Posts By: Gene Osofsky

Q. Our property taxes are due soon and we worry that we may not be able to pay them, as my wife and I had large care expenses this year. Are there any programs that we might turn to for help?

A. Yes. California lawmakers have reinstated a program called the “Senior Citizens and Disabled Citizens Property Tax Postponement (PTP) Program” to provide property tax relief, in the form of a deferment, for qualifying seniors over age 62 and for persons with a disability.

Background:  The program was originally created in 1976 and operated successfully for approximately 32 years until it was suspended in 2009 due to state budget cuts. During that interim, it helped approximately 6000 seniors and persons with disabilities remain in their homes, while generating an estimated $41 million in revenue for the state General Fund. More recently, and with strong bipartisan support and the approval of the governor, the program was reinstated and revised.

How it Works: The PTP operates as a loan program. To qualify, an applicant must meet the following five conditions: (1) Be age 62 or older on or before December 31, 2016, or be blind or disabled at the time of application; (2) Must own and occupy the home as his/her principal residence; (3) Have total household income which did not exceed $35,500 for calendar year 2015; (4) Have equity in the home of at least 40% of the home’s fair market value; and (5) There must not be a Reverse Mortgage on the home. The application filing period begins October 1, 2016 and runs through February 10, 2017. Since there is limited funding for the program, applications are processed on a first-come first-served basis.

Once approved, the State Controller’s Office will offer a loan to the applicant at 7% simple interest, place a lien on the home to secure the loan, and will then pay the current property tax to the applicant’s County. The loan will be due when the applicant moves from the property, sells or transfers the home, dies (unless a spouse or other qualified individual continues to reside in the home), falls delinquent on future property taxes or other senior liens, or upon refinancing or placing a Reverse Mortgage on the property.

Unfortunately, the program cannot be used to pay for any delinquent or defaulted property taxes. Further, if an applicant wishes to use the program in following years, he or she must reapply and re-establish eligibility each succeeding year. The program is intended to be self-funding, with succeeding years’ loan pool supported by fees and repayments collected from prior loans. So, securing the loan in the first year does not necessarily assure that a loan will be available in succeeding years.

Yet for seniors and persons with a disability in need of property tax deferment, it is a program well worth considering. The application can be for all or part of the tax due. Loans are processed in the order received, and since the application period just opened on October 1, 2016, I advise applying immediately. For an application or for more information, call the State Controller at 1-800-952-5661, or visit the Controller’s website.

References: Text of AB 2231;  Application For Property Tax Deferment.

Posts By: Gene Osofsky

Q. I plan to hire a full-time caregiver for my husband, and I want to make sure that I handle everything legally. Do you have any suggestions as to how I handle payment or anything else?

A.  Yes. There are specific rules about handling the payroll, tax and employment law aspects of hiring household help, especially a caregiver.  Here are some tips:

  1. Classify Your Hire Correctly: one of the most common mistakes is to treat the hire as an independent contractor, when they are really an employee. If you have the right to control how, when and in what manner your caregiver handles the job, the individual is an employee and should be so treated.  As such, you must make proper payroll deductions when you pay her, and furnish a form W-2 Wage and Tax Statement to her each year.  Knowingly mis-classifying your hire as an independent contractor could be viewed as tax evasion and could subject you to penalties and back tax payments.
  1. Do Not Confuse Gross Pay with Net Pay: gross pay, less payroll deductions, equals net pay. Make sure that both you and your hire are on the same page.  At the time of employment, prepare a sample payroll stub which shows gross income, deductions, and net pay and discuss this.  Doing so can go help avoid misunderstandings.  Both the IRS and the Franchise Tax Board have easy-to-follow publications to assist you.  You might ask your tax preparer to show you how to do this once, so you can do it yourself each payroll period thereafter.  He or she can also prepare quarterly reports for you to send to the IRS and FTB. You might also handle this by using an online payroll service (e.g.Payroll.Intuit.com, or Care.com/HomePay) to do it for you.  
  1. Pay Overtime Correctly. A new California law became effective in 2014, called the Domestic Worker Bill Of Rights.  It requires the payment of overtime to a person employed to assist with domestic work (including caregiving) if they work more than 9 hours in any single day or more than 45 hours in the work week.  Overtime is at the rate of 1.5 times the regular hourly rate.  This requirement cannot be circumvented by offering a fixed salary: fixed salaries are legal for “exempt” workers (generally white-collar professionals), but are illegal when employing a nonexempt work such as a caregiver.
  1. Secure a Workers Compensation Insurance Policy. Protect your hire, as well as yourself, in the event he or she is injured on the job.  Families who do not have workers compensation coverage expose themselves to significant financial liability.  You may be able to do this by purchasing a special endorsement to your homeowner’s policy, often at modest expense.  Be sure to tell your insurance agent that you are seeking an endorsement for an employee performing domestic work in your home on a regular basis, and not for someone performing occasional work on your premises.

