GeriLaw | Robert Fleming, Tucson elder law attorney, and colleagues

Family Generosity and the Gift Tax

A recent New York Times article highlighted the potential gift tax implications for baby boomers who are subsidizing parents or less fortunate siblings.  Most gifts can easily fall within the donor’s annual gift tax exclusion of $12,000 in cash or other assets per donee.  There is also a lifetime exemption of $1 million ($2 million for married couples) before a 45 percent gift tax applies. 

There are several strategies that donors can use to assist family members without paying gift tax:

• Maximize use of the annual exclusion.  You can do this by writing a check, but you can also put assets (including income-producing assets such as bonds or shares of a closely held company) into trusts for the benefit of the family members.   You can also use Section 529 education savings plans to assist siblings burdened by the costs of their children’s education.

• Pay medical and educational expenses for the family members.  You do not need to use your annual exclusion to pay for these expenses, but you must pay them directly to the providers of the services.  This strategy can be helpful with regard to elderly parents.  You can pay for anything that the parents would be allowed to deduct on their income tax returns as an unreimbursed expense.  This includes home-care attendants, medically necessary home improvements, or part of the parents’ long-term care insurance premiums (up to $3,080 for someone 61 to 70 years old, and up to $3,850 if over 70).

• Employ family members.  You can employ family members to provide such things as child care, managing real estate, or handling the books, but the compensation must be reasonable (what you would pay a stranger for the same work).

• Lend and borrow money.  This requires the same formalities of a loan from a bank, but you must use the applicable federal rate.  This is a minimum interest rate set by the Treasury each month.  You could also borrow money from family members and pay them more interest than they could receive from money markets or bank certificates of deposit.  You should probably pay what a bank in your area would charge for a comparable personal loan.

• Make a family member your dependent.  You must pay at least 50% of that person’s support, but this is not available if the person’s gross income is more that $3,400 per year.  Required withdrawals from IRAs and 401(k)s count toward this income limit, but Social Security does not.  If you are able to claim a relative as a dependent, then you can deduct the dependent’s unreimbursed medical expenses above the 7.5% of adjusted gross income floor.

• Provide a safety net.  If family members are depending on you for assistance, then you may want to make sure you have life insurance in place or include them in your estate plan  just in case something happens to you.

Andrew Hook
Oast & Hook
www.oasthook.com

Using Your Power of Attorney

One of the most frustrating experiences for the clients of elder law attorneys can come when a properly prepared and completely valid power of attorney is rejected by a bank, brokerage house, insurance company or other financial institution. Clients (and, more to the point, their spouses, children or other agents named in their powers of attorney) frequently call to report that "mom's bank says I can't use the power of attorney because it's not on their form."

This common problem is the topic of this week's Elder Law Issues article at the elder-law.com website. This (blog) setting allows us to collect stories from readers who have had similar problems, and it allows us to invite -- and share -- solutions from other contributing lawyers (and agents who have successfully dealt with the problem).

Under the law in most states, a financial institution can not be compelled to honor a power of attorney. In some states, however, there is authority for an action against an uncooperative bank -- though the damages may be limited to a court order requiring the bank to accept the document. Of course, one of the primary reasons clients sign powers of attorney in the first place is to avoid the cost and hassle of court proceedings, and when court involvement is required to enforce the power of attorney -- well, the whole point of simplicity and ease of administration can sometimes be lost.

Who are the culprits? Over the years it has been our experience that most brokerage houses have become comfortable with powers of attorney -- at least those drafted by a lawyer. Sometimes the lawyer may be asked to sign an affidavit that the document was properly signed, and that the lawyer is unaware of any revocation of the power of attorney; most attorneys are happy to sign such an affidavit on request (assuming, of course, that those assertions are correct).

