Special Needs Trusts

Are you planning to leave assets to a disabled beneficiary upon your death?  If so, consider establishing a special needs trust (“SNT,” also known as a supplemental needs trust) for your beneficiary’s benefit.

An SNT is an irrevocable trust (i.e., the trust cannot be revoked or amended) established for the benefit of a disabled individual and managed by a trustee.  Because the trust is not owned by the beneficiary, the trust assets can be used to provide for the disabled person’s needs over and above the essential primary care provided to the disabled person through public assistance programs such as Medicaid or SSI, without compromising his or her eligibility for those benefits.  SNTs are divided into two general categories, first-party or third-party, depending on who the trust is funded by.

First-party SNTs are, as you may expect, funded with the disabled person’s own assets.  A first-party SNT is established by the disabled person or on his or her behalf by a guardian, parent or grandparent, or the court.  While a first-party SNT is a good option for a disabled person who wants to preserve assets he or she already has, upon his or her death the State can recover against the disabled person’s estate for benefits paid during his or her lifetime, including recovery against non-probate assets.

Third-party SNTs, on the other hand, are created by a third-party’s Will or Revocable Trust for the benefit of the disabled person and funded upon the third-party’s death from the proceeds of the third-party’s estate.  There is no limitation on who may create a third-party SNT for the benefit of a disabled person, and upon the beneficiary’s death there is no estate recovery by the State.

While many SNTs are privately managed, they can also be created as a pooled and community trust (PACT) which is run by a nonprofit entity.  While each PACT beneficiary has a separate account, the assets of all participating beneficiaries are pooled for investment purposes.  PACTs, like private SNTs, can be either first- or third-party.

If you have any questions on this topic, please contact Attorney Emily E. Ames at eames@llattorneys.com or (920) 393-1190.

What is Elder Law?

Elder Law is a fast-growing practice area due to the steadily aging population of both Wisconsin and the nation as a whole.  However, many may not have a good understanding of what Elder Law is, or the services an Elder Law attorney can provide.

The practice of Elder Law encompasses the provision of legal services to older and disabled individuals and their families.  For older clients, this can include planning for incapacity and long-term care needs, coordinating available private and public benefits, and working with the client’s family, healthcare providers, other advisors, and fiduciaries to ensure that his or her objectives and needs are being met.

Planning for incapacity will often include implementing durable powers of attorney and advance healthcare directives, such as powers of attorney for health care, declarations to physicians (also known as a Living Will), and authorizations for final disposition. If the individual in question is already incapacitated and is unable to care for him or herself, an Elder Law attorney may assist that person’s family in petitioning the court to establish a guardianship.

An Elder Law attorney can also assist an older individual in planning for his or her long-term care needs.  This can include planning geared towards Medicaid eligibility or working with the individual’s financial advisor to ensure that he or she is able to pay privately for long-term care.

For disabled individuals, planning opportunities can include special needs trusts, which are used to provide for a disabled individual’s needs while maintaining his or her eligibility for governmental assistance and benefits.  Special needs trusts may be established by or on behalf of the disabled person and funded with his or her own assets, or by a third party for the disabled person’s benefit.

If you have any questions on this topic, please contact Attorney Emily E. Ames at eames@llattorneys.com or (920) 393-1190.

Is your child turning 18? Consider suggesting that he or she execute a durable power of attorney and advance healthcare directives.

As your child prepares to begin college or enter the workforce, estate planning is likely the last thing on his or her mind—or yours.  However, there are numerous situations in which young adults can benefit from executing basic estate plan documents.  For example, should a child be in an accident and become disabled or incapacitated, even temporarily, his or her parents may not be able to act on the child’s behalf without court approval.  Alternatively, the child may be out of the country (or simply out of town) and require his or her parents to do something as simple as signing a lease or sending money to the child from his or her bank account.

A Durable Power of Attorney for financial matters, if activated, allows a parent or other individual designated by the child to act on the child’s behalf with respect to most financial and/or business matters.  Similarly, a Power of Attorney for Health Care authorizes the child’s agent to make medical decisions on his or her behalf, including decisions regarding medical consent and life support issues.  Further, a HIPAA Authorization provides the child’s parent or other designated individual access to the child’s healthcare and treatment information.

For these reasons, we strongly recommend that all adults, even those who have just turned 18, execute a Durable Power of Attorney, Power of Attorney for Health Care, and HIPAA Authorization for Release of Protected Health Information.

