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.

I just finished looking at a county bar association listing of attorneys who identify themselves as elder law attorneys.  Frankly, I was a little surprised to see that some individuals who are general practitioners also consider themselves to be elder law attorneys.  I was disturbed when I saw this, because drafting simple wills and trusts does not qualify an attorney to be an elder law attorney.  Wills and trusts may be part of the elder law process at times—but there is so much more involved than that!  Furthermore, litigating cases that have nothing to do with probate or other issues that touch the elderly does not qualify an attorney to be an elder law attorney.

Will the real elder law attorney please stand up?

When trying to find an “elder law”-focused attorney, it’s important to understand how elder law differs from traditional estate planning.  Estate planning, at its simplest, is death planning.  A traditional estate plan is typically designed to do three things:

1. Minimize estate taxes; and
2. Avoid probate court; and
3. Distribute assets from the deceased to the deceased’s heirs.

Elder law, on the other hand, is death planning plus long-term disability and care planning.  The elder law attorney is not only dealing with your estate plan, but must also deal with life care issues in the event that you or your spouse has long term health care needs during the course of your lifetime.  When there is no long term care asset preservation planning, it is quite common to see families spend a $2,000,000 net worth estate when both a husband and wife have long term care needs.  This is a key focus of an elder law attorney.

No one wants to be out of money and out of options before they are out of breath.  While it’s not possible to guarantee specific results, the elder law attorney works with clients and families to guide them through the minefield of public benefits, VA benefits, Medicare, Social Security, special needs trusts, powers of attorney, and Medicaid. Our job is to increase the quality of life for our clients, not just plan for a happy post-death asset distribution.

So if you are trying to figure out who is the real elder law attorney, please ask these questions: “How many Medicaid applications do you/your firm do in a year?” and/or “How many veterans do you/your firm assist with the VA aid and attendance benefits per year?” and/or “How many self-settled Pooled Trust plans have you/your firm done this year?”   If you are looking for an elder law attorney to do any of these things, please use an attorney who can demonstrate that he or she is working in that area every day.  The issues are complex, and you deserve to work with someone who is fluent in elder law.

Cowboy Rick (on the right) in New Mexico

“R.W. Hampton.” (On the left)

Like most baby boomers, I grew up in the age of the TV-cinema-cowboy-hero. Through television, the good guys of the cinematic Old West rode, roped, and fought their way into our hearts and minds. We boomers were saturated with the “Code of the West.” Our heroes were simple and straightforward about their virtues—and it was always easy to recognize the Bad Guys.

The Bad Guys rustled stock from the honest folk. Bad Guys—some disguised as bankers and businessmen—misused their power and position to cheat good and hard-working citizens out of their homes, ranches, and livestock. Meanwhile the Good Guys wore white hats (with the exception of Hopalong Cassidy) and selflessly fought evil as they helped the poor, oppressed, innocent, and vulnerable.

When I first went to law school, I carried that “cowboy code” inside me. Like many idealistic law students, I imagined using my legal skills to fight injustice and protect the innocent—just as my heroes had done. But I soon found that real lawyering is seldom as glamorous and interesting as a TV show—so like most attorneys, I spent the better part of my first 25 years becoming very efficient and effective at moving mountains of real estate and tax documents for clients. It was not the work of a hero, but it paid the bills.

Without recognizing it, my legal career began to change in 2000. Due to the aging issues of my parents’ generation, I became a part of a “tribe” of lawyers who practice elder law. This is a niche legal practice that combines estate planning, taxation, health care, Medicare, Medicaid, elder abuse, and more to focus on assisting the frail elderly to achieve the goals of quality health care while avoiding needless impoverishment. Most of these elder law attorneys are boomers who have dedicated themselves to serving seniors and those who love them. Most of the men and women I have met through the National Academy of Elder Law Attorneys (NAELA) have been touched by a loved one’s long-term illness or a disability. They strive selflessly and sacrificially to help the widow(er), the caregiver spouse/adult child, and the frail elderly.

To me, those elder law attorneys are the modern equivalent of Dale Evans, Roy Rogers, or Hopalong Cassidy. I am proud to have learned from them and to know them as colleagues and friends.

Years ago, when my wife I announced to her parents that we were expecting our first child, my father-in-law inquired innocently if it was okay to talk about someone being pregnant. He had been raised with rules that made that conversation out-of-bounds. My, how things have changed! These days we need only to turn on the TV to be subjected to conversations about PMS or flagging male libido.

In this time when “anything goes,” I have been surprised to find that there are still some taboos. As an elder law attorney, I facilitate discussions about life, death, and disability—not an easy task because nobody really wants to talk about his or her own death.

Oh sure, people can consider that they are probably going to die…someday. But in their heart of hearts most people can’t believe that they are actually going to die. How else do you explain the fact that 85% of the adult population are without a simple will, power of attorney, or health care directive?  The most obvious answer is that they must not truly believe that they’re going to die.

Although it’s difficult, I recommend that you take the time during the upcoming holidays and family gatherings to have what we call the Final Arrangement Conversation with your family.  A Final Arrangement Conversation should have at least two distinct elements:

1. A written expression of your attitudes and desires for life-prolonging treatment (or lack thereof) in the event that you are incapacitated, have been diagnosed as being terminally ill, or are suffering from a long-term memory-robbing illness; and
2. A written expression of your attitudes, desires, expectations, payment source, etc. regarding your final wishes–how your family should handle your funeral, burial, cremation, religious tradition, probable cost, music, choices of service providers, etc.

