Concerns Over Long-Term Care Insurance

Today's article from the Wall Street Journal (authored by Kelly Greene and Leslie Scism) highlights the rising concern over long-term care insurance policies.  If you are considering purchasing long-term care insurance, take a read through this article to better understand the risks you might be facing down the road.

Link to WSJ article: 

http://online.wsj.com/article/SB10001424127887323475304578501820197828966.html#articleTabs%3Darticle

"Rob and Katherine Deane thought they were being responsible by buying insurance policies to provide for care in their later years. Instead, the Michigan couple are encountering a growing gap in health-care coverage that the government overhaul will do nothing to fix.

The Deanes say they got hit last year with rate increases on both of their long-term-care policies, insurance plans that pay for nursing homes or in-home care. Manulife Financial Corp.'s John Hancock unit told Mrs. Deane that the premium on her 10-year-old policy would jump 77% to $6,406 a year. Her husband's insurer, Unum Group, increased his premium by 25%.

After they complained, Hancock trimmed Mrs. Deane's rate hike to 46%. In exchange, she agreed to shrink the policy's benefit period to six years from 10. "Seniors are really getting hammered," says Dr. Deane, a 76-year-old retired surgeon.

Spokespeople for Hancock and Unum declined to discuss the Deanes' specific situation. In general, the insurers say, they give policyholders ways to reduce or eliminate a looming rate increase, generally by giving up part of their benefits.

The long-term-insurance industry now is shrinking, premiums are soaring and there is no fix in sight. At the same time, government safety-net programs, already under cost-cutting pressure, are bracing for demand from more of the 77 million aging baby boomers.

President Barack Obama's health-care overhaul is supposed to provide insurance for millions of Americans. But the administration abandoned an effort to provide affordable long-term care, concluding it was too expensive. Instead, Congress appointed a commission to find ideas that could become law in five years.

Currently, Medicare pays for only short stays in nursing homes or in-home care under limited conditions. For the most part, seniors who need care have to burn through their savings to pay for it. Only after they are impoverished will Medicaid—the government health program for poor people—pay for a basic level of care.

Insurers have been aware of this gap for decades, and many began selling long-term-care policies in the 1980s and 1990s. They vowed to provide policyholders with better access to high-quality nursing homes and home-based health care than Medicaid.

But insurers underestimated how fast medical costs would rise, and how many seniors would actually use the benefits. And they underpriced the insurance premiums. Making matters worse, some insurers that were "hungry for market share" charged too little at first and planned to increase premiums later, says Joseph M. Belth, editor of the Insurance Forum newsletter and professor emeritus of insurance at Indiana University.

Many once-prominent sellers of long-term-care insurance are in full retreat. Five of the 10 largest sellers, includingMetLife Inc., Prudential Financial Inc. and Unum, have sharply reduced or discontinued sales since 2010, according to Moody's Investors Service.

Only a dozen or so companies still sell meaningful numbers of policies, down from about 100 a decade ago, according to LifePlans Inc., a consultant. In the past decade, sales to individuals have fallen by two-thirds to 233,000 policies a year, and the number of insured people is stuck at about seven million.

Most of the actuarial assumptions made by insurers years ago turned out to be overly optimistic. Underestimating how long elderly policyholders would live—and collect benefits as a result—led to a 14% shortfall in premiums, according to a presentation to college students by PricewaterhouseCoopers principal Larry Rubin.

And many state regulators erred by routinely signing off on the premium on the new products and subsequent rate increases without questioning the companies' pricing assumptions, some officials say.

Since then, many states have adopted "rate stabilization" laws to tighten oversight. Michigan, where the Deanes live, adopted such changes in 2006 "to reduce the potential of future rate increases by requiring a more accurate initial pricing of policies by insurers," says an insurance department spokesman.

The insurance industry also failed to realize how desperate many Americans are to protect themselves from runaway nursing-home costs. So they cling to their long-term-care coverage for dear life.

Many insurers predicted that 5% to 7% of people who bought long-term-care coverage would cancel their policies each year without tapping their benefits.

Instead, the annual cancellation rate at many insurers has been less than 2%, actuaries say. Initial premiums would have been about 35% higher if insurers had assumed such a low cancellation rate, PricewaterhouseCoopers estimates.

