So, You Want to Sell Your Life Estate?

So, You Want to Sell Your Life Estate?

Many people have established a life estate in their residence to protect it if they require Medicaid benefits to pay for their long-term care.  A person establishes a life estate in their residence by signing a deed which transfers ownership to their desired recipients, but also reserves them the legal right to use and benefit from the residence for their lifetime.  Under current Medicaid rules, a life estate is considered an unavailable asset and the underlying residence is not counted in determining the life estate holder’s eligibility for the program if more than five years have passed since its creation.  Life estates created prior to August 1, 2014 are also protected from the Estate Recovery program, which is designed to recover amounts paid for Medicaid benefits from recipients’ estates following their deaths.

A common question arises if the life estate holder no longer occupies the underlying residence: can the residence now be sold?  After all, there are many expenses associated with maintaining a residence, including property taxes, insurance, utilities and maintenance.  If the life estate holder left the residence to enter a long-term care facility, then the cost of such care often means there is little income available to pay for such expenses.

Once a life estate has been established, the underlying residence can only be sold if the life estate holder and all other owners agree to the sale.  However, prior to any sale, it is important to understand the ramifications for the life estate holder’s Medicaid eligibility.  While the life estate itself is considered an unavailable asset for Medicaid purposes, the proceeds from its sale are not.  Accordingly, if a life estate holder is receiving Medicaid benefits and sells his or her life estate, the resulting sale proceeds could cause him or her to have too many assets to continue to qualify for the program.  Alternatively, if the life estate holder does not receive his or her share of the sale proceeds, then under Medicaid rules he or she will be considered to have divested them and this may also disqualify him or her from the program for a period of time.

In light of these Medicaid eligibility issues, it is often beneficial to avoid selling the residence until after the death of the life estate holder.  The owners may consider renting the residence to help cover the costs of maintaining it during such time.  However, many people do not wish to become landlords and decide to sell the residence anyway while relying on other planning options to deal with the sale proceeds, such as using them to purchase assets that do not count for Medicaid eligibility or contributing the proceeds to a Wispact special needs trust.  If the underlying residence is sold and the life estate holder is concerned about his or her eligibility for the Medicaid program, it is important to correctly value the life estate for Medicaid purposes to ensure the life estate holder receives the correct share of the proceeds.

The Medicaid program uses a standard table to value life estates based on the life estate holder’s age at the time of sale.  The value of a life estate decreases as the life estate holder ages since statistically he or she has a shorter life expectancy during which to use the underlying residence.  Accordingly, the older the life estate holder, the less valuable his or her life estate.  For example, for Medicaid purposes, the life estate of a 70 year old is worth approximately 60% of the value of the underlying residence, while an 85 year old’s life estate is only worth approximately 35%.  In the event of a sale, the life estate holder should receive a percentage of the sale proceeds that corresponds to the value of his or her life estate.  If the life estate was established more than five years prior to such sale, then the remaining sale proceeds can be divided by the other owners without penalty.

Prior to selling a residence with an outstanding life estate, it is important to understand the Medicaid ramifications of such sale.  It is also important to discuss any potential income tax ramifications.  Taking the time to consult with a knowledgeable attorney and accountant prior to the sale can help you avoid many of these potential pitfalls.

 

How to Address Family Conflicts Concerning Caregiving for Aging Parents

How to Address Family Conflicts Concerning Caregiving for Aging Parents

Having adult children provide care and support to an aging or ill parent can be very helpful, but in some cases, can be a cause of stress and family conflict.  Caregiving can bring families closer as they provide mutual support, but in some situations, the stress and pressure of caregiving leads to strained relationships.  This strain may be caused by old patterns of family dynamics involving unresolved past wounds or childhood rivalry or, in some cases, because one or more children are unable to accept the reality of the parent’s illness and eventual death.

