Matthew J. Leonard, Esq. has devoted his practice to handling the legal needs of individuals and their business interests through all stages of life. As an attorney with the law firm of Salter McGowan Sylvia & Leonard, Inc., he has been engaged to handle matters from basic to sophisticated involving Estate Planning, Elder Law, Medicaid Planning, Probate, Trust and Estate Administration, Real Estate, Business Transactions, Business Creation and related litigation.
What is a Lady Bird Deed and Are They Allowed in Rhode Island?
A “Lady Bird Deed“ (also known as an enhanced life estate deed) is a way to transfer property to someone else outside of probate while retaining a life estate in the property. But unlike a regular life estate, a Lady Bird deed gives you the power to retain control of the property during your life, including the right to use the property for profit or to sell the property.
THE GOOD: The 2014 Rhode Island budget addressed Lady Bird Deeds and the impacts on elder care planning techniques which rely on their use. The bill created a new statute (R.I. Gen. Laws § 34-4-2.1) which, for the first time, officially recognizes the use of these deeds which are distinguished from traditional life estate deeds in that the life estate holder alsoretains the power to sell, convey, mortgage or otherwise dispose of the property without the consent or participation of the remainder interest holders.
Traditionally, these deeds have sometimes been used to transfer real estate to family members while avoiding a transfer penalty for purposes of Medicaid eligibility.
THE BAD: However, the budget contains another new statute (R.I. Gen. Laws § 40-8-3.1) that effectively eliminates this planning opportunity by providing that a Medicaid applicant, who has transferred his or her primary residence using a “Lady Bird” or “Enhanced Life Estate” deed recorded after June 30, 2014, must re-convey the remainder interest to himself or herself prior to qualifying for Medicaid benefits. Upon re-conveyance of the remainder interest, the life estate holder will again own the entire property in fee simple, as if the transfer had never occurred.
So the good news is that Rhode Island finally recognizes Lady Bird Deeds, unfortunately, the primary purpose they were used for, namely Medicaid Planning, no longer works as the new law prohibits its usage for qualification purposes.
Still have questions? Contact our office for a free consultation what other options still exist for you!
Will readings. Family gathered around the table, dressed in black, all sitting in a lawyers office while the lawyer reads to the family. That is how Hollywood has projected it and how it works. The decedent signed the document during their life and the family all learn at the same time who got what.
While that can happen in real life, rarely does it occur. More importantly, and the bigger point of this article, this should NOT happen.
A Will As Part of the Estate Plan – Not the Entire Plan
A Last Will And Testament is a proper and necessary document that all people should have. But the Will is only PART of the documents a person should have as part of their estate plan. A Will is the beginning – not the beginning and the end! A Will should be accompanied with Trust, Durable Powers of Attorneys,Health Care Powers of Attorney, Deeds, Conveyances, Bequests and an overall goal to ease administration and ensure the wishes of the deceased are followed, and followed efficiently.
A Will does not avoid probate – it causes probate
A Will alone does not ease the administration of Estates, it only guarantees that there will be a probate estate to administer. The Probate Courts and the Probate Process is a lengthy, time consuming, expensive process that typically takes over a year to complete.
The attached article explains the impact of not having a full estate plan. While a will is a part of the estate plan, it is not the entire plan. Sadly, this lesson comes too late for some, like Mr. Sacks.
Meeting and discussing your estate plan with an attorney experienced in drafting and preparing estate plans is an important first step in ensuring your goals and objectives are met. Contact our office for a free consultation on planning your estate, the proper way.
Nursing Home – A promise that cannot always be kept
The perception of life in a nursing home.
Promise you won’t put me away. It is hard to say no to that request. But it often is even harder to honor it.
For many, the idea of being sent to a nursing home facility implies abandonment. Older Americans remember the poorhouse , where the old and infirm were hidden away to die. But many younger people also are repelled by the idea.
