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The Medicaid Millionaire: Myth or Reality?

by with 2 Comments Asset ProtectionEstate Planning Drafting SoftwareLegal Technical

As the Lawyers with Purpose attorney trainer, I am often asked by transitioning attorneys or new members how I can justify helping people shelter money so that they could possibly one day receive Medicaid benefits, while still having funds available in trust. I often think as I respond, how could you not?

The Medicaid program was established in 1965. The original purpose of the program was to provide needed care for the indigent. In a 2011 House hearing on “Abuses of Medicaid Eligibility Rules,” Rep. Trey Gowdy argued that the extremely wealthy should not be on Medicaid. Medicaid is a program to alleviate impoverishment, so certainly this argument makes sense. One thing both Donald Trump and Hillary Clinton have in common is that neither should be in our offices asking how to get Medicaid benefits for long-term care.


Bigstock-calculator-on-the-background-o-117504416But Rep. Gowdy went a step further, stating that “Income and asset tests are easy to circumvent and abuse. In fact, a cottage industry has arisen seeking to educate the wealthy on how to transfer or hide assets so taxpayers can pay for their long-term care.” When I read Mr. Gowdy’s quote, certainly I was not shocked. We, as a “cottage industry” of elder care attorneys, have already been pinned “pension poachers” by the Department of Veteran’s Affairs. So, it is not a stretch to hear that we are also being labeled in this way, even though we never break or abuse a law and certainly never ask our clients to do so.

I would like to ask Mr. Gowdy, and all of those who paint us with the broad brush stroke of system abusers, if they actually have any idea who our typical clients are. I suspect that they do not. Because the reality is that very few multi-millionaires come into our offices seeking Medicaid benefits. No, they come in for tax planning, they come in for asset protection and they come in for family trust planning. The people who come through our doors because a spouse has just entered the nursing home and they have been asked to deplete their $250,000 in savings to pay $8,000 a month for care are not these “millionaires.” They are the hard-working, tax-paying middle class. And they are frightened, they are nervous and they know that they are quickly becoming the indigent.

Currently, long-term care beneficiaries represent about 7 percent of the Medicaid recipient population. However, they absorb about 19 percent of the Medicaid funds. Why? Because long-term care is astronomically expensive and there is no other public program available to help with the expense. It is also believed that the average pre-plan for couples who plan over five years prior to institutionalization is saving the married client between $240,000 and $750,000. These numbers decrease by over half when we look at crisis cases. When asking why they pre-planned for Medicaid eligibility, below are the answers I received from former clients.

From a former school teacher married to a Vietnam veteran: “My husband has dementia. He could be sick for a long time and I am only 68 years old.”

From a widow with an adult disabled child in her home: “My daughter has special needs and is wheelchair-bound and I need to have the money left over to care for her for the rest of her life.”

From a retired doctor and his wife, a teacher: “I paid taxes all my life and I continue to pay all that is required of me. I also donate time and money to those in need. My children work hard and I do not want to be a burden on them.”

From an auto mechanic with Parkinson’s and his wife, a retired bus driver: “My neighbor lost everything they worked for. I don’t want to die having lost everything I worked for my wife to have when she is alone.”

It is also worth noting that the “Abuses of Medicaid Eligibility Rules” hearing never grew into any proposed law changes. This is most likely because the officials from the state Medicaid agencies and the nursing care industry who were brought in to speak before the committee painted a completely different portrait of the “system abusers.” They told the stories that they see every day. They spoke of the middle class – scared, desperate, and struggling to pay for care – and the attorneys who help them manage the legalities of a complex system. They spoke of the reality, not the myth.

If you haven't registered for the June Tri-Annual Practice Enhancement Retreat we're filling up fast and Early Bird pricing expires soon!  Don't miss THE estate and elder law event not to be missed! Click here to register now and reserve your spot!

Kimberly M. Brannon, Esq., Legal Technical & Software Trainer – Lawyers With Purpose

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Dig, if you WILL … the truth about Prince’s estate

by with One Comment Estate Planning Drafting SoftwareLegal MarketingLegal Technical

Doves do not cry.   Crying as an expression of pain or emotion is a mammalian trait. I know this to be true because on a 6th grade trip to the zoo, dressed in my finest purple, I asked the zoologist. So I am confident in stating that if you owned a raspberry beret and spent any portion of 1986 walking into the grocery store through the out door, you understand the depths of my mourning for the death of Prince.  

