Hawaii Estate Planning Blog

Take Your Estate Planning Documents With You on Vacation

Hauling a massive three-ring binder or a file folder with you when you travel is impractical.  However, there are times when having your estate planning documents at your fingertips can be helpful.  If you or someone close to you should experience a health emergency and can’t make decisions, how do you prove who has the authority to step in as “substitute decision maker”?  Wouldn’t it be ideal to have immediate access to your advance health-care directive and possibly other estate planning documents as well?  The good news is, you can. 

One substitute for that great big binder is a USB drive, also known as a “thumb” drive or a “jump” drive.  It is a thumb-sized piece of hardware that plugs into almost any computer (iPads excepted!) that will hold more information than you will need it to hold.  At a bare minimum, you will want access to your advance directive and your HIPAA authorization (the document that gives medical providers your permission to talk to your decision maker), but you might also want other documents available, such as your durable power of attorney.  The downside to this technology is that it is a piece of non-waterproof hardware that can be lost or stolen and misused.

Another solution is to subscribe to a service that will give you online access to your documents.  Two companies that provide this service are Legal Directives (866-363-4894, www.legaldirectives.com) and DocuBank (866-362-8226, www.docubank.com).  Both companies will keep your advance directive and HIPAA authorization on file and give you the ability to look at them online and print them out, or have them faxed by way of an automated system to wherever you are.  The way you access the system is by following the instructions on a credit card-sized plastic card that you are issued.  This is a great solution while you are in your home town as well as well as when you are on the road.  The major catch is that you need to have your card with you when you go to the emergency room or otherwise seek treatment.

Yet another option is internet technology that allows you to store your estate planning documents in the “cloud” and access them from a computer or laptop (including your iPad) whenever you want, and wherever you happen to be at the time.  One example is called Cubby (www.cubby.com), but there are others on the market.  When you are a cubby subscriber, you can create a secure link that you (or your kids or your financial planner) can use to access your estate planning documents, 24/7.  This can be a very helpful solution in a variety of contexts—not just medical emergencies.

Of course, all of these technologies require access to a computer, a telephone, and/or a fax machine, and may require Internet access.  If your travels take you deep into the jungles of Borneo or to the summit of Mt. Everest, you may need to do things the “old fashioned” way, and carry paper copies in a waterproof container.

Paying for Long-Term Care

According to an article published in the Wall Street Journal on May 14, 2012, if you are married and you and your spouse both reach the age of 65, there is a 70% probability that one of you is going to need long-term care.  As if that is not troubling enough, a great many of us are completely unprepared to pay the cost of long-term care.  Skilled nursing in Hawaii can easily top $8,000 per month.  How do people handle that?

For those of us who are not incredibly wealthy, one approach is long-term care insurance.  This is a specialized area, and you should talk with an insurance agent who focuses his or her practice on long-term care insurance before you plunk any money down.  A couple of important details are whether you are insurable (the older we get, the odds of that decrease), and whether you can afford the premiums (which tend to be higher if you are buying your policy later in life).  The bottom line is that the sooner you look into long-term care insurance and get your policy in place, the more likely it will be that you can find a policy you can afford.

An alternative to insurance is Medicaid.  It goes by different names in different states (Hawaii’s version is called MedQUEST), but it is run jointly by our federal and state governments.  The federal government sets the overarching rules and provides funding.  The states, which implement the program, are allowed to adopt their own rules for qualification and enforcement.  Think of it as government insurance for nursing home care for those with limited financial resources.

Medicaid is “means-based.”  This means that having "too much" income or "too much" in assets will disqualify a Medicaid applicant.  In addition, having “assets” is not the same as having the money to pay for care.  Those undeveloped lots in Nevada that seemed like such a good deal at the time could push you over the asset limit for Medicaid, and they may be impossible to sell.

For those with assets exceeding the Medicaid limits, giving assets away may disqualify them from Medicaid assistance if the transfers violate the “look back” period designed to keep people from gaming the system.  Of course, an elderly individual might have had innocent intentions when he or she made a disqualifying gift before the need for long-term care was foreseen.  Regardless, any gift (including a gift to charity) is a red flag when it comes to Medicaid qualification.

Each state takes a different approach, and it is easy to run afoul of the rules and be disqualified from benefits.  The good news is that having an awareness of the rules that are specific to your state can help you plan for a worst-case scenario where you or a loved one might need assistance with long-term care costs.

