Clients frequently come into my law office asking “Should I (or we) have a trust?”  My answer is always “It depends on your situation and what your goals are.” 

Then I ask clients, “What are your goals?   What are the concerns you have that make you think about having a trust?”   These concerns may include:

• Providing for a minor or young adult child
• Providing for a disabled person
• Providing for a pet
• Avoiding probate
• Minimizing estate tax
• Preserving your assets against the high cost of nursing home care
• Keeping your vacation home in the family.

There are many different types of trusts, for many different purposes:

• A trust for a minor or young adult child;
• A “special needs trust” for a disabled person;
• A trust for the care of an animal;
• A revocable living trust, to avoid probate;
• A tax-oriented trust, to reduce estate taxes;
• A trust to preserving your assets against the high cost of nursing home care;
• A trust to hold your vacation home for the benefit of your family.

In the coming weeks, I will write about different types of trusts which can be useful depending on the client’s situation. Later this week:  Trusts for minor or young adult children.

by Sally M. Wagley, attorney

Parents of disabled children tend to worry a lot. I am frequently asked the following questions:
• Will my child be able to live independently, without my support?
• Does my child need a guardian?
• Where will my child live?
• Does my child qualify for public assistance programs such as SSI and MaineCare (Medicaid)?
• If I leave money or property to my child, will my child lose public assistance?

Will my child need a guardian?
Some children, in spite of their disabilities, are able to live independently. Many people with physical disabilities lead active lives, helped by adaptive equipment, in-home services, and legal protection under the Americans for Disabilities Act. For this group, the appointment of a guardian is not a concern.

Even a child with mental or emotional disabilities may be able to live on their own or in supportive settings such as supervised apartments and group homes.

A parent of a disabled child should ask him or herself, “Is my child able to make decisions about medical care? Is my child able to manage money?” If the parent has any doubt, he or she should first consider whether the child has the mental capacity to sign a durable power of attorney, in which the child chooses another person (such as a parent, other family member or family friend) who can to access medical and financial information and make the decisions for the child, to the extent the child is unable. In this situation, the child continues to have a degree of independence.

However, the child’s mental disability may be so severe that he or she does not have sufficient understanding of the power of attorney. In this case, I advise parents, upon the child’s turning 18, to petition the probate court for appointment as the child’s guardian. Otherwise, the parent will no longer be able to make decisions for the now adult child. Where the child has money or property in excess of $5000, the parent must also be appointed as the child’s conservator.

A parent will also worry who will watch over the child after the parent is gone. I advise parents, in their wills, to designate a responsible adult to act as the child’s guardian in this circumstance.

Where the child receives some kind of Social Security benefit, the parent should also apply to become the child’s representative payee, to handle that child’s benefit check.

Will my child qualify for public assistance?
A child who has a physical, mental or emotional impairment may be unable to support him or herself financially. The child is also unlikely to have medical coverage.

In order to be eligible for cash benefits from the Social Security Administration, the child must undergo a disability determination. This can be started by visiting the local Social Security office.
If the child is determined to be disabled, he or she may qualify for Social Security Disability Income (SSDI) or Supplemental Security Income (SSI). A child with a deceased or disabled parent may qualify for SSDI, based on his parent’s work record. The amount of the cash benefit will vary, based on the parent’s work history. After two years of being on SSDI, the child will also qualify for Medicare, which will cover much, but not all of, the child’s medical expenses. Depending on the amount of the SSDI benefit, the child may also qualify for MaineCare. (discussed below), which would cover the child’s other medical expenses not covered by Medicare.
Children who do not qualify for SSDI may qualify for SSI. The child must be low income and have limited assets. The maximum SSI benefit in 2010 is $674. If the client qualifies for SSI, he or she will also qualify for MaineCare.

MaineCare (Medicaid) is a comprehensive public insurance program. MaineCare is available to a number of different populations, with different income and asset thresholds for each group. You should call the local Department of Health and Human Services office to find out whether your child might be eligible.
In my will, should I leave my child money or property? Will this cause my child to be ineligible for public assistance?

The parent may be want to leave money or property to the child, but may worry that the child will lose benefits, particularly medical coverage.

Special Needs Trusts for Disabled Children
There is an answer to this problem. The parent’s will should leave the child’s inheritance to a special needs trust. This arrangement will enable the child to maintain benefits while having funds available to provide for the child’s “special” or “supplemental” needs. A person, known as a “trustee”, oversees the funds. You can choose a family member, friend, professional or financial institution to be the trustee. The trustee will have discretion as to what kinds of things to spend the money on. The trustee will not give money directly to the child (this would cause the child to lose benefits) but instead will make payments directly to providers of goods and services to the child. The primary purpose of the trust is to meet those of the child’s needs which may not be met by benefit programs. These needs may include: dental care, eyeglasses, holistic health care, special therapies, in-home services in excess of what public programs provide, companion services, adaptive equipment, telephone, tuition, transportation, exercise programs, and the like.

The trustee may also, in the trustee’s discretion, expend funds for the child’s housing. For instance, the trustee might purchase a modest home for the child or might pay for an oil delivery. If the child is on SSI, such an expenditure will cause the child to lose a little more than one-third of his or her monthly benefit, but this may not be a bad trade-off.

The trust can provide that, upon the child’s death, the balance of the trust will go to other family members or to charity.

Getting help
When it comes to a will, a special needs trust or a power of attorney, consult a lawyer who is knowledgeable in this area. Beware of forms on the internet or in books, which may not be appropriate for Maine residents, and which may not address your particular situation. Also, there are tax considerations, which can only be addressed with the help of a competent professional.

The information provided here is for educational purposes only, and should not be construed as legal advice or an answer to a specific legal problem.

Sally M. Wagley assists older and disabled people and their families in the areas of public benefits, estate planning and estate administration, with the firm of Levey and Wagley, P.A. in Winthrop, Maine, www.leveyandwagley.com.

New law requires financial institutions to honor Maine powers of attorney

Have you ever tried to transact business on behalf of an elderly or disabled relative using that person’s financial power of attorney (POA)?  Have you been told by the financial institution that it will not accept the form because it was a) signed too long ago, or b) is not on the institution’s preferred form?  This scenario can be extremely frustrating if you are trying to look after someone, paying bills and monitoring investments.  Your elderly or disabled relative may now be too incapacitated to sign a new POA on a form acceptable to the financial institution, requiring you to spend time and money getting a court order appointing you conservator. 

Hopefully, this will change as of July 1, 2010, when a new Maine law, the Uniform Power of Attorney Act, takes effect.  The purpose of the law is to make it easier to use validly executed POA’s.  Under this law, financial institutions are subject to penalties if they fail to honor powers of attorney which have been properly acknowledged (witnessed by a notary public or attorney at law):

• Institutions may not require an additional or different POA form if the form you have grants you the authority to perform the act requested.
• Institutions have a maximum of seven days to honor a POA. 
• If an institution has a question of concerning the validity of the document or your authority as “agent”, the institution must, within that seven-day period, ask you to sign a “certification” of your authority, or must seek an “opinion of counsel” (letter from an attorney regarding the legality of the document).
• Once the institution has obtained the certification or opinion of counsel, it has only five additional days to honor the document.  
• If the institution violates these rules, and if you have to obtain a court order confirming the validity of the POA, the financial institution will be required to pay attorney’s fees and costs incurred by you to obtain that court order. 
• (There are, however, exceptions to these rules.  An institution will not be required to honor the document or pay attorney’s fees and costs if: the institution had actual knowledge that the POA was terminated; if the institution had a good faith belief that you lack authority to perform the act requested; if the institution had a good faith belief that physical or financial abuse, neglect, exploitation or abandonment has occurred; or if it would be inconsistent with federal law to honor the document.)

          Recently, as part of my role as a mediator in the Maine court system, I was selected to serve as a mediator in the new Foreclosure Diversion Project.  

        A substantial increase in the filing of foreclosures in residential real estate has occurred in Maine, as it has in the rest of the country. Families are losing their homes, lenders are losing their investments, and there are a greater number of abandoned and neglected properties.  Maine’s Legislature has responded to this crisis with amendments in the foreclosure law.  These amendments have the goals of reducing the amount of foreclosures, giving homeowners an opportunity to stay in their homes and pay their mortgages, and stabilizing the housing economy.   

         A key component of the new law is mediation.  For all foreclosures filed after January 1, 2010 against the owner of an owner-occupied dwelling with less than four units, mediation is mandated.  The required mediation will allow the parties to communicate directly with each other, with the assistance of a mediator, to see if there is a settlement which might result in the homeowner keeping the home, and paying the loan or a modified version of the loan. 

         I look forward to writing future posts on this subject after the foreclosure diversion project has had some experience, and we can all see whether the new law is helping.  

           A question I often hear from clients is:  “Should I give my house (or camp) to my children?”  Clients often believe that deeding property to others will preserve it in the event of nursing home expenses. Clients may also want to avoid probate, or may want children to help with taxes, insurance and maintenance. It is essential for any client considering this move to know the risks and benefits.

 Possible benefits:

• If the client is able to go five years without needing nursing home care, but later does need such care, the property will not count against the client if the client seeks financial help from the MaineCare (Maine Medicaid) program.
• If the property is out of the client’s name at death, the State and other creditors will not have a claim against the property.
• As a condition of transferring the property (especially a camp), children may agree to pay all or part of the property-related expenses, making life a bit easier for a client on a fixed income.
• The client may, if desired, maintain a degree of control over the property with a life lease or life estate.*

 Possible risks (and some ways to reduce risks):

• Nursing home expenses:  If the client needs nursing home care within five years after deeding the property, and if the client needs to apply for MaineCare (Maine Medicaid), the client will be penalized for the gift and will be ineligible for MaineCare for a period of months or years.  The client will either have to go without the needed care for that time period or will have to ask the children to pay for care until the period of ineligiblilty is over.
• Loss of control:  Having given the property away, the client will need to get approval from the children if the client wants to sell or refinance the property.  (The client can, however, maintain the right to live in or use the property by insisting on a life lease or life estate.*) 
• Child’s creditors or divorce:  If the child gets into financial trouble or bankruptcy or gets divorced, the child’s creditors or ex-spouse may be able to obtain an interest in the property. (However, the transfer of the property to an irrevocable trust may offer some protection against a child’s creditors or ex-spouse.)  
• Child’s unexpected death:  If a child unexpectedly dies before the parent, the property may go to the child’s own heirs. (The irrevocable trust or a joint ownership arrangement may be helpful in this circumstance as well.)
• Tax consequences:  If the client transfers a residence to a child and the property is later sold, there will be a capital gains tax, as the client will no longer be able to use the IRS primary residence exclusion.  The client may also lose property tax exemptions, such as the homestead and veteran’s exemptions.  In addition, the child may later, upon selling the property, pay a higher capital gains tax than if the child inherited it (unless a life estate* or similar arrangement is used).  

 Caution concerning life estates:  Be aware, however, that if you reserve a life estate in the property (treated differently  from a life lease under the State’s MaineCare rules), this  may expose the property at your death to a MaineCare “estate recovery” claim.

  Questions for clients:

          Before advising a client about whether to transfer property, I ask the client a number of questions, including: 

• How is your health? What are the chances that you might need long term care in the next five years?
• Do you have long term care insurance?
• Do you have enough money to pay for nursing home care for all or most of the next five years?
• Are you willing to give up a degree of control to your children? 

          In short, there is no simple answer to the question “Should I give my property to my children?”  While this may be a reasonable step for some clients, for others (especially older people with chronic health problems and little savings) the risks may be too great.  Any client considering this move should first obtain legal advice from a skilled estate planning or elder law attorney.

The information provided here is for educational purposes only, and should not be construed as legal advice or an answer to your specific legal problem.

Sally M. Wagley practices elder law, estate planning and estate administration with the firm of Levey and Wagley, P.A. in Winthrop, Maine, www.leveyandwagley.com.    

Are you, or is someone you know, raising a grandchild?  People over 50 are increasingly responsible for the care of young children and adolescents.  Sometimes young adults are unable or unwilling to be good parents themselves due to military service, divorce, substance abuse, mental illness, or other problems.

Legal authority.  Grandparents caring for a child or teen often do so at a time when their own resources – physical and financial – are limited. What information should you have, and where can you turn for legal and financial help?  A grandparent must have legal authority to make decisions for that child – about issues such as medical care and schooling. This can be done in several ways.

• If the child’s parents are willing, they can sign over a power of attorney, also called a delegation of parental rights, giving temporary rights to the grandparent to make medical, schooling and other decisions for the child.  This arrangement is meant to be temporary, and the parent may revoke the document at any time.   

• If the child is to be enrolled in school, however, the school may insist that you do more — provide proof that you are the child’s legal guardian. To do this, you must file papers with the probate court. The process may be simple if the child’s parents agree, but will be more complex otherwise. The probate office at your county courthouse can tell you more.

• If the child has been abused or neglected, the Department of Health and Human Services may be involved. You can seek to become the child’s foster parent, enabling you to make parenting decisions and get financial help. As a “caretaker relative,” you have the right to certain notices and information from the DHHS regarding their plans for the child. To read the Maine Department of Health and Human Services’ kinship care policy, go to www.maine.gov/dhhs/ocfs/cw/kinship.shtml

• Some grandparents – typically, where the parents have died or abandoned the child – may adopt the child, through the probate court. If the child has a disability or special needs, a subsidy may be available to the adopting grandparents.

Financial help for grandparents. If you are on a fixed income, and unable to get support from the child’s parents, other help may be available:

• The child may be eligible for Social Security Disablity or Supplemental Security Income  payments, because of the parent’s disability or death, or because the child is disabled.

• The child may be also eligible for payments from the State’s Temporary Assistance to Needy Families program and health coverage through MaineCare (the Maine Medicaid program), regardless of your own income.  For helpful information on applying for assistance through these  programs, go to the website for the University of Maine Center on Aging, Maine Rural Relatives as Parents Outreach Program, to make use of the program’s “tip sheets.”  http://www.umaine.edu/mainecenteronaging/mhrapp.htm

• If you need day care, the State’s child care voucher program may cover part of the cost.

Emotional support.   There are also support groups for grandparents and other relatives caring for young people.  For information, contact Maine Kids Kin:  Families & Children Together: www.mainekids-kin.org 

What you should know about the probate process. “Probate” is the process under which the assets of a deceased person are distributed.  Maine has a streamlined probate system.  In most cases, no judge is involved, unless there is disagreement between heirs, a disagreement involving creditors or if there are irregularities in the execution of the Will.  This is called “informal probate.”  Simple paperwork is submitted to the Probate Court, which is then processed by the court staff. 

Appointment of Personal Representative (executor).  The first step in the probate process is the appointment of a Personal Representative (referred to by many as the “executor”). These are the steps:

• A family member or other interested person will submit a simple probate application  to the Probate Court for the county in which the deceased lived or the county in which the deceased owned property. The application asks for information concerning the deceased, the money and property in the estate, the deceased’s family and the people named in the Will.
• If the deceased left a Will, then the original Will is also filed with the Court.
• The family member or interested person pays a filing fee, which is based on the value of the estate.  (If that person has to pay from his own pocket, he will eventually reimbursed from the deceased’s funds.) 
• A Court employee reviews the information in the application, and if there is a Will reviews it to determine whether it was properly witnessed and executed. 
• If everything is in order, the Register of Probate (a court official) issues “Letters of Authority” appointing the Personal Representative (referred to by many as the executor), who will be in charge of administering the estate.  If the deceased left a Will, then the Personal Representative named in the Will is appointed.  If there is no Will, then the next of kin is appointed. 
• This step usually takes a week to a month, depending on the Maine county in which the application is filed.

The Personal Representative’s job, step by step.  The Personal Representative is the “boss” of the estate.  Once appointed, the Personal Representative will have complete control of the deceased’s accounts and property, and can get to work.  These are the steps:

• While the Personal Representative is in complete control of the estate, he or she has a duty to do so in the interest of the beneficiaries and to keep them informed of what is going on.
• The Personal Representative first prepares an “inventory” (list) of the assets belonging to the deceased, with their values as of the date of death, and distributes the inventory to the heirs and the people named in the Will.
• The Personal Representative pays all bills as they come in.  The Personal Representative will also wait four to five months for other creditors to submit their bills and should usually not distribute assets to beneficiaries until that period is over.  (Creditors have a period of four months after the Probate Court publishes a legal notice in the newspaper concerning the opening of the estate.)
• The Personal Representative gathers and distributes personal property (furniture, dishes, jewelry, tools and the like) to the beneficiaries and will sell or dispose of items not wanted by the beneficiaries.
• If there are investments such as stocks and bonds, the Personal Representative may sell the investments.
• If there is real estate to be sold, the Personal Representative gets the property ready to sell and then lists it for sale.  If the real estate is to be distributed to beneficiaries, the Personal Representative will deed the property to the beneficiaries.    
• The Personal Representative files the deceased ’s final income tax return and may also, depending on the income to the estate, file a separate tax return for the estate.  
• An estate tax return may also be filed, depending on the size of the estate and whether there is real estate.   (Only estates of over $1 million are subject to estate tax.)
• After all bills have been paid, the Personal Representative may begin to make distributions to the beneficiaries.  The Personal Representative may distribute the estate all at once or may make distributions in installments. 
• Once the assets have been distributed, the Personal Representative prepares a final account of all income, expenses and distributions, and distributes the account to the beneficiaries.  
• Finally, the Personal Representative closes the estate by filing a sworn statement with the Probate Court.
• The Personal Representative is entitled to “reasonable compensation” for his or her services.  The amount of pay the Personal Representative gets depends on the amount of time spent, the degree of skill required by the particular activity, and any special expertise the Personal Representative has.    

Is the Judge ever involved in Probate?  If the Will was not properly executed or if there is a dispute among beneficiaries or a dispute involving creditors, the probate process may become more complicated.   Before the Personal Representative is appointed and the Will declared valid, there will have to be a hearing in front of the Probate Judge.  In rare instances, the Personal Representative may be supervised by the Court and may not be permitted to make distributions without Court approval.  In most instances, however, beneficiaries will find a way to agree without involving the Court.

Can you probate a Will without an attorney?  Some people choose to handle the probate of an estate without an attorney.   However, others find that getting the help of an attorney gives them peace of mind, knowing that the job has been done correctly, and minimizing stress after the death of a family member.

As you get older, illness or injury may make it difficult for you to make decisions, both financial and personal. If you have a family member or friend whom you trust, you may ask that person to make decisions for you when the time comes.

There is good reason to consider signing a Durable Power of Attorney:   to name a trustworthy and capable decision maker. If you become incapacitated, then your family member or friend can take care of things for you without having to go to the time and expense of asking a court to appoint him or her  Guardian and Conservator.  Signing a simple Durable Power of Attorney, with the help of a lawyer, can make things easier.

With a General (Financial) Durable Power of Attorney, you name someone as your decision maker (called your “agent” or “attorney-in-fact”) regarding your money and property. That person will have the power to withdraw money from your banks, pay your bills, or sell or rent out or mortgage your house — everything you can do, yourself.  This Power of Attorney can take effect immediately.   Or, it can be written so that it is a “Springing” Durable Power of Attorney, taking effect later, after a doctor has stated in writing that you are incapacitated.

A Health Care Power of Attorney (also called an Advance Health Care Directive) names a decision maker to make decisions about your health care, if you are too ill or incapacitated to make your own decisions. Your decision maker can decide: what hospital you go to; who your doctor will be; whether you undergo surgery; what medicines you are given; whether you get care in your own home or in a nursing home or other facility.

Your Health Care Power of Attorney/ Advance Directive may also include a Living Will declaration, which states what types of care you receive if you are in a terminal condition. If it is your wish, you can direct that life support not be given to you under these circumstances, but that comfort measures and pain relief continue.

It is important that the decision maker you choose be trustworthy. The power of attorney gives that person lot of power, to help you or to hurt you.

If you change your mind about the power of attorney, you can revoke it, or take it back, as long as you are still of sound mind. You can name someone else as the decision maker, or you can decide you want to make all your decisions yourself.

The important role of family caregivers.  More than 50 million people in the U.S. provide care for a chronically ill, disabled or aged family member each year. Some “tend out” to a relative; others give up their homes to move to a relative’s home; and others bring a relative into a guest room or in-law apartment. Consider the following survey data from 2000:

• Family caregivers provided the overwhelming majority of long term care in the U.S.:  about 80%.
• Over three-quarters of adults in the community in need of long term care relied exclusively on family and friends for care; only 8% use paid help only.
• 17% of family caregivers provided 40 hours of care a week or more.
• The estimated value of “free” services provided by these caregivers was $306 billion a year ($1.8 billion in Maine) — almost twice the amount spent on paid home care and nursing home care combined.
• 1.4 million children under age 18 provided care to an adult relative.
• 30% of caregivers are over age 65, many with their own health problems.
• More than half of family caregivers work worked outside the home while caring for a family member.
• The typical working family caregiver lost $109 per day in wages and health benefits as the result of care giving responsibilities.

(Source:   National Family Caregivers Association, www.nfcacares.org.)

Typical family caregivers. Some typical family caregivers I have seen in my practice:

• Alice, a single teacher in her 50’s, whose father has dementia, takes early retirement with a reduced pension to live with and care for him full time.
• Bertha and Gladys, maiden ladies in their 70’s, live together in the family home. Bertha cares for Gladys, who has Parkinson’s and receives MaineCare.  Bertha worries she will lose the home when Gladys dies.
• John, a single father, leaves work frequently to drive his mother to doctor’s appointments, and worries about losing his job.  He’d like to hire a neighbor to help out, but can’t make sense of the payroll requirements.
• Frances, married to Albert for 40 years, cares for him at home with the help of her two children.  Albert will soon need nursing home care, and Frances worries that the cost will take all their savings.

Answers and solutions for family caregivers. Caregivers face additional stress when encountering legal and financial issues.  There are some answers and some solutions for them, such as:

• In the case of a married couple, when one is in a nursing home or assisted living, the spouse at home need not spend down all savings to pay for care, nor must she give up the home.
• With proper advice, a married couple with one enrolled in MaineCare have opportunities to protect their estate for their heirs.
• Hiring paid caregivers can be made easier with the help of an accountant or payroll service to handle tax withholding and other requirements.
• Investment in income-producing property can be a wise move for some people, helping with MaineCare eligibility and helping to minimize the impact on their finances.
• Under certain circumstances, an older person who wants to give his home to a live-in caregiver child or to a disabled child may, with proper legal advice, do so without risking MaineCare eligibility.
• Older siblings who own and live in a home together can ensure that the survivor is able to keep the home upon the death of the first of them.
• Maine’s “Long Term Care Partnership Program,” now in the development stage, provides incentives to people who purchase long term care insurance by enabling them to preserve assets for their heirs if they later receive Maine Care.
• With a personal care contract properly drafted by an attorney, an older person may pay a relative or friend to provide care, without risking MaineCare eligibility.
• A caregiver who takes time off of work to help an ill relative may be protected under the state and federal Family Leave Act.
• A caregiver and older person who want to collaborate financially to build an in-law apartment should obtain advice to minimize tax consequences and ensure MaineCare eligibility later on.
• Middle income elderly and disabled people seeking care at home may meet MaineCare income guidelines and should not hesitate to apply for help to supplement the help of a family member.

Caregivers in these situations should obtain professional advice.   “Self-help” is usually not a good idea.

Helpful links for family caregivers:

Spectrum Generations’ Family Caregiver Support program.  Download their publication, “Connections: A Guide for Family Caregivers in Maine”:  http://www.seniorspectrum.com/Services/Family_Caregiving.asp

Services available through Maine’s five area agencies on aging under the National Family Caregiver Support Program:  http://www.maine.gov/dhhs/oes/fcsp.htm

Information on respite/alternative care and caregivers’ support groups:  http://www.maine.gov/dhhs/oes/caregivers.htm