"We don't want to be a burden to our children," says Allan Sugarman, 71, of Morganville, N.J. Mr. Sugarman and his wife, Joyce, bought long-term-care policies from John Hancock about a decade ago after hearing that a friend had paid more than $100,000 to support his father in an assisted-living facility. They later learned another friend's disabled mother was sleeping on her son's sofa, for lack of an affordable alternative.

The couple are paying $6,380 a year for the two policies. They want to keep their coverage so much that Ms. Sugarman says she was relieved when Hancock let them avoid a double-digit rate increase by sacrificing part of an inflation-protection perk.

Hancock says it won't discuss specific policyholders.

Some regulators are making it tough for insurers to bump up premiums to a sustainable level, contributing to the decision by some companies to leave the market. Last year, a Pennsylvania state-court judge faulted the state's insurance department for not approving big premium increases for two troubled insurers.

"This case presents a serious indictment of the existing system of rate regulation of long-term-care insurance," Judge Mary Hannah Leavitt wrote. Pennsylvania officials have appealed the ruling and are seeking approval of a rehabilitation plan for the shaky insurers. The department declined to comment on the judge's comments.

Genworth Financial Inc.,  with about a 33% market share of long-term-care policies sold to individuals, said in May that it is seeking premium increases averaging more than 50% to stave off more losses in its oldest policies.

Genworth also halted sales June 1 through AARP, the older-Americans' group with a huge pool of potential customers.

"We've learned a lot over the last 30 years, and we now believe we have a better ability and more knowledge" to issue policies that "provide significant financial protection to Genworth," Genworth Chief Executive Thomas McInerney said in an interview.

The insurer started requiring blood tests and other medical screening, which the industry generally hadn't done before. And it is charging women who apply individually more than men for the first time because women tend to live longer and require more years of care.

In general, a 55-year-old single person buying long-term-care protection can expect to pay $2,065 a year for $162,000 in benefits, including a 3% inflation-protection rider—a 20% increase from last year, according to the American Association for Long-Term Care Insurance trade group.

Rate increases are forcing existing policyholders to dig into savings, sacrifice elsewhere—or drop their coverage. For insurers, that could mean healthier policyholders abandon ship while sicker, more expensive customers hang on.

Bob Barry, a 74-year-old AT&T Inc. retiree in Bluffton, S.C., says he walked away from his Hancock policy 18 months ago after the annual bill for basic, three-year coverage jumped about 50% to nearly $1,000. He and his wife, both healthy, are grappling with big premium increases for their homeowner's insurance, too, he says.

For the time being, they chose to maintain coverage for his wife, who is four years younger, reasoning that she could outlive him. "I wanted her to keep hers because I expect to check out before her," he quips.

Many insurance agents and financial planners are steering clients to new "hybrid" coverage, basically life insurance with a rider providing long-term-care benefits. One appeal: The policyholder can leave something to heirs even if the long-term-care benefits don't get tapped.

But the long-term-care benefits often are less generous than those in conventional policies, and policyholders typically have to write one big check upfront to obtain the coverage, rather than paying premiums each year, says Nancy Courser, the Deanes' insurance agent.

"We have no way of knowing if these policies will self-destruct in the future," cautions Mary Ahearn, a financial planner in Arizona.

—Erik Holm contributed to this article.  Write to Kelly Greene at kelly.greene@wsj.com and Leslie Scism atleslie.scism@wsj.com"Schedule an appointment today to discuss your estate planning and elder law questions.

The Last Will and Testament: What, when and why?

I can't tell you how many times a client of mine has told me that they need to get their Will done soon because they are "getting older."  I can tell you that the vast majority of them are over the age of fifty with children out of high school.  And while it is never too late to consider executing your Will, waiting until your kids are over 18 and you are retired may be too late.  This article will touch upon what a Will is, what it entails, when you should execute one and why.

What is a Will?


A Will is a document by which a person (often called the "testator" or "testatrix") indicates their final wishes with respect to the distribution of his or her assets.  It is a document that provides for the payment of your last expenses, the distribution of your property after your death and the appointment of a person (in Maine the "personal representative," but often times called the "executor" or "executrix") to oversee the administration of your estate after your death.

Why do I need a Will?


