ARE YOU PRACTICING ELDER LAW? YOUR AREA OF LAW MIGHT FALL

WITHIN THE SCOPE OF ELDER LAW

Sponsor: Elder Law Section CLE Credit: 1.0

Wednesday, June 21, 2017 3:35 p.m. - 4:35 p.m. West Ballroom C-D

Owensboro Convention Center Owensboro, Kentucky

A NOTE CONCERNING THE PROGRAM MATERIALS

The materials included in this Kentucky Bar Association Continuing Legal Education handbook are intended to provide current and accurate information about the subject matter covered. No representation or warranty is made concerning the application of the legal or other principles discussed by the instructors to any specific fact situation, nor is any prediction made concerning how any particular judge or jury will interpret or apply such principles. The proper interpretation or application of the principles discussed is a matter for the considered judgment of the individual legal practitioner. The faculty and staff of this Kentucky Bar Association CLE program disclaim liability therefore. Attorneys using these materials, or information otherwise conveyed during the program, in dealing with a specific legal matter have a duty to research original and current sources of authority.

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TABLE OF CONTENTS The Presenter .................................................................................................................. i Are You Practicing Elder Law? Your Area of Law Might Fall within Its Scope ................. 1

Health Care Law .................................................................................................. 1 Family Law .......................................................................................................... 6 Bankruptcy Law ................................................................................................... 9 Litigation ............................................................................................................ 11 Estate Planning ................................................................................................. 13 Conclusion ......................................................................................................... 17 Resources ......................................................................................................... 19

THE PRESENTER

Shari Polur Shari Polur, Attorney at Law

125 Chenoweth Lane, Suite 203 Louisville, Kentucky 40207

(502) 489-4880 Sharipolur@gmail.com

SHARI POLUR maintains a private law firm in Louisville and concentrates her practice exclusively in the areas of elder law and special needs law. She received her undergraduate degree from the University of Pennsylvania and her J.D. from Boston University School of Law, where she was a Paul Liacos Scholar and Public Interest Project fellow. Ms. Polur is admitted to practice before the United States Supreme Court and is a member of the Kentucky, Massachusetts, Florida and Washington, D.C. Bar Associations. She is active in the National Academy of Elder Law Attorneys and in the Kentucky Bar Association's Elder Law Section, both on the executive committee and formerly as chair. She is also a member of the Kentucky Guardian Association and the Community Relations Council of Kentucky. Ms. Polur was appointed by former Governor Steve Beshear to the Statewide Independent Living Council, and now serves as Vice Chair. She was appointed by Governor Bevin to serve on the Kentucky Assistive Technology Loan Corporation's Board of Directors. In addition, Ms. Polur is accredited by the Department of Veterans Affairs to serve as an attorney in assisting veterans and their families.

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ARE YOU PRACTICING ELDER LAW? YOUR AREA OF LAW MIGHT FALL WITHIN ITS SCOPE

Shari Polur∗ The following article examines how the practice of elder law is actually various legal areas blended together. When speaking of elder law, the common denominator is not a federal or state statute or regulation, but rather the client's age and time of life. Most lawyers can list some legal areas encompassed under the term "elder law" including: Medicaid, planning for veterans benefits, estate planning, probate, and guardian-ship. Perhaps less cognizable elder law issues arise out of health care law, family law, bankruptcy, litigation, or tax practices. It is the less common overlap with these latter disciplines that this article will explore. The goal of this article is threefold. First, the article should generally raise the Kentucky legal community's awareness of the unique concerns of our growing senior and disabled population. Second, the writing should aid attorneys in identifying elder and special needs issues within their own practices. Third, the article should provide Kentucky counselors at law, having identified these issues, with resources and tools to serve clients and their families, helping them navigate the unique challenges facing our senior and disabled clients. This article is organized by practice area, and addresses the following practices: health care law, family law, bankruptcy law, litigation, and estate planning. For those who are interested in exploring where their practice area might spill over into elder law, skip ahead. Note, also, that elder law encompasses special needs practice areas, as well, and that these are sprinkled throughout. I. HEALTH CARE LAW

The practice area of government and private health care attorneys overlaps with that of elder law attorneys in several respects. First, these practitioners must initially make determinations of client competency. Next, both types of lawyers must understand basic information about health insurance options. Additionally, these lawyers often advocate in the areas of patient records, insurance denials, and discharges from facilities.

A. Assessing Client Competency

Most attorneys assume that their clients are competent. Not so with attorneys in health care and elder law fields whose clients may present with diminished capacity. Kentucky Supreme Court Rules and a recent ethics opinion give guidance on dealing with clients who may have diminished capacity, advising:

When a client's capacity to make adequately considered decisions in connection with a representation is

∗ I gratefully acknowledge the editorial assistance from my colleagues Jonathan Hall, Mary Ellis Patton, Melissa Rodden Mays and Robert McClelland.

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diminished, whether because of minority, age, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.