Often, conflict is caused by an unequal division of caregiving duties. A parent will typically name one child as agent to make health care and financial decisions in the event of incapacity by completing health care and financial powers of attorney.  The parent will usually choose the person they believe to be the most responsible, the most available or the closest in proximity.  Regardless of the reason, choosing one sibling over another sometimes leads to the caregiving child feeling overburdened with shouldering all of the caregiving duties while the other siblings feel resentful, left out and sometimes suspicious of the caregiving child’s actions.  These feelings often lead to individuals seeking the advice of an elder law attorney regarding the designation of one of the children as agent in a power of attorney. The advice that is most typically sought includes: the validity of the Power of Attorney, agent decision making, financial feuds and the mistreatment of the parent(s).

Questioning the Validity of the Power of Attorney.

Since a person must be competent in order to appoint an agent under a power of attorney, accusations are often made that the parent did not understand the documents or was unduly influenced to sign a power of attorney.  If the parent truly was not competent, Adult Protective Services can step in or the power of attorney can be invalidated.   However, if the accusations are more related to the dissention between family members, the result can often entail an investigation into the agent’s actions that ultimately only results in more family tension and unnecessary legal costs on both sides.

Agent Decision Making.

If siblings do not trust the child who is named as agent, it can cause ongoing questioning of every detail related to the agent’s decisions.  Sometimes, siblings challenge legitimate decisions made by the agent child because they are not as informed or do not understand, which results in continuing resentment and exhaustion on the part of the caregiver.  If an agent is actually making questionable decisions, Wis. Stat. s. 244.16 provides for the actions of a financial agent to be reviewed by the court and Wis. Stat. s. 155.60(4) provides for the actions of the health care agent to be reviewed by the court.

Financial Feuds. 

Finances are a huge source of dissention between family members.  Using a parent’s funds to provide for long-term care will likely reduce potential inheritance, leading to discord between siblings who are not supportive of the type of care being provided.  Also, a caregiving child will sometimes request compensation for caregiving services.  Although such payments are allowed by law, the caregiver’s siblings might object to such payments.   Potential heirs can bring a legal action to review the financial conduct of an agent who has acted illegally or unethically, or petition the court for guardianship to allow for court oversight of the actions of the person in charge.

Abuse, Neglect and Financial Exploitation.

In some cases, the caregiver may be accused of elder abuse, neglect or exploiting the finances of the parent.  These concerns can be reported to Adult Protective Services.  If necessary, a concerned family member can obtain an injunction under Wis. Stat. s. 813.123, to restrain the caregiver from further abuse or financial exploitation.

While an elder law attorney can help with legal remedies for agents who are abusive or exploitative, in most cases the emotional issues are better addressed by opening the lines of communication on both sides.  The following are potential actions that the caregiver and siblings can respectively take to open the lines of communication.

For the caregiver

  • Communicate with family members. Even if you do not all get along, let everyone know what is happening with their parent, both personally and financially.
  • Initiate family meetings, even if everyone will not participate. Discuss the current health and financial status and the next steps.
  • Make a list and prioritize the types of services and support that the parent needs now and may need in the future.
  • Identify what support can be provided by the caregiver, other family members or outside services.
  • Ask for help, and delegate appropriate responsibility to willing family members.
  • Remember that as caregiver, you may end up carrying a heavier load than your siblings and some may not help at all. Having more responsibility may not feel “fair,” but the more important issue is to make sure your parent is receiving appropriate care.

For the siblings of the caregiver

  • Accept that the caregiver child has likely been chosen by the parent because of the trust your parent had in him or her, and not because your parent did not want you to act.
  • Attend family meetings and ask questions about status, next steps and services needed.
  • Be clear about what help, if any, you are willing and able to provide so that the caregiver’s expectations of you are appropriate. Caregiving can be exhausting and emotionally draining.  If you cannot take on specific responsibilities, offer to be a sounding board or a listening ear when the caregiver needs to vent.
  • Consider using outside sources to work through family issues such as mediators, counselors or social workers. A third party can be valuable in providing perspective without taking sides.

Since everyone’s situation is different, there is no solution that will work for every family in terms of dealing with caregiving and family conflict.  Open and honest communication, focused on the needs of the parent, however, can eliminate some of the tension and hard feelings, resulting in better help for the parent and better help for each other.

