The Unicorn of Long-Term Care Insurance

As an estate planning firm that also specializes in elder law, we are always heartened to see a potential Medicaid applicant client’s portfolio containing a long-term care insurance (“LTCI”) policy. This is because, as planners, we know that the client is uniquely positioned to take advantage of creative strategies to accelerate his or her eligibility for Medicaid while protecting some assets from getting swooped up to pay for long term care.  More importantly, it buys us and our clients precious time to think and plan.

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As excited as we are when a potential Medicaid applicant has a long-term care insurance policy, we get even more excited for the rare moment when we discover that the client’s long-term care insurance policy participates in the New Jersey Long-Term Care Insurance Partnership Program – making them “unicorns” among LTCI plans! This is truly a happy occurrence because in these cases we can protect assets by setting aside amounts equal to the insurance benefits received from such a policy so that such assets are treated as “unavailable” or “disregarded” for Medicaid qualification purposes.

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Here is how it works–

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Medicaid has strict limitations on income and assets.  Typically, an unmarried individual Medicaid Applicant (Institutionalized or Ill Spouse) can only have $2000 in resources.  For a married couple, the spouse of the Medicaid applicant (“Community Spouse”) can only keep $130,380 in resources (2021 figures).  These numbers are adjusted for inflation, and every year the government circulates information establishing the thresholds for the following year. If an individual has more assets then the established threshold when applying for Medicaid, he or she is at  risk for being considered over-resourced and therefore would be denied eligibility.

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Due to these strict thresholds, elder law attorneys like myself analyze our client’s countable assets that are deemed “available” for Medicaid purposes and separate those from exempt or “unavailable” assets prior to submitting the application. We want to ensure as much as of the client’s assets as possible are exempt from Medicaid and any excess assets are “spent down” in a Medicaid permissible manner to achieve the maximum benefits.

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This is where long term care insurance and the NJ Long-Term Care Insurance Partnership Program comes in.

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The Partnership Program is a public/private arrangement between the state government and private long-term care insurers to assist individuals in planning for their long-term care needs.  People who purchase these specific types of policies can protect more of their assets should they later need to have the state pay for their long-term care. According to the bulletin issued by the State of New Jersey, “These special rules generally allow the individual to protect assets equal to the insurance benefits received from a Partnership Policy so that such assets will not be taken into account in determining financial eligibility for Medicaid and will not subsequently be subject to Medicaid liens and recoveries”1. For example, if you received $100k in benefits under your long-term care insurance, you may be allowed to protect an additional $100k in assets at the time you apply for Medicaid through a feature known as “Asset Disregard” under the New Jersey Medicaid Program.

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Our office has had the good fortune of being presented with such a “unicorn-like” situation recently.  Because of  our thorough oversight together with our patience & persistence working with the Medicaid caseworkers, we were able to  have them disregard a significant amount of our client’s assets over and above the Medicaid threshold limits and get  our client eligible for Medicaid.  The amount set aside in turn has helped the Community Spouse retain more of the assets than originally anticipated, which became a win-win for all.

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If you have a stand-alone long term care insurance policy, look at the benefits to see if you have this “unicorn plan” or call your agent to find out.  And if and when the time comes where the policy needs to be triggered, call our office immediately so we can provide the proper assistance and guidance on what your next steps ought to be.

 

  1. 1. The Deficit Reduction Act of 2005, Public Law 109-171, (the “DRA”) allows for the expansion of Qualified Long Term Care Insurance Partnership Programs by states (nj.gov)

Benefits of Revocable Living Trusts

As a newbie estate planner, many moons ago, I heard the “gurus” of estate planning tout the benefits of New Jersey being a “probate friendly” state. This meant that New Jersey’s court systems were easy on a family’s representative to adhere to the rules and formalities to admit the Will to probate and was also relatively inexpensive In fact, I remember an incident at a Continuing Legal Education seminar once when an older, more experienced estate planning attorney berated a young managing attorney of a boutique Trusts & Estates firm for what he called “churning out” Revocable Living Trusts (or “Rev Trusts”, as we often call them) just to make more money. The older attorney felt that the younger attorney should respect the long-standing tradition of creating the simpler and less expensive Wills, like most New Jersey attorneys were doing at the time. Boy, times have changed! Today, some of those very “gurus” have come to realize the valuable role Rev Trusts play in many a client’s life – and not just because these clients have property out of state (which used to be one of the primary reason for setting up these trusts), but because their benefits far outweigh their downsides, which we will address later on in this article.