SCR 3.130(1.14)(a). further instructs an attorney evaluating the diminution of a client's capacity to weigh whether and to what extent a client can "articulate reasoning leading to a decision." SCR 3.130(1.14) at Comment (6). The attorney must also evaluate the client's "variability of state of mind and ability to appreciate consequences of a decision; the substantive fairness of a decision; and the consistency of a decision . . ." Id. Thus, an attorney has ethical rules and guidance on evaluating whether a client is capable of maintaining an appropriate attorney-client relationship. This is a critical first step for health care and elder attorneys.

Counseling Tip: The standard for competence is fluid, based in

part on what type of document a client will execute. For a Last Will and Testament, the standard is a "lucid interval." See Bye v. Mattingly, 975 S.W.2d 451 (Ky. 1998). Although a client must meet the criterion for lucidity at the time of signing a will, no memory is required. Presumably, the competency required for executing a Power of Attorney or Health Care Surrogate designation would be greater, such as that required to execute a contract.

B. Government and Private Medical Insurance

In advising clients, attorneys need to help them assess their current and future medical needs. Health insurance, unlike automobile, fire and casualty insurance is likely to be used on a regular basis. As such, it is something about which lawyers should be able to advise clients, particularly as they age. This includes some familiarity with the basic rules governing eligibility and coverage under traditional Medicare, Medicare Advantage and Medicaid systems.

1. Medicare.

Medicare is the federal health insurance program for people who are sixty-five or older and certain younger people with disabilities. Health care lawyers are generally familiar with the following parts: Part A (hospital, hospice, skilled nursing facility, and limited home health care); Part B (required doctors' services, preventive and outpatient care, and medical equipment and supplies); and Part D (prescription drug coverage).

Counseling Tip: Medicare does not cover long term care-

either at home or in a facility. Given that the median cost of private long term skilled care was $7,000 per month in Kentucky in 2016, clients may want to consider investing in long term care insurance (or taking up heavy smoking.)

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Source: Genworth 2016 Cost of Care Survey, conducted by CareScout, April 2016.

2. Medicare Advantage.

Medicare Part C is a form of private health insurance in lieu of Medicare Parts A and B. This essentially private insurance is not bound by Medicare rules exclusively. The advantage of these plans is that they may include benefits from Original Medicare along with perhaps dental, vision, drug, and wellness programs. While some clients are aware that Medicare Advantage is less costly for younger and healthier clients than traditional Medicare is, they need to be instructed that as one ages, one needs more frequent medical care. This results in more co-payments. Further, as circumstances changes, perhaps fewer doctors in the client's area may accept Medicare Advantage plans. For this reason, attorneys should help their clients understand the benefits and limitations of Medicare Advantage plans fully before opting for them.

3. Medicaid.

Much in the news lately, Medicaid is a joint federal and state program that assists people with limited income and assets with paying for health care. Unlike Medicare, it can help with the cost of long term skilled care, such as nursing home care. In Kentucky, Medicaid does not generally pay for lower levels of care, such as for assisted living or personal care. However, Medicaid is the insurer of last resort, after Medicare, employer and group, and private insurance. For additional information, see the Kentucky State Medicaid website at http://www.chfs.ky.gov.

C. Access to Patient Records

Many clients are challenged when seeking their own medical records, or that of a spouse, child or parent. The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") contains a health care privacy rule intending to provide patients with control over the use and disclosure of their own personally identifiable health information. HIPAA mandates investigating compliance and imposing civil or criminal penalties for violating the privacy of an individual's personal health information. The law was designed as a shield, protecting the unfettered sharing of personally identifiable health information without authorization.

Oftentimes, HIPAA is wielded as a sword against the individual, family member, or attorney seeking a patient's own medical information. This is in contravention of HIPAA regulations, which clearly permit access to one's own protected health information. The regulations mandate that such records shall be provided or made available to the individual or a designee, such as an attorney. 45 CFR 164.524(c)(3).

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In addition, HIPAAA regulations limit fees that may be charged. Those providing information may charge "a reasonable, cost-based fee, provided that the fee includes only the cost" of labor, supplies for creating the copies, postage and "if agreed to by the requesting individual, the cost to prepare an explanation or summary of the protected health information." 45 CFR 164.524 (c) (4) (emphasis added).

Kentucky has similar rules governing a person's access to his or her own medical records. A copy of a patient's medical record must be supplied upon a patient's written request. KRS 422.317. The first such copy is free and then a copying fee of no more than one dollar ($1) per page may be charged upon request either by the patient or the patient's attorney or the patient's authorized representative. KRS 422.317. See, also, Eriksen v. Gruner Simms PLLC, 400 S.W.3d 290 (Ky. App. 2013) (reaffirming summary judgement wherein chiropractor lost challenge to interpretation and constitutionality of KRS 422.317(a) as related to providing one free copy of records to attorney of requesting individual.)