Insurance companies may be somewhat less likely to accept a power of attorney, though that may be appropriate. Changing beneficiaries on an insurance policy may be outside the scope of the agent under most powers of attorney. The other kinds of things an agent may be trying to accomplish with an insurance company might include: (a) cashing in an annuity, or an IRA or tax-qualified retirement plan, or (b) converting an existing life insurance policy to paid-up status, or transferring ownership to the owner's living trust, or making other administrative changes to a policy. In most cases, insurance companies eventually bring themselves around to an appropriately cooperative position.

Other financial institutions may present special problems. Title insurance companies often resist transfer of real estate interests using a power of attorney, though this problem seems less common in recent years. If you want to use a power of attorney to transfer U.S. Government securities -- well, good luck.

That leaves banks. Oddly, the most recalcitrant banks seem to be the largest ones. You might assume that a larger bank would have access to good -- and responsive -- internal legal advice, and resources that let the teller figure out what local law and practice require. You'd be wrong. The very worst banks to deal with (in our experience, anyway)? Well, think stagecoaches. And San Francisco. And Italian heritage. That's two banks, if you're having a hard time counting.

Why do banks resist accepting powers of attorney? The answer is speculative, and tinged with cynicism. As the banking industry has become less personalized and more, well, impersonal, it seems to have come to rely on untrained, short-term and high-turnover staff. Rather than try to train, retain or support front line bank employees, the big organizations seem bent on reducing every policy to the simplest and most enforceable answer. That means the "answer" is usually: "no!"

Bank legal departments used to be a good resource for customers and their lawyers. No more. National banks do not like to acknowledge the existence of a legal department, and it is virtually impossible to ever get to talk to even a receptionist in the in-house legal offices they do maintain. When, by begging, flattering, cajoling and threatening, you finally get to talk to the "legal department," it almost always amounts to a trainee legal assistant who seems never to have met a lawyer, either professionally or socially.

So banks tend to insist on the use of their two-paragraph "powers of attorney," sometimes referred to as their "short-form" or "signature card" powers. There is nothing in the law of any state requiring anyone to rely on those documents, of course -- but that doesn't stop the banks. Those are the forms they are most familiar with, and the training curve is very simple if you only accept one, standardized document as a power of attorney.

Related to this phenomenon is the growing practice by some banks (and a handful of other financial institutions) to rely on their own playbooks for other legal proceedings. Death in the family? Produce "letters testamentary" (forget that your state may not use that language -- that's what the playbook written in North Carolina, or Missouri, or wherever, says to ask for). Does your state have a "small estates affidavit" procedure to avoid the necessity of probate proceedings (and, therefore, the issuance of "letters")? Don't expect anyone except at the highest echelons of the bank to have any idea what you're talking about. You have the "letters of personal representative" (that's what we would call them in Arizona)? Oh, good -- but you'd better have a certified copy of the death certificate, too. What, you say? It's impossible to get a probate started on a living person? Of course it is -- but the bank's playbook says you need to prove the death to the bank, too. It's not good enough to satisfy the probate court that the account owner is deceased.

We could go on and on. Perhaps, if there are comments, questions or an invitation to tell horror stories, we will. But the bottom line is this: dealing with banks, and sometimes with other financial institutions, can be difficult and even sometimes nearly impossible. Despite the best efforts of legislators to simplify the probate process, and to provide for non-court alternatives like powers of attorney, the frustrating reality is that in recent years it has gotten harder, rather than easier, to get even simple financial transactions completed when you are dealing with an incapacitated or deceased account holder. We wish it wasn't that way, and that we didn't spend so much of our time dealing with this frustration, but the only way we see to fix the problem is to buy a bank. Sadly, we're a little short of pocket change just now.

Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com
www.specialneedsalliance.com

Psychiatric Advance Directives by Thomas D. Begley, Jr.

 by Thomas D. Begley, Jr.

 

Psychiatric Advance Directives (PADs) are legal documents similar to advance directives given in connection with end-of-life decision making. However, PADs are used to give instructions with respect to preferences for future mental health care treatment. They can also be used to designate a proxy decision maker. A number of states have enacted PAD legislation.[1] In some states, such as Wisconsin, a Power of Attorney may not be used to authorize mental health treatment. 