If you have any questions on this topic, please contact Attorney Emily E. Ames at eames@llattorneys.com or (920) 393-1190.

Someday, Even Your Estate Plan Will Be Electronic

In today’s day and age, most transactions may be accomplished electronically.  However, there is still one field where old-fashioned pen and paper is typically still required: Trusts and Estates.  Given the sensitivity of estate planning documents, difficulties in authentication, and the potential for data loss or hacking, many people would be (rightfully) hesitant to create or store such documents electronically.  Despite these obstacles, interest in electronic wills and other estate planning documents has increased in recent years.

The Uniform Electronic Transactions Act (UETA) of 1999, setting forth nationwide rules for electronic transactions, has been adopted in 47 states (including Wisconsin) and the District of Columbia.  The Electronic Signatures in Global and National Commerce Act, passed by Congress in 2000, allows the use of electronic records and signatures in interstate commerce.  However, both Acts specifically exclude application to the creation and execution of wills, codicils, and testamentary trusts.

Currently, Nevada and Indiana are the only states to have enacted legislation explicitly authorizing electronic wills (although, electronic wills have been successfully admitted to probate in other jurisdictions under the harmless error doctrine).  Efforts to pass similar legislation in Florida, Arizona, New Hampshire, and Virginia have been unsuccessful.

In late 2017, the National Conference of Commissioners on Uniform State Laws (NCCUSL) formed a Committee for Electronic Wills.  According to the NCCUSL website, the Committee will “draft a uniform act or model law addressing the formation, validity and recognition of electronic wills.”  See http://www.uniformlaws.org/Committee.aspx?title=Electronic%20Wills.  In addition, the Committee will consider expanding its mission to address other estate planning documents, including advance medical directives and powers of attorney for health care and finance.

It will be years, or even decades, before electronic wills and other estate planning documents become commonplace, but the trend is clear: someday, even your estate plan will be electronic.

If you have any questions on this topic, please contact Attorney Emily E. Ames at eames@llattorneys.com or (920) 393-1190.

Passing Notes

In 2015, the State of Wisconsin passed 2015 Wisconsin Act 55 which created a rule requiring Promissory Notes to be negotiable, assignable, enforceable and marketable in order for them to not be considered a divestment. As a result, use of Promissory Notes as a divestment tool was essentially eliminated.

In July, the Federal Government officially informed the State that effective August 1, 2017, this policy was not allowed under federal law. This is a major development in divestment planning because Notes are extremely useful in that they are: simple, inexpensive and effective.

In order for a Promissory Note to be used correctly as a divestment tool, they must comply with the following requirements:

1) The note must have a repayment term that is actuarily sound (based on SSA life expectancy tables);
2) The note must have equal payments during term of note (no deferral or balloon); and
3) The note cannot be cancelled upon death.

If a note is done correctly, it’s important to note that payments received from a promissory note are income in the month they are received. However, the value of the note itself is not counted as an available asset provided it can’t be sold.

So how does a note work in real life? Take the following two examples:

EXAMPLE 1
Jane is a single person, 90 years old, has $100,000 of available assets, and is currently in a nursing home. She has income of $700/month of Social Security. Her nursing home bill is $9,000 per month.

Jane makes a gift of $50,000, and simultaneously borrows her son Dick $50,000 in return for a promissory note. The terms of the Note: 1.29% interest, payable in 6 equal monthly installments of $8,364.72.

Jane applies for Medicaid and is denied due to the gift, and assessed a penalty period of 179 days ($278.05/day/$50,000).

Result: Jane uses note payment and SS to cover cost during penalty period, successfully saved $50,000 cash.

EXAMPLE 2
Charles and Di are each 90-years old and married.

They borrow William $75,000. William signs a note at the applicable federal rate of of 1.93%, payable in 58 equal installments (there is a 4.85-year life expectancy for Di) of $1,355.39 per month.

Di applies for Medical Assistance. Amount remaining on note is unavailable, and no divestment is made, $1,355.39 per month is income which can be retained by Charles as part of his Spousal Income Allocation, assuming his other income doesn’t rise to the maximum level.

As you can see, notes can save a significant amount of money if used correctly, and should be a tool utilized in many situations.

Dying to Help, and Helping to Die?