D. Advocacy Relating to Insurance

Assume a client has successfully obtained his or her medical records, but still cannot use these records to commence payment of insurance benefits to which the patient believes him or herself entitled. This is an opportunity for attorneys to advocate on behalf of clients, and can arise in a variety of contexts.

Counseling Tip: Advocacy works, but equally important is drafting

a robust Health Care Power of Attorney designation for each client to name an agent for health care purposes.

1. Long Term Care Insurance.

Nonpayment of insurance benefits can arise in the context of long term care insurance. For example, a couple buys a long term care insurance policy and now one spouse has moved into care. The other spouse notifies the insurer but the claim is rejected.

Often, a review of the long term care contract itself can help clarify its terms. An attorney might find that the policy has an elimination period that must lapse before payments begin. The lawyer can help insured clients advocate for their rights, including commencing payments for the care, terminating premium payments, arranging for payments to be made directly to the facility, and the like. See, generally: www.naic.org (National Association of Insurance Commissioners site).

2. Observation status.

Another context in which attorneys advocate regarding health insurance payments is during and after hospital stays. "Observation status" is the term given by hospitals when a patient

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stay is classified as "out-patient" rather than "in-patient." While the patient is, indeed, in a hospital bed and receiving medical treatment and supervision by doctors and nurses, the patient and the family may be unaware that the patient has not been admitted to in-patient status. As a consequence, clients may lose valuable Medicare coverage, including all Medicare coverage for the patient's in-patient rehabilitative care after a hospital stay. This rehabilitation may persist for up to 100 days following the hospital stay but requires a three-day hospital admission prior to rehabilitation for Medicare to cover the stay. In real dollars, this can total five hundred ($500) dollars per day or more that the patient will be required to pay out of pocket. A good advocate could help a family avoid this expensive outcome by verifying the status of the patient's hospital stay, and ascertaining that the hospital and doctors are complying with Medicare standards.

Counseling Tip: Patients' families can be advised

regarding the status issue, and can themselves advocate with the hospital.

3. Improves versus maintains standard.

Once in rehabilitative care – and covered by Medicare – the client cannot simply breathe a sigh of relief. There is no promise that the patient will remain "on rehab" for the full one hundred days, not even for the first full twenty days, covered by Medicare. This is due, in part, because the medical community has traditionally and erroneously applied an "improvement" standard as the basis for Medicare eligibility. Moreover, Medicare recipients are now routinely denied coverage because they are "no longer improving," or are characterized as "stable", "chronic," or as needing only "maintenance services." This is an improper denial of a federal benefit.

The federal court supposedly resolved this in Jimmo v. Sebelius

wherein the judge approved a settlement clarifying that Medicare covers nursing home care not based on the individual's potential for improvement, but rather on his or her need for skilled care – which can be to maintain or slow deterioration of the individual's condition. Jimmo v. Burwell, No. 11-CV-17, 2017 WL 462512 (D. Vt. Feb. 1, 2017). Nevertheless, patients are regularly released from rehabilitation status and offered the "option" to pay privately for additional services or to remain at a facility paying out of pocket because the patient is no longer "improving." This is a wonderful place for counselors to advocate for their clients.

E. Discharge from a Nursing Facility

Another area ripe for advocacy relates to discharging residents from nursing homes. Discharges require compliance with various federal and state laws, as well as private contractual terms. In general, federal

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nursing home residents' rights mandate that a skilled care resident can only be transferred after a thirty-day notice has issued. This notice must include the reason, timing, and appeal rights related to the discharge. Additionally, a resident has the right to remain in the nursing facility unless a transfer or discharge:

1. Is necessary to meet the resident's welfare; 2. Is appropriate because the resident no longer requires nursing

home care; 3. Is needed to protect the health and safety of other residents or

staff; or 4. Is required because the resident has failed, after reasonable

notice, to pay the facility charge for an item or service provided at the resident's request.

See 42 CFR §483.10 "Resident rights" (concerning rights of residents in long term care facilities, including basis for discharge, prior notice and right to appeal.) See, also, 910 KAR 1:210 "Kentucky Long-term Care Ombudsman Program" and the National Long Term Care Ombudsman Center Resource Center at: http://ltcombudsman.org.

II. FAMILY LAW

Both family law and elder law attorneys address many of the same issues in dealing with families. Having initially determined that a client is competent, attorneys may still need to address whether other family members are fully able or not, and if they are likely to remain so. A second area where family law drifts into elder law is in addressing conflicts within the family, whether between spouses, among children or intergenerational. A third area where family law edges into elder law involves forward planning for spouses, children or ex-spouses who may have special needs and be receiving public benefits, such as Supplemental Security Income (SSI) or Medicaid.