Do not get me wrong – having a Will is still far better than not having anything at all. It is better to formalize your intentions to ensure that the people who you want to receive your assets ultimately end up getting your assets, rather than letting New Jersey’s intestacy laws determine who those assets go to. For example, many starry-eyed newlyweds (am I dating myself if I refer to them as DINKs – Dual Income No Kids?) who haven’t begun to think about death or incapacity may be surprised to know that in the unlikely event that something should happen to them or their partner, if there is no will in place, their new spouse will need to share the assets of the estate with their parents. For those who would want their assets to go solely to their spouse, setting up a Will that stipulates this is a crucial step. An added bonus for newlyweds, Wills are less expensive (note that I did not say “cheap”) than Rev Trusts, and for these newlyweds, a simple Will package may be all that they need to get their affairs in order. And keep in mind, Rev Trusts (contrary to popular misconception) do not offer creditor protection or estate tax savings. They are purely meant to serve as Will substitutes or as one client called it – Rev Trusts are just “Wills 2.0”!

So one may ask the question – “If a will is good enough for the hypothetical newlyweds, why won’t it suffice for me??”

Well, planning becomes more complicated once you have children to pass on your assets to, and as your family grows you may begin to form opinions on how children ought to inherit the “gift” passing from you to them upon your death. Also, as the assets grow over time, investments also become more complex. Once you have reached this stage of life, you may begin considering how the benefits of a Revocable Living Trust apply to you, such as:

  • They afford privacy (it is not a public document like the Will)
  • They offer smooth succession upon incapacity
  • So long as all assets are properly re-titled into the trusts, or at least have the trust named as a beneficiary, they completely avoid the courts (which may make a huge difference, especially if you have assets in multiple states some of which may have an expensive and cumbersome probate process, such as New York, California or Florida)
  • They travel with you. For example, imagine that you set up a Rev Trust in NJ and transfer assets into it, and then move to New York, you can still keep the same trust (but you may want to just have a NY attorney restate the trust to make it compliant to NY law).

However, there are 2 additional important considerations that you may not have thought about:

  • With the Rev Trust, the cost of probating a Will upon death is avoided (or at least minimized). If you think about the savings in probate costs down the road, you may not mind paying a small premium for a Rev Trust plan now rather than three times that amount down the road (it could be as much as $5k now compared to $15k later).
  • Having a Revocable Living Trust can save your beneficiaries valuable time. Imagine you are concerned about how your children (or other non-spousal beneficiaries) will inherit your assets, and you create a testamentary trust to protect the assets passing to them. If you are a resident of the state of New Jersey and have a testamentary trust in place but no Rev Trust, your beneficiaries will be forced to wait 9-15 months (maybe more if the Tax Branch is understaffed) until they receive their full inheritance. This is because New Jersey has an interesting rule: If assets do not flow into a trust at death (such as when the decedent has a Rev Trust), then the Executor can easily sign a self-executing waiver and transfer all of the assets immediately to the estate, and then to the beneficiaries. However, if assets are to pass into a trust, then the Executor/Trustee has to file a tax return with the State of New Jersey Estate and Inheritance Tax Branch and patiently wait until the waiver is received before the full amount of assets can be transferred over.

Now for the cons of a Rev Trust. After drafting several hundred Wills & Trusts for our clients as well as assisting a similar number of families with probate upon the death of a loved one, I really and truly believe that the cons of setting up a Rev Trust boil down to just 2 compared to a Will:

  • Its more expensive than a Will to set up – almost double in cost; and
  • It’s a 2-step process – unlike a Will plan, which is complete upon signing, in the case of Rev Trusts, you still need to “fill ‘em up” after you sign the trust agreements and when the trusts become effective. This is an essential part of the process that leaves many clients nervous, intimidated, and downright fearful of the administrative hassles they expect to encounter. That said, like anything else that reaps huge rewards at the end (no pain, no gain, right?), in my humble opinion, the short-term hassles seem worth it in the long run.

Families (especially non-spousal beneficiaries) find inheriting assets smooth and hassle free when they inherit assets from Rev Trusts. They don’t have to run around from institution to institution trying to transfer over the assets into the estate, struggle with the court formalities to ensure all of the court’s rules & regulations are adhered to, pay large retainers to attorneys to help these families with the probate process, file tax returns when necessary, and where applicable get trustees qualified in Court once assets are ready to be distributed to the beneficiaries’ trusts. These delays and added costs (which add up in the long run) make setting up Rev Trusts more desirable – maybe not for all clients but more and more for a good number of New Jersey residents.

