Living Wills

The problem here is similar to the problem with the power of attorney. A living will is a document which states what is done in case you are unable to make medical decisions, and another is to make decisions for you. If you make the holders of the living will joint, and decisions must be made immediately and one of the holders is not available, the whole point of the living will is lost. Even if you make it joint and several (either one can act), you then have the problem if they disagree.

Therefore, like the power of attorney, the living will should be successive so that each agent can act independently without the problem of a conflict. People feel that they must name both their children so as not to offend the other. They miss the point that the living will is not to satisfy the children, but it is drawn to protect the parent.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

  © December 2012, Post 221

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Role of Statistics in Determining Human Behavior

In my prior post, I discussed the fact that an attorney should take a psychological approach to his client.

Another area of psychology that is relevant is psychological statistics, which are studies that relate to human behavior. The key words in psychological statistics are validity and reliability. A study is valid if it tests what it intends to test. A study is reliable if the scores you get on the test are consistent.

The fallacy in studies is that people often assume that correlation means causation.  This is not true. For example, the most famous longitudinal study in psychology was done by a psychologist named Thurmond. The study concluded that since there is a correlation between intelligence and mental health, that intelligent people are healthier mentally than others. This theory has been disproven many times.

The approach to psychological statistics is based upon the bell curve. A confidence level is determined  in accordance with something known as the standard deviation. If the confidence level is within an acceptable amount (usually 5%), then the study has some significance. However, the mere fact that there is a relationship between correlation and causation, is not the approach that  should be taken.

I was fortunate in college to have a teacher of psychological statistics with the name of Ulric Neisser. Dr. Neisser’s key example was a study which would determine the effect of staying up all night on study results. In a study after an exam, students were asked if they stayed up all night and then the results were correlated between whether they stayed up all night or went to bed early and the result. This is a fallacious study because the question of whether such behavior has an effect upon the result, was made after the test.  A proper psychological study is to develop the theory before the activity and then determine the result according to the bell curve or confidence level.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© November 2012, Post 220

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Powers of Attorney

In many posts, I have discussed powers of attorney. The purpose of this post is to review the significant considerations. Firstly, the person giving the power of attorney (“the principal”) must be competent. The word “competence” is difference for a doctor and a lawyer. For a lawyer, if a person understands the meaning of a power of attorney at any moment, that is sufficient to do a new power of attorney. The question then becomes should you give the power of attorney to people simultaneously, or to one individual.

If the power of attorney is joint, there are two ways to do it. It can be done jointly so that each person must agree the power of attorney to be exercised. This should never be done because if the holders of the power of attorney (the “agents”) disagree, the whole purpose of the power of attorney is wasted, since decisions would have to be made by a court. Even if the power of attorney is joint and several (either person can exercise), this also creates a problem. Because if the agents disagree and one acts contrary to the desires of the other agent, it might result in a court proceeding or a delay of exercise of the power of attorney.

The way to do a power of attorney is to name the agents successively so that one can act alone and you avoid the above problem.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© October 2012, Post 219

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

An Element of Estate Planning That Is Often Overlooked

An element of estate planning that is often overlooked is the tax clause. That is, in every will there is a clause that allocates the payment of state or federal taxes.

If the scrivener inadvertently allocates any tax to the charitable or marital deduction, this reduces the deduction to the extent of the tax. This is known as an interrelated deduction. That is, you cannot know the charitable or marital deduction until you know the tax, and you cannot know the tax until you know the charitable or marital deduction. This can be solved by a simultaneous equation or method known as “trial and error”. However, the point is not to allocate the taxes to a deduction, because the deduction is reduced to the extent of the tax.

New Jersey common law provides that if there is an ambiguity, the presumption is that tax is not allocated to a charitable or marital deduction. However, to be safe, you must make sure the tax is properly allocated.

The worse situation would have taxes allocated to both the charitable and marital deduction. This would require a very complicated computation and result in an increase in tax.

There are a myriad of issues relating to the tax clause, but this is just one that must be considered.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© October 2012, Post 218

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Psychological Aspects of Elder Law

In prior posts, I have stressed the fact that an attorney should not dictate to a client but should listen to a client’s response to the various alternatives presented by counsel.

