Recently, at two different MCLE (continuing legal education) presentations, I spoke on the “Elder Law Essentials.”  The goal of the presentation was to distinguish the solutions of elder law vs. the solutions underlying traditional estate planning.

I was originally trained as a tax attorney, and my principal estate planning solutions were motivated by the client’s desires to:

• Minimize or avoid estate & gift tax costs; and
• Minimize or avoid probate expenses; and
• Minimize problems at the time of ultimate distribution to heirs/beneficiaries.

As an elder law attorney, however, the usual client motivation is the diagnosis of a long term illness.  This is illustrated by the life-changing call I received at my office almost ten years ago.  A family friend called me and she asked, “Rick, what are we going to do?  Bob has been diagnosed with Alzheimer’s disease.  Am I going to lose my home?  Are we going to lose EVERYTHING?”  There was panic in her voice.

In those days, I was not prepared to give appropriate answers.  I was a traditional estate planner—and she was not asking for a traditional solution.  She was asking me for answers to these questions:

• How are we going to maintain sufficient income?
• How are we going to pay for Bob’s health care needs?
• Will I ( the healthy spouse) be forced  move out of my home by health care expenses?

When someone asks these type of questions, elder law has the answers.  Our goal is to work with our clients to try to assist them to protect their income, obtain quality health care, and protect the marital residence for the healthy spouse.

If a traditional estate plan is not the right fit, please call us to discuss how we may be able to help you.

Rick Law

He looked into his wife’s eyes and flatly stated, “I’ll put a gun to my head before I ever go to a nursing home.”  But the sad truth is this:  His wife will be the one to bear the burden caused by his long term care needs and her own aging challenges.

This couple are frugal people who worked hard all their lives.  They lived on two Social Security checks, his modest pension, and minimal investments.  They were able to pay their bills and enjoy simple luxuries—until the out-of-pocket expenses of long term care begin to drain what they worked a lifetime to save.

His wife selflessly provides in-home care for her beloved husband, until eventually the day comes when her strength is not enough to pick him up or keep him from wandering away from home.  On that day, it might be a doctor, a discharge planner, or a policeman who looks into her eyes and speaks the harsh truth to her: “I’m sorry, ma’am. You can’t take care of him by yourself any more.”

This poor woman now faces a nightmare as she walks the elder care journey with a frail and declining husband.  First she learns that neither Medicare nor their health insurance provide any payment for home health care costs.  Later, when her husband must be relocated to a long term care facility, she discovers that neither Medicare nor Medicare supplemental insurance will pay the facility’s $3,000 to $8,000 monthly cost.

Quickly, she also learns that Medicaid is not available because she has “too much money.”   Her husband’s care will be offset by Medicaid only if she and her husband meet stringent income and asset limitations.  If they have assets over approximately $101,000, they must “spend down” their life savings, which Medicaid defines as “excess assets.”  When all excess assets have been spent on her husband’s medical care, then Medicaid will also control her monthly income.  She is restricted to $2,500 per month; any income above that must be used to pay for her husband’s care.

Later, when her husband dies, she receives more bad news.  She loses his pension, and as the “survivor spouse” she loses one of their two Social Security checks.  She has spent nearly all of their assets to provide for her husband’s care, and now she can’t even afford to live in her own home.  The nightmare of long-term care has left her impoverished and stolen her independence.

She will now face her own elder care journey alone.  She will not have the luxury of a spouse who will serve her as she served him.  No one will be there to dutifully care for her at home and to delay the day that she must move to a long term care facility.  She will not have the financial resources that he had, because Medicaid called them “excess liquid assets” and she spent those assets on his care.  As a single person, she will not be provided with assistance by the State of Illinois or the federal government until she has become impoverished to the point of a paltry $2,000 or less in total assets. The indignity committed against her does not stop there, for now she must sign over all her income to the nursing home as well, except for a miserly “personal needs allowance” of $30 per month.

The loving wife who faithfully cared for her husband is now out of money and out of options.  $30 per month will not even give her the privilege of having her hair done.  She is alone—and living the nightmare of long term care in America.

