Has a nursing home asked you to sign?

Your mother, father, aunt, etc., is moving to a nursing home.  You accompany your dad, for example, so he won’t be going through this alone, and he might need help completing paperwork.  The nursing home asks, or requires, that you sign as hi—STOP!  Don’t sign!

The nursing home asks you to sign as your dad’s “personal representative.”  Or to sign as guarantor.  Or to sign anything.  What you are likely doing is signing an agreement to be held financially responsible if your dad, through his insurance or Medicaid, does not or cannot pay his bill.  This might happen if his Medicaid application is not approved, or if insurance denies his claims, or any number of reasons.

But, the nursing home simply wants you to sign as the “responsible relative,” the person who will take steps to see that Medicaid or insurance pays your mother’s nursing home bills, right?  Or as the point person who will track down information, call the insurance company, provide information, right?  You would certainly agree to help your mother this way.  The problem is that you have unwittingly agreed to also be financially responsible to the nursing home for your mother’s bills.  Just ask Judy Andrien.

This practice by nursing homes occurs regularly, at least according to what I see and hear.  It happened to my family member, where the nursing home left his sibling lying out in the hallway on a gurney until the family member signed as “personal representative,” assuring this family member that “oh, it’s just a formality–we never pursue payment.”  They did pursue payment.

It is illegal under the federal “Nursing Home Reform Law” (summarized here) to require or request someone to sign as a guarantor as a condition of someone (usually a family member) being admitted, or of being permitted to continue to stay.  Nursing homes often get “crafty,” however, by asking family to voluntarily sign, whether as personal representatives, the responsible party, guarantor, etc.  “It’s just a formality….”

As an attorney, I have handled matters where stunned family members come to me with 5-figure bills from the nursing home, where the nursing home says that they signed as a financially-responsible party and now the bill is due.  At this point, one of the the only arguments is that my client did not sign voluntarily which can be a difficult argument to make, not to mention costly in attorney fees.

My advice if you accompany someone other than your spouse to a nursing home to be admitted?  Do not sign anything.  Period.

If you have any questions, contact me at julie@juliemillslaw.com.

What is a trust?

What is a “trust”?  What does it do?

There are three parties involved in a trust.  First is the person who makes the trust, called the settlor or grantor.  Second is the person who is to benefit from the trust, called the beneficiary (or beneficiaries).  Third is the person who manages the trust, called the trustee.  A trust is a contract, with terms determined by the grantor to govern how the trustee manages the trust, terms to decide how the assets in the trust are to be distributed to beneficiaries, terms to govern who is included in the class of “beneficiaries” if the beneficiaries are not clearly defined, terms to decide when the trust should terminate, among others.  Because a trust is a private contract, the settlor or grantor can decide upon whatever terms and conditions he or she wants in the trust, unless they are illegal or against public policy.

Essentially, a trust is a way for someone to control his or her assets “from the grave.”  For comparison, with a last will and testament, assets are distributed once the deceased’s debts are paid by his estate.  The administration timeframe with a will is usually no longer than thirteen months.  With a trust, the trust holds assets (typically by re-titling or re-deeding an asset) and the trustee makes distributions according to the terms of the trust, which could be at staggered ages (25, 30, 35), or to pay for college, etc., and could last for years.

There are several different types of trusts used for several different purposes.  Most of my clients use trusts to provide for children or grandchildren (pay for college, provide distributions at key ages in life), or they have a child or grandchild with a disability and they want to leave assets to their disabled loved one to maintain their quality of life, without jeopardizing government benefits.   Other common trusts include credit shelter trusts, life insurance trusts, domestic asset protection trusts, firearms (“gun”) trusts, pet trusts, IRA trusts, among many others.

Trusts have certain benefits that clients find attractive.  Unlike wills, which are public documents and can reveal private information including finances, a trust is not a public document.  Privacy can be a big concern for those wishing to keep certain things private, such as business owners and their finances.  Trusts, if properly funded, avoid the probate process.  In some situations, trusts can protect assets from creditors.  Particularly important for many of my clients (as mentioned above), trusts permit someone to control the distribution of their assets from the grave, often for years.

This blog post is a very general and condensed explanation of the benefits of a trust.  If you are interested in learning more about how a trust might benefit you, email me at julie@juliemillslaw.com or contact me via http://www.juliemillslaw.com.

Trustees for special needs trusts: “You must choose, but choose wisely.”

There are special considerations when choosing a trustee for a special needs trust.  As with any trust, the trustee should be responsible and trustworthy.  If the trust is for the benefit of someone with a disability, you have added issues to factor into your choice that are critical to family relationships, safeguarding assets in the trust, and maintaining the beneficiary’s eligibility for government benefits.