As a closet follower of all things pop culture, I have listened repeatedly to my Prince playlist and read every article I have run across about Prince since his death. And then, today, it happened. I read an article so blatantly ridiculous, it could not possibly be true. Who would write such an atrocious, fabricated tale, and who would believe it? Turns out the top celebrity magazine in the country wrote it, and based on the 396 comments I saw, everyone believed it. The article has since been edited. Experts in the area have been interviewed and the magazine has fixed its egregious errors. Most likely these errors were discovered when their own attorneys almost fell out of their chairs, as I did. So, I promise that I will not trouble you with the hideous nature of the original article or the depression that sank further into my soul as I browsed reader comments saying they were going to contact their police stations on the subject. I will simply tell you the title of the article, which will provide you with all of the outrage and confusion you need for the day.

Who Will Get Prince’s Millions? Cops Say They Have No Record of a Will for the Late Singer.

Ctyp_73ded5_prince-purpJust let that sink in. As promised I will not regale you with the quotes from the original article saying that if no will is filed soon, the property of the singer who died a few days ago may be divided equally between his siblings. I will not bore you with the notion that the word TRUST was in the original article zero times. I will not tell you how the original article relied on police officers for all quotes related to probate administration. (Of course, they did not use that phrase.)

I will simply say this: We have no idea what will happen with Prince's estate. However, this article and hundreds of others like it do send a clear message that people are being miseducated and misinformed about estate planning and administration by the media. 

As elder care attorneys, we need to take seriously this article and the hundreds of comments from readers believing everything they read. Our baby boomers are reaching the age of health issues, and every family is one accident away from a crisis situation. It is our duty to continue to educate our communities through workshops on the truths about wills, trusts and administration. Understanding the importance of protecting their assets for themselves and their children is a duty LWP attorneys have to our communities, and I am proud that we do not take that lightly.    

And, if you are an elder care attorney, I encourage you continue the workshops you provide to your community giving the tools and knowledge necessary to help make educated decisions about family affairs. And, providing options to attendees will potentially save thousands of dollars when crisis strikes or old age rears its ugly head.  

Let us, as the LWP community working together with our clients, not give up on our goal of educating and providing the best legal advice out there for families. Let us not give up – until the doves cry.

Early Bird registration and pricing is now open for the June 20th – 24th Tri-Annual Practice Enhancement Retreat in San Diego.  During the week you'll discover our most effective and PROVEN practice growth strategies, legal/technical best practices and marketing GOLD – so powerful and cutting edge we will ONLY share them face-to-face! Register today and reserve your seat at early bird pricing!

Kimberly M. Brannon, Esq., Legal-Technical and Software Trainer

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The ILIT / TAP Distinction

by with One Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting Software

Many people commonly use Irrevocable Life Insurance Trusts (ILIT) to ensure that life insurance owned by an individual is not included in their taxable estate at death. While an ILIT is a useful trust, you could accomplish far more with a TAP™ trust. So let's review an ILIT and distinguish how a TAP enhances the benefits often sought by ILITs. An ILIT is an irrevocable trust wherein the grantor retains no rights to modify the trust, benefit from the trust or control the trust. Retention of any of these rights will trigger estate tax inclusion under Internal Revenue Code Sections 2036 through 2042. An Irrevocable Life Insurance Trust may be a non-grantor trust or grantor trust, depending upon the attorney's drafting choice.

Triggering a provision of Internal Revenue Code Sections 671 through 679 will cause the inclusion of all income from the ILIT to be included in the personal income tax return of the grantor. While the grantor retains no rights to modify, control, or benefit from the trust, the grantor may be taxed on its income if a grantor trust provision is triggered. The most common of these grantor trust provisions is to allow the grantor to substitute assets of equal value, or make loans to the grantor without adequate security. By choosing grantor trust status, it essentially serves as an additional gift without having to utilize the annual gift tax exclusion, because the income taxes are paid from the grantor, rather than the trust. As a result, those additional sums are retained in the trust, thus providing additional assets to the intended beneficiaries that otherwise would have been used to pay the taxes.


Bigstock-Red-Pencil-Standing-Out-From-C-104390930One of the core elements of an ILIT is ensuring the use of Crummey powers. Crummey powers are based on the landmark case Crummey v. the Commissioner wherein the U.S. Tax Court held that granting someone the right to withdraw money funded to a trust immediately but limited to a short period of time (i.e. 30 days) was sufficient timing to deem the contribution a "present interest" and thereby trigger the annual gift tax exclusion for the contribution. A Crummey power is essential to ensure that the annual gift tax exclusions are utilized so as not to reduce the grantor's overall lifetime estate and gift tax exemption. One critical restriction under the current power, however, is that Section of the Internal Revenue Code limits the annual exclusion made to trusts to the greater of 5 percent of trust assets or $5,000. Therefore, it is essential to have a "hanging power" to ensure any contributions in excess of $5,000 or 5 percent are not deemed to be taxable gifts.

