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Skilled Nursing at VA Expense

December 26, 2015

by Lawyers With Purpose with One Comment Asset Protection Estate Planning Drafting Software Legal Technical VA

“But I won’t ever need Medicaid. I’ll be in a VA nursing home.” You may have heard this before from a client in your attempts to consider the possible need for Medicaid in a veteran’s estate planning. Hopefully the client will never require skilled nursing care, but the reality is that the VA will only pay for or subsidize veterans who need nursing home care due to a service-connected disability or any vet with a combined service-connected disability rating of 70% or more and who need skilled nursing care. The VA only provides nursing home care for individuals in other categories IF beds and resources are available.

First, what do we mean by skilled nursing care and what exactly is a VA nursing home? Medicare.gov defines skilled nursing care as “Care given or supervised by registered nurses. Nurses provide direct care; manage, observe, and evaluate a patient’s care; and teach the patient and his or her family caregiver.” It goes on to say, “Any service that could be done safely by a non-medical person (or by yourself) without the supervision of a nurse isn’t skilled nursing care.” Title 38, Chapter 1 of the Code of Federal Regulations, which relates to the VA, defines a nursing home as:

(1) Any extended care facility which is licensed by a State to provide skilled or intermediate-level nursing care,

(2) A nursing home care unit in a State veterans' home which is approved for payment under 38 U.S.C. 1742, or

(3) A Department of Veterans Affairs Nursing Home Care Unit. [38 CFR 3.1(z)]

The first type of nursing home is one not affiliated with the VA at all. These are private facilities, and probably the majority of nursing homes in which your clients may reside are of this kind. The second type of nursing home is a state veterans’ home that is owned, operated and managed by the state, but must be formally recognized and certified by the VA on an ongoing basis. The state, however, determines the criteria for admission, even though the facility may receive funds from the VA to help subsidize the cost of care to veterans. The third type is what is commonly called a VA nursing home, even though the VA doesn’t call them nursing homes anymore. The VA introduced the term “Community Living Center” and seeks to make the nursing home as much as possible like a real home.

As stated earlier, only veterans with both a documented need for skilled nursing care and who have a service-connected disability that meets certain criteria will qualify for this care at a VA nursing home at no charge. Veterans with non-service-connected disabilities and veterans with lesser-rated service-connected disabilities can apply as long as they require skilled nursing care, but they may be subject to long-term care co-payments.

There are also some other limitations if your client insists on a VA nursing home. There are far fewer of these than the other types of nursing home, and thus there might not be a VA nursing home in your client’s geographical area. State Veterans Homes are fortunately much more common. You can find a directory of State Veterans Homes at the website of the National Association of State Veterans Homes at http://www.nasvh.org/StateHomes/statedir.cfm.

Furthermore, you can’t just decide you are going to a VA nursing home, even if you believe you meet the level of care and rating requirements. There is a process to be evaluated for VA nursing home care. You must first be enrolled for Veterans Health Benefits, which is another process in and of itself and can include an evaluation of income and assets. For example, veterans with non-service-connected disabilities applying for extended care or the Nursing Home Care Unit may be required to complete the VA Form 10-10EC to determine the family's current income and assets. Then, once enrolled with the Veterans Health Administration, you must then be evaluated by a primary care provider or a geriatric specialist for nursing home care.

Another limitation of VA nursing homes is that they generally only accept veterans and not surviving spouses. Some State Veterans Homes do admit surviving spouses and even parents, but that depends on the state. For example, California has veterans assisted living facilities and skilled nursing facilities that will admit spouses, but California also has aggressive estate recovery policies to recoup state funds used to pay for those facilities. Finally, veterans who qualify for VA nursing home care may not always remain qualified. Veterans may be discharged from a VA nursing home without consent when VA nursing home care is no longer needed; for example, if the veteran's needs can be met at home or in a private nursing home close to the family.

If, despite all these hurdles, your client still wants to explore skilled nursing at VA expense or any other long-term care resources of the VA, visit the VA’s webpage at http://www.va.gov/GERIATRICS/index.asp to find information related to geriatrics and extended care.

As we approach the end of the year, we want to personally tell you how thankful we are to have you as a subscriber of the LWP Connection blogs and newsletter. Whatever the reason is that you stay connected with us each week via email (i.e. substantive law training, marketing assistance, practice management tips)…we are glad you are here

Yet, as you work on your practice goals and plans for 2016, please know that the guidance and mentorship you receive here is only THE TIP OF THE ICEBERG of what we offer at LWP.

We want these same results for YOU in 2016! It’s time to check out what becoming a Lawyers With Purpose Member would look like for you and your practice. If you’re even a little curious about what we offer in the Lawyers With Purpose program and how becoming a member will forever change your practice, you owe it to yourself to spend a few minutes reading through this page: www.joinlwp.com.

Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

I Never Expected This

December 16, 2015

by David Zumpano with No Comment Asset Protection David J. Zumpano Legal Marketing

Recently I finished my first book, “Protect Your IRA: Avoid the Five Common Mistakes.” It was a project I've attempted to do for years, but quite honestly I wasn't prepared for the strategic by-products that came from it. Most interesting was the impact it had on those closest to me – my family – who don't know the details of what I do. They were intrigued by how the book took very complex information and made it simple to understand. After reading it they said, “Wow, I didn't know you dealt with all that stuff.”

