Ronald Morton's Elder Law Blog

Medicaid Qualfying Divorce?

An article in the most recent AARP magazine gives the impression that the only option that many seniors have for qualifying for Medicaid and protecting some assets is to get a divorce.  While divorce is certainly one planning option, it is only one of many, and almost always the last resort.  After a couple has shared a lifetime together, weathering storms and celebrating triumphs, very few people desire to divorce their mate as an asset protection device.  The good news is, you don't have to.  There are always other asset protection options, many of which will protect as much if not more assets than a divorce would.  In fact, in 18 years of practice, I have only had one client choose a divorce for purposes of qualifying for Medicaid once, and that was a rather complicated case involving disabilities of both spouses, each needing Medicaid in different states.  The complexity of planning around the different qualification rules of two different states for a married couple proved to be unworkable, and a divorce was the most logical choice.  But such cases are extremely rare.  Common wisdom from many well meaning "advisors" will often suggest that this is the only choice.  Sadly, some of these well-intended advisors sometimes even include lawyers that are not well versed in elder law, but there are almost always other options.   If you are being advised to get a divorce to protect your assets from Medicaid, get a second opinion.  There are many, many other options, and an experienced elder law lawyer can advise you of all available options. 

Marijuana Garden Club Anyone?

Controversy has erupted in a California retirement community over a marijuana gardening club.  I never thought I would see the day. 

Pre-Need Plans can be a R.I.P. Off

A recent article points out the efforts that Mississippi Secretary of State Delbert Hosemann has made against funeral homes selling pre-need plans. Mr. Hosemann is to be applauded.  Far too often, these plans are under-funded and the funds or service provider are nowhere to be found when the time for final arrangements are finally needed.  I personally experienced an attempt by an unscrupulous funeral home to renege on such an agreement when my grandmother died.  The terms of the contract were clear that all contracted services were included, but the funeral home tried to charge additional sums contrary to their agreement.  Fortunately, I had a law degree to back up my claims of impropriety and the funeral home ultimately saw it my way, but most families are not so fortunate. 

Our advice to our clients is to never purchase a pre-paid funeral.  Instead, we recommend establishing a funeral trust.  The trust can be funded with life insurance, and the funds can be used at any facility, on whatever is needed for the funeral, rather than some pre-established plan that may be inappropriate when services are ultimately needed.  The trust assets are unavailable as an asset for Medicaid qualification purposes.  And, perhaps best of all, one does not have to deal with a pre-need salesman in order to establish a funeral trust.  The funeral trust makes funds available to your family on the next business day, to be spent on the funeral as your family directs.

Woman Charged with Medicaid Fraud

JACKSON, MISSISSIPPI (BNO NEWS) — A Fayette, Mississippi woman was arrested and charged on one count of felonious Medicaid Fraud, prosecutors announced on Thursday.

Kristina Stampley, 28, turned herself into investigators with the Medicaid Fraud Unit of the Attorney General’s Office. The indictment alleges that, while working as a case manager at Southwest Mississippi Mental Health, Stampley submitted approximately 229 claims for services that were billed to Medicaid, but for which services couldn’t be verified.

Southwest Mississippi Mental Health has cooperated with the investigation and has already repaid Medicaid more than $15,000 for the fraudulent claims.

If convicted, Stampley faces a maximum sentence of five years and $50,000 fine.

This case is the result of an investigation by the Medicaid Fraud Control Unit of the Attorney General’s Office.

More at : MS woman arrested and charged for Medicare fraud http://www.thaindian.com/newsportal/world/ms-woman-arrested-and-charged-for-medicare-fraud_100326473.html#ixzz0h2PaUjPq

Tax the Soda

A proposal is now before the Mississippi legislature to tax sodas in order to combat obesity in the fattest state in the nation, and as a way to provide additional funding for Medicaid. As I sit here sipping my caramel latte, I wonder exactly how this will work.  Will regular Coke be taxed, but Diet Coke and Coke Zero be sparred?  And what about my latte?  It is not only loaded with sugar, but fat loaded milk as well.  Will restaurants charge one price for sweet tea and another for unsweet tea (and then maybe add the tax if you request sugar to self sweeten, (but not add the tax for sweet & low or splenda)).  And given that food stamp purchases are exempt from sales tax, and presumably would be from this sugar tax as well, aren't we eliminating an entire class of consumer from any obesity deterrent?  From my limited observations in the supermarket checkout, those consumers are not typically the most trim in the store.  I am all for discouraging obesity, but this proposal isn't designed to do that, as the above examples illustrate.  To think that such a sugar tax would be workable is obsurd.  It is designed to raise revenue and nothing else.

