Michigan Elder Law & Estate Planning

Perhaps the most important lesson an estate planning attorney can convey to a client is that your end-of-life decisions will be made for you-and possibly expose your estate to significant and unnecessary expense-unless you create legally enforceable estate plan documents. Without a clear expression of your wishes, some of your most important decisions may be made by a family member, a stranger, or a probate judge who may have no idea what your real wishes were. This can lead to increased costs, family disagreements, and other forms of waste. Several types of legal documents can help you and your family avoid these problems:

• A medical power of attorney is used to appoint someone to make your medical decisions and provide that person with guidance regarding your wishes.

• A financial power of attorney appoints someone to make your financial decisions. There are many different types of financial powers of attorney with significant differences between them. For example, whether your agent has the power to make gifts to others can have tax implications, as well as expose your estate to risk. On the other hand, without gifting authority, Medicaid planning can become more difficult. Read the rest of this entry »

There are two apparently contradictory themes running throughout this blog and indeed the field of elder law in general. On the one hand, one is regularly advised to plan ahead for long-term care needs with asset protection trusts and similar techniques. On the other hand, the law changes so rapidly in Medicaid qualification that pre-planning seems impossible. For just a few examples consider that recently a cap has been placed on the value of the automobile you can buy, the state has to be named as a remainder beneficiary on annuities, and estate recovery has been enacted. The list of changes is seemingly endless and the pace of change is rapid. So how is it possible to advise people to plan ahead when the law could be different tomorrow?

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How lax is security at Alzheimer’s facilities in Germany? This story apparently answers that question and explains that fake bus stops are used to gather in patients who wander away:

“It sounds funny but it helps,” said Franz-Josef Goebel, the chairman of the “Old Lions” association.

The result is that errant patients now wait for their trip home at the [fake] bus stop, before quickly forgetting why they were there in the first place.

“Our members are 84 years old on average. Their short-term memory hardly works, but the long-term memory is still active.

“They know the green and yellow bus sign and remember that waiting there means they will go home.”

I have never seen a facility in Michigan that would allow patients out the door, never mind rely on a fake bus stop to retrieve the patients. I wonder, however, whether this story has been reported with complete accuracy or if something has been lost in translation. I cannot believe that an Alzheimer’s ward would allow patients to wander off unobserved. It makes more sense that the fake bus stops are used as a form of therapy: if the patients feel that they must try to return home, the bus stop can allow them to scratch that itch. And going out to the bus stop will give the patient some exercise. But I would be interested to hear the thoughts of others with some expertise in the care of Alzheimer’s patients. Can this story be accurate as reported?

There are a variety of reasons why one may wish to rescind an irrevocable trust, even if only in part. For instance, it may be the case that an irrevocable trust was established in order to shield assets from the cost of long term care, but long term care is needed before the five year look back period has elapsed. The assets of the trust are therefore needed to pay for long term care. The ability to return assets directly from the trust to pay creditors will provide a simple solution for executing an alternative spend down plan or paying through the remaining look back period.

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Gertie Brooks, a columnist for my local paper, the Tri-City Times, has written an interesting column on the origin of ‘Taps’. I have no idea if the history is accurate, but Gertie seems a trustworthy source and the story, while astounding, explains much. ‘Taps’ apparently originates from the civil war and a story worthy of ancient tragedy:

It all began in 1862 during the Civil war when Union Army Captain Robert Ellicombe was with his men near Harrison’s Landing in Virginia. The Confederate Army was on the other side of the narrow strip of land. During the night, Captain Ellicombe heard the moan of a soldier who lay mortally wounded on the field. Not knowing if it was a Union or Confederate soldier, the Captain decided to risk his life and bring the stricken man back for medical attention. Crawling on his stomach through the gunfire, the Captain reached the stricken soldier and began pulling him toward his encampment.

For the rest of the story click here.