There are a number of reasons that you should draft a Will:

1.)  Primary among them is that you can dictate who receives your property after your death and who your personal representative will be.   In Maine, if you do not leave behind a validly executed Will, the laws dictate how your property is to be distributed and who will be named personal representative.  Often times, this may result in your property passing to relatives that you had no intention of leaving property to (e.g. estranged children, spouses, siblings, etc.).  In Maine, there is a priority of relatives who would take your property if you do not leave a Will behind (See Title 18-A M.R.S.A. Sections 2-102 and 2-103).  It is not guaranteed that your spouse will receive ALL of your property if you do not leave a Will behind.  If you do leave a Will, you are the one to decide who will receive your assets and who will take care of your financial affairs when you pass away.

2.)  As alluded to earlier, if you have a Will, you will name your personal representatives. More than likely, you will name several alternates also.  Again, the personal representative is the person who handles your affairs after you pass away.  They are responsible for collecting and inventorying your assets, paying your final expenses, settling your final tax obligations and arranges for distribution of your estate pursuant to your wishes.  Married individuals will most frequently name their spouse as their primary personal representative and then name 1-3 other family members to be alternates if the spouse is unable to serve (e.g. children, siblings, friends, etc.).

3.)  For those who have taxable estates (in Maine, the tax exemption is $1 million for each individual and $2 million for spouses), your Will can be used to take advantage of estate tax planning and lessen the estate tax impact.  For example, you can use charitable giving, credit shelter trusts, marital deduction gifts to alleviate the estate tax burden.  Your Will can dictate how to administer property, including estate and income tax elections.

4.)  Many individuals will need nothing more than a "simple will" (e.g. everything to your surviving spouse and then to your children in equal shares).  However, it is not uncommon to have other complexities based upon your specific family circumstances.  A Will can provide helpful ways to plan for those that have minor children or disabled family members that they would like to benefit.  In fact, it may be to the detriment of disabled family members to inherit part of your estate because it results in their ineligibility for public benefits (e.g. supplemental security income, MaineCare, etc.).  Most importantly, if you want to leave part of your estate to minors or disabled individuals, you can name an individual (commonly called a "trustee") to manage those assets for those individuals.

5.)  If you have minor children, you may want to nominate the individuals who would take over as "guardian(s)" in the event that both you and your spouse pass away prior to your child becoming 18.  In your Will, you can nominate the individuals that you want to take care of your children in that situation.  If you do not leave behind a Will, it will be at the discretion of a Judge to determine who is best fit to care for your children (e.g. your parents, siblings, the State, etc.).

6.)  If you have children or other family members that you wish to keep from inheriting any part of your estate, you should draft a Will.  For example, if one of your children has estranged themselves from you, and you do not want them to receive any part of your estate, you must have a Will to do so.  Otherwise, they will most likely inherit an equal part of your estate.

Why can't I just write my own Will or print one off the internet?


This is a common question for estate planning attorneys.  However, it is a very easy one to answer.  You CAN write your own Will.  Maine recognizes almost any written document stating your intentions upon your death (often times called "holographic wills").  Normally, a Will should be signed by at least two witnesses and notarized or acknowledge by an attorney.  However, in Maine, a handwritten or typed Will signed by the testator are treated equally to witnesses/notarized Wills and need only meet minimal requirements to be probated.  HOWEVER, it's not that simple.

Your holographic Will may still be found unacceptable to the Probate Court and is much more susceptible to a Will contest than a Will prepared and executed by an attorney with witnesses and a notary.  There is a much stronger presumption that a Will executed in front of witnesses and a notary or attorney is validly executed.

Furthermore, there is no guarantee that your holographic Will is including the right language to clearly state your intentions.  As you can see from the above section on why to draft a Will, there are a large number of considerations that you may not even be thinking of.  Having an attorney guide you through the process will assist you in spotting potential problems or identifying various solutions to your family's circumstances.

Many individuals think that they will save money by preparing their own Will, but, in the long run, it may cost them thousands or more.  For example, if you leave behind a Will that has ambiguities or creates problems with your family members, they will dispute the Will in the Probate Court.  Many disputes will result in high attorneys' fees and Court costs.  These attorneys' fees and court costs will often times be paid out of your Estate and not by the people bringing the claims.  In most cases, you can have a simple Will prepared for somewhere between $150-$500 depending on the attorney drafting the document.  It is not uncommon for contested probate proceedings to cost tens of thousands of dollars.

How to Draft a Will in Maine

In Maine, any person over the age of 18 who is of "sound mind" and acting under no undue influence may execute a Will.  The "sound mind" standard means that you can identify your assets and liabilities, as well as the natural objects of your bounty.

