Plan to be 100

These days, living to be 100 years-old is not unusual.  But most people (at least most of my clients) don’t necessarily want to think about what that means from a planning perspective.  As their advisor, I share these thoughts:

Hang On To Your Assets

As people age they often become more generous and more concerned about “protecting their assets.”  Both of these concerns can give rise to an impulse to transfer some of their resources to subsequent generations.  I discourage this impulse.

As people age, they also often need assistance with their care.  That care is expensive.  If you want to have choices about the quality of care you receive in your declining years, hold on to what you have.  Unless you have substantial wealth (multi-millions of dollars in reserve), anything you do now that reduces your resources is likely to have significant implications on your quality of care when you get older.

Further, the government safety net programs that currently provide older Americans with a base income (Social Security) and health care coverage (Medicare and Medicaid) are all unsustainable.  Whether we even have these programs in 20 years is purely speculative, let alone what they will pay for.  Today’s Medicaid funded nursing homes, as undesirable as they may be, will likely be castles compared to what the government will provide in the future.  Don’t rely on those benefits for your quality of life.

In the end, my advice on this point can be summarized as follows:  your resources are for your needs first.  The future is uncertain.  The kids can have what’s, if anything, left when you’re gone.

Plan for Incapacity

Although not everyone who lives to a ripe old age will become incompetent, many will.  The Alzheimer’s Association estimates that half of people aged 80 have some level of cognitive impairment.

When clients talk about estate planning, they focus first on what happens to their property when they die.  At least as important is the question of: who will make decisions for me if I am alive, but unable to make decisions for myself?

Having well-drafted power of attorneys (medical and financial) is a key to good planning.  That means that the documents not only express your wishes and sufficiently enable your agents to act, but that the people you select to make these decisions for you are the right people to handle these matters.  There is as much litigation these days over control of people and their assets while they are alive and demented, as is there is about their estates after they have passed.  Many of these cases arise because the planning that was done was inadequate or the people selected to make decisions were not well considered.

Watch Out for Greedy Kids

A related concern is that while many older people have saved and accumulated some assets, their children have not necessarily been so prudent.  The dynamic of children having an expectancy in their parents’ estates drives a lot of what we now call “financial exploitation of vulnerable adults.”  As harsh as it sounds, I encourage clients to recognize that children, especially children who, for whatever reason, have failed to establish a sound financial base, may become overly and/or inappropriately concerned that if their parents live a long life, their expectancy in the estate of those parents may be at risk.

Create estate plans where people who are financially stable and/or who have no expectation in a distribution from your estate are in control of decisions about how to spend your assets in the event you do live a long life, but lose the ability to manage those affairs on your own.

Imagine Your Children in Old Age

We all picture our children as youthful.  But one of the quirky realities of living to be 100 is that you have children who are in their 70’s when you die.  Leaving estates to 70 year-olds has implications that most people simply don’t contemplate.  Estate plans should consider this possibility.  It may mean that as one generation reaches a set age, that generation is skipped, and assets instead pass to grandchildren or great-grandchildren.  Or it may mean that the Trustee or executor of your estate has the ability to decide whether or not to make distributions to people of an advanced age based on their health and financial need.

Expect Another Relationship (or two)

Living to an advanced age may mean you outlive your spouse, perhaps by decades.  Loneliness is not required or even healthy.  This means that a subsequent important relationship may develop in your later years.

Pre-nuptial agreements are critical for second marriages, especially second marriages for people of advanced years who enter into marriages with established separate estates.  Not only because they protect against invasion in the event of divorce (which is more common in second marriages than first), but more importantly they limit the rights of a “surviving spouse” to the assets that pass at death by will or trust.  That doesn’t mean you can’t provide for a second spouse if you choose to, it just means that the decision about what and how much to provide can be defined by you in your documents and not by laws that were written without contemplating this situation.

Have A Death Wish

Finally, an edgy topic to consider:

Today, assisted suicide is illegal is most States.  However, the trend appears to be toward allowing people who get to the point where their quality of life is such that they would rather not be alive, to have the ability to opt out.

If that trend continues, assisted suicide may be broadly accepted within the next twenty years.  Accordingly, in anticipating a long life, it is probably worth thinking about (and perhaps even providing a written expression) what degrees of indignities you would choose to suffer before having your life artificially terminated.

Conclusion

The good news is that we are living longer, and that if you have reached the age of 70 or 80 in relatively good health, there is a reasonable possibility that you may see your 100th birthday.  The bad news is that living to 100 involves legal and financial considerations that are not always obvious or comfortable to think about.