For a variety of reasons–a relative’s health problems, the recent passing of a client–I find myself all the more appreciative of life in general. It is one blessing of working with the elderly generally that I am often reminded of life’s preciousness, and working with veterans in particular helps me to know the extent of the sacrifices our veterans have made. To all of our veterans and their families, thank you.

UPDATE: The History Channel offers a very different story on the origin of ‘Taps’ that can be found here.

The reality is that families faced with the chronic illness or disability of a loved-one often have few options but a traditional long-term care facility. Aside from the financial devastation that this usually entails, there is the fact that a traditional nursing home is a difficult place to be in. It is good therefore to see nursing home alternatives emerging, such as described in this story about a new nursing home developing near Grand Rapids, Michigan:

Differing from a traditional “hospital-style” nursing home, the so-called green house concept features smaller facilities designed to create a home-like setting with private rooms, baths and other amenities. Residents still receive the daily assistance and medical care they need, though their activities are not regimented nor predicated on their medical needs.

While the article is silent on the cost of care at this facility, it is not unreasonable to assume that it will be more expensive than traditional nursing home care. If it were otherwise, the article would be trumpeting both higher quality care and lower costs. The fact is that this sort of care remains out of reach for most seniors whose savings would be quickly depleted by the cost of this higher level of assistance. Perhaps the best chance most seniors will have at this sort of care is begin planning early in order to maximize assets.

The same technology that allows coffee and internet afficiandos to stay in one cafe for hours on end is now helping seniors to retain their independence and cope with serious health issues. A new Wi-Fi device is capable of alerting your physician in case of heart attack. Thoughtful implementation of new technologies offers a great deal of promise for those seeking to remain independent for as long as possible. Similar technologies offer the promise of helping seniors remain independent as long as possible. Advances in home design and remodeling are likewise helpful to seniors who wish to age in place.

The Michigan Department of Community Health announced today that Detroit nursing homes would receive $1.7 million for improvements. See this Free Press article for coverage. I have never visited a nursing home that did not have a dedicated, but heavily-burdened staff. And obviously there is no end to the needs of the nursing home residents. I can imagine that in Detroit in particular, there would be certain areas that would feel an acute scarcity. I am glad that the patients and staff of these facilities will be receiving some help.

One very important matter for retiring seniors is the decision of when to begin receiving social security benefits. This helpful calculator from AARP can help in the decision-making process. But be forewarned: there is a lot of information on the internet suggesting that you should delay receiving benefits as long possible. And this is not without some merit as your benefits will be higher and theoretically provide better cashflow through your retirement the longer you wait to begin receiving benefits. However, in many cases the modest monthly gain for waiting is not offset by the years of foregone benefits. Consider it this way: If you retire at 65 with a household income of about $50,000.00, you can immediately begin receiving about $1,750.00 per month. If you choose to wait until age 67 to begin receiving social security, your monthly benefit will be about $1,988.00 per month. Think you should wait for the extra $238.00 per month? Well, in order to receive that additional $238.00 per month, you will not receive $42,000.00 in benefits ($1750.00 x 24 months = $42,000.00). The additional $238.00 per month will take you a little more than 176 months to make up the difference between the total of what you would have received with the earlier election and waiting to have the higher monthly payout.

Several reforms to Michigan’s Blue Cross Health Insurance are currently pending in the Michigan Legislature. Proponents hope that these reforms will help reduce the costs of health care in Michigan, while advocates for the health insurance industry voice concerns about declining revenues and increased costs. The issues are complicated, but it seems fair to say that health care is only getting more expensive as the system continues to absorb the shock of a growing retiree population. Read the rest of this entry »