There’s now a wider spectrum of facilities catering to different levels of need, but even the best ones can feel institutional. Daily life is often rigidly regulated, robbing residents of autonomy, and the familiar faces and spaces of a person’s life are gone.
This unfortunately is the perception. With this perception loved ones pressure their family to promise not to let them live there. Seeking to comfort, a promise is made, a promise that cannot always be kept. Nurses are hired, changes to rooms, stairs, ramps and rails are added. All helping for a while, but never fulfilling the promise. What is a family member to do?
When you meet with your attorney, he or she will guide you through the various choices you will be called upon to make, so that you end up with a set of documents that reflects your intentions. If you want to make this time with your attorney most productive, here are 7 things you can do to prepare. If you are able to put thought into any of these 7 things beforehand, you will be way ahead of the game.
1. Assemble a list of your assets and significant liabilities. This includes your house (and mortgage), bank accounts, investment accounts, business interests, personal belongings with value (e.g., artwork or jewelry), insurance policies on your life and retirement accounts. For each asset on the list, include an estimate of its value or current balance, as well as whether you own the asset in your individual name or in joint name with another person, such as your spouse. Your attorney will want to take a look at this list at the outset of the meeting, if not before, because it is a good starting point for determining which tax strategies could offer you and your family the biggest savings.
2. Consider if there are any personal belongings you want to leave to a particular person. You should think about how you would like to dispose of your things, even if you are convinced that they are not worth much money. Oftentimes, a couple will provide that all of their household furnishings, jewelry, collections, etc., will pass to the surviving spouse when the first spouse dies, and then everything will be divided equally among their children when both of them are gone. Because the sentimental attachment to certain items can be high, consider whether you should be more specific about who should receive those items. Keep in mind that the deepest rifts among adult children can begin with a tug of war over items that have value only to them. If you cannot decide at the time or want to remain flexible to change things over time, you can have a request put in your will that your spouse and/or children deal with your belongings according to any side letter you leave with your will. For this approach to work, though, you must promise yourself you will actually write that side letter.
3. Start to think about who has the skill and willingness to be the personal representative(s). The persons that you name in your will as the personal representatives will be charged with settling the estate following your death. His, her or their duties will include collecting your assets, paying debts, expenses and any taxes that may be due and then distributing the assets as directed by the rest of your estate plan. People usually name their spouse to serve as the personal representative in the first instance. If you decide to do the same, you still need to consider who should act in this capacity if and when both spouses are deceased. You can name more than one person if you like. Whoever you choose, you should also think about a successor in case the first person(s) named cannot act for any reason.
4. Get comfortable with the idea of trusts for your children and grandchildren as an alternative worth considering. You could decide to pay out all of the trust property equally among your children when you (or both you and your spouse) have died. Many individuals and couples choose another approach, however — to divide the trust property into equal shares, with one share being held in trust for each child until the child needs or wants funds. Your estate planning attorney will explain the advantages of this. For example, one compelling advantage is that property held in trust for a beneficiary tends to be insulated from the claims of that beneficiary’s creditors, including a divorcing spouse. If you choose this alternative, the trusts could last throughout your children’s lifetimes. Or, you could provide instead that specific portions of the trust property be distributed outright to your children at certain points in time (e.g., 1/3 at age 30, 1/3 at 35, and the balance at 40). You must also consider how you would want your property handled if one of your children predeceases you, leaving young children of his or her own.
5. Start to think about who has the skill and judgment to be the trustees. As with the appointment of personal representatives, the person or persons that you name as trustees of your revocable trusts following your death may be family members, friends and/or professionals. If your children are relatively young and/or you decide to provide for grandchildren, the trusts could last many, many years. You may want to consider naming an institutional trustee (such as a law firm or bank) so that you will be sure there will be continuity of management. The trustee is responsible for managing the assets and making sound distribution decisions, so there will be adequate resources to meet your spouse’s and/or your children’s needs after you are gone.