Handling the employment relationship appropriately can be mutually beneficial: you will be complying with law, protecting yourself from financial surprises, and may find that your payments to your caregiver are tax-deductible.  At the same time, you will create benefits for your employee in the form of contributions toward Social Security, Medicare, unemployment and state disability, and provide a documented source of employment income to enable her to apply for credit.  Following these basic guidelines will help foster a long-lasting relationship.

Posts By: Gene Osofsky

Q.  My wife was recently in the hospital for two days, and was then transferred to a rehab facility for a three week recovery. Medicare later refused to pay the hospital and rehab bills, claiming that she spent those two days only in “observation”, and was therefore not covered. Any idea what’s going on? Can we fight this?

A. Yes. A little known fact about Medicare is that it generally will not cover hospital bills unless a patient is formally admitted to the hospital as an inpatient. Increasingly, patients are kept in “observation status”, sometimes even for days. This increasing use of observation status is apparently the result of pressure from Medicare auditors. If they determine that a patient should not have been formally admitted, they may deny a hospital’s claim for reimbursement and/or reverse payments previously made. So, hospitals are caught in this squeeze between patient care and the Medicare auditors.

Unfortunately, if your wife were held in observation status, then neither her hospital expenses, nor her rehab expenses, would be covered by Medicare.  That is probably where the problem lies. While she can appeal the Medicare decision, it is probably an uphill fight at this point.

For similar reasons, her stay in the rehab facility is not covered. In order for her to have Medicare coverage in a rehab or nursing facility, she must have been previously admitted into a hospital as an inpatient for at least three (3) consecutive days before transfer to the rehab or nursing facility. This often comes as a big surprise to seniors who expect their follow up nursing or rehab care to be covered by Medicare, at least for the first few weeks.

Most patients seeking care in a hospital have no idea that they may have been coded as an outpatient during their entire hospital stay, and certainly no idea about the lack of Medicare coverage as a result. For this reason, last year Congress passed the “Notice of Observation Treatment and Implication for Care Eligibility Act” (“NOTICE Act”), requiring that hospitals give Medicare patients, who have been  held more than 24 hours in observation status, formal Notice of their status and the corresponding Medicare lack of coverage implications. The Act, and its corresponding requirement of Notice, is expected to take effect in the Fall of this year.

Meanwhile, the California legislature has just overwhelmingly approved a similar Bill (SB 1076; Hernandez).  As of this writing it awaits the Governor’s approval, which is expected. If Governor Brown signs the Bill, it will become law in 2017 and will then apply to all persons receiving hospital treatment, not just those on Medicare, and will require notice of observation status “as soon as practicable”.

Meanwhile, if the situation should reoccur for your wife, I suggest seeking her doctors’ help while in the hospital by asking that she be formally admitted as an inpatient, on the ground that her care in the hospital is “medically necessary” and requires an “inpatient hospital level of care”. It may be helpful to explain to her doctors the Medicare coverage implications of remaining in observation status.

Update:  On September 27, 2016, Governor Brown signed the bill into law.

References:  Federal Notice Act; California SB 1076; In depth comments by Center for Medicare Advocacy on “Outpatient Observation Status”; CMS Delays Implementation of Notice Act to Fall 2016. On March 24, 2020, In a written court decision, “Judge Michael P. Shea of the U.S. District Court in Hartford, Connecticut found that certain Medicare beneficiaries who are placed on “observation status” at hospitals, rather than being admitted as “inpatients,” have the right to appeal to Medicare”. According to the Center for Medicare Advocacy, “[t]he case, Alexander v. Azar, is a nationwide class action case filed by the Center for Medicare Advocacy that went to trial in August 2019. The ruling finds that as a matter of constitutional due process, patients who are initially admitted as inpatients by a physician, but whose status is later changed to observation by their hospital, have the right to appeal to Medicare and argue for coverage as hospital inpatients.”