A. Communication

First and foremost, a lawyer must identify who the client is, and is not, and verify that the client is fully capable of engaging in the attorney-client relationship. Once the client relationship is established, it is then clear to whom the attorney owes duties: whether of loyalty, confidentiality, diligence, or communication. Having thus established the relationship, and having determined that a client is competent, (Section I.A., above) attorneys in family and elder law may have an additional burden: how to communicate effectively and appropriately with numerous family members. The governing rule is found at SCR 3.130(1.4) "Communication," which states generally that a lawyer must reasonably and promptly:

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(1) inform the client of any decision or circumstance requiring informed client consent . . . (2) consult with the client about the means to accomplish the client's objectives; (3) keep the client informed; (4) comply with reasonable requests for information; and (5) explain a matter as necessary to permit the client to make informed decisions.

As the Comment to this rule elucidates, the client needs sufficient information "to participate intelligently in decisions concerning the objectives of the representation and the means by which they are to be pursued, to the extent the client is willing and able to do so." SCR 3.130 (1.4) at Comment (5). On this basis, it is to the client and not to other family members, that the attorney owes the duty of communication. See, also, SCR 3.130 (1.6) (maintaining confidentiality of client information.)

Of course, if a client is not a "comprehending and responsible adult" the attorney may be relieved of this responsibility. For example, when the client is a child or suffers from diminished capacity, attorneys are pointed to SCR 3.130 (1.14) governing diminished capacity. SCR 3.130 (1.4) at Comment (6). At such time, the family or elder law attorney may appropriately reach out to others, including family members.

Attorneys must identify the client and conduct all counseling and other interactions with and for the client's benefit unless or until a determination of diminished capacity is reasonably made, or unless or until instructed otherwise by a competent client. See, SCR 3.130 (1.14) and SCR 3.130 (1.6) ("[W]hen taking protective action . . . the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client's interests.")

B. Family Bliss or Family Rifts

According to recent data from the American Psychological Association, approximately 40 to 50 percent of married couples in the United States divorce. The divorce rate for subsequent marriages is even higher. Encyclopedia of Psychology, A. Kasdin, Editor American Psychological Association: Washington, 2000. For this reason, identifying the client, or clients, their interests, and your duty and responsibility to each is of paramount importance early in the relationship.

As many as 70 percent of all American families are now blended families. In this sense, not only the assets but also the progeny can be characterized as belonging to Spouse A, Spouse B or both spouses. The attorney's job is to ascertain how to proceed for the client regardless of

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the often vocal input from next generation, and perhaps the in-laws as well.

In working with blended families, it is always wise to be cognizant of confidentiality issues. Supreme Court Rules admonish lawyers not to reveal client information "unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation" or the disclosure is otherwise permitted by the Supreme Court Rules. SCR 3.130 (1.6)(a). With numerous family members involved, revealing or safeguarding any information can be fraught with challenges.

Counseling Tip: It is good practice to ask clients at the onset to

give written authorization as to whom the attorney is permitted to contact or share information. A client's handwritten list of names, relationships and contact information is a helpful document to maintain and refer to later.

1. Division of assets.

At times, clients seek to divide their assets, whether due to divorce, engaging in long term planning for blended families, or perhaps considering eligibility for public benefits. In so doing, attorneys need to evaluate what the family's objectives are. Is the primary consideration minimizing tax burdens? Planning for future incapacity and extraordinary medical expenses? These decisions may have significant impact on long term plans for this couple, particularly as they age and enter years with high medical expenses. Notably, a spouse or ex-spouse who is eligible for needs-based public benefits may be made ineligible due to a property settlement.

2. Future special needs of a spouse, child, or former spouse.

The division of assets provides some interesting planning opportunities for families who have, or might have, persons with special needs. For example, imagine a person receiving Supplemental Security Income (a means tested benefit) is getting divorced. One option would be to have the ex-spouse transfer any of assets owed to the disabled individual due to the divorce into a third party special needs trust for the disabled individual. This would be instead of transferring these assets directly to the person with the disability. Assuming that this is done appropriately pursuant to a divorce agreement, this might be sufficient to preserve the divorced person from losing eligibility for greatly needed benefits. (See Section IV.A., below, for a fuller discussion of special needs trusts.)

Regarding spousal support (i.e. "maintenance") in a divorce, the amount and duration of such support may impact at the time of the divorce or later on the recipient's eligibility for public benefits. One option for attorneys would be to add language into the Settlement

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Agreement that maintenance can be revised in contemplation of the recipient's need for Medicaid or other public benefits.

When retirement funds are divided between divorcing spouses, and a recipient spouse is declining in health, there is a planning opportunity to work within the Medicaid system. The higher income spouse can contribute more in exempt retirement funds and less in monthly maintenance because the corpus of a qualified retirement account is considered as exempt when calculating assets for Medicaid eligibility. It follows that a QDRO (qualified domestic relations order) or other decree should be drafted to reflect the specific divisions of these retirement funds and then the property settlement would document that the apparent discrepancy in liquid assets was cured by the addition in retirement funds.

III. BANKRUPTCY LAW

Both bankruptcy and elder law clients have learned that sometimes life's surprises are unpleasant ones. Within the bankruptcy context, various issues arise that disproportionately affect older or special needs clients. Fiscal exploitation, consumer scams, and mortgage issues are of particular importance.