In a famous experiment by Solomon Asch, an individual amongst a group of individuals was persuaded to give the wrong answer because of the authority of the group. The individual was known as the “goat”. Similarly, an attorney is an authority figure. Analogous to the Asch experiment, the attorney is similar to the group. That is, if the attorney dictates to the client and gives the wrong answer, the client might be persuaded to follow the attorney’s advice.

Therefore, as I have stressed, the attorney should give options. The answer should be provided by the client. Furthermore, the attorney should extract his personality issues from his role as an attorney and should be objective in every sense. Otherwise, as in the Asch experiment, if the attorney dictates to the client, the client may follow even though the advice is incorrect.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

  © October 2012, Post 217

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Further Discussion of Buy-Sell Agreements

In Post 172 , I pointed out the argument that stock subject to a buy-sell agreement is not an available resource due to the restrictions of the agreement.

I pointed out the rule for buy-sell agreements in that Post.

There are other aspects of a buy-sell agreement which do not relate directly to elder law and which I believe require further discussion.

One of the reasons for a buy-sell agreement is to get a stepped-up basis for the stock. This can be done by having what is called a cross-purchase agreement where each shareholder owns life insurance on the other. To the extent the life insurance owned by the other shareholder purchases stock of a decedent, the stock gets a stepped-up in basis. However, there may be a shortfall in payment due to the lack of adequate insurance of the other shareholder. In such case, insurance should be owned by the corporation.

This is called a “wait and see agreement”. Such agreement provides that the other shareholder purchases the stock to the extent of the insurance owned by the other shareholder. If there is a shortfall in the amount of the insurance, the insurance is purchased by the corporation. To the extent the insurance is purchased by the corporation, there is not a stepped-up in basis. However, there are advantages of having insurance owned by the corporation. For example, even if the stock owned by the living shareholder is sufficient to purchase the stock, the stock owned by the corporation can serve as “key man” insurance. That is, the value of the insurance can be used to replace the value of the deceased shareholder.

Moreover, stock owned by a corporation can be used to fund a disability “buyout”. That is, although many agreements do not provide for such provision, a buy-sell agreement should provide that if a shareholder becomes disabled, the stock is purchased by the corporation. Neither a disabled person nor a corporation wants such person to continue employment.

However, it is important that the word disability in the buy-sell agreement be consistent with the definition of disability in the disability buyout policy. That is, a disability buyout should be triggered by the definition of disability in the policy. Again, this is an example of the point that I have stressed that an elder law attorney must be familiar with various areas of law and corporate law is certainly an area to be understood as it relates to elder law issues.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

  © October 2012, Post 216

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

A Distinction Can Mean A Difference

New Jersey has a unique statute that provides :

“… any provision in a contract of insurance, health benefits plan or other health care coverage document, will, trust agreement, court order or other instrument which reduces or excludes coverage or payment for health care-related goods and services to or for an individual because of that individual’s actual or potential eligibility for or receipt of Medicaid benefits shall be null and void, and no payments shall be made under this act as a result of any such provision” – N.J.S.A. 30:4D-6f.

Many years ago, I spoke to the scrivener of this statute and the meaning is if you draft a testamentary trust that mandates that distributions be made so a person qualifies for governmental benefits, it has the opposite result and the trust is a resource. Regardless of your approach to special needs trusts, you must use precatory language as opposed to mandatory language. That is, a testamentary trust should not have mandatory “kick-out provisions” which refer to Medicaid eligibility.

Moreover, unless you violate the above statute, distributions from testamentary trusts are not transfers. The transfer rules only apply to inter vivos trusts subject to the above statute.

As indicated in my Post 184, even though discretionary trusts are not transfers, they don’t satisfy the elective share rights of the surviving spouse. So that if you are planning the will of a healthy spouse, I have concluded in Post 184 that the elective share must be left to the nursing home spouse outright and not in trust.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

 © October 2012, Post 215

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Legislative Aspects of Elder Law

Various posts have discussed the fact that an elder law attorney must be familiar with various areas of law such as elder law, estate and gift law, constitutional law, fiduciary income tax, income tax and ethics.