If we really want to discourage obesity and encourage better health, why not just tax obese people (of which I am one) extra, or offer a tax credit to thin people.  If there is one thing that the earned income tax credit has proven, it is that tax policy motivates the behavior of a lot of people in Mississippi.  People will limit their income to $13,000 event though capable of earning more, and add children to their family, in order to maximize their "refund" of taxes they never paid to begin with.  No doubt a tax on excess weight would similarly motivate many to fall and stay below the weight threshold, myself included.  It is no different than when many of my friends put $100 each into a pot, with the one who loses the greatest percentage of weight to take the purse.  Money motivates behavior, but a policy that taxes responsible thin people, but exempts fat poor people, and selects only a tiny segment of the vast junk food market, is nonsensical. 

A Tale of Two Sisters

While meeting with a client yesterday I heard a story that I thought was instructive and worth repeating.  My client's two aunts were both in the same nursing home.  One of her aunts was destitute, and her room was paid for by Medicaid.  The other had managed to save a couple of hundred thousand dollars and was in the room next door privately paying for her care at about $5,000 per month.  After about 3 years, the other aunt was also destitute and received Medicaid.  My client correctly observed  that both sisters had the same type of room, in the exact same facility, and received the same care, but one was spending her life's savings while the other received the same care at no cost.  My client wisely recognized the wisdom of planning in order to preserve her life's savings. 

Spouses May Be Left Pennyless

The estate tax expired on January 1, 2010. It remains to be seen whether Congress will reinstate it before it returns in 2011, but the fact that there is currently no estate tax can have unintended consequences for spouses. Standard language found in many estate plans may leave spouses with nothing. It is important to check with an estate planning attorney to make sure your estate plan does what you want it to do.In previous years, estates could pass a certain amount of assets tax free (up to $3.5 million in 2009). In addition, spouses can receive an unlimited amount tax free. To take advantage of these rules, estate plans often contain a "bypass trust" (or "credit shelter trust") and a will with language in it that is designed to allow estates to pass without any estate tax. For example, the will may state: "I leave to my trustees the maximum amount that can pass free of estate tax and leave the residual to my spouse." Because there is currently no estate tax, individuals who die in 2010 with this language in their estate plan would wind up leaving nothing to their spouses. While Mississippi allows spouses to claim a child's share of the estate even if they don't receive anything under a will, this can be a time-consuming and expensive process. Additionally, for estates planned with living trusts, such an election against the will may not be available at all.  To ensure this does not happen to your spouse you should talk to an estate planning attorney. 

Oscar the cat knows when death is near

The following is reprinted from the NAELA eBulletin:

At first it was just a curious observation. Now it’s an undeniable conclusion, first published two years ago in a medical journal and now in a new book coming out Tuesday: “Making Rounds with Oscar: The Extraordinary Gift of an Ordinary Cat.”   Oscar is the cat. David Dosa is the author and the doctor. And it would be a mistake to assume from the title that Oscar merely accompanies Dosa at Steere House in Providence, which cares for patients with terminal dementia.  “It’s definitely his world,” Dosa says. “He just lets us work there.”  Oscar lives at the nursing home. And in his roughly five years there, Oscar has sensed the imminent deaths of some 50 patients whom he insisted on sitting beside and keeping company as their lives came to a close.  “It’s not like he dawdles,” Dosa writes. “He’ll slip out for two minutes, grab some kibble, and then he’s back at the patient’s side. It’s like he’s literally on a vigil.”    Dosa is an assistant professor of medicine at Brown University. He has faith in science, not in a cat. Well, that was once the case. Dosa’s faith has been shaken.  “My own intellectual vanity made it easier for me to reject the notion that some errant feline could know more than we as medical staff did,” Dosa writes. “I felt strangely elated by the notion that I could be completely wrong.”  A few years ago Dosa realized he was completely wrong. Two patients on opposite sides of the nursing home were dying. A female staff member who earlier noticed Oscar’s aptitude to sense the onset of death took Oscar out of one patient’s room and brought him to the room of the other patient who was regarded as more deathly ill.  “She brought in this angry cat and put him on the bed,” Dosa says. “Oscar charged out of the room and immediately ran back to the other room. Oscar was right. That patient died that evening. The patient we thought would die first lived a couple of more days.”Source:  Providence Journal (February 1, 2010)
Full story:  http://www.projo.com/lifebeat/content/artsun-oscar_01-31-10_61H80A6_v26.3a627cd.html

Deed Signed by Impaired Individual Held Invalid

A recent case decided by Mississippi's Court of Appeals illustrates the standard of review for overturning the validity of a deed.  In that case, the elderly owner of a funeral home moved in with her daughter in 2001 after being diagnosed with dementia and other infirmities. Over the next two years, the mother showed signs of psychosis, paranoia, and sleep problems with insomnia and was placed on anti-psychotic medication. On April 2, 2003 a quitclaim deed was filed containing the alleged signatures of the mother and her daughter, conveying the funeral home to the daughter's son. In 2006 it became necessary to establish a guardianship for the mother, and at that time other heirs sought to set aside the deed.  The Court found that the Chancellor did not err in rejecting testimony that the mother appeared to be normal in light of medical evidence that her condition was continuing to decline and that she was on anti-psychotic medication. The evidence presented supported, by clear and convincing evidence, the assertion that the mother lacked the mental capacity. 