Frequently, PADs are used to request or refuse specific treatment, such as any types of medication and other mental health interventions, use of physical and chemical restraints, release of information for treatment, participation in clinical trials of experimental treatments, hospital selection, and other directions to manage the person’s routine responsibilities.

 Advantages of Advance Directives

The advantage of a PAD is that the individual can assume control over future health care treatment decisions. They are useful in communicating preferences to family members and providers. They may also facilitate appropriate and timely treatment interventions before situations deteriorate to emergency status. Utilization of PADs may lead to a reduction in adversarial court proceedings involving involuntary psychiatric treatment. Some states do not allow agents to make decisions in regard to psychiatric care; instead, court proceedings are necessary if the treatment is not voluntary.

 Legal Capacity

There are two points in the PAD process in which legal capacity is an issue:

1,  Execution. At the time the individual drafts and signs an advance directive, the person must be competent. Most states presume that persons are competent at the time the advance directive is executed. Also, most state statutes require that the PAD be signed by two adult witnesses who attest the person’s capacity at the time the instrument is drafted.

2.  Utilization of Document. At the time the document is used for health care or psychiatric decisions, the person must be incompetent to make those decisions for him or her self. Some states require that a court make capacity determinations at the time the PAD is utilized. Other states, such as Oregon, provide that determinations may be made by either a judge or two physicians. Since one of the goals of PADs is to avoid court involvement, the Oregon approach is preferable.

 Refusal of Treatment

There is a controversial issue concerning the use of PADs to refuse all treatment. Most state laws provide that an individual may use a PAD to consent or refuse psychiatric treatment.

Override

Under what circumstances can a PAD be overridden? There have been no court decisions yet on when a PAD may be overridden, but it is likely that a PAD authorizing treatment refusal would be overridden if the individual was determined to be dangerous to him or her self or others.

 Revocation

So long as an individual is competent, he or she clearly reserves the right to revoke a PAD.  If the individual is actively symptomatic and in need of treatment, the issue becomes murky.  A court hearing may be required in individual cases.

The National Alliance for the Mentally Ill (NAMI) suggests that an “Ulysses clause” be considered. Under a Ulysses clause, an Advance Directive instructs treatment providers about specific treatment preferences, and explains that any statements made refusing treatment during periods of incapacity should be ignored.[2]

 Interest in Advance Directives

A recent study of mental health consumers in public health treatment settings (in five states) showed that only 4% to 13% have completed a PAD. However, between 66% and 77% of those consumers say that although they currently do not have a PAD, they would want to complete one if they had the necessary assistance.[3] The study showed that there were likely to be more interest in PADs when the following factors were present:

 •  Past adverse experiences with treatment pressures

 •  Social disempowerment

 •  Degree of insight into their illness and need for treatment

 •  Existence of social resources, including marriage

 Registration

New Jersey is in the process of establishing a registry where PADs can be registered. Vermont and Washington State have established registrations for all advance directives through the US Living Will Registry.[4]

 

 

Thomas D. Begley, Jr., CELA

 

Begley & Bookbinder, PC

 

ATTORNEYS AT LAW

 

COMMITTED TO EXCELLENCE

 

 

Specializing in Elder & Disability Law

 

www.begleylawyer.com

(800) 533-7227

 

---

[1] Alaska, Hawaii, Idaho, Illinois, Maine, Minnesota, New Jersey, North Carolina, Oklahoma, Oregon, South Dakota, Texas and Utah.

[2] Advance Directives by Ronald S. Honberg, www.nami.org.

[3] Psychiatric Advance Directives Among Public Mental Health Consumers in Five

U.S.

Cities: Prevalence, Demand, and Correlates.

[4] www.USLivingWillRegistry.com

Elective Share and Separate Property

A recent Fairfax Circuit Court case highlights the need for premarital or marital agreements for blended families.  In Higham v. Williams (CL2006-11954, March 28, 2008), the husband and wife maintained separate property throughout their marriage.  The wife died, and the husband filed an elective share claim against her estate.  The wife’s estate claimed that the parties maintained separate property so that they could leave their property to their respective children from previous marriages.