In conclusion – most of our clients who have shied away from Rev Trusts over these years, have really done so because of the cost factor – they said they were not quite ready to spend on a trust just yet. And while that is a legitimate concern, there are some people whose estates are too complex to be properly covered by a simple last will and testament package. Although the price tag may seem high at first glance, spending some extra effort and money on a Revocable Living Trust now can prevent one’s loved ones from dealing with a mountain of bills and paperwork in the future.

Rao Legal Group, LLC is committed to providing comprehensive estate plans which include both Last Wills & Testaments or Revocable Living Trusts. Our packages not only include the main document that will cover you (and spouse) upon death but our well designed General Durable Powers of Attorney (authorizing someone to handle financial affairs) and the Healthcare Power of Attorney (authorizing someone to handle healthcare decisions) will ensure that you are adequately protected upon incapacity as well. Call us today – we are just a phone call away!

Documents in Advanced Health Directives, and Why They Are More Important Now Than Ever

Amidst an ongoing pandemic, you may have heard some well-meaning declarations urging you to make sure your health care documents are in order. However, there are many kinds of health care documents, and it can be difficult to know what you need and what gaps there may be in any documents you already have prepared. This article is not intended to serve as legal advice, but it may provide an overview of the available types of health care documents so that you are prepared to speak to an attorney about ensuring you have a plan in place that is comprehensive and accurately represents your wishes.

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The first and most general document is the HIPAA waiver. The Health Insurance Portability and Accountability Act (HIPAA) sets national standards for the protection of personally identifiable health information. Because of this Act, doctors and other health care professionals are limited as to who they may share health information with, including family members of their patients. A HIPAA waiver authorizes doctors, hospitals, and long-term care facilities to disclose protected health information to certain individuals named in the document. A public health emergency does not mean HIPAA no longer applies; while certain jurisdictions have adjusted guidelines to allow doctors to communicate with those involved in the coordination of care, without a waiver in place, communication is not guaranteed. Executing a HIPAA waiver when competent makes clear who you want your doctors and other caretakers to speak to and give advice regarding your care. Without one, family and friends may be unable to receive information from doctors while you are being treated, which can add additional stress and uncertainty to a situation that is already stressful for your loved ones.

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While many advanced health care directives include a section for HIPAA rights, if this is separated out into a stand-alone document, then not everyone who you may name in a HIPAA waiver needs to be or should be able to make health care decisions on your behalf. In that case, to give someone that power, you should execute a Health Care Power of Attorney (HCPOA). A power of attorney is a document that allows named people to act in your place. Many people are familiar with this kind of document as it relates to finances (authorizing someone to deal with your bank on your behalf, organize to have your bills paid, etc.), but it exists for your healthcare too. A HCPOA names someone who can legally make decisions about your care with health care providers. Depending on what powers you include, this document may authorize them to consent to (or refuse to consent to) your medical treatment, hire or fire medical personnel, make decisions about the best medical facilities for you, visit you when visiting is otherwise restricted, gain access to your medical records, and get court authorization if a hospital or doctor refuses to honor your own wishes or your authority as the authorized representative. A HCPOA does not automatically authorize someone to consent or refuse consent to organ donation, as the document’s authority terminates upon your death. However, in some states as in New Jersey, you may choose to draft the document in a way that covers authority over the disposition of your body. Additionally, you may even choose to have your healthcare representative make end-of-life decisions if you do not want to execute a Living Will (see more on that below) which shifts the responsibility over to one or more doctors. Therefore, the importance of this document is immense. Instead of only relying on doctors who you may have a limited or no relationship with, you can designate someone you trust to carry out your wishes regarding end of life if you are unable to. Although most states allow family members to step in as care coordinators (with an order of preference usually beginning with the spouse), a lack of this document can still be problematic and cause unnecessary tension and stress on the family in deciding the best course of action thereby taking precious time away from coping with your illness.

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Complementing the two above documents, especially if you have particular intentions on end-of-life decisions, is the Living Will. The Living Will lays out specific directions about types of treatment you want or do not want should you go into a terminal state where there is no meaningful chance of your recovery. It can be as comprehensive or as limited as you want, depending on your preferences of different types of treatment. Typical procedures mentioned in a Living Will might be blood transfusions, CPR, dialysis, use of a respirator, surgery, or palliative care. Particularly amidst the continued spread of the COVID-19 pandemic and as people realize that they may not desire to be put on a respirator should they be hospitalized with this illness (where a number of people who need to be hospitalized end up on respirators), you should consider whether you want to revisit these preferences noted in this document. This is especially important when you may not have communicated your preferences to your HCPOA. Without a Living Will, the person making health care decisions on your behalf will have to guide those decisions. It’s a significant burden that you will be imposing on him or her so you should make thoughtful decisions. You should speak to both your elder care attorney and members of your family to decide the pros and cons of executing a Living Will, and if one should be included in your plan. Having this important discussion ahead of time will allow you to decide whether or not entrusting family with this decision is a good idea.