In June, a bill was introduced in the Wisconsin State Senate called the “Compassionate Choices” bill. The bill proposes to create a new chapter 156 in the state statutes that would, essentially, allow for physician assisted suicide under certain conditions. The bill is modeled after laws in Oregon, Washington and Vermont (and similar bills have been passed or proposed in 23 other states, plus Washington D.C.). Advocates for these bills feel that people who are suffering should be able to choose for themselves whether they live or die. Opponents feel life is precious and should be preserved at all costs.

The bill creates a statutory form called: “Request for Medication Authorization to End My Life In a Dignified Manner”, which people use to make the request for their physician to prescribe them medication to end their life. The bill requires the patient to follow several steps in order to have the medication administered. 1) the patient must be of sound mind, be 18 or older, and have a terminal disease (defined as incurable and will cause death within 6 months); 2) the individual must orally ask their doctor; 3) Within 15 days of the oral request, must make a request in writing (by filling out a form similar to the statutory form mentioned above), however it cannot be done until a consulting doctor (someone other than the attending physician) examines the patient to confirm that the patient has a terminal disease, is not incapacitated and is making a voluntary and informed decision; 4) After the written request, the patient must again orally request the medication. The request can be revoked at any time.

The bill defines the responsibilities and immunities for physicians when a patient makes this request. The doctor must 1) determine if there is a terminal disease, the patient is not incapacitated and is making the request voluntarily; 2) inform the patient of the diagnosis, risks/results of taking the medication, and alternatives; 3) refer the patient to counseling if the doctor believes the patient may be suffering from a psychiatric/psychological disorder including depression; 4) Ask that the patient notify his or her next of kin (it is not required that the patient do it, but the doctor must ask them to); 5) Inform the patient that the request can be revoked; 6) prior to filling the prescription must ensure the patient followed the steps required by the patient, that more than 48 hours have passed since the 2nd oral request, and that the decision is an informed one; 7) The physician must document the requests, the determinations made in (1), the determinations of the consulting physician, certify that the patient was informed the request could be revoked and a certification that all steps were properly taken; 8) The doctor may refuse to fulfill the request but must make a good faith attempt to transfer the patient to another physician to fulfill the request.

A doctor cannot be charged with criminal, civil or unprofessional conduct for: 1) failing to fulfill a request (except it is unprofessional to not refer the patients care), 2) filling a request, 3) failing to act on a revocation unless they have actual knowledge.

Finally, the bill states that requesting the medication does not constitute attempted suicide and taking the medication does not constitute suicide.

This is a truly fascinating piece of proposed legislation, and one that I presume will either die quietly without a vote, or be subjected to a great amount of protest and scrutiny. Any time someone’s life or death is involved, politics becomes emotionally (and often religiously) charged, even though the reasons for outrage aren’t always clear cut. In addition, the bill was proposed by democratic senators in a republican controlled legislature, with a conservative governor. The likelihood of success seems small.

Aside from the politics, the bill creates many hoops that someone would need to jump through (which makes sense), and creates several potential timing issues that would limit a patient from doing everything correctly in order to be prescribed the medication. Other problems I see with the bill being utilized is the requirement that the patient be competent. I’m not a medical professional, but in the vast majority of cases where someone has a terminal illness, the person is not competent, which would automatically remove the ability to do this. Obviously, an incompetent person should not be making important decisions, but I do think an extension to this bill would involve added terminology to Health Care Powers of Attorney or Declaration to Physicians that would invoke this right. I would also think that most people in this situation, even if competent, would be suffering from some form of depression, which would apparently prevent their wishes from being granted. Due to the nature of the bill, I do think the writers did a pretty good job of trying to cover all of their bases. The decision to take one’s life is not something that should necessarily be easily or quickly done. Whether the bill accomplishes what it seeks to, or if it becomes law, is something we will have to wait to see.

A Trumpcare Update

A few months back, I posted an article about possible changes to the health care system (specifically changes to Medicaid), and the changes to the Affordable Care Act, that had been proposed by President Trump. Many things have changed since that time, including the passage of ACHA by the House of Representatives. This week, it appears that the Senate is prepared to vote on the “Better Care Reconciliation Act of 2017”, which is the Senate’s version of health care reform. Given the fast-changing political climate, it is very possible that by the time you read this, the information will be outdated, but I think it is interesting to follow the possible course of what I believe is the program upon which most drastically effects more people in the United States than any other (Medicare is vitally important as well, and is also affected by this bill, but it is outside of the scope of this article. Medicare is also available to everyone over a certain age, where Medicaid affects almost entirely the poor, elderly and disabled).