6. Decide who should make medical decisions for you if you are incapacitated. The health care proxy, along with the power of attorney, is an important component in planning for incapacity. In the health care proxy, you name an agent to make health care decisions for you if you are unable to do so. Give some thought to the person who should have that responsibility, along with a successor to him or her.
7. Decide who should take care of your financial affairs if you cannot. The power of attorney is similar to the health care proxy, except that you are appointing a person or persons to act as your agent with regard to your financial matters during your lifetime. The power of attorney can take effect only when you are incapacitated or it can become effective immediately after you sign it (for instance, the power of attorney may be useful if your spouse is away and you need to sign on his or her behalf).
The purpose of this list is not to overwhelm you with decisions or delay you crossing this item off your to-do list. If you get stuck on any of them, know that your estate planning attorney will explain all of these things and the different options available to you when you sit down with him or her. Instead, this list is meant to get your thinking started while you have the luxury of time – in the days and weeks before the meeting – to reflect on these issues, so the ultimate result is exactly what you set out to achieve.
Why Should You Consult an Elder Law Attorney on Medicaid Issues?
Many people are reluctant to consult attorneys on legally-related matters due primarily to inexperience in working with attorneys. This is doubly true with respect to issues related to Medicaid coverage of nursing home care for the following reasons:
The cost of consulting with an attorney.
Medicaid eligibility is seen as a non-legal matter that should be straightforward and not require legal assistance.
Nursing homes often offer to prepare Medicaid applications for residents for no charge at all.
Discomfort with using a public benefits program.
Let’s discuss each obstacle to legal representation in turn.
There is no getting around it. Lawyers are expensive. But the bottom line-since that’s what we’re talking about here-is that they’re a lot less expensive than nursing homes. In the Rhode Island area, nursing homes generally charge $9,113 or more a month. If the consultation with the lawyer saves even a month of nursing home fees, the legal costs will be more than justified. At stake can be a lifetime of hard work and savings.
Medicaid as Law
Certainly, public benefits should be available to those who qualify without having to resort to hiring an attorney. Unfortunately, this aspiration and the reality of the Medicaid rules are far apart. The eligibility requirements are defined in a conflicting set of state and federal laws, regulations, bulletins and practices that make it impossible even for attorneys to fathom unless they specialize in the field. Your case may be simple and may not require the depth of knowledge needed to plan for a more complicated estate. However, you cannot be sure of that without first meeting with a specialist. Again, a lot is at stake and given the cost of nursing homes, it’s not difficult for a qualified attorney to save the client more than the attorney’s fee.
Free Application Services
Yes, the nursing home provides application assistance at no charge. In addition, in the majority of cases there is no risk in using these services if you’ve checked it out with an attorney ahead of time. However, there is a great risk to using the nursing home’s services without first consulting an elder law attorney. We have seen countless examples of incomplete or improper advice leading to significant lost planning opportunities for our clients, no matter how well-intentioned the advice giver may be. Rectifying the situation may cost more in legal fees than would have been the case with a proper plan. In any event, the nursing home and the resident’s family often have conflicting interests since their private-pay rates are typically $4,000 a month more than they receive in Medicaid reimbursement. In other words, every month that a resident pays privately rather than receives Medicaid coverage is additional money going to the nursing home and less preserved for the resident’s spouse and family.
In addition, to the extent that the application raises legal issues, it makes sense to have an elder law attorney prepare the application. This would be the case, for instance, if a trust were involved or if you were seeking an exception to the usual penalties for transferring assets.
Medicaid as Welfare
Medicaid serves a number of different populations, including poor recipients of Supplemental Security Income (SSI) and disabled people receiving Social Security Disability Income (SSDI). No one would argue that when Medicaid was created it was meant to be the main system of paying for long-term care for older Americans. But in the absence of any other program to fill that need, Medicaid has become the nation’s long-term care financing system by default. Medicaid planning permits nursing home residents to be covered by the program under its rules. Congress can change the rules, and often does. Consulting with an attorney permits seniors and their families to understand the rules as they are and the options available to them. It does not require them to take any particular steps. It can be vital to preserving the financial security of a healthy spouse continuing to live at home.