These hanging powers allow the Crummey beneficiary to continue to have the right to withdraw this excess amount, even beyond the 30-day period. For example, if a grantor contributes $42,000 to a trust for three Crummey beneficiaries and the $42,000 is the only asset of the trust and it was utilized to pay the insurance premium, then 5 percent of the trust assets only equals $2,000. Obviously, $5,000 would be greater, so $5,000 of each $14,000 contribution would be deemed to be a present interest gift and $9,000 of the contribution would "hang" until no contributions are made in a given year. At that time, an additional allocation of the annual gift would occur based on the $5,000 or 5 percent trust value limitation. Obviously, this could be problematic if these powers hang and one of your Crummey beneficiaries becomes subject to lawsuits, divorce or long-term care costs.

Another consideration with the Crummey power is to have straw Crummey beneficiaries. This is typically done by adding beneficiaries to the lifetime trust, which operates during the grantor's lifetime and provides the names of people who are not residuary beneficiaries. For example, one straw Crummey beneficiary might include spouses or other remote relatives who are willing to be a Crummey beneficiary, understanding that they are not likely to be an ultimate beneficiary. This allows additional payments each year to be contributed within the annual exclusion limit. Both ILITs and TAP trusts have Crummey provisions with hanging powers.

Neither ILITs nor TAPs are user friendly to individuals with estates less than $5,450,000, or $10,900,000 if married. These excessive restrictions need not be applied in circumstances where the total estate of the grantor plus the life insurance benefits does not exceed the estate tax limit. Obviously, the only other consideration would be if your state had an estate tax at a lower limit. If estate tax is a concern, a primary benefit of the TAP trust over the ILIT is that a TAP trust stands for Tax All Purpose trust, which means its intended benefit is far beyond the holding of life insurance. The TAP trust will typically hold life insurance policies, stocks, bonds, and other assets and/or business interests that the grantor would like to get passed on to the trust beneficiaries after death. This is especially helpful, as it will ensure that there are other assets in the trust other than the life insurance policy to accumulate assets of more than $280,000 to ensure that the entire Crummey contribution can be utilized each year with no hanging powers. In addition, the TAP trust has extensive provisions for lifetime and residuary trusts to the individuals or classes of people.

For example, sometimes a grantor will create a family-type trust that takes effect after death for the benefit of the surviving spouse and children, and upon the death of the surviving spouse, it provides separate residuary trusts for each child. Other times, clients may want to create a benefit for a class of their children for their lifetime, and at the death of the last child the balance is allocated to their then-surviving children in separate share trusts. TAP trusts are extremely flexible and powerful in ensuring that whatever assets are passed through them (life insurance, stocks, bonds, business interests, etc.) are passed on to their loved ones fully asset-protected in separate asset protection trusts or common trusts, depending on the client's goal. One of the critical distinctions in asset protection trusts after death is to ensure that the trustee is an independent trustee under Internal Revenue Code Section 672(c). One distinction to resolve the concern of naming the child beneficiary as the trustee without violating Section 672(c) is to ensure that you name a co-trustee who is adverse, a strategy far too few lawyers utilize. For example, after the death of a grantor, the surviving spouse can be the trustee with a co-trustee of one of their children. While this would be considered under the family attribution rules to be a controlled trustee, the adverse party interest ensures that the Internal Revenue Code distinctions are met. For example, if a child was a co-trustee with the spouse and approved a payment to the spouse during a family trust administration, that would be adverse to the child's residuary interest and thus satisfy the restrictions within 672(c).

The other exciting element of a TAP trust is the allowance of the spouse or trust protector to have a power of appointment to modify the beneficiaries within a class of people identified by the grantor. This can ensure that the family is able to adjust for changing circumstances after the death of the grantor to cover his or her overall planning intentions. One of the key distinctions of a TAP trust is also specific language that authorizes the accumulation of income but specifically requires the trustee to account separately for income that is accumulated and converted to principal, so as to ensure no portion of that is utilized to pay insurance premiums on the grantor. While the trust ensures that all the proper legal language is included, to be legally proper it is incumbent upon the attorney to educate the client to understand how to properly administer a trust so as not to violate that provision.

So, as you look at the distinctions between an ILIT and a TAP, it's important to note that everything an ILIT is is included in the TAP trust, but not everything in a TAP trust is included in an ILIT, so a TAP is a far more expansive trust that allows much more flexibility and use by a client. If you want to learn more about becoming a Lawyers with Purpose member to discover how the TAP trust can benefit you in your practice and, more importantly, benefit your clients consider joining our FREE webinar "The Four Essentials For A Profitable Practice" on Thursday, April 21st at 8EST. Click here to register now.