The husband and wife did not have a premarital or marital agreement that would prevent either party from electing a marital share of the other spouses’ property.  The husband asserted that the court could not deny his elective share claims in the absence of such an agreement.  The court  agreed with the husband’s position, and held that it could not impose a premarital or marital agreement on the parties that waives the right of each spouse to claim against the estate of the other spouse, when the spouses did not make such an agreement themselves.  The court could not impose such an agreement even though there may be concerns of fairness to the wife’s two children and one grandson.  The court also considered which of the wife’s assets should be included in the augmented estate, and which assets should be excluded.

Andrew Hook
Oast & Hook
www.oasthook.com

SOCIAL SECURITY EARLY RETIREMENT DECISION CAN BE REVERSED

The attorneys at Oast & Hook are often asked, “When should I start claiming my Social Security benefits?”  Many baby boomers are facing the trade-off of claiming Social Security benefits early and receiving a lower benefit, or waiting until full retirement age or later and receiving a significantly higher benefit.  A recent article in USA Today highlights this trade-off, and discusses a little-known option that allows retirees to have the best of both worlds.

Those who claim their Social Security benefits at age 62 can retire at an earlier age, but they will receive a reduced benefit that may be insufficient later in life.  Waiting until full retirement age (age 66 for baby boomers who turn 62 this year) will result in increased monthly payments, but many boomers will therefore have to work longer.  This can be a problem for workers who dislike their jobs or want to spend more time with their families.

Most retirees don’t realize that if they claim early retirement benefits, they can later change their minds.  Mary Jane Yarrington, senior policy analyst for the National Committee to Preserve Social Security and Medicare, states that those who receive early retirement Social Security benefits can withdraw their applications, repay the benefits they have received, and file for benefits again at a later date.  This strategy will work if the retiree has saved enough money to repay the benefits, and the retiree will not have to pay interest on the benefits received.  Retirees electing this strategy could fare better than if they continued to receive the reduced benefits. 

In one example, a 70-year old retiree claimed early retirement benefits and receives $11,556 per year.  If this retiree had waited to file at age 70, then she would have received $20,000 per year.  If she wanted to withdraw her application and reapplied for benefits at age 70, then she would have to repay $79,305 (interest-free), but she would raise her standard of living by 14%.  In this example, this strategy would provide the retiree the equivalent of an inflation-indexed annuity.  This strategy is well-suited for people who took early retirement, are unhappy with that decision, and want to increase their benefits.

The strategy is not without risks.  There is a chance that the government could change the rules and eliminate the option to reapply.  Claiming early retirement benefits could also put the spouse at risk.  If the higher-earning spouse takes early retirement benefits and dies before withdrawing and reapplying, then the surviving spouse would receive reduced survivor’s benefits for the rest of his or her life.  If the higher earning retiree dies soon after repaying the benefits, then he or she would not recoup their investment; however, the surviving spouse would receive the higher survivor’s benefit.

Retirees interested in repaying and reapplying for benefits, can visit their local Social Security Administration office, or phone 800-772-1213 and make an appointment.  They will need to fill out Form 521, available at the Social Security Administration’s website, www.ssa.gov.  If the retiree’s spouse is receiving benefits based on the retiree’s earnings record, then the retiree must obtain the spouse’s consent before the application can be approved.

Andrew Hook
Oast & Hook
www.oasthook.com

R.I.P. Wyatt E.T. Fleming

Wyatt Earp, a Welsh Corgi, was nine when he first came to work at Fleming & Curti. He was a rescue dog of sorts -- his owner had gone into the nursing home, and we had represented the owner's daughter when she had to establish a guardianship, and when she asked what she was going to do with Wyatt ... well, you can correctly guess the rest of the story.

Wyatt died Monday, May 5, 2008, at the age of 13. He will be missed by many; clients, colleagues, neighbors among them. He even had a modest following among the national elder law community.