The other surprise was how it landed on the professionals I work with. After reading the introduction and closing, they felt as if they were part of the book with me because of the commitment in the book to having professional alliances to help clients attain their goals. Coworkers were also intrigued, and pointed out that as many times as they've heard me say the things that were in the book, they never understood it as a whole, organized in the fashion it was, with such poignant points for clients to understand. In fact, they even suggested it will make them more competent in talking to clients on this very complicated issue of IRAs. Finally, the client’s response after reading it was, “Do I need to get in and get a checkup? Am I all set?”

While this reflection shares the impact my book had on me, the most exciting part is that it can have the same impact on you as a joint author. We've had dozens of attorneys use this book in their community to derive the same benefits and insight that I have been able to derive from it. If you're a Lawyers With Purpose member, and these benefits are something you're looking for in your practice, I encourage you to go to www.lwpirabook.com to find out how you can be a co-author of “Protect Your IRA: Avoid the Five Common Mistakes.” If you aren't a member (this is just one of the hundreds of benefits you do get by being an LWP member) just pick up the phone and talk with Molly Hall at 877-299-0326 x 202 to learn more about becoming a member and launching your book project!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Submitting Medical Expenses to the VA

December 12, 2015

by Lawyers With Purpose with 4 Comments Asset Protection VA

Why submit medical expenses?

When applying for Wartime Pension benefits through the Veterans Administration, the claimant must meet both income and asset limitations. Practitioners focus mostly on reducing assets to qualify; however, the claimant’s income must also meet the income standard. A claimant’s yearly family income must be less than the maximum annual pension rate (MAPR) amount set by Congress for any particular year to qualify. Unlike transferring assets to qualify, a claimant cannot transfer income in order to reduce or eliminate it for VA purposes. Sometimes the only way to reduce countable annual income for a claimant is to provide documentation to the VA of allowable medical and dental expenses to offset that income. Considering how medical expenses play a crucial role is critical to a successful claim.

What medical expenses may be submitted?

Not all medical expenses are considered allowable by the VA. The medical or dental expense must have actually been paid by the claimant or claimant’s spouse and be unreimbursed by insurance or any other source, and it may be incurred by any member of the claimant’s household, and even by non-dependents in some cases. The VA provides the following list of examples of medical expenses that might be considered in their instructions for VA form 21P-8416:

Hospital expenses
Doctor's office fees
Dental fees
Prescription/non-prescription drug costs
Vision care costs
Medical insurance premiums
Monthly Medicare deduction
Nursing home costs
Hearing aid costs
Dental fees
Home health service expenses
Expenses related to transportation to a hospital, doctor, or other medical facility

The VA Adjudication Manual gives a more detailed list of common allowable medical expenses in M21-1MR, Part V, Subpart iii, Chapter 1, Section G.42.c. From the total annual medical expenses that the VA considers, only that part which is more than 5% of the maximum rate of pension for your particular claimant may be deducted from income. Thus, you must always consider this deductible when seeking to offset income with medical expenses. The Lawyers with Purpose VA Qualification Worksheet automatically makes this calculation for you.

The VA must consider all expenses that are directly related to medical care, even though this care does not necessarily have to be provided by a licensed health professional. This applies most notably in the case of home health care when the “VA has rated the disabled person (beneficiary or Veteran’s spouse if the Veteran is dually entitled to compensation of at least 30 percent) entitled to A&A or Housebound,” M21-1MR, Part V, Subpart iii, Chapter 1, Section G.43.d.

When to submit medical expenses

Medical expenses should be submitted to the VA at essentially three different times: at the initial application stage, and once approved, after the end of any particular calendar year and whenever there is a significant change in medical expenses. There are two categories of medical expenses that the VA recognizes: prospective and actual medical expenses that are related to when you submit medical expenses. Pursuant to the VA Adjudication Manual M21-1MR, Part V, Subpart iii, Chapter 1, Section G.44.d, “normally, medical expenses are deducted from an award after the fact, based on the claimant’s report of expenses actually paid. However, under 38 CFR 3.272(g), medical expenses may be allowed prospectively if the claimant is paying recurring nursing home fees or other reasonably predictable medical expenses.” When you first apply for VA benefits, you should submit prospective medical expenses for the 12-month period following the effective date. Unfortunately, nowhere is it defined what is considered “reasonably predictable,” and this determination is left to the discretion of the individual adjudicator. In my firm’s experience, the VA will often not consider prescription costs, incontinence supplies, or over-the-counter medical supplies or medications as “reasonably predictable” recurrent monthly medical expenses.

After approval of VA benefits, all actual medical expenses may be submitted for the VA’s consideration. You have until the end of any year to submit actual medical expenses for the prior calendar year. You only need to submit actual medical expenses each year if you are relying on those actual expenses to offset income. If the recurring medical expenses are sufficient to offset the claimant’s income, there may be no need to update the VA annually regarding actual medical expenses. The only other time you should submit medical expenses to the VA is when these change significantly. An increase in medical expenses may not make a difference in the amount of benefits paid but should be reported to the VA nonetheless. A decrease in medical expenses may mean a reduction or even termination of benefits, thus it is important to notify the VA as soon as possible regarding a decrease in order to avoid a potential overpayment of benefits.

