Category Archives: Children

Caretaker Child

Caretaker Child

For many seniors, owning a home is synonymous with the American Dream. The goal is to stay in the family home, and then pass it on to the next generation. The nightmare that plagues many older Americans is being forced to sell their homes to pay the expenses of long term care. For this reason, many seniors want to transfer their homes to their child or children especially if the child resides with them.

In most instances, transferring a home to a child or other family member may cause a penalty period in which Medicaid is not available to pay for care. In certain circumstances, the transfer can be considered exempt and the penalty can be avoided. One such exempt transfer is to a “Caretaker Child”.

The “Caretaker Child” is one who resides in the parent’s home providing care for at least two years prior to the parent moving into a long term care facility such as a nursing home or applying for assistance from a Home and Community Based Services (HCBS) waiver program, such as PASSPORT. Simply residing in the house is not enough. The Caretaker Child must provide needed care which otherwise would have required the parent to go to a nursing home or apply for a HCBS Medicaid program.

The Medicaid rules are quite specific as to what a Caretaker Child must do in order for the exemption to apply.

  • The Caretaker must be a natural or adopted child.
  • The child must actually reside in the parents’ home with them.
  • The parent must require help with activities of daily living or instrumental activities of daily living (See lists) to such an extent that he or she would require nursing home care if the child were not there to help
  • The child must continuously live in the home providing the care for at least two years immediately prior to the parent going into a nursing home or applying for HCBS Medicaid help.
  • The child must continue to live in the home until the transfer is made, even if the parent is placed in the nursing home or receiving HCBS Medicaid.

To prove herself, the Caretaker Child, must provide Medicaid with documentation that she meets the definition. For the transfer of the home to be exempt from penalty, Medicaid will require written proof from the parent’s doctor and the child providing care. Medicaid will scrutinize this documentation to determine if the exemption applies. It is the family’s responsibility to keep careful records as they go.

If you hope to protect the family home via a Caretaker Child exempt transfer, it is important to begin documenting your status as early as possible.

  • Be sure that you have a proper power of attorney in place in case you become too ill to sign the deed when the time comes
  • Talk to your doctor about the kind of care required and your child’s role in providing that care.
  • List the activities and actions that your child performs to keep you safe at home.
  • Your child should keep a journal or calendar of your activities, doctor’s visits, hospital stays and changes in your condition.
  • Keep a checklist of care and services provided on a regular basis.

Contemporaneous records can help you remember all your child has done and to assemble necessary proof when needed. That documentation must show the date that the child moved into the home, the parent’s condition that required the care to stay out of the nursing home, the extent and type of care that was provided, the amount of time the child devoted to the care, and other activities such as school and work, that the child was involved in during that period.

The Caretaker Child exclusion cannot be used for early planning. It is a crisis exemption as the status of Caretaker Child can only be determined at the time the parent enters the nursing home or applies for a HCBS Waiver Program. If the child moves out before the transfer is made, the exemption is lost.

There may be adverse consequences of transferring the home that should be considered.

  • The child may not qualify for certain real estate tax exemptions that the parent had
  • Transferring to the Caretaker Child may defeat the parent’s intention to divide his property equally among all of his children.
  • Transferring the house during the parent’s lifetime may create a capital gains tax problem when the child sells the house.
    • For example, if the parent purchased the house in 1950 for $30,000 and the house is now worth $230,000, the capital gain would be $200,000. A lifetime transfer gives the child the same basis ($30,000) as the parent. If the child received the house at the parents death, the child would get a “step up” in the basis to $230,000 and there would be no capital gains when the house is sold.

The laws surrounding Medicaid and the transfer of the house are complicated and constantly changing. Seek the help of a qualified elder law and estate planning attorney who can analyze your unique situation and create a plan most appropriate for you.

Activities of Daily Living (ADL)

            ADL’s are self-care activities that everyone must perform to lead a normal, independent life.

Eating: Do you have the physical ability to swallow or chew food? Do you have trouble moving food from the plate to the mouth?

Bathing & Hygiene: Can you bathe yourself and brush your own teeth?

Dressing: Are you physically able to dress yourself and make appropriate clothing decisions?

Grooming: Can you comb your hair and trim your toenails and fingernails? Can you properly apply makeup or shave yourself?

Mobility: Can you move around without the assistance of a walker, wheelchair, or cane? Can you successfully get out of bed, get onto and off of the toilet, go up and down the stairs and sit or rise from the couch or other furniture on your own?

Toileting & Continence: Are you able to use the restroom without any assistance or handle your own ostomy bag?

Instrumental Activities of Daily Living (IADL)

IADL’s are activities a person must perform in order to live independently in a community setting during the course of a normal day.