Immediately after joining our family Wyatt started going to work daily. He might have been dozing outside my office door, but he was constantly attuned to the sound of the front-office door. He quickly decided that his job was to trundle out to the reception room to greet new arrivals, most of whom reinforced his behavior by fawning over him. There was something about the conference room that particularly fascinated him; if anyone headed down the hallway toward the conference room, he padded along with them, curled up in a corner of the room and napped semi-attentively through the meeting. He never asked to be excused, never interrupted the proceedings, mostly blended with the furniture. We joked about billing him out at a mere $50/hour because he was so quiet. But he insisted on attending every meeting.

One memorable client visit drove home the value of having Wyatt on staff. A school counselor came to see us about her estate plan, and she was (as clients sometimes are) illogically nervous about talking about her own death. She sat on the edge of the office chair, talking a mile a minute, kneading Wyatt's ears aggressively. "I know why you have him in here," she said from between clenched teeth. "It's to relax me. And it's working." It probably was, but that only made me nervous about how tightly-wound she would have been without Wyatt's presence. Wyatt, incidentally, loved that client; he could handle an aggressive ear-scratching for hours (Corgis do have a lot of ear to work over).

About two years after his arrival Wyatt became disabled. He had, as we learned, been suffering from degenerative myelopathy, a neurological condition that slowly deprived him of the use of first his hind legs and ultimately even his front legs. We had him outfitted with a sort of wheelchair, and he became a notable fixture on the sidewalks in and around our office and home. Every morning and evening he would walk past the coffee shop next door; the regulars may not have known my name or the names of the patrons at the next table, but they all knew Wyatt, and many of them would have a treat to offer him. He invariably, and graciously, accepted.

In the last six months Wyatt's condition deteriorated to the point that he couldn't even use his wheelchair. Nonetheless he insisted on going to work with me every day. Even on holidays I often loaded Wyatt into the car, drove to the office, put him on the rug next to my desk, checked my e-mail, and then brightly announced that it was time to go home, that his workday was over. Somehow even the ten-minute workday made him feel like he had done enough to earn his pay, I guess.

Wyatt was an extremely gentle canine soul. He barked (his vocal cords had been cut as a puppy, years before I met him), but mostly only to let other dogs know that they needed to understand he was still in charge even though immobile. He and I bonded on some extraordinary level -- Wyatt was only the second dog I have ever had, and Freckles, the first one, died in 1969. He will be missed by many, all right, but mostly by me. His advancing disabilities meant that his formal duties had already largely passed to Andy and Chalupa, but I think even they will miss his regular suggestions about how they might better perform those duties.

Goodbye, Wyatt Earp Tomlinson Fleming. I miss you, buddy.

Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com
www.specialneedsalliance.com

STRUCTURED SETTLEMENTS IN CASING by Thomas D. Begley, Jr.

                It is possible to use a structured settlement in cases not involving physical injuries.  In those cases, the assignment is a non-qualified assignment that does not take advantage of the tax benefits of I.R.C. §130.  There are three companies, BARCO, NABCO, and PRUCO, each incorporated in

Barbados

that will serve as non-qualified assignees. 

                                •              Types of Cases.  Typical cases that might be appropriate for non-qualified assignments include the following:

                                                ◦              punitive damages;

                                                ◦              legal malpractice;

                                                ◦              construction defect;

                                                ◦              contract dispute;

                                                ◦              environmental;

                                                ◦              lottery annuity obligations;

                                                ◦              employment discrimination;

                                                ◦              non-wage related;

                                                ◦              attorney’s fees (including stand alone).[1]

                                •              Matrimonial Settlements.  Non-qualified assignments may be appropriate in a matrimonial settlement.  The structured settlement ensures that the spouse receiving alimony or payment of equitable distribution on a periodic basis or the child receiving child support will receive those payments on time, thereby reducing the cost of new court proceedings to resolve issues that may arise.  In cases involving a disabled party, a rated age may be used so that a higher monthly payment can be achieved with a smaller lump sum payment.