How to submit medical expenses

The main application forms for non-service-connected pension – the VA forms 21-527EZ and 21-534EZ – both have small sections for reporting medical expenses. However, there is one specific VA form used exclusively for medical expense submission: VA form 21P-8416 “Medical Expense Report.” You are, however, not required to notify the VA of medical expenses using this particular form. As long as your submission includes the specific purpose for which the payments were made, the amount paid, the date paid, the name of the provider, and for whom the expense was paid, that is sufficient to constitute notification. Generally the VA will accept notification of medical expenses without supporting documentation like receipts unless the adjudicator has cause to question any of the expenses. For this reason, you should advise your client’s family to maintain records of all medical expenses for at least three years, in case the claimant is ever called upon to substantiate those expenses.

Expected changes for medical deductions

In January 2015, the VA issued proposed changes to the regulations governing deductible medical expenses. Of note, when the rules become “final” (expected in February 2016), the VA will no longer count the fees charged by independent living facilities as deductible medical expenses and will cap the deductibility of home health care at $21 per hour.

Please join Dave Zumpano, Sabrina Scott (Director of VA Services, LWP), Kimberly Brannon (Technical-Legal) and me on Monday, December 14 at 4:00 pm eastern as we have a panel discussion of the 2016 VA changes, VA planning and accept your questions. It is our duty as the leading estate planning attorneys in the nation to be prepared and educated on the VA changes coming in 2016, and we at LWP are excited to make sure all of our members are ready and educated when the changes take place.

Registration Link: https://attendee.gotowebinar.com/rt/8232313303938319617

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC, and Director of VA Services for Lawyers With Purpose.

VA Pension Changes Not Likely To Occur Until Spring: How To Prepare Our Veteran Clients

December 9, 2015

by David Zumpano with No Comment Asset Protection Legal Technical VA

In February 2016, the Veterans Administration was set to enact new rules that will limit the availability of pension resources to thousands of veterans in need of care across the country. The February enactment of the new rules was based on information provided on regulations.gov. However, the most recent insider information suggests that the earliest we may see the final rule announced is Spring 2016. Regardless, changes are coming and as elder care attorneys and strong advocates for the senior community we must quickly align our practices with the new VA rules to provide our clients with the optimum result under the changed rules. Currently, the proposed changes to Title 38 of the CFR, include several items worth note.

First, while the current rules allow a veteran or his widow to exempt “reasonable” land as a home place, whether the veteran or widow live there or not, the new rule will limit the home place exemption to 2 acres or less. This will certainly have an impact on farmers and those living in the more rural areas of the country.

Second, under the current rules, information and regulations regarding the deductibility of independent living facilities is contradictory to say the least. Currently, there is enough indication by the VA that as long as a doctor states that the applicant is in need of custodial care and assistance with at least two activities of daily living, an argument can be made that the independent living facility fees should be deductible medical expenses. Under the January 23^rd changes, this “loophole” will be sealed and no independent living fees will be deductible medical expenses.

And, lastly, and most importantly, the proposed rules impose a 3 year lookback for all transfers made for less than value AND subject the applicant to a penalty period of up to 10 years for said transfers. Among the penalized transfers, transfers to trusts and funds converted to annuities are expected to be included.

Where does this leave us as trust and elder care planners? How do we move forward under the new rules? In order to ascertain the answer to these questions, we must evaluate the proposed rule changes along with the rulings the VA has issued on the availability of trust assets.

Currently, there are a number of VA Office of General Counsel rulings indicating what trust assets are not attributable to the veteran. Among these are trusts in which the veteran is the grantor and trustee, but all current and future interest in trust assets and income vest in the veteran’s child or grandchild (Op. G.C. 5-62 (3-2-62), VAOPGCPREC 73-91 (12-17-91)); testamentary trusts established for the benefit of the veteran over which the veteran has no personal control or discretion (VAOPGCPREC 72-90 (7-18-90)); and, third party trusts in which the veteran is an income beneficiary but all trust corpus vests in the trustee (VAOPGCPREC 64-91 (8-9-91)). Another ruling expressly states that any first party supplemental needs trust established by a competent veteran or his fiduciary will count as an available asset to the veteran (VAOPGCREP 33-97).

To indicate the importance of the grantor-trustee not having the authority to access income for himself personally, we can look to a recent VA decision as a case study. A lawyer filed an income only trust (NOT control only) with the veteran as grantor and income beneficiary in November, 2014. The case was denied almost immediately in December 2014. The basis of the denial, while no law or general counsel opinion was provided, was that all assets in the trust are countable assets because the veteran “receives net income of the trust.”

Where do the new rules leave us as planners? As LWP attorneys, we have an arsenal of trust plans available to assist veterans and plan for future Medicaid eligibility at the same time. First, there is the traditional plan that LWP has recommended for years. The home and land can be placed in a My Income Trust (MIT). The MIT is an irrevocable pure grantor trust in which the grantor maintains control and income. We move the home place into a MIT because it is an exempt resource and a low basis asset, allowing us to keep the step up in basis at death and maintains the lifetime exemption of $250,000 under the IRC Code Section 121 at the sale of the home. When the home is sold, the principal from the sale is owned by the MIT and does not then disrupt the grantor’s benefits eligibility. To be extremely cautious, some practitioners will put language in the MIT stating that upon sale of the home, the proceeds therefrom are to become part of another trust, generally a CGT or TAP, in which other assets are placed. Bear in mind that if the home sits on over 2 acres, any land beyond the 2 acres is not an exempt resource under the new rules. So, in that situation, it may be better to place any land over 2 acres into a trust in which the grantor has no income rights. It is not recommended by LWP that any other assets, other than the home place and up to 2 acres of land be placed in the MIT at this time.