A critical realization is that Medicaid may limit your options in terms of care facilities or quality of care.  So we should not all assume that Medicaid is the best option for us or our family.

Medicaid Basics

Where can you find good information about what, exactly, Medicaid means to you and your elderly loved ones?

A recent Forbes article is a good place to start. The article is aptly titled “Medicaid And Your Parents: The Basics.”  Essentially, Medicaid is a program run jointly by the federal and state governments.  The federal government sets the overarching rules and provides funding.  The states, which implement the program, are allowed to adopt their own rules for qualification and enforcement.  Think of it as government insurance for, among other things, late-in-life nursing home care for those with limited financial resources.

Medicaid is “means-based.”  This means that having "too much" income or "too much" in assets will disqualify a Medicaid applicant.  In addition, having “assets” is not the same as having the money to pay for care.

For those with assets exceeding the Medicaid limits, giving assets away will only disqualify them from Medicaid assistance if the transfers violate the “look back” period designed to keep them from gaming the system.  Of course, an elderly individual might have had innocent intentions when he or she made a disqualifying gift when the need for Medicaid was unforeseen.  Regardless, any gratuitous transfer (including a gift to charity) is a red flag when it comes to Medicaid qualification.

Each state is different in its approach, and it is easy to run afoul of the rules be disqualified from benerits.  The good news is that having an awareness of the rules that are specific to your state can help you plan for a worst case scenario where you or a loved one might need assistance with long-term care costs.   You can click here to learn more about Medicaid qualification in Hawaii.

Reference: Forbes (February 11, 2014) “Medicaid And Your Parents: The Basics”

Lawsuit Sheds Light On Medicare Coverage For Rehabilitation

Learning the ins and outs of Medicare benefits can leave beneficiaries and their families more than a little frustrated.  Especially when there are misunderstandings among the facilities offering care. Luckily, a landmark lawsuit a year ago brought attention to the blurred lines of coverage for rehabilitation services.

The case was Jimmo v. Sebelius, and it became the subject of a recent Forbes article titled “When Medicare Will Pay for Skilled Nursing or Physical Therapy.”

The Jimmo case focuses on what has for many years been considered one of the guiding principles of Medicare.  This principle is the so-called “improvement standard.”  The idea was that Medicare would pay for skilled nursing care or physical therapy only when the patient’s health had the potential to improve.  Accordingly, the payments would cease when there was no more improvement to be had.

Problem: skilled nursing and physical therapy are not necessarily just for curing a problem, but for managing it, especially among the elderly.  Jimmo, however, holds that payment for these services will be made if they are “reasonable and necessary to prevent or slow further deterioration” and that benefits “cannot be denied based on the absence of potential for improvement or restoration.”

Real changes have been slow as providers test the waters, and many other rules regarding skilled care come into play in each specific case.  Nonetheless, an apparent misunderstanding has been put to rest, and an entire class of patients can now be assured of receiving benefits. Those previously denied benefits may even have the option of having their coverage re-reviewed.

Reference: Forbes (January 31, 2014) “When Medicare Will Pay for Skilled Nursing or Physical Therapy”

Don't Let Long-Term Care Coverage Lapse!

Long-term care planning is prudent for unforeseen care expenses on down the road.  Do you or an elderly loved one have a long-term care insurance policy?  If yes, then you likely have some peace of mind.  But what happens if you forget to pay the premiums?  If you are not sure, then you will want to read a recent horror story in The New York Times - The New Old Age Blog titled “The Policy Lapsed, but No One Knew.”

Generally speaking, any form of “insurance” exists to help minimize various financial risk exposures to the insured.  In essence, you pay a premium you can afford (and the insurance company will accept) to cover a risk you cannot afford.  Once insured, you really only need to think about the much easier task of remaining insured, which usually means making timely premium payments.

Unfortunately for some families, remaining insured can sometimes present a few challenges uniquely associated with old age itself.  What happens when the loved one begins to develop dementia and simply stops making the premium payments on the policy?  Dementia can begin subtly before it becomes unmistakable.  Accordingly, you may want to implement some financial safety precautions.

The terrible lesson coming out of the original article is how the caregiver/son was diligent, but a mistake by his father at the bank snowballed into missed payments and a lapsed policy.  The worst part of the horror story is that the cancellation notice from the insurer was never received - and the family was unaware of the policy lapse until they went to claim its benefits.