To validly execute a Will, you must be the person signing the Will or someone can sign in your presence at your direction.  As previously indicated, except with holographic Wills, your Will must be signed by at least 2 persons who witnessed your signing.  It is also highly recommended that you have your signature acknowledged by an attorney or a notary public.

Things to consider when preparing to have your Will drafted or prior to meeting with your estate planning attorney


1.)  You should have the current names and addresses for your spouse and children, as well as any individuals or entities that you intend to benefit in your Will.  This will assist your Personal Representative in locating your beneficiaries when you pass away.

2.)  You should have a list of all your assets, the current values and where they are located.  You should also know how the accounts or assets are held (joint tenancy with rights of surviviorship, tenants in common, etc.) and who your named beneficiaries or PODs (payable on death) are.  It is important to know that if you have a joint tenant or beneficiaries named, these assets will pass automatically even if your Will says something differently.  These are commonly called non-probate assets.

3.)  You should consider whether you want to make any gifts to specific individuals or entities (e.g. friends, family members, charitable organizations, academic institutions, etc.).

4.)  You should consider how you want your assets to pass, both when your spouse passes away and after both of you have passed away.  Most commonly, married couples will leave property to their children equally.  However, you may intend to benefit children differently or may be children from different marriages to consider.  You should consider whether any of your beneficiaries' shares require special treatment (e.g. disabled individuals, individuals with financial difficulties, minors, etc.).  It is important to note that every family is different and each requires independent evaluation.

5.)  You should consider the individuals that you want to name to various fiduciary roles.  In particular, you will want to consider who to name as your personal representatives, trustees and guardians for any minor children.

When should I execute my Will?


You really shouldn't wait.  Wills are for everyone and not necessarily just those that are married or have children.  I would highly recommend to anyone that they should make an appointment with an estate planning attorney as soon as possible to discuss the various options.

In conclusion...

Drafting a Will is not as easy as one would think.  In a highly litigious society, it is becoming increasingly important that Wills be carefully drafted and executed.  A well drafted and thought out Will could save your family the money and, most importantly, the conflict that often results from poorly drafted Wills or no Wills at all.

If you need assistance in preparing your Last Will and Testament, please do not hesitate to contact me and make an appointment.  My phone number is 207-743-6351 and my email address is miles@dowslawoffice.com.

Advanced Health Care Planning

Overview of Health Care Planning

Over the years, it has become increasingly difficult for loved ones to access medical records, make medical decisions and advocate for patients without authorization.  Due to the passage of the "HIPAA" (the Health Insurance Portability and Accountability Act of 1996) and other health care laws and regulations, individuals must plan ahead to ensure that their health care wishes are followed.  While laws like HIPAA protect our privacy, as well as prevent fraud and abuse, they also result in practical problems for family members when you do not plan ahead.

In addition, you may have specific family dynamics that will make it difficult for decisions to be made in emergencies or end-of-life situations.  Planning ahead can avoid disputes between family members and will also give you peace of mind that the right people are making the decisions that are consistent with your wishes.

Maine law allows you the right to accept or decline different forms of medical care, including the right to withhold artificial life support.  Under the Uniform Health Care Decisions Act (18-A M.R.S.A. §5-801 to §5-818), you have the right to make numerous decisions about how you will be treated and to appoint individuals who can make decisions in the event of your incapacity.

In this article, I will lay out the various medical directives that you can make in advanced health care planning.  These directives can make the most difficult decisions, at the most difficult times, easier for you and your loved ones.

The Advanced Health Care Directive

Naming an Agent:

One of the most important decisions that you can make ahead of time is who will make medical decisions for you in the event that you become incapacitated.  This could be a result of any number of events including accidents, the effects of medication, dementia and mental impairments.  Your agent is authorized not only to make decisions, but to access your medical records and speak with your doctors about your medical care.

In most directives, you may indicate several agents to serve in the order that you direct.  For example, you may name your spouse as your primary agent, your oldest child as your second agent and your youngest as your third agent.  In the event that one is incapacitated or unavailable, the next in line may make decisions.

Furthermore, you may direct when your agents' authorities will become effective.  You may direct that their decision-making take effect immediately or on some later date.  Many individuals prefer to indicate that their agents' authority becomes effective when the treating physician certifies in writing that the individual lacks capacity to make decisions.