When one spouse requires long-term care in Michigan, the Department of Human Services will do an assessment of the couple’s total resources. Without any planning or asset positioning, the spouse at home will be permitted to keep 1/2 of the couple’s assets as of the date the spouse needing long-term care entered either the hospital or long-term care, with a maximum of $104,400.00 and a minimum of $20,880.00 (in 2008). For example, a marital estate valued at $100,000.00 in non-exempt assets will be limited to $50,000.00 that the at-home spouse can keep. The remainder will have to spent on long-term care or converted to exempt assets before Medicaid will provide assistance with the cost of long-term care.
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A recent article in The Economist explained how some senior citizens used Facebook to fight back when their investments in Asset Backed Commercial Paper ended up in bankruptcy court. Sometimes the innovations wrought by the internet can be a little startling, even if pleasantly so. The idea that a broad spectrum of investors, including many elderly, might form a coalition on Facebook and force a corporation to hear (and heed) their complaints is an astonishing example of how much has changed. Not only has the internet brought people together in wonderful new ways, but the phenomenon has spread to all parts of society, including the elderly:

Following the example of their children and grandchildren, some small investors formed a group on Facebook, a social-networking site, to trade information, provide mutual support and plot strategy. Brian Hunter, the group administrator, says the site turned out to be an “amazing tool”. People who would never have met in real life, from pig farmers and retired loggers to MBA students and pastors, created a formidable interest group.

I find the internet a fascinating world of possibility. There is no limit to the connections that can be formed or the information that can be harnessed. Although written several years ago (and updated more than once) I would recommend The World is Flat to anyone hoping to see the breadth of what has changed through the influence of the internet.

Sue Schiebel has written an excellent article on Medicaid Planning. While her article concerns MassHealth, which is the Massachusetts Medicaid program, the rules and ideas explained are the same in Michigan. She writes:

A lot of middle-aged people don’t realize Medicare, the federal health insurance program, pays for a very limited amount of skilled nursing home care. As we live longer, that means more of us will have to spend our own money for long-term care or must rely on MassHealth, the state health insurance for low income people. Many people wind up doing both — first using up many of their own assets to “spend down” to Medicaid limits so they are financially eligible for state help.

Medicaid qualification is a complex area of the law. To highlight just one counter-intuitive aspect, consider that donations to a church or charity are treated as gifts under the law. One making such a gift is technically creating a period of ineligibility for Medicaid. Strictly speaking, one could then have no means to pay for a nursing home after all other assets have been spent down. An elder law attorney helps families cope with these bizarre rules and avoid such unfortunate results.

Many of my clients are uneasy about placing their assets into a trust as part of an asset protection plan. In order to demystify the process and help you understand why you might consider having a trust drafted for your specific needs, I would like to explain some of the reasons you might consider having a trust and little bit of how a trust works.

Trusts are an important part of elder law and estate planning. Elder law is really the art and science of preserving personal and financial independence for seniors. Many forces threaten a senior’s independence, from ailing health to limited finances to extensive regulatory systems. The goal in creating comprehensive estate plans is to extend resources as much as possible and to create options. How is this possible? The right trust agreement is an important tool for achieving this goal.

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Retirement assets (401ks, IRAs, etc) are considered available assets for purposes of Medicaid qualification in Michigan. In simple terms, that means that those funds have to be spent down until the threshold for asset eligibility is met. In the case of a single person, asset eligibility is generally about $2,000.00, with some additional allowances for the homestead, modest life insurance and funeral expenses. In the case of a married person, the threshold is higher, and will be between $20,880.00 and $104,400.00, depending on the couple’s assets before entering the nursing home. For more details, see The Basics of Medicaid Qualification, below.

In order to avoid having to spend these assets on the cost of care, it is very common to annuitize the retirement assets. For a variety of reasons, I think this is something to avoid whenever possible. First of all, the return on such annuities is low. With inflation likely to increase in the present economic climate, it is difficult to recommend a long-term investment with a low return. An additional concern is that current law requires an annuity to pay out in level installments and in an actuarially sound manner. The days of the deferred annuity with a substantial amount held until after the passing of the owner are gone. Furthermore, under current law, the state of Michigan must be named as the remainder beneficiary after the community spouse or a disabled child. It is true that an annuity will provide secure retirement income for a community spouse, but it should be considered an alternative of last resort in light of these considerations.

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