Illinois senior citizens may soon be punished by the State of  Illinois when they announce new Medicaid eligibility rules for nursing home (NH) and Supportive Living Facility (SLF) benefits. The goal is to save the state big money by creating new ways to deny fragile senior citizens assistive living or nursing home help. The state wants to impose harsh penalty periods of ineligibility for NH and SLF services for any Illinois senior has given away money or assets during the five years (60 months) prior to a Medicaid application.  Can you imagine being punished for helping your children and grandchildren?

Due to recent unemployment in the younger generations, Illinois seniors have paid loved ones’ medical bills, mortgage payments, tuition, and grocery bills.  Illinois Healthcare and Family Services (HFS) is about to implement rules which will punish seniors whose only “crime” is helping those they love.

The current Illinois Medicaid eligibility rules are fair and include a  “forgiveness factor.”  Seniors who give away money or other assets create an immediate Medicaid penalty period of eligibility. When  a senior is still healthy and/or wealthy enough to cover their own healthcare expenses the ‘penalty’ quickly goes away.  For example, if a senior gives away $10,000 to a loved one, within about three months the senior is “forgiven” for that gift.    BUT—

The new rules have no forgiveness factor. They will impose penalty periods of  ineligibility that will hang over a senior’s head for five years.  If you apply for Medicaid within five years after a gift, you will be punished with non-payment of Medicaid nursing home costs. This will happen even when the senior is ill and impoverished.  Both the senior and the long term care industry will be denied payments.  Can you predict what your health will be in five years?

Illinois must provide law-abiding seniors with fairness and a Medicaid forgiveness factor!

Illinois elder law attorneys have organized a DRA Task Force for Senior Fairness.  Ask Governor Pat Quinn and HFS Director Julie Hamos to be fair to Illinois’ frail senior citizens and long term care providers.  Contact Jessica Bannister at jessica@lawelderlaw.com to become involved!

(This post about our amazing veterans and Law ElderLaw’s dedication to helping them receive the benefits they deserve was first published in October of 2008. I am reposting this today in the hopes that it will help more veterans and their families find the aid they need.)

“Most of the men who hit the beach with me that day now lie under little white crosses. Some news guy wrote that if you landed on Iwo Jima in the first wave and you were not hit by machine gun fire, that it was as unlikely as running through a thunderstorm and not getting wet. There was nowhere to hide on that rock. It was like fighting on the moon. No trees, nowhere to find cover. There were so many of us that every time the Japanese fired, somebody got hit. During the first three days that I was on the island, I got a bullet-hole through my shirt, my helmet, and my pants.”

These are the words of my client Fred as he described to me the experience of going up against the Japanese forces who manned the island of Iwo Jima on February 19, 1945. Many of my veteran clients have amazing stories to tell from their days in the service.

As an attorney who is focused on the issues of the elderly, an important part of my practice is to assist wartime veterans who are now over 65 and disabled. We often assist them (pro bono) by securing a veteran benefit to help pay for care for themselves and/or their disabled spouses. I am honored to have the opportunity to serve those who have served their country so well.

Fred was in my office that day to discuss how he was going to pay the over $8000 a month cost of care for his wife, who suffered her first debilitating stroke eighteen years ago and has needed care ever since.

Fortunately for Fred, a wartime veteran does have the possibility of receiving some assistance through a VA Special Monthly Pension. It’s important to understand that Aid and Attendance or the Survivor Spouse VA benefit is only available to those who meet very stringent limitations related to medical necessity for care, and financial need as determined by both income and asset limitations. It is my job as an attorney to be able to assist individuals to evaluate what, if any, VA Aid and Attendance benefits may be available to them. This VA benefit can make all the difference in helping a wartime veteran or widowed spouse maintain their dignity, home, and lifestyle.

For more information click here to download any of our .pdf guides about VA Benefits.

Medicare and Medicaid sound the same, but they are as different as the two beauty queens you see here. Frankly, it’s surprising how many people don’t recognize the difference between the two.

Few people realize the limitations of Medicare—which winds up costing them a substantial loss of dignity if or when they get hit with long term care expenses. Medicare is the federal health insurance program provided on behalf of persons who are over the age of 65, blind, and/or disabled. Medicare does not provide long term care benefits (nursing home care, for instance). Medicaid, which is a poverty health care program, pays for 50% of the nursing home care in America today.