Some examples of IADL’s include:

  • Shopping
  • Cooking
  • Washing laundry
  • Housecleaning
  • Managing medications
  • Using a telephone
  • Managing money
  • Driving
  • Handling mail
Advertisements

Baby Steps

Baby Steps

If you stopped by to see us in 2016, no doubt you met Dominic, our legal assistant Laura’s son and Williger Legal Group’s resident baby. Dominic has been bringing smiles and fun to our office since March when Laura came back to work. It’s been amazing to watch him grow and even more astounding to see Laura hold him in one arm while typing with the other. But Dominic is now on his feet, hands free to explore, and no longer content to sit and watch.

A new child brings many new responsibilities. One of these responsibilities is making sure the child is protected in the event something happens to the parents. Here are a few tips for young families to consider when creating or updating their estate plan:

Who will raise your child if you can’t?

  • Nominate a guardian for your minor children in your will. Also, name a back-up in case that person is unwilling or unable to serve. The guardian will have legal custody of your child. Choose someone who is willing to take on the responsibility and has a similar child rearing philosophy. Also consider the age, health and location of the guardian as well as his or her stability and family situation.

What will the child’s financial needs will be?

  • Young families should consider life insurance to supplement inheritance and social security death benefits. Level term premiums are usually the least expensive option.
  • Consider using a trust to name someone responsible to manage the money while your child is young. The trustee can use the money for the child’s health, education, maintenance and support. You can designate how you would like the money to be used as well as the age at which the child should receive the money. Some families feel that 25 is a more appropriate age to receive a lump sum than 18.

Do you need to change your beneficiary designations?

  • Not all assets pass by your will or trust. Make sure the beneficiaries named on your life insurance policies, retirement accounts, annuities, and other assets match the intent of your will or trust. If properly titled, your beneficiaries may be able to “stretch” IRA’s to continue to enjoy deferred tax benefits.
  • How would you care for your child if you couldn’t care for yourself?
  • Create Health Care and Financial Powers of Attorney. If you become incapacitated your powers of attorney give your agent the ability to help you with medical decisions and make sure your bills get paid. Without these documents, the only alternative may be a court appointed guardian.

How will your family find information?

  • Keep an Inventory of your assets and key documents as well as contact information for your attorney, doctor, insurance agent, broker, and other trusted advisors. Make it easy for your agent, executor or trustee to determine what you have and what you owe. Don’t forget to include digital assets, and those precious digital photos, keep a master list of accounts, insurance policies, important legal documents and passwords.

How can you make sure the plan will work?

  • Review your plan every year to be sure it is kept up to date. Update your plan as your life changes. Are there any new family members? Is anyone named in the document no longer appropriate to serve in the role you have given them? Has your net worth changed?
  • Consult an attorney. Each state has specific requirements as to how a will and other legal documents must be executed. Be sure that yours comply.

Trust For Children

TRUSTS FOR CHILDREN

It is a parent’s job to raise and take care of their children. The question no one wants to think about is who would do that job if you were gone? Losing a parent is one of the hardest things emotionally a child can go through, but you can still take steps to provide for your children if you should die before they are grown. You can appoint a guardian in your will to raise your children, but you can also set up a trust to make sure the money is managed properly to provide for your children’s care.

A trust is like a basket. It is simply the vehicle for holding assets. The person who sets up the trust (the settlor) can customize the trust to handle things as she sees fit. She can name who will handle the money (the trustee), and name backup trustees in case the original trustee is unable to manage. The settlor can also name beneficiaries to the trust and decide what benefits they will receive from the trust. The settlor can also decide at what point the trust has served its purpose and will end, and when it ends who gets whatever assets may be left in the trust.

How to Spend the Money

The parent can make the trusts as strict, or as flexible as they like. Some parents choose to leave the trustee complete discretion. So if something like a trip to Europe for the child comes up, the trustee can choose to pay for it if they think it’s a good idea, or decline. Other times, the parents may say that the trust is only to be used for education, so if the same European trip came up, the trustee should pay for it only if it were deemed a study abroad educational expense.

Some parents may place conditions on what the child needs to do to inherit their share. They can say the child is entitled to inherit at age 25, or inherit at age 25 provided they have graduated from a state accredited college. If they do not graduate, they do not inherit.

The parent may say the money is to go to care for the family home so long as the youngest child is living in it, or it may simply lay out a general wish of how the settlor hopes the money will be used.

How to Hold the Money

Another question the settlor will have to decide is how the money is going to be “held.” If there is more than one child, the money may be divided into equal shares and each child has their own equal trust. When the child has used up the money in his own trust, it is gone and he cannot access his siblings’ trusts.