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Finally, there is another document called the POLST or Practitioner Orders for Life Sustaining Treatment. Similar to a Living Will, this is also a directive for a specific method of care during the end of life stages; however, a POLST is typically executed somewhat later on than a Living Will might be. They are generally intended for patients who are at risk of a life-threatening clinical event or who may experience a life-threatening clinical event while already under facility care (thus, most facilities have long-term residents sign one upon entry). It is a form made legal with a signature from you (or your agent) and your doctor that is portable between different medical institutions like hospitals and nursing homes, or even to your home, without needing to be changed each time. Every state has its own form, but there is some reciprocity across states. POLST forms are often filled out by a nurse or social worker when someone is admitted to the hospital and the patient is at risk of significant deterioration; this is what makes them so important right now. In June 2020, ventilators have become vitally necessary for many patients suffering from severe cases of COVID-19. At-risk groups such as the elderly or those with underlying medical conditions have difficulty coming off a ventilator, and some people would rather die in dignity than spend weeks or months on a ventilator or other artificial life-extending device. However, if that person does not have proper documentation directing their health providers to follow their wishes—if they don’t tell a doctor or loved one that they don’t want a ventilator—the patient will be put on a ventilator if the situation arises and it is necessary to prolong life.

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When we consider health care documents from these perspectives, it is clear that a lack of articulated intentions results in stress, confusion, and poor health outcomes (where a positive health outcome is measured by patient satisfaction with care as well as physical health). The creation of advanced health directives is an action taken to protect both yourself and your loved ones from unnecessary grief in the future. Planning for incapacity, no matter the source of the incapacity, is a vital part of any sound estate plan that is unfortunately sometimes overlooked until it is too late. The best thing you can do to prepare yourself and your loved ones is speak to a specialized estate planning attorney to implement your own advanced health directives. Rao Legal Group, LLC (“RLG”) is committed to providing comprehensive estate plans which always include advanced health care directives and financial powers of attorney to help you and your loved ones plan for incapacity. We are only a phone call away.

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  1. 1. https://www.hhs.gov/hipaa/for-professionals/special-topics/hipaa-covid19/index.html
  2. 2. https://www.nolo.com/legal-encyclopedia/living-will-power-of-attorney-29595.html
  3. 3. https://www.nolo.com/legal-encyclopedia/living-will-power-attorney-medical-issues-29536.html
  4. 4. “Importance of POLST During the COVID-19 Pandemic” webinar given by Goals of Care Coalition of New Jersey

Getting Documents Signed Amid Coronavirus Precautions

During this time of worldwide uncertainty, many of us are facing huge portions of our lives suddenly being moved online. Telecommuting has proven that we can do plenty of our daily activities from home—but there are still limitations. Historically, the signing and notarization of estate planning documents is not something that can be done without all participants sitting together at a table with the physical documents between them. In many places and for many kinds of documents, this is still true, but remote online notarization is a practice that is gaining more recognition.

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In New York, Governor Cuomo recently signed an executive order amidst coronavirus precautions allowing the use of remote online notarization statewide; this is an unprecedented usage of executive orders.1 Some have called for guidance from the highest state courts regarding this action, seeking assurance that the order will be allowed to stand before its validity is confirmed. At the same time, other states are considering the option to take similar measures in order to respond to the spread of coronavirus worldwide—these orders may have even been signed by the time of this reading.

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For a few weeks, New Jersey lagged behind many states who had already jumped on the bandwagon. Both houses of the New Jersey state legislature debated whether “certain notarial acts” could be performed remotely since mid-March, but it took until nearly a month later for an Act to be signed into law. On April 14, Governor Murphy signed a bill into law that allows for certain kinds of remote notarization during the Public Health Emergency and State of Emergency declared by the governor in Executive Order 103 of 2020.2 Frustratingly, this Act excludes the signing of wills and codicils. However, it is at least applicable for matters such as the creation of HIPAA waivers, healthcare directives, and powers of attorney.3 Firms have developed creative strategies to sign estate planning documents during the past month of waiting to hear whether the bill would pass; now that we have a path forward, we can use remote online notarization in conjunction with these strategies to ensure that we continue to serve our clients’ needs without face to face conference room type meetings.