When I begin this conversation with clients and their families,  I almost always run into resistance. Seniors (even terminally ill seniors) often say, “I don’t care. Funerals are for the living, so do whatever you want.” But families really want to know how their loved ones feel about these issues. When seniors choose to talk about it, they often find it very meaningful to share their expectations. Once we overcome this conversational taboo, the discussion almost always ends with a hug.

Alton Nichols and Betty Hall, Photo by David Lassman

Recently, the child of one of my clients told me about a wedding her parents had attended. The wedding was that of a giddy-in-love senior citizen couple. The groom was 82, the bride 87; both living at the same long-term care facility. The bride was heard to gush, “I wanted to marry a younger man this time.”

Love and marriage is wonderful (as is obvious from the photo of Alton Nichols and Betty Hall, pictured above) but for senior citizens it raises very different issues than it does for the young and newly married. One obvious issue is the fact that most seniors already have adult children, and many of those adult children are quite vocal in their concern about their mother or father becoming involved in a new love life. Before mom or dad get married, many children want to make sure that their inheritance is protected.  To that end, many seniors use wills or trusts which direct that assets go to “my kids and grand-kids,” or create pre-marriage-property-settlement agreements (pre-nuptial contracts) which require that the pending bride or groom give up any interest in their new spouse’s assets.

Despite these attempts to safeguard assets for the original families, there is another hidden danger to the family wealth whenever a senior chooses to wed. A trust or pre-nuptial agreement does not protect the assets of one spouse from being drained to pay for an ill spouse’s medical costs, including long-term care costs. The “Common Law of England” required long ago that husbands and wives be legally responsible to pay for each others’ necessaries, and our own government adopted that requirement. Included in those “necessaries” are food, housing, and yes: healthcare. This includes the cost of care when someone is diagnosed with Alzheimer’s, Parkinson’s or any other long-term illness.

To protect themselves from this hidden drain on a lifetime of earnings, healthy vigorous seniors who are considering getting “hitched” must consider the wisdom of purchasing long-term care insurance and perhaps engaging an elder law attorney to assist them with longevity planning. All this must take place before your marriage, so that you have some idea of what your real risks are. Elder law attorneys have many creative legal solutions that go beyond the traditional estate planner’s basic will and trust, which merely deal with the distribution of your assets at the time of your death, avoidance of probate, and minimization of estate taxes.

If you are over 65 and considering saying “I do,” please recognize that you are also promising to pay for your new spouse’s future long-term care medical expenses. “In sickness and in health” is a standard line in most wedding vows, and the state of Illinoise takes that vow and makes it law. In the Chigaco metropolitan area the monthly cost for assisted living expenses ranges from a low of $2,500/month to about $6,000/month, and the cost for skilled nursing home care ranges from $5,500 to $10,000/month, or more.

With these numbers in mind, it’s good to remember that when you say “I do” what you’re really saying is “I’ll pay.”

Luise May

Law ElderLaw, LLP, is a law firm focused on the issues of estate planning, long-term disability planning, veterans benefits, and Medicaid assistance. Our eighteen staff members are attorneys, paralegals, and other support personnel.  But oddly enough, our firm did not begin with a lawyer.  Rather, our firm began with a phone call from a woman named Luise May.

Nine years ago, Luise May called me with panic in her voice, “Rick, Bob has been diagnosed with Alzheimer’s.  What are we going to do?  Am I going to lose my home? Are we going to lose everything?”

At the time, I was a tax and real estate attorney; I didn’t have an answer for Luise. But Luise and her husband Bob had been friends for years, and I wanted to help her. “Luise,” I said, “I don’t know the answer to that, but I promise I will find out.” The problem was, I didn’t know where to start looking for answers. I wanted to make sure Luise and Bob wouldn’t lose their home, but I had never even heard of the term “elder law.”

Fortunately, I discovered a capable attorney right in my home community who was doing work in what he called the Elder Law Center. I called him and told him Luise’s story, then asked if this Elder Law Center could help people in their situation. His answer was immediate; “Yes Rick, bring them on over.”

We explained that Bob had recently been diagnosed as having some type of dementia, most likely Alzheimer’s. Steve (the capable attorney) reassured my friends that he would work to make sure they would keep their home and control of their assets.  He was not able to prevent them from having substantial costs related to long-term care, but they would not lose everything, as they feared.

After the first meeting, I was stunned at the transformation in Bob and Luise.  They were exuberant. They were reassured that they would not lose their home, and in addition they had found a capable counselor to walk along beside them, serving as a guide as they moved further and further into the valley of shadow and darkness.

As I observed the legal work being done for my friends, I knew that this was the type of law that I wanted to be doing.  Three years later, I made the decision to become an elder law attorney, so that I could help more “Bob and Luise” couples.

Bob and Luise eventually moved to Georgia to live near their daughter who is a nurse practitioner. Bob has been able to live at home for more years than they initially thought possible, and it is only during the last six months that Bob finally needed to move to a long-term care facility.

Bob and Luise remain close and valued friends. Last week, it was our privilege to host Luise in our office. She had come to attend the wedding of my youngest daughter, Catherine. She was kind enough to come and share her experiences as a caregiver for a husband with Alzheimer’s. And we want to share her experiences with you, our readers. Come back next week to read her story here on our blog.