The other way is to set up a “Common Pot Trust” which puts all the money in one trust, and the spending on each child is based on need rather than on equivalency. In a common pot trust two beneficiaries may receive drastically different funding based on their needs. This is especially true for clients who have children born significant years apart and can help treat individual circumstances differently. There is no “primary” beneficiary so no child is required to receive any funds before or along with any other child.

Trusts are hard to think about in the abstract, so let’s look at an example:

The following illustration is for example purposes only:

Sally is a single mother, who is diagnosed with terminal cancer. She has four young children, Aiden (20), Becca (18), Carly (16), and Davey (4). Her main goal is to make sure her children are taken care of when she passes away. Her ex-husband, Matthew, is a good father, who Sally trusts to raise the children, but he is not good with money.

Sally doesn’t have much in assets when she passes away, but she did purchase a $500,000 life insurance policy for the kids when she got divorced, that she hopes will be used to care for her children’s wellbeing and education.

If She Does Not Set Up A Trust

If Sally names her minor children as beneficiaries of the Life Insurance Policy, the funds will be held by their legal guardian, and the children will have full access to their funds on their 18th birthday.

This means that Aiden and Becca would each inherit $125,000 immediately. Aiden takes a European vacation and buys a car. Becca uses some of the funds for college, but also pays for trips to the bar and shopping trips with her friends.

Carly and Davey’s share is held by their guardian, Matthew. Matthew uses the funds to care for the children, and there is some money left over when Carly turns 18, but not much. Davey’s share is spent before he is 18.

If She Sets Up Individual Funds

Sally names her sister as trustee for the funds, and sets up the trust with individual funds because she wants to treat her children “equally”. She says they can inherit when they turn 25.

Each child gets their own trust of $125,000. The trustee can only use funds from the child’s individual trust for their care and once they reach age 25 it is distributed to them.

Aiden is already in his third year of college when Sally passes. The trustee uses some of his trust to pay for his last year of college and helps with some incidental payments over the next few years but when he turns 25, he receives $100,000. He decides to take this money and go drink on a beach for a year.

Becca is just starting college, and decides she wants to go to Med school afterwards. The $125,000 is quickly spent on her undergraduate education and first year of medical school. She pays for the rest of medical school herself by going into debt, and there is nothing left to distribute when she turns 25.

Carly gets in a car accident when she is seventeen. Her trustee uses most of her funds to pay her medical bills and her rehabilitation funds. There are no funds left to help with her college.

Davey is the youngest. Over the years the trustee pays out so that he can have the same lifestyle his siblings had growing up, but the funds run out before he reaches 15.

Even though they each got equal shares of cash, equal doesn’t always mean fair. Davey was much younger than his siblings when his mother passed away, and the siblings all had mom’s support while she was alive. Sally may be rolling over in her grave at the thought of Aiden drinking his inheritance away on a beach while his siblings cannot afford to pay for their schooling or medical bills.

If She Sets Up a Common Pot Trust

If she set up the funds in a common pot trust, then the insurance money all goes into one pot of $500,000. The trustee has full discretion how to use this money. Sally can set up the direction or her wishes to the trustee to be as limited or as broad as she likes. Sally decides the primary use of the funds should be to raise Davey and for college educations. The trust will continue to provide for all four children until the youngest turns 25.

Aiden decides not to go to college. He buys a house and gets married but pays for everything himself, because the trust is intended to provide for education and Davey’s care.

Becca decides to go to college and then to med school. The trust pays $225,000 for her tuition and books over the years.

Carly decides to go to a year of culinary school. The trust pays $25,000 for her tuition.

Davey is only four when his mother passes away. The trustee pays an allowance to support Davey throughout his childhood, which costs about $210,000 until he turns 18. He decides to go to a local college with a scholarship. The trust pays $36,000 for this expense.

When Davey turns 25, there is only $4,000 left in the trust which is to be distributed equally to the four children. So they each get $1,000.

This may seem unfair to some. After all, Aiden only got $1,000 in inheritance from the trust, and Davey received $246,000. Becca and Carly both went to school for their careers but Becca received $200,000 more than Carly in tuition. On the other hand, if Sally’s main goals were to make sure Davey received the same opportunities as his siblings growing up and to provide for educational opportunities for her children, the trust accomplished it’s goal.

Which is better?

It depends on Sally’s goals. There is no one “right way” to make a trust because everyone has different goals for their children. Because of the customizable nature of trusts, saying “you have a trust” does not tell anyone what that trust does. Trusts are useful tools for accomplishing all sorts of different tasks. One very good use for a trust is for a parent to set one up to hold and manage money for young children if the parent should die before they are grown. This ensures that the parents can lay out rules and hopes for how the funds are to be used to care for their children, even after the parent is gone. Talk to a qualified estate planning attorney about how a trust could help care for your children.