The Senate plan would reduce federal spending on Medicaid by approximately 26% by 2026, and the overall plan would result in approximately 22 million less people being insured (about 5 million of which are on Medicaid). Medicaid covers nearly 20% of all Americans, 40% of all children and disabled and over 60% of all nursing home residents. It also pays for almost 50% of all births and long term-care (which includes things like in-home care, assisted living, etc.). The problem with Medicaid to many is that the spending by the federal government is open-ended and based on the number of enrollees in each state. Currently, Medicaid can cover as many people as are eligible, but naturally when more people are covered, it costs more. What the Senate plan will do is place a cap on the amount the federal government will spend, regardless of how many people actually need it. The spending caps would be set at the rate of inflation, which is about half of the rate of the growth of need for Medicaid, which is mostly based on the fact that the overall population is aging. Many of these changes won’t become effective for a number of years, or will be phased in, but in the next ten years the amount of spending on Medicaid will be reduced by $772 billion dollars. The end result is that states will face more pressure to provide health care for less people. The change would force states to drastically change Medicaid qualification rules, which will make planning very difficult for individuals that may or do already require long term care. It’s also likely that states will need to trade quality of care for lower costs.

It is unknown right now what the final changes to the program will be. As someone that is keenly aware of how the aging population is using the program, I know that there are some cases where great planning can put a person in a position to rely on Medicaid to provide for their long-term care, even if at some point it would’ve been possible for them to pay their own way. However, those cases are actually very rare. Most people are shielding such a small amount versus the actual cost of care that these proposed changes are extremely aggressive. There are things that could be done to change qualification rules (and are done all the time) to close “loopholes” or make qualification more selective. Those changes could be done without fundamentally altering the program that could well affect many helpless individuals.

Over the River and Through the Court to Grandmother’s House We Go

A recently decided Wisconsin Supreme Court case has made it easier (slightly) for grandparents, great-grandparents and stepparents to receive court-ordered visitation of their grandchildren, great-grandchildren or step-children. The case of In re Marriage of Meister, 367 Wis. 2d 447 (2016) removed a previously held rule that a grandparent, great-grandparent, or stepparent needed to prove a parent-child relationship in order to secure visitation rights under Wisconsin Statute §767.43(1). The statute provides that certain people can apply to a court for visitation rights of children. Previously, the court had decided that parents, grandparents and stepparents needed to prove a parent-child relationship. The Meister court decided on a different statutory interpretation, deciding that only “other persons” needed to prove a parent-child relationship, and the clause did not apply to grandparents, great-grandparents or stepparents. The ruling makes sense from a statutory interpretation and legislative history standpoint.

I mentioned earlier that this ruling made it only slightly easier for grandparents to be granted visitation rights. This is because in general, family law is not at all black and white. Of all areas of the law I’ve ever practiced in, family law is the least predictable and most prone to case-by-case analysis and guesswork. Proving a parent-child relationship, especially when each parent-child relationship varies by family, was not typically the biggest hurdle grandparents faced when trying to get visitation of their grandchildren. There are two other monumental hurdles. First, there needs to be evidence that a set visitation schedule with a non-parent is in the child’s best interest. Second, when determining the best interest, the court must give special weight to a fit parent’s opinions regarding the child’s best interest as part of any best interest determination. This requirement was first determined by the U.S. Supreme Court in Troxel v. Granville: “The Due Process Clause of the Fourteenth Amendment protects the fundamental right of parents to make decisions concerning the care, custody, and control of their children.” 530 U.S. at 66, 120 S.Ct. 2054.

The Meister case was interesting for two reasons. First, the grandchildren, not the grandmother, were the ones that appealed. The concurring opinion noted that had the issue been brought up, the case would have been dismissed because the grandchildren didn’t have standing to appeal. The grandchildren do not have a right to ask the court to be granted grandparent visitation under this statute, so they could not appeal a ruling that denied it. The issue was not addressed by either party, and thus the court didn’t address it. Second, the grandmother actually passed away before the appeal was filed. Generally, when this happens, the case is moot (meaning there is no reason to decide it, because nobody will benefit from the ruling), and the appeal would be dismissed. However, the parties allowed the case to move forward because it is an issue that is constantly in front of courts on grandparent visitation cases. What we don’t know is whether the grandmother in this case would have actually been granted visitation or not. This case didn’t actually grant the grandmother visitation, and wouldn’t have even if she had still been alive. It merely decided she didn’t need to prove a parent-child relationship. The circuit court would have needed to decide if it was in the children’s best interest after giving special weight to the parent’s opinion.