Posts By: Gene Osofsky

Q.I was obliged to move my wife into an Assisted Living Facility, where she now resides in the memory care unit. It costs almost $6,000 a month and I see our savings dwindling.  If we qualify financially, will Medi-Cal help with the cost of her care?

A. Maybe.  Here’s is how it all works:

Short Answer:

To qualify for Medi-Cal in an Assisted Living Facility (“ALF”),
1) The ALF must participate in the ALF Waiver Program and be located in one of the 15 participating counties;
2) The Individual must qualify for an available slot. There are wait lists;
3) The individual must have less than $130K in savings and other countable resources (the “cap’ through 12/31/2023);
4) The individual must have No Share Of Cost, which for a single individual, as of 04/01/2023, means that his/her monthly income can be no more than $1,677 /month after deducting all medical insurance premiums.
If an individual is close to the monthly income threshold, consideration can be given to purchasing – on the private market — additional medical insurance, say for dental, vision, etc. at a monthly premium which reduces his/her gross monthly income to the threshold amount, indicated above, in item 4.

More Detailed Answer:

The general rule is that Medi-Cal will help pay the cost of care for those who financially qualify, only if received in a nursing home and then only if the nursing home participates in the Medi-Cal program. Essentially, generally — but subject to the exceptions discussed below — care received in any other kind of care setting must be paid for with one’s own savings or– if one is lucky enough to have it – Long-Term Care Insurance or, perhaps, a Veterans Aid and Attendance Pension.  Unfortunately, as a general rule neither Medicare nor Medi-Cal will subsidize the cost of care received in a facility which is not a nursing home. This limitation generally leaves out Assisted Living Facilities (“ALF’s”).

Many clients are surprised by this limitation, and often only make this discovery only after their loved one has lived for a time in an ALF, often at great personal sacrifice to family resources.  Sometimes this belated discovery requires that a loved one be relocated to a nursing facility in order to receive a Medi-Cal subsidy and avoid the further depletion of financial resources.

There are, however, a few exceptions to this general rule:

1) Assisted Living Waiver: Medi-Cal is experimenting with offering a Medi-Cal subsidy to some individuals residing in assisted living facilities (“ALF’s”) who would otherwise be required to reside in a nursing facility.  In order to participate, applicants must be eligible for no share of cost Medi-Cal benefits and require a nursing facility level of care. Only selected counties participate in this program, and fortunately Alameda and Contra Costa Counties are two of them.  Unfortunately, the available beds are very limited, and at my last check most of them were already taken.  The following facilities in Alameda County participate in this program:  Bellaken Garden and House of Palms, both in Oakland; Elm Assisted Living II in Castro Valley; and Lotus Residential Care in Hayward. Some good news:  in 2019, the CA Assisted Living Waiver Program (“ALW”) has been renewed for another five (5) years and in early 2022 another 7,000 more slots have been added for qualified candidates, in the now combined 15 CA counties participating in the program.  More good news:  On 07/09/2019,  California legislation was signed into law by the Governor to increase the qualifying income threshold for low income persons, subject to approval by the Federal Agency in charge of Medi-Cal/Medicaid (i.e., the Center for Medicare and Medicaid Services, aka. “CMS”).  As of  04/01/2023, that increased qualifying income threshold was set at $1,677/month for unmarried persons and $2,269 /month for a married couple.

Of course, the individual will also be expected to meet the Medi-Cal Resource Cap, which as of 07/22/2022 was bumped from a very modest $2,000 up to $130,000 for a single individual, and more for a married couple.

By the way, the “waiver” in the name of the program refers to the fact that, for this experimental program, Medi-Cal waives the traditional requirements to qualify for a Medi-Cal subsidy, including, most notably, the requirement that the individual receive care in a nursing facility. For more information contact the facilities or the Department Health Care Services at 916-552-9105.