                                                The obligations of child support, equitable distribution or alimony can be transferred to BARCO, NABCO, and PRUCO, which then purchase annuities.  BARCO purchases annuities from Liberty Life Assurance Company of

Boston

, NABCO purchases from Allstate Life Insurance Company or Allstate Life Insurance Company of

New York

, and PRUCO purchases annuities from Prudential Insurance Company of

America

.  In the case of NABCO or PRUCO, if there is a Guarantee Letter issued by a U.S. company to the effect that if the non-qualified assignee fails in its obligations, all parties are protected independent of the annuity contract.[2]

Thomas D. Begley, Jr., CELA

Begley & Bookbinder, PC

ATTORNEYS AT LAW

COMMITTED TO EXCELLENCE

Specializing in Elder & Disability Law

     www.begleylawyer.com

(800) 533-7227

---

[1] www.ringlerassociates.com

[2] Structured Settlements 4Real: What’s Real on Structured Settlements and Settlement Planning?, Aug. 1, 2006, http://structuredsettlements.typedpad.com.

Veterans' Benefit for Home and Assisted Living Care

One little-known benefit for veterans and their families is the Aid and Attendance (A&A) benefit.  This benefit can be used for care in an assisted living facility or for care at home.

Title 38 of the U.S. Code contains statutes regulating veterans' benefit programs.  Many of our readers are probably familiar with service-connected Veterans’ Compensation.  This compensation is provided to veterans for disabilities caused or exacerbated by military service, and it is normally expressed as compensation for a certain percentage disability.

Non-service connected benefits (pensions) are available to veterans (and some widows or widowers) who meet certain conditions.  The veterans do not have to be retired from military service, but the program is needs-based.  The veteran must have served 90 days on active duty (the requirement is longer for more recent veterans), with at least one day during wartime, and have received a discharge under conditions other than dishonorable.  The veteran must be “permanently and totally disabled” because of a non-service connected condition, or be over the age of 65 years.  Additionally, for the improved pension program, the veteran's income cannot exceed $931 per month (with no dependents) or $1,220 per month (with one dependent), the current maximum annual pension rate (MAPR). 

The A&A benefit is an increased benefit for veterans who require “care or assistance on a regular basis” to protect them from dangers in their daily living environment.  Veterans living in assisted living facilities are presumed to need this level of assistance, but the veteran should include a letter from the veteran’s personal physician regarding the veteran’s disability.  The need for A&A increases the income limit from $931 per month to $1,554 per month (with no dependents), and from $1,220 per month to $1,842 per month (with one dependent).  The MAPR for the A&A benefit, therefore, is the higher of $1,554 or $1,842 per month.  (Widows or widowers can receive a maximum of $998 per month.)  One significant feature of the pension program is that income is reduced by paid but unreimbursed medical expenses, including insurance premiums, Medicare premiums, prescriptions, dental and vision care, and the costs of an assisted living facility, in-home aid, or adult day care.  In many cases, these costs can easily reduce the applicant's income to a level that would permit the applicant to receive the benefit.  The net worth of the applicant is also considered in the evaluation for A&A; there are no hard and fast rules, but a net worth below $80,000 for a couple, or $50,000 for an individual, has been acceptable.  The VA looks to the net worth at the time of the application; there is no penalty period for the transfer of assets.  If the veteran, however, transferred property that produced a great deal of income on the previous year’s tax return, that previous year’s higher income would be reflected on the application and may affect eligibility.  Further, because the lack of a penalty for transferring asset conflicts with Medicaid requirements, elder law attorneys should advise their clients of this disconnect and plan accordingly.  The A&A benefit payments are made directly to the veteran or eligible surviving spouse, and they are specifically excluded from the definition of income for Medicaid purposes.  The benefit is reduced to $90 per month if the veteran lives in a nursing home.

Andrew Hook
Oast & Hook
www.oasthook.com

Designing a Structured Settlement by Thomas D. Begley, Jr.