Medicare only cares about short-term or “acute care” health care. Medicare only cares about your health care expenses if you can get well! Medicare does NOT provide care when a person is diagnosed with a long-term illness and needs nursing home care. Essentially, our senior citizen health care is based on a “diagnosis lottery.” If you are “lucky enough” to have a heart attack or diabetes, then you are covered by Medicare. You are out of luck if you are diagnosed with Alzheimer’s, Parkinson’s, Huntington’s disease, or anything else that lands you in a nursing home. If you need a nursing home and you are not impoverished, you are on your own dime!

So, unfortunately for seniors, the blind, and disabled persons living in 2010, the acute care model does not help them when they are afflicted with long term care costs. Medicaid is the safety net for the impoverished. Once you become sufficiently impoverished, then Medicaid is designed to provide care for you. To qualify for Medicaid nursing home benefits you must be very ill and have no more than $2,000 total assets.

An elder law attorney knows the ins and outs of the public benefit system and can provide the client with solutions that help to fulfill the requirements of the law and still provide a better future for themselves or their loved ones. We help clients fulfill their legal obligations and avoid unnecessary impoverishment due to long term care expenses. If you want more information regarding a specific client situation, please contact us.

It is a common human paradox that we often treat money from different sources as if it had different value.  For example, money from an inheritance or the lottery is almost always spent on luxuries and frivolous things—it’s typically gone within 18 months.  Money from a bonus is blown on those extras that you feel that you “deserve.”

One source of money seems to be treated as far more valuable than any other source—IRA funds.  In our practice we talk to senior after senior who would rather die than spend their IRA and/or 401(k) money.  When we do estate planning, gift planning, and long-term care planning, we often find that our clients are willing to use almost any other source of money except spending their IRA funds.  Why is that?

The answer is that they spent a lifetime accumulating those funds through their working years.  This money means much more to them than “phony-baloney” capital gains increases in the house that they bought for $30,000 which is now valued at $300,000.  To them, that’s not “real money.”  But there is no question in their minds that the money that’s in their IRA is something that they sweated to accumulate.  Now in their retirement years they don’t want to let that money go.

Like a legendary dragon who safeguards his hoard of treasure against all attackers, our senior citizen clients hoard their IRAs.  We have had many clients tell us with anger in their voices that “they [the IRS] make me take so much money out of my IRA every year!”  They have forgotten why they saved that money in the first place.

Kathy Motley, our Executive VP of Operations, often tells people, “You forgot why you got your IRA!”  She reminds them that they accumulated that money over their working years so that they could spend the money in their retirement years.  The reason to accumulate this money in a tax-deferred manner is so that when they reach their retirement years, they are able to use that money and pay income taxes at a lower rate of taxation.  She goes on to say that they have developed a habit over the years of thinking about this money as “untouchable.”  They have developed a habit of using all other sources of money except their IRAs.

We have to ask our clients what would actually benefit the IRS more—our seniors taking the money out and using it for the things they need?—or forcing their children to take the money out at higher tax rates?  Our clients have seldom considered the fact that if they don’t spend the dollars, it will be spent by their children after paying a higher tax rate.

Of course, there’s always the argument that if the client dies with the IRA, then the child could stretch the benefits of the IRA over a lifetime.  But most of our seniors say to us, “I know my kids could save the money, but they won’t…  They’ll spend it and spend it fast!”

So the question that we have to analyze with our senior citizen clients is this:  who should pay the taxes on the IRA?  Would it be better for them to use their taxable money now, or leave it for their children?  Many of the senior clients that we talk to are people who have already begun to incur sizeable out-of-pocket medical care costs.  There is a substantial deduction for our seniors who must incur large, unreimbursed health care costs.  We try to show them that they’re often much better off using taxable IRA dollars to pay for deductable medical care expenses.  It’s always a better idea to spend tax dollars when you have an offsetting deduction.

So as you think about that IRA—don’t forget why you got it!