Ultimately, the burden of proof was not on the insurer regarding whether the premium notice had been sent and received.

Will there be a legislative reaction to stories like these?  It seems this case will not go anywhere soon, but there may be more like it across the country.

Reference: The New York Times – The New Old Age (January 31, 2014) “The Policy Lapsed, but No One Knew”

Just When You Started to Have Some Peace of Mind, The Bill Rolls in

Filial support laws exist in 29 states as well as Puerto Rico and have quietly existed on the books for a long time. Now, however, these laws are a very real and present concern for the adult children of elderly loved ones.

Essentially, filial support is the legally-imposed financial responsibility whereby children are responsible for their aging parents. The origins of filial support are found in some pretty old laws and lines of legal reasoning. History aside, consider filial support the flip-side of the legally-imposed financial responsibility parents owe to young children.

Nevertheless, in a modern context with the massive escalation of healthcare costs, some see a dangerous pattern emerging. This is most dramatically evident when it comes to the costs of long-term care. So are you at risk?

These are state laws. However, you might be liable if an elderly loved one resides in one of these states even if you do not. Does this have your attention?

Fortunately, Forbes has provided a crash course regarding filial laws and their potential challenges in an article titled “Who Will Pay For Mom's Or Dad's Nursing Home Bill? Filial Support Laws And Long-Term Care.”

Be sure to read the original article and, perhaps, do a little online research yourself. If nothing else, find out which states have filial support laws. (Spoiler warning:  as of this writing, Hawaii has no filial support law, and our legislature does not appear to be getting on the bandwagon for the 2014 legislative session.)  As the Forbes article points out, however, you should not get cocky if you do not live in a filial support state.  That's because you need not be present to get wacked.   As long as your parent lives in one of the listed states, you are at risk of being liable.

ObamaCare and Estate Recovery - Another Government Property Grab?

I lifted the following entirely out of a blog post by a dear friend, David Zumpano, and attorney and CPA from Syracuse, New York.  It offers some real food for thought.  It reminds me of Joseph making the people of Egypt and the surrounding countries indebted to Pharoah for food supplied during the 7 years of famine that followed the 7 years of surplus that he had prophesied.  Do we really want our people to be indebted to our government in this way?

The Omnibus Budget Reconciliation Act of 1993 required all states to implement an “estate recovery program” to recover assets from the estates of any individuals who received Medicaid benefits during life.  The default language of the federal statute provides the state can recover from the “probate estate” of the Medicaid recipient, but allows the states to expand the definition to include all assets owned by the recipient including joint accounts, lifetime interests, beneficiary designated accounts, and even trusts.  

So what does this have to do with the Affordable Care Act, commonly known as, “Obama Care”?  There is a new twist coming to light regarding States’ rights to recovery for Medicaid benefits paid.  What does the Affordable Care Act have to do with Medicaid benefits?  While it does not, in any way, provide care for nursing homes, it does provide that Medicaid can be a provider of health insurance and can be available on the exchange for affordable healthcare.  It seems pretty ordinary, except the Affordable Care Act has a provision that ensures estate recovery from the estates of those receiving Medicaid benefits for healthcare. 

What does this all mean?  Well, for the first time, estate recovery will apply to those individuals who receive Medicaid as a health insurance benefit rather than just as a nursing home benefit.  This could impact many seniors who currently rely on Medicaid (in addition to Medicare) to help pay for their medical expenses and healthcare costs.  It is unclear whether the enforcement procedures or the state’s ability to recover on healthcare-related Medicaid costs will be enforced and, if so, how it will be managed.

It is essential we understand the estate recovery laws and how they impact Medicaid recipients.  More importantly, it’s imperative to ensure your healthcare needs will be met now and in the future.  The best way to ensure the total protection of your assets and your values now and after you pass, is to plan ahead.  Those that have failed to plan are typically the most adversely affected by the rules.  I encourage you to make sure you address these new rules when doing your planning. 

Handling The Assets Of Your Elderly Loved One

Handling finances can be tricky enough when you do it for yourself.  It's even trickier when you are doing it for your elderly loved one. How do you take care of business for someone else?

The issue involves much more than financial acumen. There are very specific rules to follow depending upon the role you take on and it is important to play the part properly.