End of Life Decisions:

Most health care directives will allow you to make decisions about your care in the event you are in a terminal condition, irreversible coma or other persistent vegetative state.  It is important to look at the definition of what condition you must be in prior to these decisions taking effect.  Some directives have more broad definitions and some are more detailed.  

In the event you are in one of those conditions, most directives allow you to make decisions about the following:

• whether or not you prefer to be kept on artificial life support (e.g. ventilators, breathing machines, defibrollators, heart beat stimulators, drugs to stimulate heart and lungs, etc.);
• the withdrawal of artificial nutrition or hydration (e.g. intravenous feeding, tube feeding, misting, etc.);
• whether or not to have pain relief even if it hastens your death; and
• whether or not you consent to your doctors signing a "do not resuscitate" order in the event you are in one of the pre-defined conditions.

Do Not Resuscitate (DNR) Orders

A DNR order is a direction given by a physician who authorizes first responders or any other medical personnel to refrain from administering any medical treatment or extraordinary measures to revive you.  These orders are most common with patients who are terminal or in vegetative states.  It is important to note that no one else can write a DNR order, except your physician.  

Organ Donation

Many of you know that you can identify yourself as an organ donor by obtaining a sticker for your identification card.  However, many of you probably do not know that you can identify organ, tissue and part donation wishes in your advanced health care directive.  You can also specify which organs, tissues and parts that you intend to donate and for what purpose (e.g. transplant, therapy, research and education).

Designation of Primary Physician

One of the benefits to identifying your primary physician is that you can deliver your advanced health care directive to him or her.  This will allow them to put the directive in your medical records, which are generally available country-wide to health care professionals. 

Disqualifying Certain Surrogates

In the event that you do not have a health care directive, Maine identifies certain individuals who have priority to serve as your health care "surrogate" (Title 18-A M.R.S.A. § 5-805).  If you click on the link, you will see that there is a priority of family members and friends that are permitted to make medical decisions for you in the event of your incapacity if there are no agents or guardians named.  In most directives, you can identify if there are any individuals who you do not wish to make these decisions under any circumstances if your agents cannot be located.  For example, you may have a child who has estranged himself or herself from your family and you do not want them to cause problems for you if you become incapacitated.

Instructions for Funeral and Burial Arrangements

While it is difficult for most to contemplate their funeral arrangements, identifying your wishes in a document may ensure your peace of mind.  Many individuals may verbally explain their wishes to their spouse or a child.  However, what happens if that spouse or child predecease the individual?  Having your funeral wishes in writing, in whatever detail you prefer, may be the only way to ensure that your affairs are handled as you intended.

Your Medical Providers' Responsibilities

Maine law requires that your medical providers comply with your decisions and make your records available to your agents or surrogates (Title 18-A M.R.S.A. Section 5-807 through 5-809).  They must verify your medical decisions with you, promptly record your information about the existence or revocation of your directives and comply with your instructions or your agent's instructions.  

Section 5-809 provides protections and immunities for your health care agents, surrogates and medical providers who act in good faith to carry out your wishes.  In an effort to assure that your wishes are honored, the statute even provides for damage awards against medical providers that intentionally violate the statute's requirements.  

Drafting and Executing An Advanced Health Care Directive

Maine has published a statutory form that is available at most hospitals and doctors offices.  It is also available online here (Click on "here" to go to link).  This is only a suggested form and you are free to draft your own.  Many law offices are using more detailed forms and you may feel more comfortable executing these.  

I am happy to assist you in making these difficult decisions and ensure that your wishes are honored.  If you need assistance preparing and executing your Advanced Health Care Directive, please do not hesitate to contact me.  Our phone number is 207-743-6351 and my email address is miles@dowslawoffice.com.  

Obtaining a Durable Financial Power of Attorney in Maine

I often get calls from family members of loved ones who "need to get power of attorney" of their respective mothers, fathers, children, etc.  There appears to be a misunderstanding regarding powers of attorney: what they are and how they are procured.  What is even more concerning is that many Mainers are turning to websites and online resources to obtain their powers of attorney: a flaw that may prove very costly.  This article is intended to assist individuals in understanding the values of having an updated, validly executed durable financial power of attorney in Maine.