A. Fiscal Exploitation of the Elderly

Among the many forms of elder abuse is financial exploitation of the elderly. This is generally defined as illegal or improper use of an elder adult's assets, property, or funds. As the numbers of seniors in this country continues to grow, this issue is rapidly becoming an epidemic. In 2000, National Association of Adult Protective Services Administrators conducted a survey and determined that financial exploitation comprised 13 percent of investigated allegations. Teaster, P.B. "A Response to the Abuse of Vulnerable Adults: The 2000 Survey of State Adult Protective Service." National Center on Elder Abuse, 2003. Those in the field generally agree that elder exploitation is generally underreported and undocumented.

Attorneys working with this population note that fiscal abusers are quite often a trusted family member, caregiver, or close friend. Lawyers need to help educate our clients, and put measures in place to support them as they age. Such measures include strong Power of Attorney authorizations, redundant supervision over older clients' accounts, limits on access to an elderly person's funds, referrals to Adult Protective Services, and if necessary, Guardianship and Conservatorship over the client's person and assets.

Counseling Tip: Kentucky bars felons, including those who

financially exploit the elderly, from inheriting property from their victims. Assets may escheat to a state trust fund for elderly and vulnerable victims. KRS 381.280

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B. Consumer Protection and Scams

The National Institute of Justice funded a study to examine consumer fraud victimization among the elderly, using a sample of 2,000 participants in Florida and Arizona. In the year of the study, nearly six in ten participants were targeted by at least one fraud attempt. The most prevalent scams included nonexistent prizes and false magazine subscriptions, donations to fake charities, and scams to obtain personal financial information. Holtfreter, Kristy, Michael D. Reisig, Daniel P. Mears and Scott E. Wolfe, "Financial Exploitation of the Elderly in a Consumer Context," Final Report to the National Institute of Justice, grant number 2010-IJ-CX-0008, March 2014, NCJ 245388.

In general, the elderly are particularly at risk of harm, and not simply those with dementia. Attorneys in bankruptcy and elder law are uniquely poised to protect our clients against both the misconduct of others and the risks brought on by their own challenges.

Counseling Tip: Kentucky mandates reporting adult abuse,

neglect, or exploitation. Further, ethics rules permit an attorney to reveal necessary information to comply with a law. KRS 209.030(2), SCR 3.130 (1.6)

C. Mortgages, Liens, Foreclosures, and Reverse Mortgages

Many homeowners take equity out of their homes in the form of mortgages. Older homeowners can take out a "reverse mortgage" which is a specific type of home loan that converts some of the equity in a home into cash. Unlike a traditional home equity loan, borrowers need not repay the loan until they fail to use the home as their principal residence or fail to meet any mortgage obligation.

The federal government has a reverse mortgage program through the Federal Housing Authority (FHA) called the Home Equity Conversion Mortgage ("HECM") program. In order to take out a HECM reverse mortgage, the homeowner must be at least sixty-two years old, living in the home, and either own the home outright or have a low enough mortgage that the balance can be paid off with the proceeds from the reverse mortgage at loan closing. Additionally, the homeowner must have sufficient resources to pay ongoing property charges, including taxes and insurance. While this specialized mortgage may be a saving grace for older homeowners, the risks are significant: the loss of the home for failing to meet any term or having to vacate after one of the spouses moves out.

Counseling Tip: The FHA recommends avoiding any service that

charges a fee for referring a borrower to an FHA-approved lender. Steer clients to an FHA-approved lender by searching online at www.hud.gov or call (800) 569-4287, for the name and location of a local HUD-approved housing counseling agency. These services are provided at low or no cost.

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Liens and Foreclosure Practices

Elderly clients and those with special needs may be disproportionately impacted by liens and foreclosures. In many instances, a tax sale can be commenced when a homeowner simply fails to pay taxes, something that a person with a physical or mental impairment might do. If an older person is having challenges, this could result in an inability to maintain a property, resulting in local fines or fees. Further, if a person is suffering from memory issues, this may cause difficulty with all fiscal matters, not simply an inability to remember to pay taxes.

Our elderly clients and those with special needs deserve additional support and services to avoid catastrophic outcomes, such as the loss of a residence. Attorneys can assist with drafting robust legal documents, such as Powers of Attorney, as well as guidance on fiscal management and supervision by a trusted friend, relative, or counselor. If need be, lawyers can work with family members on establishing a guardianship.

Counseling Tip: HUD provides foreclosure avoidance

counseling throughout the country, including numerous locations in Kentucky. Find help for clients online at: https://www.hud.gov/offices/hsg/sfh/hcc/fc/index.cfmh

IV. LITIGATION

Litigators work in many areas that overlap with elder law. Some seek compensation for tort or personal injury claims. Others pursue actions against health care providers. Still other litigators are involved in nursing home abuse or negligence cases. In many of these cases, settlement proceeds provide both planning opportunities and discrete reimbursement requirements. Several of these are addressed below.