Managing the estate or affairs of an elderly loved one is sometimes such a delicate dance that it has attracted the attention of the Consumer Financial Protection Bureau (CFPB). Late in October the CFPB came to the table with four guides entitled Managing Someone Else’s Money. Available online, these guides were unveiled on the Consumer Financial Protection Bureau Blog in a post titled “Managing someone else’s money.”

The four guides address matters that include powers of attorney, court-appointed guardians, trustees, and government fiduciaries.

Those left to pick up the reins on behalf of a loved one would do well to learn their roles, and these can be helpful guides. That said, however useful, a guide is still just a “guide.” Unfortunately, most family members who pick up those reins learn on the job.

Regardless, loved ones on either side – those who receive care and those who take care of them – would do well to consider the issues early and plan accordingly.

Medicare And “Marketplace Plans” - What's The Deal?

Changes in healthcare can get a tad confusing, so it is good to know what is required and what isn't. For example, did you know there's a new law that makes selling unnecessary “marketplace” coverage to seniors on Medicare illegal?

Kaiser Health News recently addressed this concern in an article titled “Selling Marketplace Plans To Medicare Beneficiaries Will Be Illegal.”

The Problem: Medicare Part A is free for most beneficiaries and goes toward hospitalization and limited nursing home care. Since this fulfills the insurance requirements set by law, those on Medicare generally do not need any additional coverage. For 20 years or so, it has been illegal for private insurers to try and sell their plans to individuals known to be Medicare recipients. This is the result of an effort to keep insurers from taking undue advantage of folks who might not know better.

Of course, Medicare recipients are not prevented from purchasing marketplace coverage, which is part of the difficulty.

The Medicare enrollment period starts next month and runs from October 15 to December 7. Coincidentally, the first healthcare marketplaces (the “exchanges”) will also start selling online next month with the requirement for such plans to become effective as of the beginning of 2014.

Seniors need to know the difference between Medicare “enrollment” and marketplace purchasing. Unfortunately, the timing of the two is not helping matters.

Bottom line: Medicare recipients should not buy on the marketplace what they get by enrollment in Medicare. Hopefully, the legal penalties will scare off those insurance sellers who might try to make a few extra bucks selling unneeded coverage.

Secret Money for Senior Veterans

Many Veterans believe that they have to have suffered an in-service disability to qualify for monetary benefits from the Veterans Administration.  This is a common misconception.  Depending on their health status, their income, and their assets, many senior Veterans and their dependent or surviving spouses can qualify for not only basic “Improved Pensions” based on low income, but also supplemental benefits of up to $2053 per month as of 2013.  The supplemental benefits are called “Housebound Benefits” and “Aid & Attendance Benefits.” 

In order to qualify for any of these pension benefits, the Veteran (or surviving spouse, based on the Veteran’s military service record), must satisfy the following general criteria:

·         The Veteran must have served at least 90 days of active duty.

·         At least one day out of the 90 days of active duty must have been during war time (there are defined dates for the beginning and end of World War II, the Korean War, and the Vietnam Conflict; the Gulf War, which began on August 2, 1990, is not concluded yet, and its ending date will be set by Presidential Proclamation at the appropriate time).

·         The Veteran must have received a discharge other than dishonorable.

·         The claimant and household must have limited income and assets.

·         The claimant must have a permanent and total disability at the time of application (note that a surviving spouse can qualify for a basic low income pension without being disabled, but the Veteran must be disabled—although the disability does not have to be related to war time or military service).

·         The disability must have been caused without the willful misconduct of the claimant and must not have been due to the abuse of alcohol or drugs.

As the name implies, Housebound Benefits are payable where the claimant is substantially confined to his or her home because of permanent disability.  In order to qualify for Aid & Attendance benefits, the claimant must:

·         Require the aid of another person in order to perform personal functions required for everyday living (such as bathing, feeding, dressing, toileting, transferring from bed to a wheelchair, or dealing with incontinence) OR

·         Be bedridden, in that he or she must remain in bed apart from any prescribed course of convalescence or treatment OR

·         Be a patient in a nursing home due to mental or physical capacity OR

·         Be blind or have very poor vision.

Applying for these supplemental benefits is not a quick or simple process, and if you decide to apply, you may want to enlist the help of a Veterans’ assistance organization or a specially-trained individual.  Note that whoever assists with the application cannot charge a fee for that service.  However, if the individual or organization performs other services, fees may be chargeable for those other services.