The Right to Control Funeral and Burial Arrangements (Part 1)
Recently my client, Joe asked me how he could be sure his wishes with respect to his funeral arrangements would be honored. Joe is not married. He has children but is not close with them. He has no siblings. I suggested to him that he could set aside money in a prepaid burial. This is something that is often done as part of a Medicaid spend down but can also be utilized where Medicaid is not needed. Joe must go to the funeral home and make the choice of services he wishes. Instead of paying the funeral home, however, money is set aside in a trust account. The funds are paid from that trust account to the funeral home after Joe’s death when the funeral services are provided. Joe wasn’t thrilled with the idea of going to the funeral home. Instead, he said he explained to his companion of many years, Betty what he wants for a burial. “How can I make sure that Betty will be able to carry out my wishes?”, he asked. “I don’t want my kids meddling in my affairs.” New Jersey law provides that a person can be
Irrevocable Trusts and Medicaid (Part 3)
I promised in last week’s blog post that I would explain another solution to Mary’s Medicaid dilemma. Her uncle left assets in a trust for Mary but the terms provide that the funds can be used for Mary’s health support and maintenance. I explained to Mary and her sister, Betty, who is trustee, that Medicaid is likely to count the assets as Mary’s for eligibility purposes, even though the trustee has the discretion to spend or not spend the money. I told Mary and Betty that they could appeal a Medicaid denial but I cannot guarantee that they would succeed, although I believe that a Medicaid approval is the right outcome. They were not comfortable with a long legal battle. There was, however, another solution which would give them more certainty. Because Mary is 57 years old and has been disabled by Social Security, another option is to withdraw the remaining funds from the trust and distribute them to Mary. Instead of spending those funds towards her care, however, I told Mary and Betty that we could establish a special needs trust for Mary’s benefit and place the assets into that trust. The
Irrevocable Trusts and Medicaid – Part 2
In last week’s blog post I was talking about a call I received about Mary, who is now in a nursing home. She has spent her assets towards her care and the only source of payment left is money that was left in an irrevocable trust for Mary’s benefit by her uncle when he died. I explained to Mary and her sister Betty, who is the trustee, that I would need to examine the trust document to determine whether the funds in that trust must be spent down before applying for Medicaid to cover her care. Betty gave me a copy and here is what I told her. The trust is irrevocable but as I explained last week, that fact alone does not answer the question. The trust provides that the income and principal can be used to meet Mary’s health, support and maintenance needs, including nursing or other long term care. The trustee has the discretion to decide how much to use as opposed to it being mandatory. So what does that mean when it comes time to apply for Medicaid? The trustee could say that since she has the discretion of whether to
Irrevocable Trusts and Medicaid – Part 1
I’ve written about trusts many times on my blog over the years, specifically about how we get many callers asking us to take a look at an existing trust the caller has set up - or that a family member set up for the caller - to advise on whether the assets in the trust are “protected” when it comes time to apply for long term care Medicaid benefits. A few weeks ago we received another such call. Mary’s uncle left a will that directed part of his estate be left in trust for Mary. During the course of the next 10 years, Mary’s sister as trustee managed and distributed the funds either to or for Mary’s benefit. When Mary’s health declined she moved to a nursing facility, sold her home and used the proceeds to pay the $13,000 per month cost of care. She is now close to running out of funds. The only other source of funds is the trust. Mary and her sister, Betty called me to ask whether they must spend down the trust funds first before applying for Medicaid. Betty offered up that “the trust is irrevocable. Doesn’t
The Continuing Rise in Long Term Care Premiums
A few years ago I wrote about the number of clients calling our office who are getting notices of substantial rate increases on their long term care insurance policies. Since then it has been a problem that has only increased in frequency. An article this week in the Wall Street Journal caught my eye. Steep rate increases keep coming as the cost of long term care keeps rising and the population is aging. What happened is that when insurance companies priced these traditional “use it or lose it” policies in the 1980’s and 1990’s, they missed badly. They underestimated the number of claims actually filed. They also missed the mark on how long people would collect on the policies before dying. Finally, they underestimated the number of people who would let the policies lapse without ever filing a claim. Other factors have contributed to the problem. Insurers set premiums too low and marketed the policies as level premium, telling potential customers they could expect the rates to hold steady for years – although these rates were never guaranteed. A downturn in the economy has also contributed to the problem. When insurance companies take
The Problem with Out of State Documents – Part 2
In last week’s post I was telling you about a situation with a client who has a North Carolina power of attorney that his wife needed to use here in New Jersey where they currently live. The document is a springing power of attorney, meaning it does not have effect until the principal is incompetent or incapacitated. The client’s wife presented the POA and a statement from his doctor expressing the opinion that he lacks the capacity to make financial decisions to the financial institution where his account was held for the purpose of liquidating and spending down the balance to achieve Medicaid eligibility. The institution still refused to honor the POA. Why? It turns out that North Carolina has a provision in it’s statute covering springing powers of attorney that requires the document to be registered with the Office of the Register of Deeds. A POA is not valid when the principal is under a disability or incapacity until the document has been recorded. We argued that since the client is now a New Jersey resident and no such requirement exists under New Jersey law, therefore, the registering process should be unnecessary.