Drafting Tip: The definition of "disability" as used in the context of special

needs trusts is the same definition contained in the Social Security Act, as applicable for determining eligibility for Supplemental Security Income and for Social Security Disability Insurance.

A. Special Needs Trusts

A special needs trust (SNT) is a trust used primarily to preserve means-tested public benefits for a person with a disability. For families with one or more such members, these are crucial planning tools. Two SNTs can be used in settling civil cases for clients with disabilities. When properly drafted, the corpus in these trusts is not considered a countable asset in determining an applicant's eligibility for means-tested public benefits.

One such SNT can only be created for a person under age sixty-five who may have current or future needs for government benefits. To preserve

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these benefits, the client could "self-settle" a special needs trust that meets the standards set forth in 42 U.S.C. §1396p(d)(4)(A). This is referred to as a "payback" or "First Party" trust as it is funded with a person's own assets. Any assets left after the beneficiary dies or the trust terminates must be used to reimburse Medicaid for payments made on the beneficiary's behalf. Further, the trust must be "for the sole benefit of" the disabled beneficiary. There are rigid limits for what trust assets may be used. The SNT terms should clarify that disbursements may "supplement" but not "supplant" government benefits.

For persons over age sixty-five with disabilities, a different SNT can be used. The special needs trusts for these older clients are permitted under 42 U.S.C. §1396p(d)(4)(C) and are colloquially referred to as "Pooled" trusts. The corpus and income of a Pooled trust will be treated under the same rules as a First-Party trust as long as it meets the requirements set out in 42 U.S.C. §1396p(d)(4)(C). Each such trust must be created by a nonprofit organization, and each beneficiary must have a separate account, although the trust assets are pooled for investment and management purposes. Similar to the "(d)(4)(A)" trusts, each account in the Pooled trust must be for the sole benefit of the beneficiary. However, upon the death of a beneficiary, remaining funds may either be used to reimburse the state Medicaid agency or may be retained by the trust to be used for the benefit of other disabled individuals. Funds placed in the Pooled trust by others besides the beneficiary may be treated differently and designated to pass on to others, rather than repay Medicaid.

These two types of SNTs are "safe harbors" providing great options for litigation proceeds.

B. Reimbursement of Government Liens

Medicare has an absolute statutory right to reimbursement for medical payments on an individual's behalf. 42 U.S.C. §1395y(b)(2)(A), (B) and related regulations at 42 C.F.R. §§411.20-411.54. Medicare must be reimbursed no later than sixty days after receipt of any kind of settlement or judgment proceeds. Failing to reimburse Medicaid can give rise to interest penalties. In addition, Medicare may also seek reimbursement from "any entity that has received a third party settlement" including attorneys.

Medicaid is a state and federal program that provides health care benefits as a payor of last resort. After an injury caused by a third party, the state Medicaid agency automatically has a lien against any money recovered in any claim asserted as a result of that injury, and for which it paid related medical bills.

Simply put, reimbursement to Medicare and Medicaid is mandatory. These liens must be settled as part of any litigation. Anyone with additional interest in this area may also look into reimbursement to the Department of Veterans Affairs, and to private insurance companies.

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See, also, Arkansas Department of Health and Social Services v. Ahlborn, 547 U.S. 268 (2006).

Counseling Tip: There is an obligation to inquire about and

investigate liens. Having made such inquiries, attorneys can seek to negotiate a lower reimbursement amount.

C. Medicare Set Asides

Medicare requires that its future interests be taken into consideration in certain circumstances. The most typical of these is in the context of worker's compensation cases. The injured worker may need to create a pre-approved Medicare "set aside" account. Future medical payments related to the injury must be made from this account before Medicare will begin to pay for related care that is covered and reimbursable.

D. Structured Settlements

When concluding a litigation, one alternative is to suggest clients accept a "structured settlement." By this tool, clients who may be unable to manage their own funds may elect a stream of payments over a period of years. This permits consistent and predictable funds for medical and living costs, and may offer tax advantages as well.

There are downsides to using structured settlements. Generally, such annuities do not permit large withdrawals, such as are necessary to purchase home, cars and the like. Perhaps more significantly, steady streams of income, if paid directly to the injured party, may render that person ineligible for public benefits. Attorneys can help avoid this outcome by establishing a supplemental needs trust to receive the annuity payments.

V. ESTATE PLANNING

Estate planning and elder law attorneys create client documents including financial and health care powers of attorney, living wills, do not resuscitate orders, and perhaps trusts. For elderly clients or those who may risk incapacity, other documents might include HIPAA releases, advance directives for mental health matters, guardianship, and life care plans.

Elder care attorneys often address such "low brow" topics as reviewing the client's daily money management, finances and potential need for future public benefits. Lawyers may review clients' veteran status and may also help evaluate a client's housing and medical concerns. In the scope of estate planning and elder law, three issues arise frequently: taxes, retirement benefits planning, and certain legal documents.