After the home is placed into the MIT, the remaining assets can be placed in a CGT (Completed Gift Trust) or TAP (Tax All Purpose) trust. These are both non-grantor trusts. When dealing with veterans benefits, it is more typical to use a CGT trust than a TAP because the CGT does not include the Crummy Powers and GST language the TAP does, and these inclusions are generally not necessary as a person planning for VA benefits does not generally need the estate tax resources the TAP offers. Placing the liquid assets over $80,000.00 into the CGT will start the lookback period under the new VA rules. The CGT has been used by Victoria Collier, and many members, as a fool proof planning tool for VA benefit eligibility. The grantor is not the trustee, has no access to income or principal and the gift is completed for tax and planning purposes.

Further, it is clear that the rules as written do not exclude us from using a FIT to hold client assets. Well planned use of the Family Income Trust (FIT) should not only get a client on VA benefits, but will also qualify them for Medicaid in every state. The FIT, a control only trust, is a grantor trust used when a client has enough income to live comfortably on. The client can move assets into the FIT and remain the trustee. While the grantor/trustee has complete control over the assets in the trust, he personally has no access to the principal or income from the trust. The grantor can keep the assets within his taxable estate for IRS purposes, but has NO access to the corpus or income from the trust for public benefits planning purposes. While the VA has not appeared to have issued an opinion based directly on the use of the LWP FIT, it is clear their issue has lied 100% with the grantor having access to the income thereby making the FIT (a control only trust) a viable and useful planning tool.

If you're a Lawyers With Purpose member, I encourage you to listen to the webcast Dave Zumpano and Victoria Collier did last week, located on the Lawyers with Purpose website. And, if you're an estate or elder law attorney, please join Dave Zumpano, Victoria Collier, Sabrina Scott (Director of VA Services, LWP) and me on Monday, December 14 at 4:00 pm eastern as we have a panel discussion of the 2016 VA changes, VA planning and accept your questions. It is our duty as the leading estate planning attorneys in the nation to be prepared and educated on the VA changes coming in 2016, and we at LWP are excited to make sure all of our members are ready and educated when the changes take place.

Registration Link: https://attendee.gotowebinar.com/rt/8232313303938319617

Kimberly Brannon, Esq, Legal-Technical and Software Trainer at Lawyers With Purpose

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Finding Balance When Speaking

November 24, 2015

by Lawyers With Purpose with No Comment Asset Protection Legal Marketing VA

I give a ton of presentations on veteransʼ benefits, to both attorneys and the public at large. The presentations range from 15 minutes to three days. Last week I presented at an independent living facility that requested the presentation be limited to 30 minutes, which included time for questions and answers. As I often do, I wondered, “How can I tell them all they need to know in that short amount of time?”

It is about maximizing the time you have. This became very real for me when I was out of town on a business trip and I wanted to get a massage. I usually get a 90-minute full body massage, but the spa only had an opening for 30 minutes. I asked myself, “What is the point?” but I booked the appointment anyway. When I arrived, they handed me a picture of a person and asked me to circle the areas of concentration I desired. I circled my head, neck, shoulders, back, hands and feet (everything but my legs). To my surprise, the therapist did an amazing job, even though she didn't get to my hands and barely touched my feet. A quality massage in 30 minutes could be done!

And so can a quality presentation on VA benefits. The problem is that we want to give the audience the full treatment, leaving nothing unsaid. Instead, dissect the information like a body and circle the most critical areas on which to focus. Focus on those areas first; then, if you have extra time, you can add to the content. If you are short on time, cut out some of the minute details. Leave something for them to ask you or for you to share at a consultation.

After presenting easy-to-understand, complete information in 30 minutes, I had just as many people immediately request an appointment as I do when I speak for an hour. Since time is money, this begs the question: Do I need to speak for an hour? Do I need the 90-minute massage or is 30 minutes enough?

Refine your message, save time, and make more money.

If you have an hour of time on Wednesday, December 2nd at 12 EST, Dave and I will be sharing what we are currently doing in trust planning for VA benefits after the proposed look back takes place. Click here to register now. We'll talk about the transfer penalties for VA claimants expected to be implemented in February 2016. What does that mean for your trust drafting services? Will we need to change the language in our trusts? Or, worse yet, start using totally new trusts? Attend the upcoming VA Tech School Training on December 2nd at 12 EST on Drafting Trusts After the Laws Change.

Seeking Congressional Assistance to Get VA Claim Approval

November 10, 2015

by Lawyers With Purpose with 3 Comments Asset Protection Systems & Processes VA

What is Congressional Assistance?

It has been “X” months since you filed the VA formal claim, and your sole correspondence from the VA consists of periodic form letters apologizing for the delay. Your calls to the VA inquiring about status reveal only that the claim is still pending, but your client is getting exasperated hearing that the average processing time for approving VA claims is less than “X” months.