2) SSI Beneficiaries:  SSI beneficiaries are eligible for special rates in ALF’s. It may be difficult, however, to find a slot if one searches for an ALF as an SSI beneficiary. However, if one converts to SSI after entry, the ALF’s must honor the SSI rate as of 2023, which is $1,324.82 for a single individual or $2,649.64 for a couple where both live in the same facility (in 2023). In this situation, the bulk of the beneficiary’s SSI benefit goes to pay the ALF, but at dramatically reduced rates. After payments to the facility, the SSI beneficiary may keep a modest amount of their SSI benefit as a Personal & Incidental Needs Allowance (“PNA”) as follows (in 2023):  $168 for a single individual and $336 for a married couple living in the same facility. Important note: SSI Beneficiaries cannot have more than $2,000 in Resources (e.g. money in the bank) for a single individual, nor $3,000 for a married couple. Thus, the recent bump in the Medi-Cal Resource Caps do not affect SSI beneficiaries, who are limited to the much more restrictive caps just mentioned.

3) In-Home Care (“IHO”): the Medi-Cal program, at least officially, does help with the cost of care for a very few individuals receiving care in their home.  Unfortunately, the available openings are extremely limited, and the program typically has a very long waiting list, sometimes several years in duration.  Thus, as a practical matter the program is not a real option for most Californians.  A little-known secret:  reportedly, individuals moving from an extended hospital stay directly back to their own home receive priority on the waiting list, but – in my experience – the In-Home Unit is reluctant to publicly acknowledge this priority for those in the planning stage. For more information, contact the Department of Healthcare Services, In-Home Operations (“IHO”) Unit, at 916.552.9105.

References: Assisted Living Waiver;  In Home Operations Unit; SSI Recipients; RCFE Board & Care Deduction.  Good news. On February 28, 2019, the federal CMS approved the renewal of the CA Assisted Living Waiver for another 5 years from March 1, 2019, and more recently, at the beginning of 2022, added 7,000 more slots for persons who wish to apply for the ALF Waiver. CA Budget Bill increased the threshold income level for low income persons to qualify for the ALW Program and the Aged and Disabled program. It was included in one of the state budget trailer bills, SB 104.  The trailer bill amends Welfare and Institutions Code § 14005.40. There is a timing problem in that these additional 7,000 slots which were intended to relieve the waiting list backlog, have not, at least  as of April, 2023, been fully allocated to the participating ALW facilities, so that there are still waiting lists to secure a space.

More reading.  The newly released Assisted Living Waiver Report entitled “Evaluating California’s Assisted Living Waiver Program”. May, 2019.

The ‘No Share of Cost‘ requirement for a married Beneficiary who would otherwise need a Nursing Home, but who prefers to be cared for at home or in an Assisted Living Facility, is contained in the recent Assisted Living Waiver Document, submitted by California as the “Application for a 1915(c) HCBS Wavier”, and approved by CMS: https://www.dhcs.ca.gov/services/ltc/Documents/ALW-Renewal-2019-2024-Approved.pdf under Appendix I (found at page 130 in PDF format): Financial Accountability: “All ALW participants have full-scope Medi-Cal eligibility with no share of cost.”

Aged & Disabled Federal Poverty Level Program income increases, as of 04/01/2023, can be found at  ACWDL 23-03.

 

Posts By: Gene Osofsky

Q.  My wife and I are thinking of adding our son and daughter to our bank accounts. What is the best way to do this and how should we title the accounts?

A.  Good question. The manner in which you add your children to your accounts will affect their rights of ownership, access to the funds, survivorship, and exposure of the accounts to their unpaid creditors.  Here are the most common forms of title and the legal significance of each:

Joint Tenancy: If you add your children as “Joint Tenants with Right of Survivorship ” (“JT WROS”), then all four of you become co-owners and any of you may withdraw funds without restriction.  For that same reason, the account(s) would then be fully exposed to your children’s unpaid creditors, including a spouse in a divorce.  Unique to this form of title, the joint tenant who survives all of the others becomes the owner of the entire remaining balance.  I sometimes think of this as the “last man standing” rule. Banks sometimes use the word “or” between co-owners’ names to signify joint tenancy.

Tenants in Common (“TIC”): Under this form of title, each person has the right to withdraw funds, but only up to that person’s proportionate share.  Likewise, the monies in the accounts would be exposed to your children’s unpaid creditors, but probably subject to the same proportionate limitation.  However, unlike joint tenancy, the TIC form of ownership does not leave everything to the last surviving co-tenant; rather, upon the death of any co-tenant, his share would go to his own heirs or beneficiaries, presumably that child’s own family. Banks sometimes use the word “and” between co-owners’ names to signify TIC co-ownership.