This is a FREE training webinar designed for attorneys who wish to add Estate Planning, Asset Protection, Medicaid, or VA Planning to their practice, or significantly improve on their existing business using our PROVEN and paint-by-number strategies. Reserve your spot now!

 David J. Zumpano, Co-founder – Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center 

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In Defense of My Smartphone – By a Generation Xer

by with No Comment Team Building

On the second day of the Lawyers with Purpose Tri-Annual Practice Enhancement Retreat in Orlando, there was a focus session on the Infrastructure Track called “Bridging the Generation Gap,” presented by Susan Hunter. My presence there was mandatory, as I had been assigned to administrative duties as an employee of Lawyers with Purpose. However, it was also my treat, because I am a big fan of Susan’s presentations and knew I was in for an informative and humorous session – and I was right. Susan talked about the three generations that make up her law firm team: The Baby Boomers, Generation X, and the Millennials. She also explored the challenges and opportunities that may occur when working with someone not from your own generation, as well as the growth mindset needed to bridge this gap.

Bigstock-Apple-Iphone-With-Blank-Screen-29625881Among the various characteristics of the Millennials noted was their hyper-ease with technology, especially social media, predominantly via smartphones. It was cited that 98% of Millennials have a smartphone. And it is the smartphone that is usually blamed for promoting isolation and the decrease in face-to-face interactions in real time – not FaceTime. But, in defense of my smartphone, I found that I related more to the Millennials who work in our firm during this trip because of it than I think I would have otherwise. Don’t get me wrong, there was also plenty of good, old-fashioned team building in the form of conversations, brainstorming, card and board games, as well as one night with a home-cooked meal prepared by team members. However, I must confess that our smartphones did play an important part in bringing us together as a team.

My use – excuse me – our use of the smartphone during our road trip from Atlanta to Orlando as well as during the retreat was interactive. First and foremost, we used it to get information like researching recommended places to eat along I-75 or finding the cheapest gas when it was time to refuel. We also used the mapping capabilities of the smartphone extensively to direct us on our route, avoid traffic, and keep us up to date on our ETA despite the pit stops. Then there is what may be the default use of the smartphone: communication. Our firm stayed at a timeshare condo a few minutes from the hotel where the retreat occurred, and this required some coordination to accommodate the needs of all nine team members. We relied on text messages and calls to remain in contact and synchronize needed rides. During the road trip, we would also send regular text messages to Victoria, our supervisor, to give her status updates on our arrival both to Orlando and Atlanta.

Another way we communicated via smartphone was by sharing photos the team took. This included sharing funny pictures of Goofy and the team at the reception, but they also served to document our team’s work at the retreat, like the photo we shared of our completed, collaborative Brainstorming Sprints sheet. Lawyers with Purpose even provided a smartphone app called EventBoard for the retreat and the Practice with Purpose program. The app provides an interactive conference event guide with the schedule, speaker information, sponsors and their websites, floor plans, and online evaluation forms. I really like how the events grayed out on the schedule as the day went on so you could immediately see the highlighted current and upcoming sessions. Sure, there were technical difficulties. When I first opened the application, no details loaded for the sessions and the evaluation forms were blank. However, once I closed the other 20 apps that I was unconsciously, simultaneously running on my iPhone, EventBoard worked quite well.

I will confess that my first sight of some of the Millennials in our firm on any given morning during the retreat was in bed by the light of a smartphone furiously typing. Perhaps they were well on their way to the 50 or more text messages that 50% of Millennials surveyed will send in a day. But I can’t blame them, as the first thing I did every night and every morning while away was to text my family to say “Hi.”

Finally, we used our smartphones to play music enjoyed by the team as a whole. We took turns depending on who had a particular song we wanted to hear. No one had brought a portable speaker, and the van’s stereo system had no speakers in the passenger area, thus we had to improvise with one of those pairs of giant headphones that Millennials often sport to broadcast the music for all to hear. As a result, the music was a little tinny and not as loud as I would have liked. Nonetheless, it relieved the monotony of the road trip as we sang, hummed, and/or danced to music from all three generations and, more importantly I think, moved in harmony as a great team should.

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By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

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The Death of Ascertainable Standards

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting Software

The recent Pfannenstiehl v. Pfannenstiehl case in Massachusetts is a pretty good indication that the use of ascertainable standards in asset protection planning is dangerous. While this may be news to you, the Lawyers with Purpose legal community has known this for some time and has changed its recommended planning strategy more than seven years ago on how to ensure asset protection is maintained.