Congressional assistance is when a private constituent requests a member of Congress to inquire on their behalf in the administrative proceedings of a governmental agency, in this case the Department of Veterans Affairs. The purpose of doing so is to force the VA to pull a specific claim from their backlog and expedite it. The actual result is not always that, it seems. There are reports of success from various internet forums dedicated to veterans’ benefits – people who swear that, had it not been for Senator So-and-So, their VA claim would never have been approved. But there are even more grumblings on the same forums that such congressional inquiries merely elicit a form letter, and then your file returns to the backlog BUT at the end of the queue. This is horrific enough to scare you off from considering making any such inquiries, but at times of sheer desperation it can be a tool to make the VA respond, or to be able to get a copy of a VA response. Then sometimes a client’s family will demand it because apparently it had been done successfully by their hairdresser’s brother-in-law’s grandfather. Therefore, you should be aware of the option of requesting congressional assistance with a VA pension claim, how to do it, and when it may be appropriate to do so.

How do you file a Congressional?

First, you need a member of Congress. Our firm generally uses a senator. I don’t know that there is any advantage to having a senator rather than a member of the House of Representatives making the inquiry. However, you must be aware that not all members of Congress may be receptive to making such inquiries. If their platform and/or expressed political views suggest that veterans’ benefits may not be a priority, you may need to approach with caution. Most members of Congress have websites that post information for the types of assistance they provide. Members of Congress who do count a large number of veterans among their constituents may even regularly reach out to explain what specific services they can provide for them. This assistance generally requires a privacy release form that must be signed by the veteran or other type of claimant so the VA will release information to the congressperson’s office.

Our firm sends the privacy release form with a letter requesting assistance on behalf of our client, and includes a timeline of the claim highlighting any major dates relevant to the claim process. We also mention in this letter any circumstances that may merit that the claimant’s request be considered with utmost urgency. This would include statements, if applicable, as to the claimant’s terminal condition, advanced age, and/or financial hardship. Once their office files the inquiry with the VA, that agency must respond within a certain amount of time, even if it is just a form letter apologizing for the delay. The congressperson’s office generally then forwards a copy of the VA correspondence to the claimant.

When do you file the Congressional?

This is the hardest question to answer, and the only quick and easy way to do so is as follows: It depends.

You may be pressured by your client to file a request for congressional assistance at any point after submitting the formal claim, when presumably the VA should have everything it needs to decide the claim. Your client can also certainly request assistance on their own without your firm’s involvement. However, given the mixed results, I would recommend that you consider it primarily as a last resort, meaning you should exhaust all other means first, like calling the VA for status inquiries and to follow up on submitted requests to expedite a claim due to terminal condition, advanced age and/or financial hardship. You also need to decide, given the average amount of time it is taking for the VA to process your firm’s claims, at how many months you are going to seriously consider requesting congressional assistance.

Our firm currently uses the one-year mark after filing a formal claim to start considering this option, but this is subject to change as we see claim processing times change over the years. Bear in mind that processing times vary regionally, and that overuse of your local congressperson will not earn you much love from his or her office. Reserve the request for congressional assistance for those VA claims that truly seem to have dropped off the face of the earth, or for those claimants who may end up in extreme financial straits or who for medical reasons may not survive to receive the benefits to which they are entitled unless they are awarded right away.

Lawyers With Purpose is offering a FREE Webinar on Wednesday, December 2nd at 12 EST on "Trust Planning for VA Benefits After the Proposed Look Back Takes Place" – click here to register now. Transfer penalties for VA claimants are expected to be implemented in February 2016. What does that mean for your trust drafting services? Will we need to change the language in our trusts? Or, worse yet, start using totally new trusts? Attend the upcoming VA Tech School Training on 12/2/15 on Drafting Trusts After the Laws Change and find out! Register today as we have limited space!

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC, and Director of VA Services for Lawyers With Purpose.

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Protecting The Home When Medicaid Planning

October 26, 2015

by David Zumpano with No Comment Asset Protection Estate Planning Drafting Software

Many people who are seeking to qualify for Medicaid are concerned about protecting their assets from long-term care costs. For most people, their primary asset is their home. So what are the options to protect it when considering Medicaid planning?

First and foremost, it is essential to be clear that Medicaid law provides that the home is an exempt asset from being included in determining one's eligibility for Medicaid. A core distinction comes into play, however, when considering whether the Medicaid applicant is married or single. If married, the Medicaid law provides that any transfer between spouses is permissible and does not trigger any ineligibility. Therefore, if a husband and wife own a home, and one of them goes into the nursing home, the nursing home spouse can convey their interest to the community spouse and no penalty will result, and the house will remain exempt under the community spouse's exemption. The question as to whether Medicaid can access the equity in that home after the death of the community spouse is a question of who dies first – the institutionalized spouse or community spouse.

The bigger challenge, however, is in protecting the home for single applicants, or after one of the spouses has entered a nursing home or dies, thus leaving the remaining spouse single. Accordingly, there are additional challenges for single individuals who own a home. While the home is exempt in determining eligibility for Medicaid benefits, it is not exempt from estate recovery for single Medicaid recipients. So, for single people or those who are married, with one spouse at a nursing home, the mechanism to protect the house requires an outright transfer of it to ensure its protection. Retention of the house by a single individual subjects it to estate recovery after death, thus delaying the loss, but not eliminating it. The question as to whether a house is subject to estate recovery is dependent on each individual state, estate recovery rule and Medicaid.