1.)  First of all, what is a Durable Power of Attorney?
A power of attorney is a document in which one person, the “principal”, appoints another person, the “agent”, to act on his or her behalf.  Often times, the principal will give the agent general powers to perform any acts that the principal would be able to perform for themselves.  A power of attorney is “durable” if it continues in effect even if the person who created it becomes disabled or incapacitated.  

2.)  Who needs a Durable Power of Attorney?
All should plan for the possibility that they may become disabled or injured, and their spouses, children, or other loved ones will need legal authority to manage their property, transact their business, and pay their bills.  Anything can happen.  If something should happen to you (e.g. a car accident), you would be surprised how little your loved ones could do to protect you and your assets without either written authority from you (i.e. a power of attorney) or a court order.  

3.)  What if I don't have a Durable Power of Attorney?

If you do not have a power of attorney and something happens to you, your family could be faced with an expensive proceeding to be appointed as your guardian and/or conservator in order to protect you and your assets.  The legal requirements for setting up a conservatorship are complex and time consuming.  The conservator must also obtain and post a surety bond (which requires payment of an annual premium from your assets) and file annual reports or accounts with the court, which can be costly and time consuming.  A durable power of attorney can avoid the cost and complexity of guardianship and conservatorship proceedings, as the agent can act generally without the need for court appointment and supervision.

4.)  What should I be concerned about when granting these powers on my agent(s)?
There are certainly risks to be considered when choosing and appointing an agent.  Even though the agent is considered a "fiduciary" and has the heightened duty to act in the principal's best interests at all times, there are many more opportunities for the principal to be taken advantage of.  If general powers are given to the agent, the agent may decide to utilize those funds for a purpose other than the best interests of the principal.

5.)  What is the law in Maine for Durable Powers of Attorney?
The Maine Legislature passed a law that became effective on July 1, 2010, to better define the powers and duties of the agent acting under a durable power of attorney.  That law is codified in Title 14 M.R.S.  5-901 to 5-964.  As a result, Maine has very specific requirements for a Power of Attorney to be valid in Maine. 

6.)  Why can't I just print one off the internet and execute it?

The short answer is that you can never be sure that the form you are using will comply with Maine's Uniform Durable Power of Attorney Act.  Different states have different variations on what the power of attorney must include to be valid or how the power of attorney should be executed.  The new law listed above requires that a Maine Power of Attorney include specific statutory notices to the Principal and to the Agent.  It also requires that the document be executed by the principal, or signed in the principal's presence by someone directed by the principal to sign the principal's name.  This is different from the prior law and laws in other states that allow someone other than the principal to physically sign the document.  Furthermore, a Maine Power of Attorney must be notarized.

7.)  When does my Power of Attorney become effective?

Under the new law, a power of attorney is presumed to be effective when it is signed and acknowledged unless it states that it will become effective on a future date or upon the occurrence of a contingency such as incapacity or disability.  A principal may direct that his/her doctor or another individual make the determination regarding whether the incapacity or contingency has occurred.

8.)  Who can I appoint as my agent?

Most individuals will appoint their family members or close friends to act as their agents (e.g. spouse, children, parents, siblings, etc.).  Others will appoint trusted professional advisers (e.g. financial planners, bankers, accountants, lawyers, etc.).  The new law also allows for two or more persons to be co-agents, acting either jointly or singly, and for successor agents, and it more clearly defines the rights and obligations of a successor agent.  For example, you could appoint two of your children to act together and they would both be able to act independently of one another.

9.)  What types of things can my agent do and what are the duties of the agent?

Under a durable general power of attorney, unless the powers of the agent are limited, your agent can do most anything that you would be able to do for yourself.  For example, they have power over and can deal with your financial accounts, stocks and bonds, real estate, tangible property, life insurance, operating businesses owned by you, claims and litigation, personal and family matters, estates and trusts, government and other retirement benefits, taxes and gifts. 

A very important feature of the new law is §5-914, which defines the duties of an agent acting under power of power attorney to include some standards of care.  For example, your agent has the duty to act in good faith, be loyal to the interests of the principal, avoid conflicts of interest, act with care, competence and diligence, keep accurate records of all receipts and disbursements, cooperate with holders of health care authority, and endeavor to preserve the principal’s estate plan.  The new law defines precisely the extent of the agent’s liability for a breach of the agent’s duty.