Pay on Death Beneficiary (“POD”): You could add your children merely as your “Pay on Death Beneficiaries”, meaning that they only acquire rights to the account upon the deaths of you and your wife.  During your lifetimes, your children would have no access to the funds and no right of ownership.  By the same token, neither would their unpaid creditors.  Further, you could change this designation anytime during your lifetimes.

Agent: You could add them to your accounts only as your agent (aka “Attorney-In-Fact”) pursuant to a Power of Attorney (“POA”). As your agent, they would have a fiduciary duty to use the funds only for your benefit, not for their own.  Since they would then have no ownership rights, the funds would not be exposed to their unpaid creditors.  Upon the deaths of you and your wife, their agency powers would automatically terminate.  At that time, the remaining monies would go to your own beneficiaries as directed in your will. Note: banks sometimes balk at naming more than one primary agent on an account, so you may have to choose one of your children for this role.

“Mix and Match”: You could mix-and-match the various forms of holding title in order to accomplish your goals.  Example #1: you could leave the accounts in the names of you and your wife, only, but also provide that your children are your POD beneficiaries.  Example #2: you could go with the features in Example #1, but also add one of your children as your “Attorney-in-Fact” so he/she can access the funds for your benefit.

So, when adding your children to your accounts, give thought to what you are trying to achieve and your tolerance for risk, and re-title the accounts accordingly.

Posts By: Gene Osofsky

Q.  I sometimes hear the term “Undue Influence” as a basis to contest a Will. What does that term mean?

A.  To say that a Will or Trust was signed as the result of “Undue Influence ” means that it was the result of excessive persuasion by someone which overcame the Will-Maker’s own free will, and which resulted in unfairness. Evidence would include the vulnerability of the victim, the influencer’s apparent authority over the victim, the pressure or tactics used, and the inequity of the result. Usually, the influencer is also a chief beneficiary of that undue influence.

The tactics can take the form of deception, harassment, threats, or isolation. The elderly and infirm are usually more susceptible to undue influence, as they are often dependent upon others for care and basic necessities.

In order to prove that a Will-Maker (aka “Testator”) was subject to undue influence when signing a will or trust, a challenger would have to show that the testator disposed of his property in a way that was unexpected under the circumstances, that he was susceptible to undue influence (because of illness, age, frailty, or a special relationship with the influencer), and that the person who exerted the influence had the opportunity to do so.  Generally, the burden of proving undue influence is upon the person challenging the Will.

However, if the alleged influencer had a fiduciary relationship with the testator, it may be easier to challenge the will:  in that situation, the burden of proving the validity of the will would be upon the fiduciary who stands to benefit under the will, rather than upon the challenger. By way of example, persons who might have a fiduciary relationship with a testator can include a child who manages the parent’s finances or an agent under a financial power of attorney.

When preparing a will or trust, it is important to avoid even the appearance of undue influence.  For example, if you were planning to leave everything to your son who is also your primary caregiver, your other children might argue that you your son took advantage of his position to unduly influence you.  In this instance, to avoid the appearance of undue influence, you should not ask your son to assist you in the preparation of your will.  He should not be present when you discuss the will with your attorney, nor when you sign it.  To be even safer, he should not even drive or accompany you to your attorney’s office.

If you are making anything other than an equal division among your children, you might also consider getting a formal assessment of your own mental capacity from a forensic psychologist or other medical professional.

In our practice, when an elderly or infirm parent wishes to make an unequal distribution of his or her estate or to disinherit a child, we often take special precautions in order to discourage a later will contest after the parent dies.  In addition to a forensic psychological evaluation, we might also videotape the signing session, during which the parent would be asked to explain why he is making an unequal division or leaving out a child. Preserving such evidence can be very effective in discouraging a later contest, but if a challenge is made, can be invaluable in defending the Will against that challenge and preserving the client’s testamentary wishes.

Posts By: Gene Osofsky

Q.  My husband receives a Medi-Cal subsidy to help with his nursing home expense, and I have long worried about protecting our home from a later Medi-Cal “payback” claim. I heard there might be some changes coming.  Do you know anything about this?

A. Yes, indeed, there are big changes coming! Gov. Jerry Brown just signed the state’s Budget Bill, which included special provisions dramatically scaling back Medi-Cal’s right of recovery after the death of a Medi-Cal beneficiary. This change will help minimize the devastation faced by some families when later forced to sell the family home to settle up with Medi-Cal.