The next challenge is, if a single individual or the community-based spouse transfers the home to a third party or irrevocable trust, it will trigger an "uncompensated transfer" and lead to a period of ineligibility. The period of ineligibility depends upon the value of the conveyed house divided by the regional divisor (the average cost of one month of nursing home care in the region).

For example, a $200,000 house conveyed away in a jurisdiction where the regional divisor is $10,000 would create a 20-month ineligibility period. In order to mitigate this penalty period, one may consider transferring the home and reserving a life estate. By reserving a life estate, the underlying transfer is reduced by the value of the life estate. For example, transferring the same $200,000 house and reserving a life estate to an individual who is age 72 provides for a .2369 interest being retained. In this case, the remainder of .7134, or 71 percent of the $200,000, is deemed to be the uncompensated transfer (S. 142,680). By reserving the life estate, this particular client will have reduced the penalty period by 5.73 months (penalty of 20 – new penalty of 14.27). Obviously, reserving a life estate provides for a discount in the uncompensated transfer, which in most states disappears at death because there will be no value to the life estate as it extinguishes at death. Some states have begun pursuing life estates after death. For example, in Ohio, the discount really has no advantage because the state could pursue the remaining beneficiary for 5.72 months differential.

The question of how to protect the home is prominent in most people's goals. Another way to protect the home is to sell it. The question is how best to do it to achieve the best result in the shortest period of time. Utilizing the LWP Medicaid qualification software will allow you to determine the best approach and the cost benefit analysis on each choice you make. If you would like a free demo of our estate planning drafting software, click here now to schedule a call. We'll show you first hand how it can help you grown your estate or elder law practice.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Can A Grantor Be Trustee Of His Irrevocable Trust?

October 21, 2015

by David Zumpano with 8 Comments Asset Protection Estate Planning Drafting Software

Many lawyers shudder at the idea of allowing the grantor of an irrevocable trust to be the trustee. But the primary reason for this fear is long-rooted in traditional estate tax planning principles. Particularly, § 674 of the Internal Revenue Code provides that any trust wherein the grantor retains the power to control the beneficial enjoyment of the income or principal of the trust will make all of the income on that trust taxable to the grantor, and Internal Revenue Code § 2036 provides that any trust where the grantor retains the right to possess or enjoy the property or designate who will possess and enjoy the trust property will make the principal of the trust includable in the grantor's estate at death for estate tax purposes. Prior to 2001, irrevocable trusts were predominantly utilized for estate tax protection. Triggering code Section 2036 would violate estate tax planning goals.

However, after the Tax Act of 2001, wherein the estate tax exemptions were increased to in excess of $5,000,000, the traditional tax planning rationale was no longer valid. Currently, the estate tax rule is triggered only on individuals who have assets greater than $5,430,000, and on married couples who have twice that amount. Recent statistics indicate that only two in 1,000 Americans have assets that exceed the federal estate tax exemption limits, which represents .2 percent, leaving 99.8 percent of Americans without an estate tax concern. The key question is, why do lawyers continue to hold 99.8 percent of clients prisoner to the rules meant for the .2 percent?

The Restatement Second of Trusts § 99 – and the cases cited thereunder, particularly Markham v. Faye, 74 F.3d 1347 – clearly states that creditors can only access the assets of a trust to which the grantor has retained rights. The question as to what rights the grantor has to access income or principal is a designing issue related to the beneficiary designations in the trust, not the trustees. The Baldwin case goes on to clarify that a grantor, as trustee, has the same fiduciary duties to the beneficiaries as any other trustee. Restatement Second of Trusts § 266 and the cases thereunder further clarify that it is well-established law that assets of a trust are not subject to personal claims against the trustee, even if the liability arises out of his trustee capacity. Further, Restatement Second of Trusts § 170 provides that a trustee is prohibited from self-dealing or acting in his or her own best interests. Nothing in the law is better settled than the provision that a trustee may not advantage himself or herself in dealings with the trust estate. Gibson v. Sec. Trust Co., 107 F.Supp. 766. A grantor's creditors are only entitled to income or assets available to the grantor, as is well-established under Uniform Trust Code § 505, and as further clarified under the Restatement Second of Trusts § 156. So in order to properly provide asset protection, the trust by its terms must prohibit distribution of the principal and/or income to the grantor, and no discretion shall be permitted to the trustee or anyone else to distribute it to the grantor. This will ensure asset protection.

The key question then becomes what the grantor is seeking protection for. If one wants to protect income and principal, then no benefits should be retained, but the right to be trustee is still permitted. The only adverse consequence is that all of the income is taxed on the personal income tax returns of the grantor, and they are responsible for the income tax on the trust income. Further, all of the trust principal is included in the estate of the grantor at death, but for the 99.8 percent of Americans who are not subject to estate tax, this is not an adverse result; in fact it's usually a preferred result. If there is any question as to whether the grantor has the ability to pay the income taxes, then the trust can contain a provision that allows the trustee to pay any income tax due to the taxing jurisdiction exclusively (not the grantor) by reason of the inclusion of the income from the trust on the personal tax return of the grantor. This restricts distributions to the grantor, and only allows the trustee to distribute to the taxing jurisdiction, and only as to the income tax caused by the inclusion of the trust income on the tax return of the grantor.