Bigstock-Question-mark-heap-on-table-co-86579810When creating an irrevocable trust, some of the most important legal determinations made are the discretion granted to the trustee to make distributions to the beneficiaries. The two most common are "wholly discretionary" and "ascertainable standards." What is the difference? Traditionally when a trustee is allowed to make distributions pursuant to the health, education, maintenance and support of the beneficiary, that is traditionally identified as ascertainable standards, otherwise known as HEMS.

This standard was predominantly created through tax law cases where the question became whether the trustee garnered too much control or authority so as to include the assets of the trust in the taxable estate. The court cases resolved that as long as there were ascertainable standards, it would provide sufficient discretion so as not to have the adverse tax impact. So HEMS became the standard of discretion for trustees. Once again, it was a case of the tail wagging the dog. While estate tax planning was a concern in generations past, since 2001 with the passage of EGTRRA and the massive expansion of the estate tax exemption, the HEMS standard for estate tax purposes only applies to less than two out of 1,000 Americans. Why is it, then, that most lawyers still draft their trust for everyone according to the restrictions required for the two-tenths of 1 percent of Americans? The typical answer is, because that's the way they always did it.

At Lawyers with Purpose, we are absolutely present and future-oriented and always looking at the current laws, but more importantly, we consider the relevance of the laws to the needs of the clients. For example, I remember particularly a case where I drafted an irrevocable life insurance trust and granted powers to the spouse that could deem it to be includable in her estate. While this was not the best tax planning strategy for the client, I clearly reviewed all the rules with the client, explained the adverse consequences and the client's response was "I don't care about the tax impacts; I want my wife to have it." In such a case, I had the client sign an acknowledgment that he was made aware of the adverse consequence, but to any third party reviewing the trust, they were confident I committed malpractice. That's the challenge today: Lawyers want to impose their ways on clients. Our job is not to tell clients what to do; our job is to tell clients what they can do, the pros and the cons of each approach, and to let them make the decisions that best suit the needs of their family. Such is true with ascertainable standards.

It is LWP’s recommendation – and has been for many years – wholly discretionary powers are typically worded as that a wholly discretionary standard be used rather than ascertainable standards, “the trustee shall make distributions to any beneficiary in their sole and absolute discretion….” This assures that discretion is held wholly within the trustee and there is less risk of the trust being invaded by outside sources to ensure for the health, education, maintenance and support of the beneficiary. Can you imagine a court looking at a trust that a senior residing in a nursing home was the beneficiary of and the trust provided that that senior was the beneficiary and the trustee can make distributions for health, education, maintenance and support? How can the trustee not deem a distribution for the cost of that nursing home to be for their health or maintenance or support? It's an accident waiting to happen. In fact some states like Ohio have gone as far as to say that any trust that has ascertainable standards can be pierced to make medical payments in accordance with the health, education, maintenance and support provisions. Don't wait. Stop using ascertainable standards now and protect your clients from any undue risk of having their asset protection trust invaded.

If you would like to learn more about our estate planning drafting software and how it can support you in your estate or elder law practice, schedule a live software demo at: https://www.lawyerswithpurpose.com/Estate-Planning-Drafting-Software.php.  Learn how you can (1) regain lost hours (2) train your team so you spend less time drafting (3) effective document prep for 99% of your estate planning clients (4) and much, much more….

David J. Zumpano, Co-founder – Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center 

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Utilizing the New LWP-CCS Personal Services Agreement

by with No Comment Estate Planning Drafting SoftwareLegal Technical

Personal service agreements, or personal care agreements, are typically agreements between a family member providing care and another needing care. These agreements act as a legal contract between the two parties regarding the range of care one party is providing to the other. As a Medicaid and/or VA planning tool, a personal service agreements may act as a method of spend-down while making sure your elderly client is provided the services needed and is appropriately compensating a family member who is making personal and professional sacrifices to provide the services.

We are excited to share that the LWP Client-Centered Software is now providing a comprehensive Personal Services Agreement that thoroughly addresses the many issues that Medicaid will consider when analyzing a care plan. The care plan also offers the language you will need if a client starts receiving VA benefits and plans to pay those to a child or family member to provide care.

Bigstock-Legal-Law-Rules-Community-Just-94090013First, the software incorporates all parties involved in the plan and requires that all parties sign the plan.

Medicaid wants to make sure that the compensation offered to the caregiver is reasonable in the area of the country where the services are provided. The LWPCCS incorporates the hourly rates of court-appointed guardians, geriatric-care professionals and general-service providers to justify the hourly rate paid to the caregiver. If you opt to do so, the software can calculate the hourly rate of the caregiver as the average of the rates provided for the professionals mentioned above.