Diana Law

Law Elder Law is very proud to announce that our very own Diana Law has just become the youngest member of the Leading Lawyers Network here in Illinois!  The Leading Lawyers Network is a prestigious group to be a part of because the only way to become a member is to be nominated by your peers.  Even once you are nominated you aren’t actually accepted until you have been reviewed by a number of your peers.

“Leading Lawyers Network surveys lawyers, asking them which of their peers, indeed their competitors, they would recommend to a family member or friend if they could not take a case within their area of law or geographic region.”  (from the Leading Lawyers Website)

In fact, the Leading Lawyers Network takes only 5% or less of all the attorneys in Illinois.  We are proud to have TWO of our Law Elder Law attorneys be a part of this group, as Diana’s dad Rick Law is also a member of the Leading Lawyers Network.

Of course, it’s no surprise to us that Diana was nominated.  In addition to being involved in the Kane County Bar Association and giving her time in many other service organizations, Diana is known for her focused and caring service to her clients.

As for Diana, she’s pleased with the membership in part because she hopes it will be beneficial in dealing with the practical aspects of her job, which is namely ensuring that the elderly of our community receive the advice and protection they need.  Many clients come in feeling overwhelmed and scared, not even having known they needed an elder law attorney until the last minute.  Diana hopes she will be able to reach more seniors and their families this way.

When asked what Diana likes most about elder law, she answered “I enjoy providing more than just legal services. In fact some days I feel more like a social worker. We get and give lots of hugs! I like that I can develop close relationships with my clients during a crisis time of life; I’m helping them when I know they need it most.”

Congratulations Diana!

To read the full article from Leading Lawyers Network click here: Leading Lawyers Article

Gladys Kaminski and Diana Law

Meet Gladys Kaminski, a real sparkler!  My daughter, attorney Diana Law, insisted that I come into the conference room to meet Gladys.  When Gladys enters a room, merriment walks in with her.  We exchanged laugh-filled greetings, and then I asked Gladys why she wanted us to do her estate protection planning.  She quickly responded, “I don’t want to lose everything to long-term care expenses.  Even though I don’t have a lot, I want to make sure that my kids and grandkids can enjoy at least a part of it.”  She was working with Diana to prepare an Estate and Longevity Plan.  Her goal is to never be out of money or quality health care options as long as she lives.  One of the ways that we help clients achieve their goals is the use of very carefully designed trusts.

Most trusts take the name of the trustmaker—so ordinarily Gladys would have named her trust the “Gladys Kaminski Trust”—but she wanted to have it her way!  She wanted to call her new asset protection trust “The Happy Bottom Family Trust.”  Unusual, but legally a trust maker can choose any non-deceptive name for a trust.  I asked Gladys why she wanted a “Happy Bottom Trust.”  Giving me a wink, Gladys flashed a big smile and began her story.

“In 1941 I graduated from eighth grade.  I worked as a salesgirl at the dime store at 31st Street and Halstead in Chicago.  My boss, Mr. Fox, loved to tease me.  One day he came over to me and said loudly, “Gladaaas!  Gladaaaas!  Did you know your name translates as Happy Bottom?”  I laughed and laughed.  And I’ve been telling that story all my life.  Nobody remembers me when just I tell them my name is Gladys.  But everyone remembers me when I tell my name is Gladys and that means Happy Bottom.”

Now both Diana and I were laughing with her, and we agreed that The Happy Bottom Family Trust now made sense to us.  This trust is designed to protect a portion of her assets in the event she ever suffers unending long-term care costs.

Gladys is a model of excellent aging.  Despite knee replacements in 2001 and 2006, she plays golf with “the girlfriends” every week.  They also take an annual golfing trip to Florida or Arizona.  I inquired, “Don’t you girls go to Vegas?”  She looked up at me with a conspiratorial expression and said, “Oh yes!  I need to go to Vegas every year to the bingo convention.  I’m in charge of our parish bingo operation.  I’ve done that for the last 20 years.”  Gladys also serves as treasurer for numerous senior clubs and church organizations.  It’s obvious to everyone that this gal is very confident handling her own money and safeguarding other people’s money, too.

As her estate planning and elder law attorneys, we are honored that Gladys chose us to serve as her trusted guides as she travels the elder care journey.