 

World Elder Abuse Awareness Day – June 15th

World Elder Abuse Awareness Day – June 15th

World Elder Abuse Awareness Day (WEAAD) is June 15th. WEAAD is observed the same date each year and was launched in 2006 by the International Network for the Prevention of Elder Abuse and the World Health Organization at the United Nations. Its purpose is to provide an opportunity for communities around the world to promote a better understanding of elder mistreatment by raising awareness of the cultural, social, economic and demographic factors that drive and influence elder abuse, neglect and exploitation. (American Society of Aging)

As many as 1 in 10 older Americans are abused or neglected each year and only 1 in 14 cases of elder abuse ever comes to the attention of authorities. Older Americans are vital, contributing members of our society and their abuse or neglect diminishes all of us. WEAAD reminds us that, as in a just society, all of us have a critical role to play to focus attention on elder justice. (Administration for Community Living)

Experts have reported that knowledge about elder abuse lags as much as two decades behind the fields of child abuse and domestic violence. The need for more research is urgent and it is an area that calls out for a coordinated, systematic approach that includes policy-makers, researchers and funders.  (National Center on Elder Abuse citing the Elder Justice Roadmap)

Each year, an estimated 5 million older persons are abused, neglected and exploited. Older adults throughout the United States lose an estimated $2.6 billion or more annually due to elder financial abuse and exploitation, funds that they desperately need to pay for basics such as housing, food and medical care. And it is estimated that only about one in five of those crimes are ever reported. (American Society of Aging)

Financial exploitation causes large economic losses for businesses, families, elders, and government programs, and increases reliance on federal health care programs such as Medicaid.  Research indicates that those with cognitive incapacities suffer 100% greater economic losses than those without such incapacities.   (National Center on Elder Abuse citing The 2011 Utah Economic Cost of Elder Financial Exploitation and Broken Trust: Elders, Family & Finances)

Not only are older people heavily targeted by scam artists, but surprising data suggest that, as we get older, we become more vulnerable to fraud in so many of its forms.  There is neuroscience and psychological data to suggest our ability to detect risky situations may decline. Or, we may become prone to seeing the upside of a risky endeavor and dismiss the downside. Others may lose the ability to push back on a high-pressure predator. Safeguards against financial fraud take the shape of a state-by-state patchwork and, too often, once the money is gone, it is gone for good. Therefore, many advocates are fighting for better defenses. (Marketplace – Age of Fraud: Are Seniors More Vulnerable to Financial Scams)

If you have questions regarding elder abuse or need assistance, in addition to reporting to your local Adult Protective Service agency, an attorney can also assist you in taking legal action.

Local Resources

Portage County Adult Protective Services

Portage County Aging & Disability Resource Center

Portage County Department of Health and Human Service

Wisconsin Elder Adults-At-Risk Hotlines

 

National Healthcare Decisions Day – April 16, 2019

National Healthcare Decisions Day – April 16, 2019

National Healthcare Decisions Day was founded in 2008 to inspire, educate and empower the public and providers about the importance of advance care planning and encourage individuals to express their wishes regarding their healthcare and end of life decisions. Advance care planning is crucial to ensure that you are able to receive the type of medical care you want if you are unable to speak for yourself due to illness or injury.

A 2018 survey completed by The Conversation Project (a public engagement initiative offering resources to begin communications with loved ones about advanced directives) found that while 92% of Americans say it’s important to discuss their wishes for end-of-life care, only 32% have actually had such a conversation.

In recognition of NHDD , the Wisconsin State Bar is offering a free publication from April 3–19, called A Gift to Your Family: Planning Ahead for Future Health Needs, as a guide to end-of-life decisions, Health Care Powers of Attorney, Living Wills, Declarations to Physicians and Organ Donation.

Contact us for more information regarding the legal documents that are necessary to insure that your loved ones can act on your wishes and make the best decisions possible.

 

We believe that the place for this to begin is at the kitchen table—not in the intensive care unit—with the people we love, before it’s too late.
The Conversation Project

Long-Term Care and Insurance Considerations

Long-Term Care and Insurance Considerations

Clients often seek the advice of an elder law attorney regarding the best protection for their assets in the event they need long-term care in a nursing home or assisted living facility. Since Medicare does not pay for long-term custodial care, having enough to pay for several months to several years of care in a facility is a serious concern for many seniors.

