Someone recently asked me what I would wish for if I could be granted one wish about the area in which I concentrate. There was only one condition: the wish had to be realistic. That, of course, excluded anything having to do with legislation that is needed in the area of Elder Law and Medicaid, because discussing politics is taboo for this publication.
My wish, then, was an easy one. I wish that the general public would understand that the complicated world we live in requires - - demands - - that every adult have in place the four documents essential to a proper estate plan: a will, a durable financial power of attorney, a medical power of attorney (sometimes called a health care proxy) and a living will (technically called an advance directive) - - and that they achieve this with meaningful planning and in a prompt timeline.
I frequently use this monthly column to talk about real life situations involving my clients. I ask permission before writing when it is necessary, and I change names and sometimes facts to make sure I do not divulge confidences and to make it easier to illustrate the point I want to make. Occasionally, I wonder whether I repeat to often the six words I think are most important when families are dealing with estate planning: THINK AHEAD. PLAN AHEAD. ACT NOW! I always reach the same conclusion, which is that I can never stress those six words enough.
This month, I want to deal with the last two words: ACT NOW!
Many new client introductions begin with a call from the adult child of an elderly parent. Among the most frequent opening lines is: "We have been trying to convince Mom/Dad/Our Parents to visit an attorney for 5/10/many years to do a will. I hope it is not too late." Actually, it is never too late to accomplish something positive, as long as the parent still has the capacity to understand and execute documents. Of course, sometimes the passage of time limits the effectiveness of what we can do. Let’s assume that initiating the planning process did not come too late and that the client has thought sufficiently ahead and planned ahead so that there is time to put an effective plan into effect. Here is what can happen when the last two words come into play. I will illustrate this with two real cases, both of which occurred in February, within a week of each other.
DOROTHY. Dorothy came to see me last year. Her estate was about $1.75 million. She had two daughters. Susan is married and had a good job. Annie, has serious psychological problems. Dorothy, who was more than 90 years old, took care of Annie, who had not been out of the house for many years. Annie was not receiving disability benefits and did not have any insurance. Dorothy claimed Annie as a dependent for income tax purposes and had to pay a penalty under the Affordable Care Act of about $1,100 because of the absence of insurance. We discussed an estate plan that included trusts that would protect some of Dorothy’s assets in case she ever needed nursing home care, while, at the same time, would leave her with adequate resources for her own needs. Of equal importance to Dorothy was her desire to obtain public benefits for Annie and protect Annie’s share of Dorothy’s estate so that Annie did not lose those benefits by inheriting about $800,000. I recommended that Annie’s share of the estate be placed into a supplemental benefits trust, one that would restrict he use of funds to expenses not covered by Medicaid. In a future article, I will discuss this type of trust. For purposes of this article the details are not relevant.
I prepared the documents and sent them to Dorothy along with a detailed explanation. At her direction, I also sent copies to Susan. I received a call from Dorothy that the trust was satisfactory. She said, however, that Susan had some questions about the explanation and asked me to go over them with her. I did so by clarifying some statements in the document and corrected a couple of typos. I sent the revised documents for approval. More than a month went by with no response. I called Susan and told her Dorothy needed to sign the documents so that the trust for Annie would be in place. I reminded her of Dorothy’s age and told her that it would be a catastrophe if Dorothy were to die without having the trust in place. Susan said she would call her mother the next day and get her to my office. She did call the next day to say Dorothy had been admitted to the hospital but was expected to get better. They would make an appointment to execute the documents as soon as she was released. To make a long story short, Dorothy died without having left the hospital.
Although Dorothy had a previous will, it did not contain the necessary trust provisions. She had also not followed my instructions to change her TOD (transfer on death) accounts to her own name, creating another problem because those accounts were not affected by the old will and some of them will pass directly to Annie unless something can be done about it. As a result, Susan, as Executor of Dorothy’s estate is faced with the prospect of having to make application to the Superior Court to accept the will and trust as a writing intended as a will (even though unsigned) or to impose a special needs trust (different from a supplemental benefits trust) for the benefit of Annie. If a special needs trust is created, there will someday be a requirement to reimburse Medicaid for the benefits it pays on behalf of Annie. All in all, it is not a good situation, one that could have been avoided if Annie had ACTED NOW!
VIRGINIA. Virginia was referred to me by John, an attorney who is a friend of mine and who has had a long-standing friendship with Virginia and her family. Virginia has a daughter, Katie, who is in her 40's and on disability because of deep depression and, therefore, unable to work. Virginia told me she had pancreatic cancer and wanted to set up a trust for the benefit if Katie because she knew Katie would not able to handle finances for herself and needed someone to look out for her. I told her she could accomplish her objective by executing a will a supplemental benefits trust for the benefit of Annie. John, whom Virginia wanted to be the Trustee, would manage the funds and make sure of compliance with the law regarding the administration of supplemental benefits trusts. I prepared the documents and sent them to Virginia for review. Months passed. I made a number of attempts to set up an appointment for her to come to my office to execute the documents, but there was one postponement after another - - after another. Finally, I put my foot down and said the documents must be executed. We made an appointment to go to Virginia’s house because she was now too weak to leave home. She managed to sign all of the documents, sighed and said she was happy to have that burden off her chest. She died a few days later.
Katie and I met with John this week. Everything is being set up so that Katie will be taken care of without having to worry about her money.
The above two cases were very similar with regard to THOUGHT and PLANNING. They were very different when in came to ACTION! What they illustrate, however, is that all six words are necessary for the implementation of an estate plan. It does you no good to THINK and PLAN if you don’t ACT!