The key benefit of letting the grantor be trustee, and the one most important to clients, is maintaining control. Most people who have worked their whole lives accumulating assets are not ready to just turn them over to the kids or other third parties. Doing so not only puts the assets outside of the control of the grantor, but it also creates a risk of losing the assets to the creditors, predators, and lawsuits of the individual to whom they are transferred. Nothing could have a more adverse impact or be a greater risk to a client than that. Whereas the ability to control the assets, and to continue to manage the investments of the assets and keep them in the form they are currently in or change them as they desire along the way, is one of the greatest benefits to grantors when serving as trustee of their irrevocable asset protection trust. All of these provisions are permitted in the Lawyers with Purpose iPug® Trust system. The iPug Trust system monitors all of the various legal provisions to ensure the trust being utilized is proper to benefit clients in the ways they desire. So being a trustee and grantor of your trust does not subject it to risk. There is no legal authority anywhere that indicates being a trustee of your own trust makes it subject to your creditors. There is an entire line of cases where courts have invaded trusts where the grantor is the trustee, but in every case it is due to the grantor's “fraudulent conveyance and management” of the assets where the trust was invaded, not because the grantor was trustee. So, be informed and be conscious of your clients' needs, and share with them the many advantages of having them stay in control of their assets.

If you want to learn more about iPugs and in particular about iPug business planning, register for our FREE webinar this Tuesday at 4 EST. Click here to register now and check out the bullets below for just some of what you'll discover…

Learn the difference between General Asset Protection, DAPT Protection, Medicaid Protection and iPug® Protection
Comprehensive outline of the 2 primary iPug® Business Protection Strategies
Learn why clients choose single purpose Irrevocable Pure Grantor Trusts™ over LLCs
Learn how it all comes down to Funding
And much much more…

Just register below and reserve your seat… it's 100% FREE!

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Distinguishing Between Irrevocable Trusts When Planning for Public Benefits

October 19, 2015

by David Zumpano with 2 Comments Asset Protection Estate Planning Drafting Software

A question comes up for many practicing lawyers and allied professionals as to what trust to use when clients want to protect their assets and ensure eligibility for Medicaid and other needs-based benefits, should the need for long-term care arise. The Irrevocable Pure Grantor Trust (iPug®) has long been a trust of choice in providing clients with the most flexibility, the greatest protection and the greatest amount of control. Understanding the distinctions between the various iPug Trusts, and how to use them to accomplish your client's goal, is essential.

There are three iPug protection trusts utilized for clients, and each of them are Medicaid compliant, ensuring the assets within them are not considered available resources in determining their eligibility for Medicaid benefits.

The three iPug Trusts are the MIT, the FIT and the KIT. Let's cover each of them separately.

The MIT, My Income Trust, is an income-only trust that allows the grantor to be the trustee to manage and distribute the assets as the grantor desires, other than to themselves or their spouse. Under Medicaid law, any trust created by an applicant or a spouse shall be deemed an available resource to the extent the applicant or spouse is able to benefit from it. That's why it is essential in all three trusts that the grantor does not have access to the principal directly or indirectly by any means.

For example, the court in Doherty held that a trust that contained the provision that allowed the trustee to terminate the trust if they deemed it appropriate and return the trust to the "beneficiary" was an available resource because, even though the trustee did not terminate the trust, the authority for them to do so would have resulted in the assets being re-conveyed back to the grantor. This incidental approach was enough to have it be considered an “available resource.” That's why it's essential that attorneys be certain that within the four corners of the trust document, there is no authority in any person or any condition which could occur so as to permit the grantors to access principal.

The Doherty discussion has no impact on iPug Trust use because iPug protection trusts have long stated that if the trust is terminated for any reason, the proceeds go to the "remainder" beneficiaries. This is an example of how to ensure that there is no way for the trust assets ever to get back to the grantors. iPug Trusts also permit the grantor the power to change the beneficiaries of the trust and the time, manner and method of distribution of trust assets at any time but without the right to change it back to the grantor or their spouse. This gives the client the maximum control available under the law. While the grantor as trustee and the retained powers and protection for beneficiaries are unusual to all iPug Trusts, let's examine the distinctions between these iPug Trusts. The MIT permits the grantor to retain a right for their life to the income from the trust. This ensures that the grantor can still control all of the assets and retain all of the beneficial interests from the assets, such as the interest on the bank income and the dividends from the brokers' accounts and right to live in or use the trust real estate, all without subjecting the assets to risk, and ensuring the assets are not included as an available resource in determining Medicaid benefits. The second iPug Trust is the partial MIT, wherein the grantor retains a right to only part of the income, not all of it. In that case, only the income right retained will be at risk to creditors, predators, and long-term care costs. The MIT is commonly referred to as the income only version of the iPug.

The second trust in the iPug trilogy is the control-only version, which is known as the Family Irrevocable Trust (FIT). In the FIT, the grantor retains all the rights to control and manage the assets, and has full 100 percent authority to distribute the assets to anyone they determine other than themselves or their spouse during their lifetime, but the grantor retains no right to the income or principal. The primary use of a FIT is when the client does not need the income from their assets to maintain their lifestyle because they have sufficient other income to meet their needs. The predominant benefit to the FIT Trust is allowing the grantor to remain in full control of their assets and to distribute them to the beneficiaries they choose, when they choose to distribute them (during life or after death).