If you have minimal assets, you may qualify for Wisconsin’s Medicaid program to pay for care. But what if your assets exceed the limits for Medicaid qualification? Should you purchase long-term care insurance, or a combination of life insurance and long-term care insurance (called “hybrid” policies)? Factors to consider when choosing between the two include your current health status, available financial resources and your risk tolerance.

With traditional long-term care insurance, you will pay a monthly (or sometimes annual) premium. If you end up needing long-term care, the policy pays out a daily or monthly benefit, up to a lifetime maximum. If you never need long-term care, you end up with no return on the premiums you have paid. While this is the nature of many types of insurance (auto, home, term life), some find the “use-it-or-lose-it” strategy difficult to swallow.

As an alternative, some individuals will purchase so-called hybrid policies. These are policies that combine long-term care insurance with permanent life insurance policies that include a savings/investment component that builds over time. If you end up needing long-term care, you withdraw funds from the policy as they are needed, and the insurance company continues to pay for your care when those funds run out. If you never need long-term care, the funds are still available during your lifetime, and if you die without having expended the funds, your heirs receive the funds upon your death.

Typically, it is easier to qualify for hybrid type coverage because traditional long-term care insurance has stricter underwriting requirements and, therefore, the status of your health will be a consideration in which type of product to invest. Affordability may also be a factor. Hybrid policies are paid over a much shorter period of time, so you will not be able to stretch payments out as long as you would with traditional long-term care insurance, which means you will need to consider available resources. Individuals with more substantial resources may wish to look at alternative investments.

You should also inquire as to whether the payments you will be making are tax deductible. Payments for some hybrid products may not be deductible. Finally, be sure to consult with your attorney, accountant, and financial advisor as to the legal, financial, and tax consequences of your purchase before you make your final decision.

 

Transferring the Residence to a Caregiver Child-Exception to Divestment

Transferring the Residence to a Caregiver Child-Exception to Divestment

I’m often asked whether transferring a parent’s residence to an adult child or children will “save the house from the nursing home.” Parents have heard that their friends or other relatives have made such a transfer in order to protect the residence, or to avoid having to sell it to pay for expensive nursing home care. While such a transfer may be appropriate in some cases, many families do not realize that if the parent applies for Medical Assistance benefits within five years of making such a transfer, they will actually be ineligible for benefits for a period of time due to making a disqualifying divestment.

A divestment is the disposing of assets for less than fair market value. If an applicant for Medical Assistance has divested assets, a disqualification period results based on the value of the assets transferred. The penalty period is calculated by dividing the total divested amount by the statewide average nursing home cost of care (at the time of this article’s posting $252.95 per day) in effect at the time of the Medical Assistance application. This number is the number of days of disqualification.

There is an exception under the divestment rules, however, for transfers of a home to a caregiver child. This exception allows adult children to care for their parent at home as opposed to moving them into a nursing home or assisted living facility, while at the same time compensating the child for their caregiving in the form of a transfer of the parent’s home. The home would otherwise have to be sold and the proceeds used to pay for long-term care.

In order to qualify for the caregiver child exception, the caregiver child must live in the home with his or her parent for at least two years immediately preceding the parent’s admission to a nursing home or assisted living facility. The level of care that the child provides must be the type of care that would ordinarily have required living in assisted living or a nursing home, but for the care provided by the child. Such care may include monitoring medications, providing meals, providing assistance with activities of daily living, such as bathing, dressing, and using the bathroom, and ensuring the health and safety of the parent.

Documentation of the level of care must be provided in the form of a notarized statement indicating that the parent was able to remain in his or her home because of the care provided by the child. The statement must be either from the parent’s physician or from an individual (other than the caregiver child) who has personal knowledge of his or her living circumstances.

It is important to consult with an elder law attorney before making a transfer of the residence to discuss the tax and other ramifications, as well as to ensure that the requirements to meet the caregiver child exception are properly followed.

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