to authorize certain people to pick up your child if you are not able to, for whatever reason. Plus it helps to ensure that your child is never sent home with a stranger “pretending” to be a close relative or a person who you do not want watching your kid.  This is obviously an important safeguard, but as a parent, you may be interested to know what the emergency card does NOT do.

The Emergency Card does not authorize someone to temporarily take custody of your children if a SERIOUS accident happens during the school day. Keep in mind that by law, the authorities can only leave your kids with their “legal guardian” or surviving parent if something happens to you.

If you’re a mom or dad with one or more children at home under the age of 18, a Child Protection Plan may be the solution for your family. Without such a plan, if you are killed or incapacitated in an accident, the police will typically show up at your house to notify the family. If the police find your kids home alone, or with a babysitter, they will have no choice but to call in Child Protective Services and have your kids removed from your home until the system can figure out what to do, and that may take weeks or even months.

Again, if the surviving parent is unavailable or something happens to you both during school hours, your child will most likely be placed into the “system” until a judge (who doesn’t know you or your wishes!) can decide where they should go. That is NOT a position you want to put your kids in—especially during a time of grief! Fortunately, there are three easy steps you can take to make sure your kids stay protected if something tragic happens during school hours. They are:

1. Name short and long-term guardians for your minor children. Many parents have long-term guardians named in their will, but they have not legally documented who can care for their child in the short-term if the main guardian is out of town or is not immediately available to get your kids.

2. Make sure the contacts on your school emergency card match the guardians you have legally named to care for your kids.

3. Tell your child’s school, babysitter or daycare provider about the plans you have in place. Provide them with a copy of your guardian nominations and let them know how they can get in touch with your guardians in the event of an emergency. This will prevent social services from getting involved if the unthinkable happens.

A Child Protection Plan is a set of legal documents that includes an Appointment of Temporary Guardian for someone you choose to take immediate custody of your children, a Parental Consent for Medical Treatment form, and a Medical Information form containing information on your child’s medical allergies and conditions, pediatrician information, health insurance information, immunization record, and medication list.

If you are in an accident, your Child Protection Plan will help ensure that your children are never turned over to Child Protective Services because the police don’t have clear instructions from you and, if the unthinkable happens, your Child Protection Plan will help ensure that your children are not turned over to Foster Care strangers chosen by a overburden social services system that doesn’t care about your wishes or who you would prefer to take custody of your children.

By taking these three easy steps, you’ll rest easy knowing your child will always be cared for by the people YOU want if tragedy strikes. Don’t make the mistake of trusting completely in the school emergency card, as it’s not designed to fully protect your kids in the event of an emergency.

Good news for veterans!

On April 6, 2011 a new statute was made Virginia law, awarding a real property tax exemption for permanently service-related disabled veterans and their surviving spouses. Originally approved by voters in November 2010, this statute will positively affect an estimated 7,350 disabled veterans living in the state of Virginia, according to the U.S. Department of Veterans Affairs. The exemption applies to the sole dwelling and land (not more than one acre) of the veteran, but not to any vacation homes or rental properties. For most people living in the city or suburbs this will be a sufficient and appreciated break. However, if your locality exempts more than one acre under its tax relief program for the elderly, then veterans will receive this new property tax exemption for the same number of acres as allowed for the elderly.

The application is a fairly simple one-time process that does not need to be re-submitted annually, unless you move or have another change in circumstance. First, you must obtain the required disability documentation from the VA by submitting VA Form 21-4138 . Second, after you have received the appropriate paperwork that proves your 100% service-related disability, download the “Disabled Veteran Exemption Application” from your county website and submit to your county’s Department of Tax Administration along with your VA documentation for approval. Lastly, once approved, make sure to alert your mortgage company (if applicable) so that they may adjust your monthly mortgage payment according to this property tax break.

The Farr Law Firm and the Elder Law Institute for Training and Education appreciates the military service of our veterans and are proud to offer a 15% discount on our Level 1 and 2 packages to all active duty, reserve and retired military members. Our Level 1 and 2 packages include incapacity protection planning documents and living trusts, as well as optional add-ons like wills and child protection plans. This is a substantial savings of up to $1000! If you’re a veteran in need of estate planning services, please contact us at 703-691-1888 to see how we can help.

 Photo by Maggie Smith.

Your graduating senior may always be your baby, but in the eyes of the law, he or she is now an adult.

You need to understand that you can no longer make important medical or financial decisions for your child without their permission.  This can be problematic when your adult child still is relying on you for the majority of their support.

Doctors and financial institutions must abide by privacy laws.  As a result, you need several key documents in place if you want to make important decisions on your child’s behalf.  Many parents have found themselves in the nightmare scenario where their child needs medical attention for some reason, and they are hundreds of miles away at school, but the hospital refuses to provide a mere status update as to their condition, all because the right documents aren’t in place.

Warning: these statistics are extremely unfortunate and saddening; they reflect an all-too-unfortunate picture of reality.  Still, they must be understood to best prevent them from increasing.  Parents must acknowledge these figures and proactively seek the documents right for their adult children.

Each Year:

• 1,825 college students between the ages of 18 and 24 die from alcohol-related unintentional injuries, including motor vehicle crashes.
• 599,000 students between the ages of 18 and 24 are unintentionally injured under the influence of alcohol.
• More than 150,000 students develop an alcohol-related health problem (Hingson et al., 2002), and between 1.2 and 1.5 percent of students indicate that they tried to commit suicide within the past year due to drinking or drug use.

  For more statistics, visit CollegeDrinkingPrevention.gov.  Statistics based on Hingson et al., 2002, 09).

Our Level 1 Planning Package is perfect for parents concerned with the issues raised by the statistics above.  Click here for more information on why the documents are so important, and then click here to speak with someone happy to schedule you a free, initial consultation.  Or if you prefer, you are always welcome to call us at (703) 691-1888.

Image courtesy of Photographer: digitalart