If explicitly stated, a power of attorney may authorize the agent to create, amend or revoke an inter vivos trust (i.e., a trust created during one’s lifetime), make a gift, create or change rights of survivorship, change beneficiary designations, waive the principal’s rights under an annuity plan, disclaim property or exercise fiduciary powers on behalf of the principal.  The new law allows the drafter to pick and choose the powers granted and may include all powers or only limited powers.

10.)  What are some of the reasons that I may need or want a Power of Attorney?

Any number of situations can come up where a Power of Attorney would be highly useful. Here are a few (but not all) examples of when the Power of Attorney is useful:

• You may become disabled or incapacitated at any moment with no warning.  A power of attorney would enable your agents to preserve your assets and manage your financial affairs until you can get back on your feet.  
• Your spouse may lose their capacity and enter a long-term care facility.  Dementia and Alzheimer's disease can come on rapidly.  If your spouse enters a long-term care facility, you may be facing significant expenses to pay for their care.  There are ways to preserve assets and protect your own financial well-being.  A durable general power of attorney authorizing gifts between you and your spouse makes these options much easier.
• You may be out of the state or out of the country and need business transacted.  Your agent is empowered and authorized to act for your benefit at all times.

The most important thing to keep in mind is that it is very easy to wait.  However, anything can happen and you should plan ahead to provide your loved ones a way of caring for you and your assets when the unimaginable does happen.  Don't wait until it is too late.

If you need assistance preparing and executing your Power of Attorney, please do not hesitate to contact me. Our phone number is 207-743-6351 and my email address is miles@dowslawoffice.com

New Maine Estate Tax Reform Laws

Recently, the Maine Legislature passed and Governor Lepage signed a significant estate tax reform package that, among other things, will increase Maine's estate tax exemption from $1,000,000 to $2,000,000 per taxpayer as of January 1, 2013.  Married couples will be able to shelter $4,000,000 from Maine estate taxes if they plan ahead.

Under current law, family members who inherit estates valued at more than $1,000,000 are required to pay estate taxes to the State of Maine.  Individuals are able to shelter $1,000,000 with married couples able to shelter $2,000,000 from Maine estate taxes.  

In addition to the change in exemption amounts, the estate tax rate structure has been changed as of January 1, 2013, to eliminate the current “cliff tax” on estates which exceed the credit shelter amount. The rate will be 8% on amounts in excess of $2,000,000 and less than $5,000,000, 10% on amounts in excess of $5,000,000 and less than $8,000,000 and 12% on amounts in excess of $8,000,000.

Technical corrections have also been made to the Maine QTIP marital deduction for persons dying after December 31, 2010 so that Maine estate taxes can be deferred until the death of a surviving spouse.

In addition, the time for audit and assessment of estate taxes has been reduced, enabling estates to be closed and distributed sooner.

Estate planning professionals feel that these are positive developments which should improve the tax climate for Maine residents. I recommend that you check with your attorney to be sure that your estate planning is structured to enable you to benefit from these new provisions. If I can help, you can reach me at miles@dowslawoffice.com.

MaineCare Eligibility and the Myths of MaineCare

General MaineCare Information:

MaineCare is administered by the Maine Department of Human Services (DHS), a state agency.  MaineCare has different benefit packages from full benefits to prescription drug discounts, depending on age, disability, income (and assets, in most cases).

Unlike Medicare, you do not need to have the work history required for the Social Security retirement and disability programs.  MaineCare covers more services, at less cost, than Medicare.  Full benefit MaineCare provides comprehensive health coverage, with no deductibles or premiums and small co-payments. You must have low income and limited assets to be eligible. Adults, age 21 and over, with income up to 100% of the federal poverty level (after allowable deductions), who meet the assets test and other requirements, will be eligible for full benefit MaineCare. 

Becoming Eligible For MaineCare:

You must first qualify medically for MaineCare by requiring assistance with at least three “activities of daily living” or having dementia. This is assessed for DHS by a private contractor named Goold Health Systems, which does all of the DHS medical eligibility assessments.  DHS orders a medical assessment when a senior files a MaineCare application, but the individual or family may also request Goold to do an assessment earlier as part of preparing to apply for MaineCare benefits. 

In order to qualify financially for MaineCare there are several income and asset requirements that you should be aware of.  Currently, a person will qualify for MaineCare only if they have “countable” assets valued under $2,000.  However, there are a number of excluded assets (e.g. the family home, a vehicle and up to $8,000 in additional savings accounts).  While an individual receives MaineCare, his or her monthly income is paid to the nursing home except for a few deductions and a personal needs allowance of $40 per month. 