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Overall, 23 states have approved remote online notarization in some capacity, though the requirements and breadth of this ability differ from state to state. Efforts are underway to establish federally recognized remote online notarization.4 The SECURE Notarization Act is a proposed bill in the Senate that aims to do exactly that, legalizing remote online notarizations nationwide—possibly immediately, should it be passed. Currently, the text of the bill is not available, but a summary of the bill indicates that it will provide minimum security standards for the usage of remote online notarization as well as provide certainty for recognition of online notarization between states. States would continue to have the flexibility to implement their own remote online notarization standards above the federal baseline.

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As with many other things during the unfolding COVID-19 outbreak, the status of New Jersey’s remote online notarization is still uncertain as the situation continues to unfold. If you are concerned about how best to get your documents executed within the state during this time, the best thing you can do is speak to a specialized estate planning attorney who you can trust to evaluate your options and explain what options may potentially be on the way in the coming days to look out for. Here at Rao Legal Group, LLC (“RLG”) we are utilizing phone calls and video conferences to continue to provide our clients with the outstanding service we are known for while keeping the distance necessary to protect our communities. We are available to help you—call us today to learn more about how we can help you prepare for the future at a time when it’s more important than ever to do so.

 

  1. 1. https://www.governor.ny.gov/news/no-2027-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency
  2. 2. https://www.njleg.state.nj.us/bills/BillView.asp?BillNumber=A3903
  3. 3. https://www.njleg.state.nj.us/bills/BillView.asp?BillNumber=A3864
  4. 4. https://senatorkevincramer.app.box.com/s/baz8p9czm0bijkicxbeb7mb7cxby7mio

Spousal Lifetime Access Trusts (SLATs)—How Can They Help?

Chocolate and flowers have been exchanged, dinner reservations have been made and fulfilled, and Valentine’s day has officially passed. However with the end of February approaching, there is more you can do for your spouse than buying gifts or sharing a romantic evening. Although it’s far from a traditional Valentine’s gift, a well-written and up-to-date estate plan is one of the most important ways you can protect your loved ones. There are many estate planning strategies available to help you meet your personal goals, whatever they may be. In the spirit of the time of year, a nice gift exchange between clients and their spouses is a Spousal Lifetime Access Trust (SLAT).

 

So, what is a SLAT? A SLAT is a type of irrevocable trust (that is, a trust that cannot be modified without the permission of the trustees/beneficiaries once it is created) where one of the beneficiaries is the spouse of the creator/grantor. Because they cannot be amended, irrevocable trusts result in some loss of control and flexibility regarding the assets contained within them. However, in exchange, they provide tax savings and asset protection from creditors. A SLAT is a type of irrevocable trust set up by one spouse for the benefit of the other, and it can be a valuable estate planning tool for the right client.

Pros:

  • • Allows the grantor access to trust assets through his or her spouse;
  • • Allows the grantor to be responsible for the income taxes on the interest earned by the assets growing within the trust, thereby avoiding the compressed trust tax structure;
  • • Offers creditor protection to the beneficiaries as assets in the irrevocable trust are outside of the reach of the beneficiaries’ creditors;
  • • Offers protection from children’s potential divorcing spouses;
  • • Drafted properly, assets can bypass the estates of the grantor, the spouse, and the ultimate beneficiaries of the grantor;
  • • Compared to costs associated with defending lawsuits brought by creditors, these trusts are relatively inexpensive to set up;
  • • May avoid state income taxes (if properly set up in specific jurisdictions); and
  • • Use of trust protectors within the trust can provide flexibility to otherwise irrevocable trusts

Cons:

  • • Expensive, especially if established in Asset Protection Trust (APT) jurisdictions
  • • If the spouse passes away, access to trust assets may pass outside the reach of the grantor’s indirect access as the ultimate beneficiaries will now have full control over trust assets; and
  • • Depending on the jurisdiction and when and how the trust is set-up, these trusts may not protect against a subsequent divorce of the grantor

 

SLATs work best for couples with stable marriages, with significant assets, or with asset protection concerns for both themselves and their loved ones and who have no hint or threat of a potential lawsuit or claim either presently or in the imminent future. For those clients, SLATs present a valuable tool to protect the couple’s estates from creditors as well as increase tax efficiency. Additionally SLATs can protect the ultimate beneficiaries (typically the grantor’s children) from their own creditors. With SLATs, as with any other estate planning strategy, the benefits can be lost if they are not drafted by a knowledgeable and specialized estate planning attorney. If you want to find out whether SLATs can help you in achieving your estate planning goals, don’t wait—call us and schedule a time to speak with us today.