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The One Year Rule

The “one year rule” is something I developed counseling clients about adult guardianships, and specifically, when, and if, to file.

It comes up in the following situations:

Client is an adult child of a demented parent.  Parent is in situation that causes child to be concerned about their safety.  Things like:

  • they are hoarding and the house is a fire trap,
  • the food in the house is rotten,
  • they aren’t taking their medications,
  • they are driving and creating a risk to themselves and others, as well as getting lost.

On the other hand, the parent is fiercely independent and bristles at the idea that they should consider moving into a safer environment or give up their driving privileges.

We discuss guardianship – that it will give the child the authority to place their parent in a more restrictive setting, but that it will involve a confrontational court process whereby the child asks the court to find that their parent is without capacity to make their own decisions.  Child waffles.  They want to protect their demented parent but don’t want to take away their dignity and force them to live out the remainder of their life unhappy, feeling imprisoned, and angry at the child who betrayed them.

I explain to the child that it is possible that if the parent is placed in a protective setting, they may adjust and become safe and happy in their new setting.  On the other hand, it is also possible that the parent will never adjust, will be completely unhappy, and will blame the child who put them there.

It’s a tough call.  I explain to the client: I am only a lawyer.  I can tell them how to create a guardianship, but the decision as to whether it is the “right thing” to do is beyond my pay grade.  I do however offer the “one year rule” which I have found helpful for other clients facing the same situations. It goes like this:

Project yourself one year from now.  Assume that you did not petition for guardianship and all of the worst scenarios you can imagine happen during this next year (your parent starts a fire in the house, walks outside in the cold and gets lost, etc.).  Will you feel (a)  I can’t live with the fact that I knew about the danger and did not take the steps to protect my parent when I had a chance; or (b) I respected my parent’s dignity and made a conscious decision to put his/her happiness above their safety, and I can live with that.

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Ladybird Deeds and Low Hanging Fruit

Nearly two years ago, Michigan began implementing a Medicaid Estate Recovery Program.  “Estate recovery” means that people who receive Medicaid assistance in the nursing home, through the MI Choice or PACE programs, face the prospect that when they die the State could come back against their estates and seek repayment for the costs paid by the State for their care.

Curiously, Michigan was the last state in the nation to implement an estate recovery program. The laws that were implemented in 2011 were actually passed in 2007.  In 2007, those laws were intentionally written too lenient.  That is, Michigan lawmakers intended to adopt an estate recovery program that would be relatively easy to circumvent.  The part of the law that made Michigan’s program particularly lenient was the part of the law that provided that estate recovery could only be imposed against “probate assets.”

The term “probate assets” refers to assets that pass through the probate administration process.  To explain what “probate assets” are, it is easiest to describe the arrangements that cause assets to pass at death through non-probate means.  These include: through trust, by beneficiary or “transfer on death” designations, by joint ownership, and by life estate.  Assets that pass at death by any of these arrangements would not be probate assets and not be subject to estate recovery under Michigan’s current estate recovery law.

Michigan’s estate recovery law also excluded people who began receiving Medicaid assistance prior to September 30, 2007 (the day the law was passed), and provided that estate recovery would only be applied to Medicaid recipients who received written notice of the program when they first applied for benefits.

Starting and Dropping Cases

Shortly after Governor Snyder took office in January 2011, efforts by the State to finally implement the estate recovery program began in earnest.  Among other things, the State contracted with a company, Health Management Systems, Inc. (“HMS”), a company which operated the estate recovery programs for several other states.  Under the terms of the contract, HMS would operate Michigan’s estate recovery program and would receive a percentage of all funds collected.

In the summer of 2011, family members of Medicaid beneficiaries began receiving notices and questionnaires following the death of the Medicaid beneficiary, which documents were designed to allow them to determine whether they had grounds to pursue collections.

Initially, HMS and the Michigan Attorney General’s office aggressively pursued collections in several matters.  Ultimately, in a proceeding in which the Medicaid beneficiary’s family was represented by Chalgian and Tripp Law Offices, a case was heard and decided in Clinton County regarding one of the central issues in many of these lawsuits.  The issue was whether the State could collect against an estate of a person who began receiving assistance at a time prior to when Michigan was giving written notice of the estate recovery program.  The Judge ruled against the State and HMS in that matter, finding that because no written notice was given at the time the Medicaid beneficiary first applied for services, the State had no right to collect.