Medicaid will want to know where the care is provided. This can be especially important if the child is moving in with the parent to provide care in lieu of nursing care, as they may later qualify for the child caregiver exemption. The software assumes the care is at the home of the person needing care. However, with the click of a button you can choose another place of care, be it in the child’s home, an assisted living facility, an independent living facility or a nursing home.

The terms of the agreement are an important part of creating a valid contract and meeting Medicaid requirements. The LWPCCS allows you to determine the start date of the agreement, the term of the agreement (lifetime, term of years or term of weeks), how often the caregiver will be paid, and the hourly rate the caregiver receives. Another important note: When the caregiver agreement is produced, it defines the caregiver’s role as that of a general contractor and eliminates any tax liability for the person receiving care, providing additional protections for your client.

The feature of the software that allows you to specify which activities of daily living (ADLs) the person needs assistance with can help with Medicaid guidelines and VA guidelines as well.

Finally, alternate caregivers are named for any time periods during which the caregiver is unable to perform the tasks, due to personal illness, vacation, other employment or any other reason.

You can find the new personal services agreement in the LWPCCS under the Medicaid Qualification folder, since we see it as a critical part of Medicaid planning. Incorporating the new LWP Personal Care Agreement into your practice is yet another layer of solid legal planning and documentation we provide for our clients as LWP attorneys.

If you want to learn more about adding medicaid to your estate or elder law practice register for our FREE WEBINAR "Simplifying Medicaid Eligibility & Qualified Transfers" on Tuesday, March 15th at 2 EST. Click here to reserve your spot now.

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Kimberly M. Brannon, Esq., Legal-Technical & Software Trainer, Lawyers With Purpose

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Who Should Be Trustee?

by with No Comment Asset ProtectionDavid J. ZumpanoEstate Planning Drafting SoftwareLegal Technical

There's a constant battle between lawyers as to who should be trustee of an irrevocable asset protection trust. The primary school of thought is that it should never be the grantor, and some schools of thought believe it should never be the beneficiary. At Lawyers with Purpose, we disagree with both of those positions, but we recognize the concerns and rely on sound principles of asset protection law in making the final determinations.

Bigstock-Who--4420521Let's first discuss the question of whether the grantor should be trustee. Many practitioners believe that allowing the grantor to be trustee makes the assets of an irrevocable trust available to the grantor's creditors. Such a proposition is ludicrous. The challenge with most lawyers is that they do not allow the grantor to be trustee of his or her irrevocable trust. When pushed to explain why, they typically assume that's the way it was always done. Few dig further to see why it was done that way. So let's examine why grantors were not traditionally named trustee. The most adverse impact is that, if the grantor is trustee, they're deemed to retain enough control to have the assets of the trust included in their taxable estate when they die. For many generations, this was the death knell? of an asset protection trust. But in the last 15 years it's become irrelevant because of the rise of the estate tax exemption. Today only two in a thousand Americans have a taxable estate, so preventing the grantor from being trustee because of a potential inclusion of the trust asset in the estate of the grantor is not relevant to 99.8 percent of Americans. So why hold them to that standard?

The next major argument is a theory that if the grantor has control of the trust, then he could direct it back to himself. Well, that depends. What does the trust say? If the trust says that the grantor is not a beneficiary, or similarly the grantor is not a principal beneficiary but is entitled to the income, does that mean that the grantor as trustee all of a sudden gains a super power to violate the terms of the trust and give himself the principal when it's not allowed for? Hardly. In fact, there is consistent case law throughout all of the states, including cases that lead all the way up to the Supreme Court, that supports the notion that a grantor as trustee has all of the same fiduciary obligations as any other trustee and by no means has authority to act outside the powers granted to trustee. I specifically refer you to my Law Review article, "The Irrevocable Pure Grantor Trust: The Estate Planning Landscape Has Changed" in the Syracuse Law Review. In this article, I go through in‑depth review of all of the case law nationwide, and I'm excited to say that it is sound law that a grantor can be a trustee without risking the assets to the creditors of the grantor. One caveat, however, is if the grantor does retain the right to the income, then absolutely the income will be available to the creditors of the grantor.

So are there circumstances when the grantor as trustee's trust is invaded? Absolutely, but in every single case the invasion was not due to the grantor being the trustee, but rather was due to the pattern of behavior by a grantor trustee who violated regularly the terms of the trust in favor of themselves, and the trust was thereafter deemed a sham. In such cases, I concur with any court that makes that decision based on people who try to defraud the system. Irrevocable trusts must be managed in an arm's length manner, and as lawyers we do not plan for someone to become fraudulent. They are fraudulent to their own peril. But a properly drawn trust when the trustee is the grantor in no way, shape or form creates any risk of loss of asset protection if the terms of the trust are followed, as they are required to be in every case whether the grantor is trustee or not.