Ready to have the conversation about how Medicaid Planning fits into your long term plan? Contact our office for a free consultation to learn how Medicaid Planning will work for you.
For those who can afford it, Long-Term Care Insurance is becoming increasingly popular as a means of paying for nursing home or home care. The problem is choosing a good policy and being able to afford it.
Here are a few Long-Term Care Insurance rules of thumb:
Only buy policies that are approved in your state. Generally, these are individual, as opposed to group, policies. A group policy may be just as good, but since it is not regulated you must be extra careful in seeking professional assistance in examining it. In addition, if you do require Medicaid assistance despite the fact that you own a Long-Term Care Insurance policy, owning an individual policy will protect you from estate recovery; owning a group policy will not.
Buy enough coverage. It will not do you much good to have insurance coverage if it is insufficient to meet your cost of care. Anticipate your need for the insurance to occur at least ten years off and anticipate the inflation in Long-Term Care Insurance costs to exceed the growth in your income by at least 5 percent a year. However, there is another school of thought that recommends purchasing enough coverage to pay for assisted living if you can only afford the lower premiums.
Buy home care coverage. If you have nursing home coverage and not home care coverage you may feel compelled to move to a nursing home in order to save money. Do not put yourself in that bind.
Only buy the insurance if you can afford it. The guidelines above will all increase the cost of the policy. But if you cannot afford them, then do not buy the insurance. How do you know if you can afford a certain premium?A rule of thumb is that payment of the premium should not affect your standard of living. So you can afford the premium if you are using money that you would otherwise set aside to add to your savings. An alternative would be to purchase an annuity that pays sufficient benefits to cover the long-term care insurance premiums.
Long-Term Care Insurance is not an option for you? You can still qualify for nursing care without spending your entire life savings. How? A properly drafted estate plan using Income Only Trusts can achieve the same goal.
Want to lean more? Contact our office for a free consultation.
Many people plan to continue to live in their home as long as they are able to do so. If they eventually ever have to go to a nursing home, your house and its contents would NOT have to be sold in order to qualify for Medicaid. However, it is still at risk because the state has a right to recover whatever it pays for your care from your probate estate. Your home may be protected from such estate recovery by keeping it out of your probate estate.
The simplest approach to doing so would be to deed it to your children. There are four problems with doing this:
You lose control over your house. Your children now are the tile owners of the home and as such it would be subject to and vulnerable to your children’s debts or if they were sued or divorced.
This would be a transfer which would make you ineligible for Medicaid for the following 60 months.
Your children would lose the opportunity of getting a “step-up” in basis by receiving the property through your estate. Your children would be subject to potential capital gains taxes that could be avoided.
Selling the home later can become problematic. Many clients expect at some point to need to sell their home and possibly downsize. By transferring the home to your children you have added complexity with title issues and taxation issues with any sale.
So how do you keep the house out of your probate estate so that the state has no access to place a lien on it? How do you ensure your heirs get a stepped-up basis in the house? How should you own the house that allows for a ease of downsizing? There is one SOLUTION: using the Irrevocable Income Only Grantor Trust.
This trust allows you to keep the property out of your children’s hands, allows them to received a step-up in basis, allows you the freedom of selling the property without a hassle, avoids estate recovery and five years after the transfer is completely protected for Medicaid.
Want to lean more? Contact our office for a free consultation.
Long Term Care Insurance is a product known by few and used by fewer.
New research looks at trade offs in participation rates, cost and Medicaid savings. These factors must be reviewed when deciding on what is the best way to protect assets. But where does a person start?