Practically, unless there is a serious problem with one or both parents, a grandparent still has a difficult time making a case that their view of what is in a child’s best interest is correct versus a parent. In addition, a grandparent needs to consider whether their personal feelings, and set time with their grandchildren, are more important than their relationship with their own child, or their child’s spouse. I’ve never seen a case like this where the family came out on the other side unscathed. In my experience, the best interests of the child are almost never served in a courtroom.

To Gift or Not to Gift…That is the Question

A gift is defined in the dictionary as: “something given voluntarily without payment in return, as to show favor toward someone, honor an occasion, or make a gesture of assistance; present.” That definition makes a whole lot of sense. Think of gifts that you’ve received for your birthday, Christmas, or your anniversary. A box with a bow or an envelope with money in it, are the types of gifts that everyone understands. Describing these gifts would not make for a very informative article. The gifts I’m interested in telling you about occur all the time without much thought, but are considered the same as the box with the bow as far as state and federal government authorities are concerned. If you or anyone you know may be applying for Medicaid (Medical Assistance), you should be familiar with these examples.

An extremely common example of a gift, that isn’t as clear or simple as above, is selling something, but giving a loved one a “deal” on it. For example, your house is worth $150,000 but you sell it to your son for $80,000. That’s a $70,000 gift that needs to be reported and accounted for. Or your car is worth $1,000, but you sell it to your 16-year-old grandson for $1. This is also a gift.

Another situation that is common is where parents transfer a cottage or home to family members, and the parents continue to pay the real estate taxes on the property despite having no responsibility to do so. Even though the money never goes to the family members directly, payment of someone else’s obligation is a gift.

Not charging rent to someone can be a gift. If you own a rental property, but let a family member live there rent free, that can be a gift in certain situations.

Likewise, paying a family member to assist you with personal care or other activities, without a written agreement, can also be considered a gift.

There are certainly other examples of gifts that are not as simple as handing someone a box with a bow on it. Whether something is a gift or not a gift is extremely important if Medicaid (Medical Assistance) is a possibility. Currently there is a 5 year “look back” period as it relates to gifts. Any gift made within 5 years of application must be returned in full, or a penalty is imposed on the applicant. Even if intentions were good at the time, the moral of the story is to be careful, especially when you or a loved one is considering Medicaid as an option to pay for long term care (e.g. nursing home care). If you aren’t sure if something would be considered a gift or not, seek someone with experience in the area to advise you on the correct way to do what you want to do.

Leave a Dog a Bone

Something that not a lot of people think about, even very serious animal lovers, is what happens to your pet after you pass away? As with most estate planning issues, the answer is: it is up to you. If you do nothing, a pet is considered under Wisconsin law to be personal property, and would be treated like a piece of furniture or that antique clock that everyone has their eye on. In some cases, there is a beneficiary willing to adopt your pet, or find a good home. In other cases, there is not. When that occurs, pets often are shuttled to an animal shelter, where they sometimes find a good home.

An example we love to use when discussing estate planning for pets, is that of real estate and hotel tycoon, Leona Helmsley, who famously left $12 million dollars to her dog, Trouble. Even if you don’t have $12 million dollars, but you love your pets like family, how do you plan for them? There are several options, but the two most common are to set up a “pet trust” or to specifically discuss your pet in your will. The first option is more complex, but it also gives one the assurance of exactly what a trustee of a pet trust is allowed to do for the lifetime of a pet. A pet trust is also a private document that does not get filed with the register in probate, so it never becomes public knowledge. It also avoids your pet ever becoming a piece of personal property subject to distribution.

The simpler option is to either bequeath your pet to a specific person (hopefully you know ahead of time that the person wants your pet), or direct your personal representative to take special steps in regards to the care and maintenance of your pet. Keep your pets in mind when you do your estate planning. I’m sure they will appreciate it!