However, it is necessary that the elder law attorney be familiar with legislative law. For example, it was unclear to what extent the estate recovery provisions applied to a discretionary testamentary trust. The first issue is whether the decedent-recipient had a “legal title or interest” in the trust. The second issue is whether the words “or other arrangement” encompass a testamentary trust under the doctrine of ejusdem generis, notwithstanding, the state regulations. A testamentary trust was not mentioned except under limited conditions. Under the doctrine of ejusdem generis, a testamentary trust is not like the other assets subject to the lien. Ejusdem generis means similar to the previous words. The Medicaid authorities did not like this arrangement and rather than rely on the doctrine of ejusdem generis, just applied the lien to the testamentary trust.

Similarly, as I have pointed out in various posts, the lien regulations and the resource regulations have not been drafted with reference to each other. In legislation this means that they were not drafted in pari materia. For example, now that the lien provisions apply to a discretionary testamentary trust, this raises an ambiguity that is ridiculous. That is, if you set up a discretionary testamentary trust, you would never get Medicaid because you must leave the spouse the elective share. That is, the lien does not apply to a discretionary trust, but if you have a discretionary trust you won’t get Medicaid anyway. Moreover, you must leave the spouse the elective share. As various posts have indicated, Medicaid takes the position that disinheritance of a spouse is a transfer, so you must leave the spouse the elective share. Therefore, having a discretionary trust may not be subject to the lien, but there is no lien, since you won’t get Medicaid. Again, this is a legislative issue as the lien and the resource provisions were not drafted in pari materia.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

 

 © September 2012, Post 214

 

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Transfer of an Excludable Resource

In my Post on Real Estate (Post 11),  I pointed out that a transfer of an excludable resource may be subject to penalty. For example, if the community spouse owns the primary residence and transfers the residence before the applicant gets Medicaid, the transfer is subject to penalty. However, if the house is transferred after the applicant receives Medicaid, there would be no penalty imposed.

In a recent webinar I presented, someone asked the following question. If a potential Medicaid applicant transfers German reparations, is such a transfer subject to penalty? In this example, there would be no penalty. German reparations are exempt at any time and the time of transfer is irrelevant. However, this would only apply if the monies were kept in a separate account.

There are a myriad of examples regarding this principle. For example, a house may be transferred to a child with a “protected transferee” provided care for two years before the applicant went into the nursing home. However, as pointed out in Post   , if the transfer is made before the applicant applies for Medicaid, the applicant runs the risk that the transfer is subject to penalty. However, if Medicaid approves the transfer, it would be another example of an excludable that is not penalized.

As pointed out in Post 208, an attorney should not be dictatorial, but should point out the options. For there is no objective answer. It depends upon the attitude of the Medicaid worker.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

  © September 2012, Post 213

 

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

The Difference Between Disposition of Assets, Transfers and Gifts

The term “gift” is a tax term and is not used in the Medicaid statute. Under the regulations pursuant to section 2511 and section 2512 of the Internal Revenue Code, gifts require that an asset be surrendered so that the person making the gift has given up all dominion and control. However, a gift may be constructive. For example, you can put property in a person’s safe. A constructive gift has been established.

The Medicaid law does not mention a “transfer” or a “gift”. It refers to a disposition of assets pursuant to 42 U.S.C. 1396 (p)(c). As I have pointed out in prior posts, a disposition of assets is a transfer of income or principal. However, you can make a disposition of assets and not make it a completed gift. For example, you can transfer property to your children and retain a life estate. This is a disposition of the remainder interest, but not a complete gift.

An interesting example is a disclaimer. A disclaimer is a disposition of assets and does give rise to a penalty, but if you disclaim to a trust for the benefit of yourself, you have not made a completed gift. The Medicaid law penalizes disposition of assets and resources. It only penalizes gifts if they have been made within the 60- month rule.

Therefore, there is a difference between transfers, disposition of assets and gifts. Keep this in mind when using the above terminology.

Disclaimer:  This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

  © September 2012, Post 212

 

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter