A.  Unfortunately, your situation is all too common: families often confuse the Medi-Cal “eligibility” rules with the “recovery” rules.  Her home was, indeed, exempt for eligibility purposes, but that exemption expired upon your mother’s death.  Her home and most other exempt assets then became exposed to a Medi-Cal “payback” claim. This is called “estate recovery”.  Let’s review the basic rules to see if any might apply and give you some relief:

1) You and your siblings do not have a personal obligation to pay back Medi-Cal from your own assets.  Only your mother’s assets, including her home, are subject to recovery, whether held in her own name, in her Living Trust, or in joint tenancy.  However, you cannot transfer her home or other assets to her beneficiaries until the recovery claim is satisfied.  Exception: her IRA, if left to named persons, is not subject to recovery.

2) If your mother were survived by a spouse, then her Medi-Cal recovery claim would be deferred until the death of her surviving spouse.

3) Medi-Cal will withdraw its claim entirely upon proof that your mother was survived by a blind, minor or disabled child, usually established by proof that the child is receiving Social Security disability benefits.  Here, it does not matter whether the disabled child is an adult, nor whether he/she lived in your mother’s home or even relied upon her for support.

4) Medi-Cal will waive its claim if the surviving family members can prove “hardship”, based on any of six specific grounds.  One ground is a showing that a child lived in the parent’s home and provided care for at least two years, thereby delaying the parent’s entry into a nursing home; it helps to think of this ground as recognition that the caregiver child saved Medi-Cal money.  Another is a claim that allowing the surviving child or other beneficiary to receive his inheritance would enable him to go off public benefits and be self-supporting.  Unfortunately, Medi-Cal construes the hardship claims strictly and has turned down most of them. Still, it is an option to pursue and, upon a timely request, you do have a right to a hearing to make your case before an Administrative Law Judge.

(5) If there is no basis to seek waiver or deferment of the claim, you might seek a “Voluntary Post-Death Lien”.  This lien allows the survivors to continue to reside in the home while paying an agreed monthly installment against the amount of the Medi-Cal claim, which accrues interest at 7% per year.  The balance of the claim would be paid when the home is sold.  To qualify, the survivors must be residing in the home, be unable to pay the claim in full, and be unable to obtain financing to do so.

Unfortunately, all of the above exceptions and limits to Medi-Cal recovery require specific fact patterns, and many families will not qualify.  However, if these same families had taken steps during the parent’s lifetime, in many cases lawful steps could have then been taken to protect the parent’s entire estate from Medi-Cal recovery.  Once the parent dies, it is often too late and the survivors must rely upon the limited options discussed above.

For families with a loved one currently on Medi-Cal, we urge seeking the advice of an elder law attorney to determine whether steps can be taken now to avoid a later Medi-Cal recovery claim and thereby preserve assets for the benefit of surviving family members. An ounce of prevention is worth a pound of cure.

* Tax disincentives

* Loss of military and pension benefits

* Keeping medical expenses separate

* Keeping any current debt separate

* Asset protection for the benefit of children or grandchildren

If you decide against marriage, you will need to take extra steps to protect your partner and preserve spousal privileges that you would like your partner to have. For example, in case of accident or emergency, do you want your partner to have the same access to medical information that a spouse would have? Do you want your partner to a voice in making medical decisions if you are unable to do so?

Seniors will also want to consider the subject of real property and living arrangements. If something were to happen to you or your partner, would your surviving partner be able to remain in the home? Would he or she at least have time to find another living situation? Most people would like to think that relatives who inherit shared property will be compassionate toward their surviving partner, but this is not always the case.

Fortunately, there are ways for seniors who choose to cohabitate without marrying to arrange their affairs in such a way that they preserve the benefits of staying legally single, but provide their partner with some spousal benefits. The best way to do this is by  creating an estate plan that recognizes your partner as your agent and/or beneficiary.  Whether your partner is opposite sex or same sex, creating appropriate estate planning documents is the way to go.

A. You refer to the recently enacted “American Taxpayer Relief Act,” which has permanently enlarged the estate tax exemption to $5,250,000 per person (for 2013). It also permits a married couple to effectively double their exemption even without special estate tax planning.

By comparison, when you created your trust the estate tax exemption was much smaller, and special tax planning was required to minimize estate taxes. At that time, your attorney probably recommended a form of trust which was tailored to the lower estate tax exemption, namely a Living Trust with a Bypass Sub-Trust built into it. This Bypass Sub-Trust is also known as a “B Trust,” an Exemption Trust, a Family Trust, and a Credit Shelter Trust.

Bypass Trusts typically require that, on the death of the first spouse, a share of the couple’s assets be transferred into an irrevocable sub-trust called the “Bypass Trust”, rather than to the survivor directly. This is to preserve the first spouse’s estate tax exemption for later use at the survivor’s death.  Without the Bypass, the first spouse’s exemption would be lost and all trust assets at the survivor’s death would be sheltered by only the survivor’s one exemption and the excess (if any) was exposed to an estate tax at a rate as high as 55%. Understandably, couples went to great lengths to avoid that tax.

The typical Bypass Trust was not, however, without its problems:  (1) the survivor typically lost the right to make any changes in the Bypass portion even if family circumstances changed, (2) the survivor’s access to  the Bypass assets was usually restricted, (3) it interfered with applying for a Medi-Cal long-term care subsidy, and (4) it usually required the preparation of separate accounting and income tax returns during the life time of the survivor.  Surviving spouses usually found the restrictions burdensome.

Two important new developments arrived with the new law: (a) as of 2013, the amount of the estate tax exemption has now permanently increased to $5,250,000 per person, to be annually adjusted for inflation, and (b) the unused portion of the first spouse’s full exemption is now preserved for use by the second spouse even without the use of the restrictive Bypass Trust, effectively doubling the exemption for most couples.

In view of these new developments, couples with Bypass Trusts created for estate tax purposes under the old law should have their trusts reviewed and, where appropriate, consider eliminating the mandatory funding feature at the first spouse’s death. Instead, they might now consider plans which give the survivor the option of doing postmortem planning after the first death, e.g. by funding a portion of trust assets into an optional Disclaimer Trust. The Disclaimer Trust would then operate as a tax-saving Bypass Trust if that later appeared necessary due to the increase in value of the couple’s estate.

In that sense, I suppose you could say that the Bypass Trust has gone the way of the Dinosaur for most middle income estate plans, where it is unlikely that the couple’s estate would ever exceed two exemptions, i.e. $10,500,000 (for persons dying in 2013), and inflation indexed thereafter.

An exception to the above recommendation:  The use of the mandatory Bypass Trust is still useful for non-tax purposes, e.g. in situations involving second marriages. Here, each spouse usually wishes to provide financial security for the survivor, but also wishes to preserve a portion of assets for his/her own children. Under these circumstances, a Bypass Trust can still help these couples achieve their estate planning goals.

Adult children of divorced parents often find themselves caring not only for mom and dad when they get older, but also for stepmom, stepdad and sometimes even another stepparent from yet a third or current marriage. Dividing time (and often finances) between so many parents with new and special needs can quickly take its toll, as can the family politics that come with adult siblings, half siblings, and step siblings.

With all of this complexity and intermingling family ties, it is more important than ever to have conversations about estate planning and long-term care with parents and siblings before mom and dad (and stepmom and stepdad) get to an age where they need in-home or around the clock nursing care. This article in a recent issue of the CSA Journal (from the Society of Certified Senior Advisors) gives tips on how to conduct a meeting of blended families to discuss the care of parents and stepparents.

While open communication between blended family members is key, a good estate plan can also go a long way towards eliminating potential fighting and confusion by clearly defining who will be making financial decisions and who should be making health care decisions when mom or dad become incapacitated. A caregiver agreement can also provide clarity, as well as financial assistance to the one sibling who inevitably ends up shouldering most of the care giving burden.

If you are a part of a blended family talk to your parents and siblings now about any challenges the future may bring—and how to meet those challenges together.

New research suggests that the type of living situation itself makes little difference in a resident’s emotional well-being. Instead, the happiness and contentment of the resident depends more on the characteristics of the specific environment they’re in, and of course in no small part on their own personal characteristics — how healthy they feel they are, their age, and even their marital status.

Logically enough, a resident of a long-term care facility of any kind is more likely to report satisfaction and comfort if they had a hand in choosing their living situation, if they were part of the decision making process. In fact, studies show that the process of finding and choosing a living situation—researching options, visiting facilities, considering current and future social and physical needs and how they will be met—plays a very important role in the beginning of acclimatization.

Whatever your choice, you’ll need to talk to your family and plan how to finance whichever choice is made for long-term care living. Medicare.gov has published a helpful chart summarizing and comparing the various options for long-term care financing.  Remember:  There may be ways that you can conserve savings and the home while still qualifying for government benefits.  Many families are actually surprised to learn this.  If nursing home care may be in the future, the best option is to plan now.  See our “Consumer’s Guide to Medi-Cal Planning” available as a free download. 

Whatever it is that you love doing; you can bet the people who love you are aware of it. These are the people who join you on your wilderness hikes; the one who might give you a rare baseball card for your birthday; or the friend who goes with you to the antique car show because he knows hobbies are better when you have someone to share them with. These friendships last a lifetime, and yet these friendships are often forgotten when people create their wills or estate plans.

Many people go to their estate planner with their descendents and their financial assets foremost in their minds, and that is as it should be; but your estate plan can be more than a just a way to distribute property to the next generation, it can also be an opportunity to say thank you to the people who have touched your life—by gifting to them meaningful representations of your hobbies and passions, and of shared experiences.

You can express how much you appreciate your best chess opponent by leaving her your favorite chess board, or encourage the interest of a young philatelist nephew by bequeathing to him your extensive stamp collection. All you need is an estate plan which includes a personal property memorandum—and which is correctly designed to recognize and refer to that memorandum.

Our office can help you create an estate plan that not only ensures the protection of your heirs and property; it also helps you leave a meaningful ‘thank you’ to the people who matter most.

1. Talk to your parents. Find out if your parents have already thought about the topic, if they’ve made provisions for it, or if they have any specific wishes. Furthermore, opening the lines of communication lays the groundwork for trust and cooperation in the future.

2. Encourage your parents to create an Estate Plan if they don’t have one already. An Estate Plan will be important in expressing your parents’ wishes on necessary issues such as preferred agents in case of incapacity, financial power of attorney, and health care decisions. These essential documents will not only let you and others know their wishes, it will also prevent many expensive delays and frustrating red tape in the future. 

3. Make sure that long-term care planning is a part of their estate plan.   When most persons prepare an estate plan, they usually think only about passing assets to loved ones upon  death, avoiding probate and taxes.  Often overlooked is long term care planning.  Such planning should consider the need for a Medi-Cal subsidy should either parent ever need care in a nursing facility.   Many middle income individuals are surprised to learn that they may qualify for a Medi-Cal subsidy in the event of need.  However, this ability to qualify may depend upon whether proper planning documents are in place ahead of time.

4. Talk to trusted advisors about how to prepare for the financial burden of Long Term Care—because there will be a financial burden. Our firm can help you consider options for Medi-Cal and Long Term Care Insurance, as well as some lesser known options such as a Dependent Care Account or a Care Contract with a care-giver child.

As you think and talk about these issues with your parents, siblings, and other trusted advisors, remember that you don’t have to go through this alone. Elder Law and Long Term Care are intricate and convoluted subjects, but there are caring professionals out there whose business it is to guide you through the intricacies of Elder Care. Let us help you look into the future with confidence and clear eyes.

Elder law attorneys have known about Caregiver Agreements for a long time, but very few caregivers themselves are aware of this useful contract. A Caregiver (or Employment) Agreement serves to document a caregiver’s responsibilities and hours, and to set a rate of pay that’s in line with local practices and incomes. The contract would then be signed by both the caregiver and care recipient, and eventually shared with the rest of the family.

An agreement of this sort can be useful not only for the care-giver and the one cared-for; it also comes in handy if you think you may need to rely on Medi-Cal to cover nursing home costs sometime in the  future. Payments voluntarily made to a family care-giver without a written contract would likely be viewed as gifts, potentially disqualifying the parent from a later Medi-Cal subsidy should he or she later need care in a nursing home. However, if payments to relatives are made under the terms of a written employment agreement which complies with Medi-Cal rules, the risk of disqualification from a later Medi-Cal subsidy is reduced dramatically. 

Caregiver Agreements are also useful in Veterans Pension planning:  qualifying payments made pursuant to a legitimate care contract may count as an Unreimbursed Medical Expense, potentially qualifying the Veteran for a monthly pension to help pay for care expenses. 

It is important to remember, however, that in order for government programs to recognize an employment agreement between family members the contract must already be in place before services are rendered.

This is why it is so important to have such an agreement prepared by an Elder Law attorney knowledgeable regarding Medi-Cal rules and Veterans Pension Planning before any money changes hands.  If you believe that a Personal Care Contract may be a useful tool  to provide for the care of your loved one, we invite you to contact us to arrange a consultation.

According to this article in Bloomberg Business Week, however, the time has come for families to take a careful look at their finances and decide if they want to take advantage of the $5 Million gift tax exclusion before it expires. “Legislation enacted in 2010, which raised the lifetime gift-tax exclusion to $5 million from $1 million for each person starting last year, is set to expire. For 2012, the inflation- adjusted figure is $5.12 million for each person. It will drop to $1 million on Jan. 1 unless Congress acts.”

Parents who want to take advantage of the gift tax exclusion, but who worry that their children may not yet be ready to handle such a large financial gift, do have options. As the article points out, “Many [families] are setting up irrevocable trusts for children or grandchildren and transferring assets such as second homes that have the potential to appreciate.” This not only allows the assets to appreciate, but also allows parents and grandparents to breathe easy while young children or grandchildren have time to mature before receiving a gift or inheritance.

If you think your family may benefit from taking advantage of the gift tax exclusion before the end of the year, the time to act is now.

A. Yours sounds like the ideal situation for family mediation.  Mediation is a voluntary process whereby an experienced mediator helps the parties identify issues, communicate with one another in a respectful manner, develop creative solutions to their concerns and negotiate a lasting agreement that works for everyone.  The mediator does not decide who is right or wrong, but is there to help the parties communicate meaningfully with one another.

The mediator may be a person trained in social work, psychology, or law.  The mediator’s role is to make sure that everyone’s views are put forward and considered, including the views of your parents, and to facilitate respectful discussion to resolve a common problem.

Traditionally, mediation has seen its greatest use in the context of divorce settlements and business disputes, but its application in the elder care context is growing and it has achieved notable success in helping families resolve difficult issues amicably.

Sometimes the issues that are mediated concern suitable living arrangements for parents, allocating responsibility for care, financial and healthcare decisions, the need to make sure that the parents’ bills are paid, a parent’s unwillingness to surrender the keys to the car, and other practical problems of aging. Without a facilitator, anger and resentment may prevent resolution, and old sibling rivalries might surface in a way that is counterproductive to the parents’ best interests. Mediation can help resolve these issues in a manner that preserves the parents’ dignity and family harmony.

The process might take place in one session or, perhaps, over a number of sessions. The hoped-for result is that the parties, with the aid of the mediator, can arrive at an agreement which everyone feels is fair and appropriate. Compliance is voluntary, but a mutually agreed upon solution enjoys a high rate of success. Indeed, the process is often a “win win” for everyone, and can be a great tool in forging family consensus. As we approach the holiday season and a time when families will be together, it might be a great time to begin the process.

To learn more or to search for a trained private mediator visit: www.mediate.com or www.eldercaremediators.com.  Alternatively, to search for a free or low cost community-based mediation program contact the Seeds Community Resolution Center in Berkeley at (510) 548-2377 or visit its website at www.SeedsCRC.org.