In addition, the assets accumulated and held in the FIT can be held and delivered to the beneficiaries at a "step-up" in tax basis at death, which ensures the beneficiaries inherit it at the tax value as of the date of death. This will eliminate any capital gains tax to the beneficiary if they were to sell it. [All iPug Trusts ensure the assets transferred to the beneficiaries after the death of the grantor can continue in an asset protection trust for the beneficiaries for their lives, wherein the beneficiaries can have full control of the trust and full rights to the income and principal of the trust. But creditors, predators, and lawsuits will not have access to it, nor will the principal of the trust be considered an available resource for the beneficiaries' Medicaid intentions and it will not be considered a resource for purposes of the application for financial aid for children who may be in college.] The FIT is a great trust for clients who are successful and no longer need the benefits of their money but want to continue to manage and grow it during their lifetimes for their beneficiaries.

Finally, the third trust in the iPug trilogy is the KIT, this is the Kids Irrevocable trust. This trust is typically utilized to undo improper transfers done by the grantor during their lifetime. Many times clients come to attorneys having already transferred the farm to the kids. Transferring this farm or other assets such as bank accounts or brokers' accounts not only puts the assets outside the reach of the grantor's control, but more horrifically, subjects them to the risk of the transferees' creditors and predators. For example, if the child of the grantor who received the asset got divorced, died, got sued, or went bankrupt, the very assets transferred to the child by the parent will be subject to those liabilities, thereby putting at risk the parent who initially transferred them. The way to protect assets already transferred to third parties is to use the KIT. The KIT is an irrevocable trust created by the children who receive the assets, who then agree that, during the lifetime of their parent(s), they give up all right to control and access to those assets, so as to ensure they are protected from their creditors and predators at least during the lifetime of the parents. A properly drafted KIT will also ensure that the assets are protected after the death of the parents and are given back to the kids in a separate share MIT or FIT, depending upon the individual goal of each child. LWP is the only organization in the industry that provides a KIT trust that permits this type of drafting. The Kids Irrevocable Trust is also a usable tool when doing planning to ensure that a client is eligible for veterans aid and attendance and housebound pension benefits.

So utilizing irrevocable pure grantor trusts is essential in today's estate planning environment. The use of MITs, FITs, or KITs further distinguishes your skills as an attorney to meet the individual needs of clients. The LWP iPug Trust Drafting system carefully identifies each of these trusts and triggers warnings and instructions when choices are made that can be better served in one of the other trusts. Don't go it alone. Trust the technology and support LWP gives you to provide the best options for your client. To request a complementary live demo of our Drafting Software, click here now.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

WEBINAR: Turning a Death Benefit Into a Life Care Benefit

October 13, 2015

by Lawyers With Purpose with 2 Comments Asset Protection

Too often seniors who own life insurance policies will surrender them or allow them to lapse without realizing they can access a higher conversion value that can be used to pay for long-term care supports and services. Many policy owners who are getting ready for long-term care face tough choices about their policy – can they afford to continue paying premiums, and how will the policy affect Medicaid eligibility? Many are forced to abandon their policies despite having made premium payments for years.

But there is a better option for a life insurance policy – converting it into a Long Term Care Benefit Plan. More and more elder law attorneys are coming to realize this is a viable option for clients in search of funding options for senior care. Instead of abandoning a policy they have been making payments on for years, they are selling the policy into a tax-free benefit** account that is both Medicaid and VA Aid & Attendance qualified.

The range policy owners can receive is 20%-60% of the death benefit, and their money goes into an irrevocable, FDIC-insured account that makes monthly payments directly to any form of senior care they choose. If their needs change, the account can be adjusted to pay for escalating costs and/or changing care providers and environments.

Any form of life insurance policy is eligible to be converted, including term, whole, group and universal life policies. To qualify, the policy must have a minimum death benefit of $50,000 and the insured must have an immediate need for care (typically within 90 days or less from time of enrollment). Think of a Long Term Care Benefit Plan as the opposite of long-term care insurance. To buy long-term care insurance, you must be young and healthy. To convert a life insurance policy into a Long Term Care Benefit Plan, you must have an immediate need for care (the older and sicker you are, the higher percentage amount you will get for the policy) and the in-force policy can't be less than $50,000 of death benefit.

As an alternative to abandoning a policy for little to nothing in return, converting a life policy into a Long Term Care Benefit Plan provides the highest possible value in the form of a protected account that is tax-advantaged as well as Medicaid and VA qualified.

Please join Victoria L. Collier, along with Chris Orestis of Life Care Funding on Thursday, October 15th at 3:00 EST to learn more about this option for clients in search of funding options for senior care. Click here to register now for this FREE WEBINAR.

** Please note that the actual tax treatment of the proceeds from the sale of a life insurance policy will depend on many factors, including but not limited to who owns the policy, the health of the insured, the use of proceeds, the size of the estate and the state in which the policy owner lives (for purposes of state taxation). This material does not constitute tax, legal or accounting advice, and neither Life Care Funding, LLC nor any of its agent, employees, or representatives are in the business of offering such advice. The information above cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. Anyone interested in selling a life insurance policy in order to fund Long Term Care Benefits should seek professional advice based on his or her particular circumstances from an independent tax advisor.

Roslyn Drotar – Lawyers With Purpose