So at Lawyers with Purpose we encourage our members to do good legal work based on sound law, not fear, conjecture or because that's the way it's always been done. In the end, the client wins. It is silly to deny thousands of clients that we serve the ability to manage and control their own assets for the benefit of their families, just because some rogue case in some rogue state from some vile fact pattern allowed the court to invade against the intentions of the grantor. Protect your clients. Teach your clients. Share with your clients how these work. They are very safe and a great planning tool.

If you want to learn more about Lawyers With Purpose you can find all the information about becoming a member by clicking here to download our Membership Brochure.

David J. Zumpano, Esq, CPA, Co-founder Lawyers With Purpose, Founder and Senior Partner of Estate Planning Law Center

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Tips For VA form 21-0779

by with No Comment Estate Planning Drafting SoftwareSystems & ProcessesVA

Purpose of the 21-0779

The VA form 21-0779 “Request for Nursing Home Information In Connection With Claim for Aid and Attendance” is used only for certain non-service-connected pension claims, and its primary purpose is to document the level of care required by a claimant or a claimant’s dependent. The VA form 21-0779 is completed specifically for individuals who are residents of nursing homes. The importance of documenting this level of care is twofold:

  1. To support a claim for additional pension above and beyond the base level;
  2. To support the need for certain medical expenses.

There are three levels of non-service-connected pension that a claimant may qualify for: Base pension, Housebound, and Aid & Attendance. The base pension is the lowest pension that a claimant may be awarded. Additional funds are granted if you can document that the claimant is housebound, and even more funds go to those requiring another individual to assist with at least two activities of daily living, or ADLs. The VA also looks at level of care when considering medical expenses to offset income. Therefore, the VA form 21-0779 should document the level of care that justifies the medical expenses being declared. This applies to the claimant’s dependents as much as to the claimant. So for example, the VA will not consider the nursing home facility expense for a veteran’s spouse unless a form 21-0779 is completed for the spouse indicating the need for this level of care.

Bigstock-Forms-Concept-with-Word-on-Fol-95979155Completing the 21-0779

The VA form 21-0779 is just a single page and is mainly to be completed by a third party; that is, the nursing home. All you need to complete the form is the veteran’s – or claimant’s, if other than the veteran – name(s), and Social Security number(s). When you are completing this form for a living veteran’s spouse or other dependent, that person’s name appears in the field that requests the name of the claimant, even though, strictly speaking, the claimant is the living veteran. When downloaded from the VA website at http://www.va.gov/vaforms/, the 21-0779 has no separate instruction pages. The form is fairly straightforward to fill out, but it still provides a toll-free phone number for those who require assistance completing the form. Despite the fact that you are not completing this form yourself for the most part, you should still review all 21-0779s once completed by the nursing home and before submitting to the VA so that you can confirm that every field is answered.

What to file with the 21-0779

Nothing in particular is required to be filed with the 21-0779 form. If you determine that you do need to file this form, it should be submitted as part of a fully developed claim in order to expedite the processing. If you are filing the VA form 21-0779 with your formal claim, then you do not need to file a VA form 21-2680 “Examination for Housebound Status or Permanent Need for Regular Aid and Attendance” because the former documents that the claimant is in a nursing home and requires skilled nursing care and thus by definition has a permanent need for regular aid and attendance. This will, however, not stop some VA adjudicators from requesting the 21-2680 form in addition to the VA form 21-0779, thus we generally request all our VA clients to get a VA form 21-2680 completed as soon as they have retained us.

Always remember that this form can be used for supporting both a claim for a higher level of pension and the need for certain medical expenses. Keep those two purposes in mind when you are deciding whether or not it needs to be included as part of your VA claim, and when reviewing its completion by the nursing home to make sure there are not unexpected results with your claim.

If you're interested in learning more about the Lawyers With Purpose Cloud Based Workflow System join us on Friday, February 26th at 2EST.  Finally…an AUTOMATED law firm system for Estate and Elder Law Attorneys designed to free up your time and get the work out the door quickly and easily!  Click here to reserve your spot for this FREE LIVE DEMO!  We only have a few spots left so grab your seat today!

By Sabrina A. Scott, Paralegal, The Elder & Disability Law Firm of Victoria L. Collier, PC and Director of VA Services for Lawyers With Purpose.

