Estate Plan Updates in the Age of Coronavirus

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With the ever-increasing number of deaths in Europe and the U.S., many people are now doing what estate planning attorneys have advised them to do for years—get their estate plans in order. Many are having phone meetings or videoconferences with estate planning attorneys, says Barron’s in the article “The Coronavirus Has Americans Scrambling to Set Their Estate Plans. Here Are Some Key Things to Know.” People are worried, and they are in a hurry too.

However, estate planning can be complex, even when there is plenty of time to prepare. Here are a few tips:

Everyone should have three basic documents: a last will and testament, a durable power of attorney and an advance health care directive. These documents will allow assets to be distributed, give another person the ability to make financial decisions if you are too sick to do so, and also allow another person to talk to medical professionals on your behalf on treatment and care. These same documents are also a good idea for any young adults in the family, anyone older than 18 in most states.

With the proper documents prepared in accordance with the laws of your state, you may be able to avoid having a court appoint a guardian for minor children or having a probate court determine asset distribution.

However, there’s more. In addition to these basic documents, everyone needs to review their beneficiary designations on assets that include bank accounts, IRAs, annuities, insurance policies, and any other assets. If family situations have changed, these may be out of date.

It’s also a good idea to have an attorney create a medical power of attorney for a minor child, in case another family member needs to take a child to the doctor, discuss their care and make decisions. While this exact document does not exist in California, a similar document may be available.

While young adults may be more worried about the financial impact of the pandemic, seniors and the elderly are concerned about having documents in order. Wealthy people are concerned about the impact that the pandemic may have on estate planning law, and some are engaged in planning to make substantial gifts, in case the current estate and give tax exemptions are lowered.

Other issues to be discussed with an estate planning attorney:

  • Irrevocable living trusts, which provide an opportunity to protect and direct how assets in a trust will be held, invested, and distributed before and after death.
  • Durable powers of attorney, which appoint an agent to make financial decisions.
  • Health-care directive, which let people designate a surrogate to make health decisions on their behalf and receive health care information from physicians and designate whether to provide life-prolonging treatment, if in a terminal state.

Reference: Barron’s (March 22, 2020) “The Coronavirus Has Americans Scrambling to Set Their Estate Plans. Here Are Some Key Things to Know”

Dark Side of Medicaid Means You Need Estate Planning

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A woman in Massachusetts, age 62, is living in her family’s home on borrowed time. Her late father did all the right things: saving to buy a home and then buying a life insurance policy to satisfy the mortgage on his passing, with the expectation that he had secured the family’s future. However, as reported in the article “Medicaid’s Dark Secret” in The Atlantic, after the father died and the mother needed to live in a nursing home as a consequence of Alzheimer’s, the legacy began to unravel.

When the mother was placed into a nursing home, a guardian of the state signed her up for the state’s Medicaid program, MassHealth. Just weeks after entering the nursing home, her daughter received a notice that MassHealth had placed a lien on the house. The daughter called MassHealth; her mother had been a longtime employee of Boston Public Schools and there were alternatives. She wanted her mother taken off Medicaid. The person she spoke to at MassHealth said not to worry. If her mother came out of the nursing home, the lien would be removed, and her mother could continue to receive benefits from Medicaid.

The daughter and her husband moved to Massachusetts, took their mother out of the nursing home and cared for her full-time. They also fixed up the dilapidated house, treating it as if it was theirs because that’s what they believed it to be. To do so, they cashed in all of their savings bonds, about $100,000. They refinished the house and paid off the two mortgages their mother had on the house.

Her husband then began to show signs of dementia. Now, the daughter spent her days and nights caring for both her mother and her husband.

After her mother died, she received a letter from the Massachusetts Office of Health and Human Services, which oversees MassHealth, notifying her that the state was seeking reimbursement from the estate for $198,660. She had six months to pay the debt in full, and after that time, she would be accruing interest at 12%. The state could legally force her to sell the house and take its care of proceeds to settle the debt. At this time, her husband had entered the final stages of Alzheimer’s.

Despite all her calls to officials, none of whom would help, and her own research that found that there were in fact exceptions for adult-child caregivers, the state rejected all of her requests for help. She had no assets, little income, and no hope.

State recovery for Medicaid expenditures became mandatory, as part of a deficit-reduction law signed by President Bill Clinton. Many states resisted instituting the process, even going to court to defend their citizens. The federal government took a position that federal funds for Medicaid would be cut if the states did not comply. There are even some states who took a harder line, even allowing pre-death liens, taking interest on past-due debts or limiting the number of hardship waivers. The law gave the states the option to expand recovery efforts, including medical expenses. Many did, collecting for every doctor’s visit, drug, and surgery covered by Medicaid.

Few people are aware of estate recovery. It’s disclosed in the Medicaid enrollment forms but buried in the fine print. It’s hard for a non-lawyer to know what it means. When it makes headlines, people are shocked and dismayed. During the rollout of the Obama administration’s Medicaid expansion, more people became aware of the fine print. At least three states passed legislation to scale back recovery policies after public outcry.

The Medicaid Recovery program is a strong reason for families to meet with an elder law attorney and make a plan. Assets can be placed in irrevocable trusts, or deeds can be transferred to family members. There are many strategies to protect families from estate recovery. This issue should be on the front burner of anyone who owns a home or other assets, who may need to apply for Medicaid at some point in the future. Avoiding probate is one part of estate planning, avoiding Medicaid recovery is another.

Since the laws are state-specific, consult an elder law attorney in your state.

Reference: The Atlantic (October 2019) “Medicaid’s Dark Secret”