The first step in the process is consulting with an estate planning attorney. During that consultation, an elder law estate planning attorney will be able to make an initial assessment of the client, their assets, prospective needs and overall goals. Clients should be advised during the consultation if long term care insurance is an option and then the elder law attorney should make a recommendation to you to meet with a long term care insurance representative to review products available. Unfortunately, because of economic or health reasons few people can consider pursing long term care policies.
Follow the below link that discusses the findings of some recently completed new research that looks at tradeoffs in long-term care insurance participation rates, cost, and Medicaid savings.
The attached article suggests that when someone turns 65 in America today, there’s about a 50-50 chance he or she will need not just medical care as they get older, but extensive help with basic activities like dressing, bathing, walking and eating. Expenses associated with caring for individuals on average are between$91,000 and $182,000, but they can range much higher, too.
People who seek out long term care insurance cite the peace of mind knowing they are prepared for whatever life brings them. The long term care insurance industry struggles to make these policies viable for more individuals and if successful, it will have broad impact on Medicaid.
WHAT ABOUT BEING ABLE TO RECEIVE CARE AT HOME UNDER THE MEDICAID WAIVER PROGRAM?
Rhode Island has a program called SSI Enhanced Assisted Living Program that provides up to approximately $1,200 / month to be put toward the cost of assisted living. However, this is not a Medicaid program. RI does have a Medicaid program called RIte @ Home which offers 24/7 personal care in a residential environment but not in assisted living communities. Finally, the state’s Home and Community Care Medicaid Waiver also covers assisted living.
Nursing Home Demographics
Elderly Rhode Island residents can receive a variety of care services and support through the Home and Community Care Program. This program is intended as an alternative to nursing homes. The services are provided to individuals living at home or “in the community”. By the rules of the program, “in the community” includes assisted living residences. The benefits of the program are designed to support individuals at home. This program provides adult day care, in-home care, meal delivery services and medical alert services.
This program is under the jurisdiction of the Rhode Island Division of Elderly Affairs and is funded through a combination of state and federal monies.
Want to learn more about how nursing home skilled nursing and the Waiver Program may impact you and your family? Contact our office for a free consultation.
What do you mean my health insurance does not pay for nursing home care?
There are 3 major ways on how people pay for nursing home care in Rhode Island:
First is by accessing and using an earlier purchased long-term-care insurance policy. Unfortunately, very few people have them as they are for many people cost prohibitive.
The second way is by private pay, which means you write a check directly to the nursing home from your life savings to pay for the room and board to live there. Per the Rhode Island Department of Human Services, the average cost per month for skilled nursing home care in Rhode Island is $9,113.
The third way to pay for nursing care is to qualify for Medicaid coverage under the Medicaid program. By qualifying for Medicaid, an individual will not be required to spend their life savings on skilled nursing care.
Unfortunately, medical insurance does not pay for long term care. Most plans will only pay a portion of the first 100 days of skilled care. After the 100 days is used, individuals will need be responsible for paying for their own room and board – their medical insurance will continue to pay for doctor visits and prescriptions, but individuals will need to pay for the bed, meals and roof over their head in nursing home.
How do I qualify for Medicaid?
Qualifying for Medicaid is like filing a very complicated tax return over a series of years. For a person to take advantage of the tax rules the taxpayer needs to make decisions as to their assets and income, perhaps transferring assets or claiming some while using others. So too is it with qualifying for Medicaid. As a CPA helps with a Tax Return, and Elder Law Attorney helps with understanding and advising as to what needs to be done to qualify for Medicaid. It is a lengthy process that for it to be optimized requires 5 years!
Want to learn how to qualify for Medicaid? Contact our office and schedule a no-cost meeting!
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Providence, RI 02903
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South Kingstown, RI 02879
About Mathew J. Leonard ESQ.
Matthew J. Leonard's practice is concentrated in business law, estate and asset protection planning, elder care, civil and probate litigation and real estate. He is a member of the Rhode Island, Massachusetts and Florida bars. He is a frequent lecturer and has authored and spoken on in many occasions through the state.