In my practice it is typically the parents or grandparents of a child with a disability who creates a special needs trust.  The natural choice to my clients for a trustee is someone who knows and cares about the child–usually a family member.  Oftentimes, however, the family member is unaware of what is involved with administering a trust for a disabled person, which could lead to legal and financial problems for the trust and the trustee.  Professional trustees (financial institution, etc.) are viewed with skepticism because the child often has specific, individual needs unfamiliar to someone who doesn’t know the child, and their fees can seem excessive.

ISSUES TO CONSIDER

  1.  Trustee will need to learn about government benefits, trust taxation, money management.  There are rules and regulations that the trustee will need to know.  Government benefits are complex, and maintaining them requires diligence.  Certain actions can jeopardize the beneficiary’s receipt of government benefits.   There are tax rules for trusts, and assets in the trust that need managed.  Your trustee should prepare to become very knowledgeable in unfamiliar areas of government benefits, trust taxation, and trust asset management.
  2. Trustee can be held liable.  A trustee of any trust can be held liable for “wrongdoing,” even for mistakes.  With a special needs trust, mistakes from a well-meaning family member serving as a trustee could result in the loss of crucial government benefits for the disabled beneficiary, most notably, medical insurance (Medicaid).  Unfortunately, family-member trustees often do not purchase trustee liability insurance, making them vulnerable if they make an improper distribution that jeopardizes receipt of benefits, or if they fail to file taxes or submit accountings correctly. (I highly recommend trustee liability insurance for trustees.)
  3. Family relationships might become strained.  If Uncle John is serving as the trustee of his niece Jane’s special needs trust, it is John who decides whether a distribution should be made.  If Uncle John and Niece Jane have always had a good relationship, and suddenly he is in a position of having to disappoint Jane by deciding against her request for something, their relationship might become strained.  Additionally, if John is a future beneficiary in the trust if Jane dies, an inherent conflict could also strain relationships.  Perhaps John is declining Jane’s distribution requests so as to keep as much money in the trust as possible for him if Jane dies?  Whether true or not, such a conflict has the potential of creating familial tension.
  4. Cost.  One of the main complaints with professional trustees is their fee.  For some financial institutions, annual trustee fees can range from 1-5% of the value of the assets of the trust.  This might not be excessive when you consider costs associated with a family member serving as trustee.  Due to liability and time concerns, it is advisable for the trustee to hire an attorney to advise on government benefits and maintaining eligibility.  A CPA is advisable due to tax filings and tax considerations with trusts.  An investment professional is suggested to meet the trustee’s fiduciary obligation to maintain trust assets.  The family-member trustee can be compensated a reasonable fee for his or her services as trustee.  It’s the trust that pays for these services.  A professional trustee’s fees might be comparable to the cumulative fees associated with having a family member serve as trustee–if so, then I suggest factoring in other considerations above when choosing a trustee.

There is a middle ground.  For clients who want the personal involvement of a family-member trustee, but want the expertise of a professional trustee, I recommend designating the family member as “trust protector” and a professional trustee as the trustee of the trust. The trust protector safeguards the financial and other interests of the beneficiary, and can take legal action on behalf of the beneficiary if there are problems with the trustee.  The professional trustee has the financial ability to compensate the trust if mistakes are made, and the expertise to reduce the chance of making mistakes.

If you have questions about special needs trusts, special needs planning, choosing a trustee, or the role of a trust protector, please contact me by email at julie@juliemillslaw.com, or visit my website for other ways to reach me.  Planning for the future of a loved one with a disability is both critical and complex!

 

 

 

Trusts–4 things they do that you might not know

A trust is an estate planning tool where the grantor (person who creates the trust) transfers assets to the trust to be managed by someone they choose as a trustee.  Transferring assets to a trust is accomplished in many ways, but largely by re-deeding or titling.  For example, John Doe transfers the deed to his house from “John Doe” to the “John Doe Trust.”