This case illustrates both the high standard of review for overturning a deed, which are presumed to be valid unless shown otherwise by clear and convincing evidence.  It also illustrates the risk of making such transfers if one suffers from an impairment like dementia.  It may well have been that the mother was perfectly aware of what she was doing when she made the transfer and intended the property to go to her grandson, but the testimony of witnesses to the transaction was not enough to overcome medical documentation of her impaired condition.  Under such circumstances, she would have been wise to have separate medical evidence of her specific condition on same day that the transfer was made as evidence that she was lucid and possessed sufficient capacity to make the transfer.  The family should also have considered videotaping the transaction so all could observe her mental state. Finally, the case illustrates the importance of using the services of an elder law attorney in planning the affairs of someone who suffers from a disability.  While no attorney can guarantee that a transaction will be upheld, an attorney knowledgeable in the disease symptoms and in the legal standards for upholding such transfers likely would have made suggestions that would have made the transfer more likely to have been found valid.  For a list of Certified Elder Law Attorneys in Mississippi, click here.   

How Will 2010 Executors Handle Carryover Basis?

The following was posed in Crescendo eNotes January 18, 2010, and I though it would be of interest to readers of this blog:

As the first decedents pass away in 2010, executors and their advisors are now faced with great uncertainty. IRS Form 706 Estate Tax Returns will be due in nine months, although nearly all executors request an automatic extension of six months. Therefore, for individuals who pass away in January of 2010, estate tax returns are likely to be filed in April of 2011.

Attorney Conrad Teitell testified before the Senate Finance Committee on estate taxes on November 14, 2007. He explained that there are extraordinary differences in the level of estate taxation for the years 2008, 2009, 2010 and 2011. Estate taxes for taxable estates would be moderate in 2008, lower in 2009, zero in 2010 and very high in 2011.

On January 12, 2010, Mr. Teitell again wrote a letter to Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA). He noted, "Estate planning is serious business and not a game. Yet a retroactive change in the 2010 estate rules would literally make estate planning a role of the dice." To read the Conrad Teitell letter click here.

Mr. Teitell proposed two actions. First, he suggests that "the carryover basis rules be repealed retroactively." Second, he recommended that changes in estate tax laws be prospective. If the existing law is unchanged, 2010 estates will not be subject to estate tax, but also will not benefit from carryover basis. There is a $1,300,000 exclusion for each decedent and a $3,000,000 exclusion for a surviving spouse, but most assets in excess of these amounts will have a carry-forward basis.

Mitchell Gans is a respected estate commentator and teaches at Hofstra University School of Law. He published an article this week that discusses the constitutionality of a retroactive estate tax law. Mr. Gans "would favor a retroactive approach."

However, he is concerned that under United States v. Carlton, 512 U.S. 26 (1994), the retroactive estate tax compromise may not be upheld. While Carlton is a precedent for allowing retroactivity (similar to the Sec. 2057 rule that was imposed and upheld in Carlton), Professor Gans suggests that a retroactive estate tax could be determined to be a "new" tax. If so, the court may distinguish Carlton and determine that the new tax can not be retroactively imposed.

Professor Gans suggests that Congress should pass a contingent income tax that will be effective for 2010 if a retroactive estate tax is not upheld. He advocates that if "the estate [tax] were determined to be unconstitutional," a legatee would then be required to pay income tax on the inheritance.

Editor's Note: As estates now are entering the probate process during 2010, the situation becomes even less clear. As was discovered by executors in 1976 when there was another attempt to eliminate carryover basis, most estates will have great problems in establishing or proving basis for many assets (after a great outcry from executors and estate planners, the 1976 carryover basis law was repealed retroactively in 1980). But with two or three Democratic Senators dramatically behind in the polls and thus unwilling to vote for an estate tax compromise, it seems unlikely that Sen. Baucus and Sen. Reid will be able to gather the 60 votes necessary to pass an extension of the 2009 estate exemption and tax rate. As a result, the whole picture may remain unclear for most or all of 2010.