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A. Tax Considerations

In her article "Where Not To Die in 2017" Ashlea Ebeling declares Kentucky to be one of "nine states . . . ushering in death tax changes for 2017, and they're all changes that lessen the tax bite." A. Ebeling "Where Not To Die in 2017" Forbes Magazine (Oct. 10, 2016). As one of only eighteen states that tax either estates or inheritances, Kentucky is nominated by Ms. Ebeling as a bad place to die in 2017. While I appreciate Ms. Ebeling's focus on minimizing taxes, I hope to avoid all deathbed locations this year – even those that are tax free.

1. Inheritance taxes.

For elder law attorneys, it is often easy to coax a smile out of clients hoping to minimize their "death" taxes. Once clients demonstrate that they have – or are likely to have – less than $5.490 million at death (excluding portability), and that their assets will pass to Category A beneficiaries, clients are delighted to learn that the death tax is likely to be negligible. For clients with more assets or more distant beneficiaries, there may be greater tax burdens, but generally not what the client had feared. While clients still smile, a good elder law attorney will begin to discuss the cost of long term care. Often, attorneys need to clarify that medical expenses are a much greater threat to clients' economic well-being than are taxes.

2. Step-up in basis.

There are times when a client's long term plan involves gifting assets prior to death. This may be in contemplation of needing public benefits, due to the client's need for full-time care, or for other reasons. If the client understands that inherited property may benefit from the "step-up" in basis, but property gifted during one's life does not, which is the better outcome?

As with many legal questions, it depends. Is the property the client's primary residence? If so, then maintaining it preserves not only the step-up in basis but also the capital gain exclusion as a personal residence upon its sale. Lawyers weigh those benefits against the client's needs to pay for medical care, maintain the residence, or become eligible for benefits.

Put bluntly: do the tax benefits outweigh the burden of maintaining the home, paying for care and perhaps disqualifying the client from veterans benefits or public assistance? When undertaking this analysis, the question becomes which risk is greater: risking the loss of the tax advantage or risking the entire burden for the cost of long term care.

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3. Gifting.

Many clients "know" that they can gift up to $14,000 per year to unlimited beneficiaries with no tax consequences. In the context of planning for Veterans and public benefits such little knowledge is a dangerous thing. Elder law attorneys regularly explain that the annual exemption for gift tax purposes ($14,000 in 2017) is unrelated to other federal issues, such as Medicaid eligibility. For Medicaid purposes, any gift made within five years of application is considered something that applicant should have used for their own care. This is unrelated to taxes.

B. Private Retirement Assets and Public Benefits Planning

There are many estate planning tools that touch on maximizing financial outcomes for clients. These contemplate understanding both large systems such as Medicare and Social Security, as well as learning which vehicles, investment, savings products and benefits a client has or may gain access to. Attorneys working in the arenas of elder law and estate planning likely come across the following:

1. Medicare. 2. Medicaid. 3. Supplemental Security Income. 4. Veterans Benefits (pension, compensation, and other). 5. Social Security Retirement income. 6. Social Security Disability income. 7. Supplemental Security Income. 8. Annuities. 9. Kentucky Teachers Retirement System. 10. Railroad Retirement or similar alternate systems. 11. Individual retirement accounts. 12. Pension plans from private employers. 13. Long term care insurance contracts. 14. Life insurance policies – whole, term, hybrid.

These and other products are too diverse and numerous to discuss in this short article. The key for an estate or elder law attorney will be to examine

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a client's portfolio and determine how to maximize the value of these assets or to have good referral sources.

C. Legal Documents

Many clients initially seek legal advice relating to a Last Will and Testament. For many of these clients, this is an entree into educating them on various other documents that may be even more vital. One vital document for many aging clients is a robust Power of Attorney, and the one that causes perhaps the most difficulty is a trust.

1. Durable Power of Attorney.

A power of attorney is a contract authorizing another to act on one's behalf, frequently on legal and financial matters. In order to execute this agreement, the client should have the capacity required for entering into contracts. "The test of legal capacity to contract is the ability to understand and appreciate the consequences of the particular transaction." Conners v. Eble, 269 S.W.2d 716, 717-718 (Ky. 1954). Notably, the standard of capacity for contracts exceeds the capacity required for signing a will, for which only a "lucid interval" is required. Bye v. Mattingly, 975 S.W.2d 451, 455 (Ky. 1998)

For aging clients, a general durable power of attorney should name both a substitute attorney-in-fact, as well as a preferred guardian, should one be required. Its terms should explicitly permit gifting, and not limit gifting to the federal taxable exclusion each year, so that long term care planning can be conducted. The document must survive a medical determination of the principal's disability; otherwise a guardianship might be necessary. Ultimately, the alternative to a powerful General Durable Power of Attorney may be Guardianship. Unique to Kentucky, guardianship requires a trial by jury. The trial is arduous and often demeaning and can often be avoided with a properly drafted Power of Attorney.