Here are 4 things trusts do that you might not know:

  1. Protect beneficiaries. Children and grand-children are typical beneficiaries in estate planning to protect their futures. Trusts can preserve assets to children by distributing certain amounts at certain ages, such as distributing one-third of the assets at age 25, another chunk at 30, another final chunk at 40 or any age.  Staggering distributions to a child ensures they are taken care of to an extent through a certain period in their life.  If you have only a will, assets go to beneficiaries once they reach 18.
  2. Provide for beneficiaries with special needs. People with special needs often need government benefits such as Medicaid and Supplemental Security Income (SSI) for healthcare and necessities. Special needs trusts ensure that a disabled beneficiary can have assets without disqualifying him or her from receiving government benefits.
  3. Provide for pets. Trusts can ensure the care of your pets by naming people (a caregiver) to care for your pets, and providing funds to ensure that your pets receive care.  The Humane Society of the United States estimates that over 100,000 pets are taken to shelters each year after an owner dies, and in areas with large elderly populations, half the pets in shelters end up there due to their owner’s death.
  4. Encourage certain values. Trusts can provide incentives for pursuing a post-secondary education, encourage community service or productivity, support home ownership, encourage long-term savings and planning.  You cannot condition distributions to beneficiaries on anything that violates public policy, but providing matching funds or financial support in certain circumstances can be a way to reward values that are important to you.

Contact me at julie@juliemillslaw.com to discuss setting up a trust.

Benefits of a Trust

A trust is a contract, or a relationship, between the person who makes the trust (Grantor) and the person who manages the trust (Trustee).  These are often the same person, initially.  I make a trust (Grantor), and I manage the trust while I’m alive and competent (Trustee).  The Trustee manages the assets that are in the trust for the benefit of the beneficiaries, who are people the Grantor chooses to receive assets that are in the trust.  (I, as Trustee, manage assets in the trust such as investments, insurance, real property, etc., for the benefit of my children who are my chosen beneficiaries.)

Why have a trust?

The premier reason for a trust, in my opinion, is to maintain control from the grave.  For example, if you have assets such as a house and retirement plan, and if you have a minor-age child when you die, your child will inherit everything–value of your house, retirement, assets—when he or she turns 18.  It is likely that an 18 year-old person will mismanage (likely deplete) that amount of money.  If you had died with a trust, however, the trust could have reserved money for college, would distribute money at certain staggered intervals (my clients typically choose a portion distributed to the child at 25, then 30 and then 35).

Benefits of a trust

Beyond “control from the grave” for the benefit of children, however, are other important benefits to a trust.

  1. Trusts do not have airtight privacy control but, as private contracts, are typically private.  This is the opposite of probate and guardianship proceedings, which are both public matters.  With a trust, you can avoid both probate and guardianship.
  2. Avoid probate if you own property in other states (ancillary probate). For snowbirds and others who own homes and other property in another state, if the property is held by (deeded or titled to) a trust, then you do not have to have ancillary probate.  If you died owning a condo in Florida, you would have to hire a Florida attorney to probate your Florida property, unless the condo was held by the trust.
  3. A trust can serve as ‘contingent beneficiary.’ If you have a life insurance policy and name the trust as the beneficiary, then at your death the payout is to the trust which then manages that money according to the terms you set.  If the payout goes directly to a child, the money could be depleted, or attached by creditors (your child’s divorcing spouse, or a victim of car accident your child/beneficiary caused, etc.).
  4. Protect assets from surviving spouse. Assets in a trust are not part of a probate estate, which means that they are not subject to a surviving spouse’s right under law to elect against the will.  A trust reduces the chances that a surviving spouse can change the deceased’s estate plan after death, which can be important in blended families.
  5. Protect assets from creditors of Grantor’s estate. Assets in a trust are not part of a probate estate, and creditors generally cannot get to those assets.  If I died with creditors wanting to get to my estate’s assets, the creditors would not be able to get to assets in my trust.  Of course, there are some exceptions to this.
  6. Control the disposition of your assets. This benefit is similar to what I describe in the “Why Have a Trust?” paragraph above, but goes deeper.  You can determine the terms of the trust.  You can decide on whatever terms you want, except those terms that are against public policy (“nothing to my daughter if she marries someone outside of her race,” or “at my death dump the waste from my chemical company into the nearest river”).  Some terms my clients have chosen include distributions to a beneficiary with addiction issues conditioned on passing drug tests, certain incentive distributions for a beneficiary pursuing higher education or receiving certain grades, etc.  You can leave assets to a disabled beneficiary without jeopardizing that beneficiary’s government benefits (typically Medicaid and SSI).  You can provide funds for the down payment of beneficiary’s first house or a car upon graduating from college.  A trust can do most everything for a beneficiary that you would want to do if you were alive.

Trusts do cost substantially more than wills.  The cost of will plans is in the hundreds of dollars, where the cost of trust plans often starts at about $1,200.  However, probating an estate (with only a will) will likely cost more than having a trust plan prepared.

A trust is not for everyone.  I highly recommend trusts for people with minor age children, blended families, and for those who wish to maintain control over the disposition of their assets after they die.

To find out if a trust is for you, email me at julie@juliemillslaw.com.