Victoria L. Collier, Veteran of the United States Air Force, 1989-1995 and United States Army Reserves, 2001-2004. Victoria is a Certified Elder Law Attorney through the National Elder Law Foundation; Author of “47 Secret Veterans Benefits for Seniors”; Author of “Paying for Long Term Care: Financial Help for Wartime Veterans: The VA Aid & Attendance Benefit”; Founder of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Lawyers with Purpose; and Co-Founder of Veterans Advocate Group of America.

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Do You Employ The “Fifty Shades of Grey” Publicist?

by with No Comment Systems & Processes

E L James is the author of the extremely popular erotic romance trilogy "Fifty Shades of Grey," released in May of 2011 and followed by the movie of the same title on February 13, 2015. This was the author's first novel, but she clearly hit a home run!

Maybe that is where I had my misconnect. I write poetry, some of which is provocative. Believing the new release of the movie would be a great opportunity to connect two pieces of art, I sent a letter via email to Ms. James’ publicist, which included three topic-appropriate poems. Yes, it was gutsy and a stretch, but history is not made by watching other people take action (and neither is money).

Bigstock-Grey-pixel-mosaic-design-backg-107626922It has been a year and I have not heard from Ms. James or her publicist – not even a "We are not interested." It makes me wonder if Ms. James ever even got my letter, or if her publicist independently discarded it without discussion.

When are referrals or opportunities sent to you that you are not aware of? Often.

Just to share a few in my law office I, much too late, learned of:

  1. A resume for an administrative position received by a paralegal and discarded without bringing it to me.
  2. A referral, from a good friend, that wouldn't follow our office procedures and requested a free consult without first attending a workshop. Discarded.
  3. An offer to make a presentation to a nursing home.

Would I have accepted any of the above opportunities? Maybe, but now I have no choice.

  1. I was in fact hiring at the time the resume was discarded.
  2. I would have done pro bono consult to help a colleague.
  3. I would move mountains to get in front of a nursing home administrator.

So why were they discarded? Why was my opinion trumped?

Because of one of two reasons, or both.

  1. Employees who believe they know a) what is best for you or the firm, or b) what you would have said and didn't want to bother you. These are rogue employees in the guise of being independent and efficient.

OR

  1. You haven't been clear on your expectations. A system should be in place for each member of the firm to report opportunities of ALL kinds presented, accepted and rejected. An opportunity in this sense should be defined as "a request of some sort by another person or organization to either the firm or the managing lawyer."

I appreciate efficiency and independence, but I appreciate opportunity even more. The owner or manager of the firm should have the final say to accept or deny.

I feel certain that, had Ms. James been presented with my letter and poetry, she would have taken one of two actions:

  1. Remembered her beginnings and reached out to assist a sister in the arts.

OR

  1. Sent a reply politely denying my request.

Don't your prospects and professional community deserve the same?

What are you missing? What processes can you implement to catch them? What can you do to gently discard the others without leaving them hanging?

Did you know that Lawyers With Purpose has it's own Cloud Based Workflow System specifically for estate and elder law firms?  If you want to learn more about it, join us on Friday, February 26th at 2EST for a FREE live demo! Just click here to reserve your spot now.

Victoria L. Collier, Co-Founder, Lawyers with Purpose, LLC, Certified Elder Law Attorney through the National Elder Law Foundation; Fellow of the National Academy of Elder Law Attorneys; Founder and Managing Attorney of The Elder & Disability Law Firm of Victoria L. Collier, PC; Co-Founder of Veterans Advocates Group of America; Entrepreneur; Author; and nationally renowned Presenter.

Jaloza and Team

Congratulations to Andrew Jaloza, Lawyers With Purpose Member of The Month

by with No Comment Systems & ProcessesTeam Building

What is the greatest success you’ve had since joining LWP?  

The greatest success is having created a thriving Estate Planning Practice run by a cohesive team of dedicated people who are passionate about helping as many families as we possibly can.

Jaloza and TeamWhat is your favorite LWP tool?

It is not just the tools but the total client centered systematic approach of the LWP process that has allowed us to quickly go from zero to hero as an Elder Law and Estate Planning firm. 

How has being part of LWP impacted your team and your practice?

We have been impacted by our implementation coach Roz Drotar and our mentor Coach Candace Pollock, both of whom have held us accountable and challenged us to reach our highest possible potential while imparting their years of experience-based suggestions to help us achieve amazing growth over the past year.

Share something about yourself that most people don’t know about you.

Something that people don't know about me is that I am transparent. What you see is truly what you get. 

What is your favorite book and how did it impact your life?

My favorite book is called Man's Search of Meaning by Viktor Frankl. This book has impacted my life because after reading it, it has taught me that everything in your life is a matter of perspective, and how you look at something creates your world.