Health Care Services Historically Subject to Recovery

Historically, this right of recovery applied to the following: (1) All health care services received by a Medi-Cal beneficiary after age 55, and (2) a Long Term Care (nursing home) subsidy received by a Medi-Cal beneficiary of any age if “permanently institutionalized”. *

Rule for Persons Dying On or Before 12/31/2016: Recovery Applies to All Assets Owned By Beneficiary

Under current law, when an individual receives a Medi-Cal subsidy for the cost of long-term care, Medi-Cal has the right — after the passing of that individual and his/her surviving spouse – to recover the value of benefits paid, unless the individual is survived by disabled child.  That right of recovery has historically applied to ALL assets in which the beneficiary had an interest, regardless of whether they are held in a Living Trust, Joint Tenancy or Pay on Death (“POD”) accounts.  Until now, the only way to protect against recovery was for the beneficiary to engage the services of an Elder Law attorney to proactively plan for recovery avoidance by, for example, making carefully structured lifetime gifts of the home and other assets to family members, creating specially designed Irrevocable Trusts, and the like.  Until now, the garden-variety “Living Trust” did nothing to protect against recovery, nor did holding assets in Joint Tenancy or POD accounts.

New Rule For Persons Dying On Or After 01/01/2017: Recovery Will Apply Only To Assets Subject to Probate

Under the new law, Medi-Cal’s right of recovery will only apply to assets which pass from the beneficiary to others by probate or by a probate summary procedure.  By way of example, assets held in the individual’s own name, alone, and designed to pass by Last Will, would typically be subject to probate and would still be exposed to recovery.  However, assets held in a Living Trust will soon be immune from recovery, as the trust is designed to pass ownership upon death without a probate.  Likewise, assets held in Joint Tenancy form or in Pay On Death (“POD”) form will also usually be immune from recovery, as they are likewise designed to pass ownership to the survivors without probate.

The new law will only be effective for individuals dying after January 1, 2017.  Thereafter, it should be relatively easy to avoid Medi-Cal recovery by merely holding assets in a format which avoids probate, such as in a Living Trust or in Joint Tenancy or POD account formats.  Indeed, given the prevalence of Living Trusts, and the use of these beneficiary-type accounts, it may soon be the rare family that experiences Medi-Cal recovery after the death of a loved one. Caution:  the new law does not expressly address whether the new Transfer on Death Deed will also be immune from recovery.

The new law has some other helpful features:

(1) There will be no recovery, in any event, if the beneficiary is survived by a surviving spouse or domestic partner;

(2) There will be no recovery, in any event, against a home of modest value, defined as a home worth less than 50% of the average price of homes in the county in which the home is located; 

(3) Upon request, Medi-Cal must furnish, at least once per year, an itemized statement for a $5 fee; and

(4) Interest charged on Voluntary Post Death Liens will be limited.

Proactive planning will still be necessary for those persons who are at risk of dying before the new law takes effect, but for others recovery can usually be avoided by merely holding assets in a form which avoids probate.

Recent News During Pandemic: On May 14, 2020, in an effort to address Budget Problems due to the COVID-19 Pandemic, Governor Gavin Newsom of California proposed dramatic cutbacks to Medi-Cal and other public benefit programs. Most notable is his proposal to restore Medi-Cal estate recovery to what is was prior to the dramatic cut-backs approved by former Governor Jerry Brown in late 2016. If adopted, this would expose homes and other assets to estate recovery and, once again, make proactive planning essential in order to avoid this result mandatory. See Gov. Newsom’s Budget Proposal at pages 60-62, May Revision, Summary, here. Fortunately, this plan was not supported by a majority of the Legislators, many of whom were concerned about its effect on low and moderate income persons, especially during the current Pandemic, and hence it was not adopted. However, depending upon California’s fiscal needs in the future, this proposal could recur. For now, however, it is old news and the favorable changes to Medi-Cal post-mortem estate recovery, signed into law by former Governor Jerry Brown in late 2016, remain the law in California.