In designing a structured settlement, there are a number of features that warrant careful consideration.

•  COLA. In designing a structured settlement, consideration should be given to providing a cost of living adjustment (COLA) to provide for future cost of living increases. Historically, inflation has run an average of 3% per year. Financial advisors use something called “the rule of 72's.” To determine how long it will take money to double, divide the rate of return into the number 72. For example, if a person receives a 6% rate of return on an investment, it will take 12 years to double the money. The converse would seem to apply to the structured settlement. It is anticipated that there will be a 3% inflation rate over time. Divide 3 into 72 and it will take 24 years for the monthly payments to lose half of their purchasing power. Therefore, a 3% cost of living increase should be built in to a structured settlement in order to preserve purchasing power. This will reduce the initial payments, but will give the injured party constant purchasing power over the life of the contract.

•  POPs. A structure can also be designed to provide lump-sum payments at appropriate intervals, such as at age 18 when monies may be needed for college education, if appropriate. Anticipated future needs can be met in this manner. A POP is a lump-sum distribution in an amount certain at a previously agreed upon time.

•  Lifetime Payments or Fixed Term. In many situations, the injured plaintiff has a permanent disability and will not be able to work. In those situations, it is important to obtain a structured settlement that will pay the injured person or the special needs trust for the life of the disabled person. Since tomorrow is never guaranteed, it is usually wise to obtain a guarantee period where payments will continue even after the death of the injured person. Plaintiff names a beneficiary on the contract to receive the guaranteed payments. The addition of the guarantee period will reduce the amount of the periodic payment, but elimination of the risk is usually seen as worth the price when discussing the structure with the client.

•  Deferred Payment. In cases involving a minor, the payments from the structured settlement may not be required until at time in the future such as age 18. During the meantime, the parents often provide what support the minor child will need. By deferring payment for a period of time, the funds in the structured settlement annuity can build up and the periodic payments starting at the agreed upon time will be significantly higher. The longer the payments are deferred, the larger the periodic payments will be.

• The Beneficiary. Who should be the beneficiary of the structured settlement on death of the beneficiary of the trust? If the beneficiary of the structure is the trust, the balance of the payments will be used to repay Medicaid. There appears to be no restriction in federal law on naming a family member as contingent beneficiary of the guaranteed portion or a structure upon the death of the primary beneficiary of a structure, however, state law must be consulted. The Supreme Court of New York held that there is no authority to consider any guaranteed payment remaining after the death of the trust beneficiary from the trust assets subject to the State's remainder interest.[1] This would have the effect of avoiding a payback to Medicaid since the structure would then be paid to the family member and not to the trust. Only assets remaining in the trust would be required to be paid to Medicaid. The guaranteed portion of the future payment would be includable in the estate of the deceased beneficiary. Consideration should be given to purchasing a commutation rider form the insurance company to provide for funds to pay the federal estate tax.

Thomas D. Begley, Jr., CELA

Begley & Bookbinder, PC

ATTORNEYS AT LAW

COMMITTED TO EXCELLENCE

 

Specializing in Elder & Disability Law

wwww.begleylawyer.com

(800) 533-7227

 

---

[1] IMO Eddie Sanango, Supreme Court of New York, County of Kings, Index No. 41383/94 (Oct. 22, 2002).

National Healthcare Decisions Day

Governor Timothy Kaine has signed a Certificate of Recognition, designating April 16, 2008, as Healthcare Decisions Day in the Commonwealth of Virginia.  Virginia has had its own Advance Directives Day for the past two years, and this year’s effort is part of the inaugural National Healthcare Decisions Day.  The purpose of this day is to raise public awareness of the importance of planning for healthcare decisions related to end-of-life care and medical decision-making in the event that patients are unable to speak for themselves, and to encourage the specific use of advanced directives to communicate these important healthcare decisions.