In the case of married individuals, if only one spouse is in a nursing home, but the other lives at home, then federal law and MaineCare rules allow higher countable asset limits to avoid spousal impoverishment.  This spouse is permitted to possess countable assets up to the Community Spouse Resource Allowance, a number that generally changes annually.  That number in 2010 was $109,560.

Estate Recovery.

Some MaineCare packages require that, upon the death of the patient, the estate recovery unit of MaineCare must file a claim against the patient’s estate for any money paid to care for the patient.  This claim generally arises from MaineCare benefits provided by the state for individuals at or over the age of 55.  Any probate assets that the decedent has in his/her estate is subject to this claim and must be used to satisfy that claim.  Federal law allows, but does not require, states to pursue recovery from non-probate assets (e.g. assets with joint tenants, certain trusts, beneficiary designations, etc.).  Maine’s estate recovery law provides full authority to pursue estate recovery from all probate and non-probate assets of the decedent.

MaineCare Myths and Strategies to Attain MaineCare Eligibility and Preserve Assets.

1.)  "The State (or nursing home) will take my house and other property if I go into a nursing home, so I should deed it to my children now to avoid that."

This statement is not necessarily true.  Many individuals have been told by their friends or advisers to transfer or gift their property (many times real estate) to their children or other family members to prevent it from being "taken" by the State of Maine or their nursing home.  However, there is currently a five-year look back period on any transfers or gifts (this used to be a three-year look back period).   If an individual makes a gift or transfer and applies for MaineCare at any point within the following five years, DHHS may assess a penalty as a result.  You could be seriously jeopardizing your financial security, personal health and safety by making any transfers without seeking legal advice first. 

2.)  "The only downside to transferring my property away is the 5-year lookback period and penalty."

Again, that is not necessarily true.  In fact, there may be even worse consequences in making these transfers.  Once you have transferred your property away, you have relinquished control of the property and it is now subject to the liabilities of the person(s) who you transferred it to.  This may even result in your eviction and the loss of your home.  

There are also tax considerations when gifting property to your loved ones.  Inheriting property at a “stepped-up” tax basis is much more beneficial to the recipient than receiving the “gift” basis in property.    In other words, if you gift any real estate or cash to an individual, and then that individual chooses to sell it, he or she may have to pay a capital gains tax (based upon the appreciation in value since you purchased or received the property).  On the other hand, if you leave the property to that individual upon your death, and then that individual chooses to sell it, he or she may only have to pay the capital gains tax based upon the fair market value on the date of your death.

Conclusions:

Given the substantial changes to the MaineCare rules—and particularly the expanded 5-year look back and delayed penalty start date—it has become increasingly complex to determine how to preserve assets when long term care is needed.  It is critical for you to understand the balance between the goals of protecting your assets from depletion in the event a long term care need arises against the risk to your personal well being from giving assets to any individuals.

If you have any questions regarding MaineCare eligibility and asset preservation, please do not hesitate to make an appointment to meet with me.

Welcome to the Dow's Law Office Estate Planning, Probate, Elder Law and Social Security Blog

Dow's Law Office, P.A. receives numerous inquiries on estate planning, probate, elder law and social security issues.  Because I handle these issues for the firm, the attorneys at Dow's Law Office thought it might be useful for our clients and readers for me to post a series of blogs on these issues.

The first topic will be posted shortly on MaineCare Eligibility and the Myths of MaineCare.  It will cover a number of questions and concerns that my clients often have regarding the Medicaid program for the State of Maine.  I often hear the same "rumors" regarding what will happen to your assets if you require nursing home care.  This will hopefully dispel some of those rumors and give peace of mind to those individuals.

Topics in the future will include: Wills; Trusts; Social Security Appeals; Financial Powers of Attorney; Health Care Powers of Attorney/Advanced Health Care Directives/Living Wills; Guardianship/Conservatorship; Federal and State Estate Taxes; Supplemental Needs Trusts and Probate Administration.

Please check back frequently and feel free to contact me at miles@dowslawoffice.com with any questions or further information.  I would be happy to assist you with any estate planning, elder law, probate or social security issues that confront you and/or your loved ones.