Clarification For Surviving Spouses: At a gathering of California Elder Law attorneys in Monterey, CA, on November 18, 2016, the Chief of the Medi-Cal Recovery Unit, Margaret Hoffeditz, confirmed that — even if the Medi-Cal beneficiary dies before December 31, 2016– if his or her surviving spouse survives beyond that date (so that the new law is effective), then there will be no recovery at all. Thus, having a surviving spouse who survives to January 1, 2017, will be a complete bar to recovery, regardless of whether the decedent spouse’s own estate is subject to probate. Recovery would only become an issue, if at all, if the surviving spouse later became a Medi-Cal beneficiary for his/her own needs AND if his/her own estate were subject to probate.

References:  SB 833/AB 1605 at Section 22 (scroll to page 46, numbered at top of page); Article published by ElderLawAnswers.com; Statement by Senator Ed Hernandez on Budget Vote. * See HCFA Transmittal 75. Note: the individual has a right to a hearing as to whether he/she is “permanently institutionalized” and, in any event, the state’s right of recovery terminates if the individual returns home. How to find out how much you owe Medi-Cal: DHCS Form 4017.

Posts By: Gene Osofsky

Q.  What is the difference between a will and a trust? Some of my friends seem to use the terms to mean the same thing?

A. Yes, many people do use the terms interchangeably, but in reality they are quite different, although they often work together to form a complete estate plan.

A will is a document that directs who will receive your property at your death and only goes into effect upon your death and then only in the context of a court proceeding, called a probate.  By contrast, a trust takes effect as soon as you create it and usually does not require court supervision.

A trust is a legal arrangement by which one person, called a “trustee”, holds legal title to property for the benefit of another person (initially, for yourself, and later for your beneficiaries). The initial trustees would typically be you and your spouse, and the successors would typically be your child(ren) in the order you designate. As initial “trustees”, you and your spouse would continue to control and manage your assets as before, albeit as “trustees” of your own trust.  A trust usually has two types of beneficiaries: you and your spouse during your lifetimes, and your children or other designated beneficiaries after your deaths.

A will only covers assets that are in your name when you die.  A trust, on the other hand, only covers property that has been transferred into the trust, usually by re-titling assets into the names of the trustee(s), such as by a new deed.  Example: From John & Mary Jones, husband and wife, to John & Mary Jones, Trustees of the Jones Family Trust.

Note:  Neither a will nor a trust control assets held in joint tenancy, insurance policies payable to individual beneficiaries, nor financial accounts designated as “Pay on Death” or “Transfer on Death” Accounts. Those assets go to the surviving joint tenant or to the designated beneficiaries, and are not controlled by either a will or a trust.

Typically, trust administration would be handled with the assistance of an attorney, but the legal fees would usually be much less than in a formal probate.  Finally, a will becomes part of the public record and is therefore available for anyone to view, while a trust usually remains private.

Wills and trusts each have their advantages and disadvantages.  For example, a will allows you to name a guardian for minor children and to specify funeral arrangements, while a trust does not.  On the other hand, a trust can be used to plan for disability during your lifetime and for asset management by your successor trustees if doing so becomes too burdensome for you.

Unfortunately, many people who set up trusts neglect to transfer all of their assets into the trust.  That is where a companion will can help: the companion will, often called a “pour over” will, can direct that assets inadvertently left out of the trust be transferred into the trust in order to achieve a coordinated plan of disposition.

 

Posts By: Gene Osofsky

Q.  My wife is being cared for in a nursing home and the cost is running about $9,500 per month. I see our life savings and financial security dwindling rapidly, and I am concerned about my own financial future.  I was thinking about taking steps to qualify her for a Medi-Cal subsidy, but I wonder whether Medi-Cal planning is legal?  Do you have any thoughts on that? 

A.  Indeed I do. We are sometimes asked whether it is ethical, or even lawful, for an individual or couple to take planning steps in order to qualify for a Medi-Cal Long-Term Care subsidy or other government benefits.  We believe that the answer is an unequivocal, YES.

In our view, Medi-Cal planning is similar to tax planning, albeit for the middle class.  The wealthy plan their affairs and design their business strategies in order to minimize tax.  They hire very sophisticated financial advisors, accountants and attorneys to assist them in their effort, and their advisors’ success is applauded and often highly compensated.

When you think about it, this undertaking is really no different than the effort on the part of the middle-class to likewise plan their affairs in order to qualify for government benefits. The planning in each case is made with respect for the law, but just involves different populations.  Indeed, both efforts impact the public treasury. To be sure, the impact of tax planning is greater by far.

In a word, planning to accelerate eligibility for Medi-Cal is as ethical and legal as planning to avoid taxes.