In Virginia, the Health Care Decisions Act provides the specifics of the Commonwealth’s advance directives law.  It is estimated, however, that only about 15% of all Virginians have executed an advance directive, and it is estimated that less than 50% of severely or terminally ill patients have an advance directive.  One of the primary goals of National Healthcare Decisions Day is to encourage hospitals, nursing homes, assisted living facilities, continuing care retirement communities, and hospices to participate in a nationwide effort to provide clear and consistent information to the public about advance directives.

All adults in Virginia have the right to prepare an advance directive in order to put their wishes regarding medical care in writing.  There are two components to the advance directive.  The first component is the living will.  This permits an individual to state what kind of life-prolonging treatment the individual wants or does not want if diagnosed with a terminal illness and the individual is unable to express his or her wishes.  Life-prolonging treatment includes using machines, medicines and other artificial means to help individuals breathe, eat, get fluids into their bodies, have a heartbeat, and otherwise stay alive when the body cannot do these things on its own.  Medications used to keep an individual comfortable are not considered life-prolonging treatment.  Life-prolonging treatment will not help an individual recover.  Another way to look at the living will is that if an individual is in the dying process, then the individual does not want artificial means to prolong this process, but the individual might want pain-relieving medications to be administered, even if it accelerates the dying process. 
The other component of the advance directive is often called a power of attorney for healthcare.  This allows an individual to appoint an agent or agents to make medical decisions for the individual if the individual becomes incapable of making medical decisions.  The document can specifically tell the agent what kind of care the individual does or does not want.  For example, the document can give the agent the authority to work with a physician for the physician to enter a do not resuscitate order (DNR) on the individual’s behalf, but the advance directive itself is not as a DNR order.  The agent can only make medical decisions if the individual’s physician and another physician or licensed clinical psychologist examine the individual and determine in writing that the individual cannot make medical decisions for himself or herself.  As soon as the individual is capable of speaking again, decision-making authority of the agent ceases.

It is important for people to put their wishes in writing, because oral advance directives can only be created if an individual has a terminal condition and can tell his or her wishes directly to his or her physician.  Unfortunately, many terminally ill individuals may no longer be competent to discuss their wishes with their physicians.  Putting the wishes in writing reduces confusion about the patient’s desires, and also establishes clear lines of authority for decision-making.  This is important for blended families where there may be second spouses and adult children, and for younger couples where conflicts can arise between parents and spouses.  Everyone 18 years of age or over should sign an advance directive; it is not just for the elderly.  Every adult may need an agent to make medical decisions in case of a sudden illness or injury, such as an auto accident. 

Anyone 18 years of age or older can be named as an agent in an advance directive; the agent does not have to be a Virginia resident.  An alternate agent should be named in case the primary agent is unavailable to serve.  Advance directives must be witnessed by two individuals 18 years of age or older; the agents should not witness the document.  Advance directives do not need to be notarized; however, the advance directives that Oast & Hook prepares for its clients are notarized in case they need to be used in other states.  Although Virginia advance directives are designed to be valid in any state, individuals who spend a considerable amount of time in another state, should prepare an advance directive for the other state.  Advance directives can also be registered with the U.S. Living Will Registry or Docubank.

Copies of an advance directive are valid.  For this reason, Oast & Hook recommends that its clients keep the original advance directive in a secure place, and let their agents know where it is located.  They should give copies of their advance directives to their primary care physicians and all specialists.  They should also give copies to each agent, and discuss their wishes with their agents.  They should carry a copy of the advance directive in the glove compartment of their vehicles and place one on the side of their refrigerator.  It is also a good idea to take a copy of the advance directive when traveling.  Oast & Hook provides its clients with wallet cards stating that the client has executed an advance directive, and listing the names and telephone numbers of the client’s agents.  The Oast & Hook advance directive also includes a privacy act waiver, also called a HIPAA waiver, which permits the agent to talk immediately with the physicians or review medical records, even if the physicians have not declared the client incapable of making medical decisions.  This is helpful for seniors when their children do not know if they need to act as the agent for their parents and the only way they can decide is to talk with the parent’s physicians.

Andrew Hook
Oast & Hook
www.oasthook.com