We find that clients rely upon us for more than traditional legal advice.  We help clients and families put together the “aging puzzle” with its many ill-fitting pieces of frail health, caregiving needs, survivor care concerns, financial decisions, residential options, family relationships, insufficient assets, substitute decision-makers, cumbersome probate, end-of-life decisions, and more.  In fact, the legal advice we provide may be the least complicated piece of the client’s aging puzzle.

Due to the nature of our typical elder law representation, it is particularly important that we spend time educating our clients and their families to understand the attorney-client relationship.  We have a duty to represent our client.  Our client is usually the senior. Many times the client’s adult children have an agenda which conflicts with that of the senior. We strive to mediate those conflicts and seek our client’s best interests.

By contrast, when clients get information from other sources, whether it is the government, a care facility, their banker, or even another family member, the person giving the answers may be well-meaning, but it is not their job to put the senior-client’s interests first. In fact, most advisors must put their employer’s (or their own) interests first.  The elder law attorney is the filtering advocate for the frail senior. Our code of legal responsibility demands that we place our client’s interests first.

We must do what we are called to do as holistic professionals.  The scope of our legal services is defined by the client’s overall circumstances. We work at the juncture of estate planning, disability, Medicare, Medicaid, VA benefits, financial planning, health care, family dynamics, tax law, and medicine. We must collaborate with a network of other capable professionals. We seek to make our elder law practice “transformational” rather than “transactional.”  We must do more than legal task fulfillment such as resolving a dispute, drafting a document, or closing a real estate deal.  As elder law attorneys, we empower lives for the better in a way which will impact whole families for years to come. We believe that we are providing important services our clients cannot get elsewhere.

We strive to be trustworthy guides along the Elder Care Journey©.  As we look into the eyes of the aged and the infirm, we see our future selves reflected back to us. We give to our clients the same compassion, comfort, and care that we hope someone will offer to us when it comes our turn to go.

*** This blog was originally written by my friend, elder law attorney Dennis Toman, CELA, of Greensboro, North Carolina.  His website is www.elderlawfirm.com.

elder-care-journey

The growing popularity of the Veterans Administration (VA) Aid & Attendance program has been fueled by financial services organizations promoting their products with the enthusiastic cooperation of long-term care facilities.  On the surface, it seems to be a great partnership, in that both the financial service organizations and the facilities are helping veterans obtain a benefit that helps pay for their care—right now. Unfortunately, these organizations may fail to take into account the probable long-term Medicaid issues of veterans, as well as the tax and investment-related issues associated with obtaining VA benefits. This short-sightedness could result in a care facility having some liability to a resident for future loss of eligibility for Medicaid benefits. This is what I call the “Medicaid Time Bomb.”

It is common for financial service organizations, under the guise of “supporting aged veterans,” to suggest that excess assets be given away to the veteran’s adult children and then placed in annuities. This is done to meet VA asset limitations.  Unfortunately, if within the next five years the veteran should require long-term custodial care in a nursing home, he or she soon discovers that the rules for obtaining Medicaid benefits are quite different than the rules for obtaining VA benefits.  The veterans can be denied Medicaid benefits and penalized for a period of time, largely due to the gifting of money to their children.

How can the Medicaid penalty situation be resolved?  The only cure is to have the annuities cashed in and returned to the veteran. But wait!  Cashing in an annuity often triggers substantial early-withdrawal penalties.  Due to these early-withdrawal charges, even if the gifted annuity is cashed in, the family will not have enough money from the annuity to cure the Medicaid penalty. When a veteran’s family realizes that the veteran has lost money and may still be ineligible for Medicaid benefits, they are understandably at the loss of both assets and Medicaid benefits. That is what I mean by the Medicaid Time Bomb.

Elder law attorneys owe a fiduciary duty (that’s a high duty of loyalty and protection) to their clients.  When we as elder law attorneys analyze a veteran’s overall situation, we must look at the best interests of our client both today and tomorrow.  We know that an annuity may be an important tool to use in both VA and Medicaid planning. 

A qualified elder law attorney concentrates his or her practice in the areas of estate planning, disability planning, Medicaid, VA benefits, guardianships, and elder abuse issues. Call our office to learn how you can avoid the Medicaid Time Bomb.