Back in 1988, Congress passed the Medicare Catastrophic Coverage Act (“MCCA”), which included special provisions to avoid Spousal Impoverishment, and which remain in effect today.  These provisions have been designed to protect the couple’s savings (up to a designated limit, indexed to inflation), as well as their income, home and other assets so as not to impoverish the At-Home spouse, or other dependents, when a family member needs nursing care. MCCA also authorizes a judge to expand those protections even further where the circumstances warrant.

In California, these protections have been expanded still further.  For example, the law here requires that the Medi-Cal workers give out written instructions to applicants advising that strategies may be lawfully employed to protect the home from a later Medi-Cal payback claim.  Implementing these strategies is usually easier where the individual or family engages the services of an Elder Law Attorney.

Further, legislation is now effective in California to automatically protect the home of a surviving spouse from Medi-Cal “pay back”.  The public policy supporting this legislation is favored almost unanimously by the legislature and by most members of the public. Governor Jerry Brown signed this legislation on June 27, 2016, as SB 833 (part of the annual budget bill), and it became law on January 1, 2017). For more on this important development, click here.

There is the further matter of a health care system (Medicare) that discriminates against paying for certain chronic illnesses.  For example:  If someone on Medicare has a serious heart, lung or brain condition, Medicare will pay for the expensive treatment, including surgery and hospitalization necessary to treat that condition. By contrast, if a senior is unlucky enough to develop Alzheimer’s, Parkinson’s or another chronic condition, the care associated with those conditions is typically not covered.  In our view, this discriminatory health care payment system is unfair as a matter of social policy, especially since the individual needing care did not “choose” the uncovered medical condition.

In short, so long as steps are taken in accordance with the rule of law, we see nothing wrong (and, in fact, everything “right”) in planning to secure government subsidies, including Medi-Cal, in order to enable you and other seniors to live with dignity and without fear of impoverishment.

Posts By: Gene Osofsky

Q.  A good friend  is setting up a financial power of attorney and has asked me to be his agent.  He feels his own children are not responsible. If I agree, am I putting my own assets at risk?  He is in declining health and I may have to take over his financial affairs soon.

A. Generally, no. By agreeing to be his agent, or what California law calls his “Attorney-In-Fact”, you are not obligating yourself or your own assets for your friend’s financial obligations. In fact, merely because you are nominated as his agent would impose no duty upon you to act at all, unless and until you subsequently agreed to do so in writing.  However, once you agreed to do so and/or once you actually started acting as his agent, you would then have a duty to act in good faith and pursuant to the terms of your authority under his Power Of Attorney (“POA”).

At that time, you would then be a fiduciary, with a high duty to act honestly and in good faith.  More specifically, you would then have the following duties:

  • a duty to act with care and skill
  • a duty of loyalty to your friend, requiring that you must act solely in his interest and avoid conflicts of interest;
  • a duty to keep his property identifiable and separate from yours;
  • a duty to keep your friend informed and follow his instructions;
  • a duty to keep records of transactions on his behalf;
  • a duty to surrender property to appropriate persons at the termination of your authority.

If you are concerned about your potential liability, you might ask your friend to incorporate a clause in his POA that immunizes you from liability so long as you act in good faith.  Also, if you are concerned that his children may wrongfully complain about your actions, you might ask him to include another clause expressly stating that his children may not challenge your actions in court.

Further, with his permission, you might even give him and/or his children periodic accountings of actions you have taken, bills paid and summaries of accounts, so as to head off unfounded suspicion by this full disclosure.

If he just wishes you to manage a specific asset, such as a piece of rental property, you might suggest that he give you a Limited Durable Power of Attorney, authorizing you to manage just that one asset.

Lastly, if you sign any contracts on his behalf, always sign in a manner that clearly indicates you are signing his name merely as his agent. Example: If your friend’s name is John Jones and yours is Peter Smith, you should sign as follows:  John Jones, by Peter Smith, his Attorney-In-Fact.

While the above measures would be very helpful to protect you, they would not necessarily be bullet-proof.  Whenever one undertakes to handle someone else’s money, there is always the risk – even if it be small – that doing so could expose oneself to criticism and personal liability.

The basic idea is to be honest, avoid commingling your friend’s money with your own, keep good records, and have a reason to justify each action that you take on his behalf.