Counseling Tip: Advise clients to change designations of

beneficiary on each relevant financial or legal document to reflect their ultimate estate plan. This includes insurance policies, retirement accounts, traditional bank accounts, and other instruments that pay to named beneficiaries upon the death of the insured or account owner.

2. Trusts.

For those who are not tax law or estate law aficionados, trusts come in two broad categories: revocable and irrevocable. In speaking to most elder law clients, trusts can be explained simply as trusts whose assets can be "emptied out" by the creator and the trust eliminated (revocable trusts) and those that cannot

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(irrevocable trusts.) There are both benefits and countervailing costs to each.

A revocable or living trust is a good tool for managing assets during one's lifetime or disability. It provides flexibility, can be amended, and can address many blended family concerns. Unlike a will, it is a private vehicle for passing on assets. For most elder law attorneys, the challenge with revocable trust is that they are ... revocable. If a client must cede ownership, control, or access to assets, the revocable or living trust is not sufficient. For this reason, a revocable trust can be a ban to obtaining means-tested assistance, such as Medicaid or Veterans benefits.

A properly drafted irrevocable trust addresses the concern of access to public benefits or veterans planning by removing the grantor's control over the assets. The downside of the loss of control over assets entails risk: any change in long term planning strategies may be thwarted by the irrevocable nature of the trust. Likewise, the timing of trust funding may cause problems, as might the distributions rules. These and other issues are regularly addressed by elder care attorneys.

VI. CONCLUSION

A final note: this is not simply about your clients – it is about us, our families, our communities and our futures.

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RESOURCES I. HEALTH CARE LAW

A. 26 U.S.C. §213 – Medical, dental, etc., expenses (IRS rules on deductible medical expenses, n.b. subsection (10) "Eligible Long Term Care Premiums"

B. National Association of Insurance Commissioners: booklet:

"10 Things You Should Know About Buying Long-Term Care Insurance" http://naic.org/index_ltc_section.htm

In recent years, long term care insurance has become more difficult to obtain. This is due in part to the shrinking number of companies offering to sell this product, the challenge of underwriting, and the uncertainty of costs of care and the future changes in the long term care. Newer products in financing long term care include annuities, life insurance products which permit conversion of some or all benefits to long term care, and products that can be used as viatical.

C. Advocacy under Medicare

Center For Medicare Advocacy provides a free, downloadable packet for consumers to challenge various denials of Medicare coverage in skilled care facilities, including categorization of status as "observation."

See: Self-Help Packet for Skilled Nursing Facility Appeals Including "Improvement Standard" Denials and "Observation Status"

http://www.medicareadvocacy.org/self-help-packet-for-expedited-skilled-nursing-facility-appeals-including-improvement-standard-denials/#Improvement https://www.cms.gov/ https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM8458.pdf

D. LTC and Medicare Insurance Plans

See: Consumer Reports "How to Pick a Health Insurance Plan: The Three Most Important Questions You Need to Ask" (Sept. 2014) (online edition) What is the cost? What does it cover? What doctors and hospitals are under its plan? http://www.consumerreports.org/cro/2012/09/ understanding-health-insurance/index.htm (updated 2014)

II. FAMILY LAW

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III. BANKRUPTCY

A. Frequently Asked Questions about HUD's Reverse Mortgages: Top Ten Things to Know if You Are Interested in a Reverse Mortgage – HUD publication for consumers publicly available at: https://portal.hud.gov/ hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten

B. See John Rao "The Other Foreclosure Crisis: Property Tax Lien Sales"

National Consumer Law Center's report (July 2012) publicly available: http://www.nclc.org/images/pdf/foreclosure_mortgage/tax_issues/tax-lien-sales-report.pdf

C. Enforcement Resources

HUD Office of the Inspector General Phone: (800) 347-3735 Email: hotline@hudoig.gov

Federal Trade Commission: Complaint Assistance Phone: (877) FTC-HELP / (877) 382-4357 Email: spam@uce.gov

Financial Fraud Enforcement Task Force Phone: (202) 514-2000 Email: ffetf@doj.gov Web: https://www.stopfraud.gov/

D. Guardianships: Cases of Financial Exploitation, Neglect, and

Abuse of Seniors, U.S. Government Accountability Office (GAO), September 2010

E. KRS 381.280 Forfeiture of right to property for killing or victimizing

decedent

F. KRS 41.305 (establishment of elder and vulnerable adult victims trust fund)

IV. LITIGATION Arkansas Dept of HHS v. Ahlborn, 547 U.S. 268 (2006), (Medicaid can only recoup amounts earmarked or determined to be "past medical expenses" and State's Medicaid agency may recover only that percentage of the total amount it has paid.)

V. ESTATE PLANNING

26 U.S.C. §2503: U.S. Code – Section 2503: Taxable gifts (Exclusion for certain transfers for educational expenses or medical expenses) http://codes.lp.findlaw.com/uscode/26/B/12/A/

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