Over time this decision caused the State to dismiss several other outstanding cases, and it appears that now all cases involving Medicaid beneficiaries who began receiving assistance prior to the fall of 2011 have been dropped or settled.

For people entering the Medicaid long term care system after approximately November 2011, written notice has been provided to them regarding estate recovery, and this important defense is no longer viable.

Ladybird Deeds

Because the only asset that people who receive Medicaid typically own when they die is their house, early on in the process (back in 2007 when the law was passed) it became clear to attorneys practicing in this area that one way to avoid probate, and thereby estate recovery, which would not run afoul of other Medicaid eligibility rules, was the use of a so-called “ladybird deed”.

Low Hanging Fruit and the Future

So what we have today is a lenient estate recovery program that can be circumvented in most cases through appropriate planning, which often includes a “ladybird deed” – at least for single people on Medicaid.  While some at the State and HMS may be frustrated that they aren’t collecting what they hoped to collect through this program, the fact is that the law was written to allow for people to avoid the reach of estate recovery and that is what is happening.  As a result, to the extent the State is collecting anything through this program, it is from people who have no heirs and/or who failed to plan appropriately (i.e., the “low hanging fruit”).

Of course, there are some in the State and HMS who would like to change the law so that Michigan no longer has a lenient program and so that arrangements, like ladybird deeds, would not allow the Medicaid beneficiary to avoid estate recovery.  There seems to be a reasonable likelihood that such a law could be passed in the future.  Accordingly, people who have family members on Medicaid should pay careful attention to any changes in these laws and should not assume that a ladybird deed will necessarily protect their home if such changes occur.

The Fear Factor

The biggest issue with current estate recovery program is not that people who receive Medicaid assistance are required to repay the State for their care costs, because, as discussed above, that isn’t really happening.  Rather, the big concern about estate recovery is that it is  scary and confusing.  As a result, people who do not need to be in nursing homes, and who haven’t applied for Medicaid, are doing foolish things with their assets believing that if they don’t take these steps, they may lose their homes.

Making matters worse are the ever-present senior seminar scam programs which have jumped on the “estate recovery” development as a new opportunity to scare seniors into buying legal and financial products they don’t need and which, in most cases, are contrary to their best interests (most commonly annuities, and “living” or irrevocable trusts).  The world of long term care, Medicaid, and now even Veterans benefits, has become a hotbed for these bad actors.

As a result, the real damage of estate recovery is not so much the program itself, but the fear it creates in the aging community, and particularly the fact that it makes senior citizens vulnerable to making very bad decisions about their resources. Further, ladybird deeds themselves are at best an imperfect mechanism for most traditional estate planning situations, and should usually not be created where someone is not already in a nursing home or on the MI Choice or PACE programs.

In conclusion, only people who are, or who have a loved one who is, seeking Medicaid assistance in a nursing home, or through MI Choice or PACE, should worry about the Michigan estate recovery program.  If in fact they do need Medicaid assistance through these programs, there are standard approaches that can protect their assets under current law.  Seniors should avoid falling prey to “educational” sales seminars that seek to create fear about the topic. When advice is needed they should consult with an attorney who specializes in this practice area.

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Time To Make Your Death Wish?

Current law provides that we have a constitutional right not to be kept alive if we don’t want to be.  That is, if we are being kept alive artificially, we can have the plug pulled, the feeding tube removed, or our pacemaker turned off, as they case may be.  And, if we are unable to make that decision for ourselves, an agent we appointed while we were competent can make that decision for us.  This is the basis for those legal documents we create now: patient advocate designations (aka durable medical power of attorney) and in some states: a living will.

But that is a different issue: if I am alive and my body is going to keep going, but I don’t want to live anymore, can I have a doctor assist me to die?

Here’s what I see:  The number of people who I talk to who think the time for legalizing assisted suicide has gone is up – way up.  Already legalized in three states (Washington, Oregon and Montana), the genie is out of the bottle – and like legalized marijuana and gay marriages, I figure it’s just a matter of time before it becomes accepted everywhere.

So, for people planning now, and anticipating this coming change, my question is: Should you include a written expression about the circumstances under which you would want your life terminated – a “death wish” as it were?

Put another way, what indignities would you be willing to suffer before you would want to die?  Some common triggers might be:

•  When I don’t know who my children are.

•  When I don’t know who I am.

•  When someone else has to clean me (ie, wipe my butt).

•  When I have to be fed by someone else (because of cognitive impairments, not physical).

•  When I have no meaningful human connections (ie, when no one cares about me or visits me).

• If I am going to die anyhow, that is, the decision has been made to pull my feeding tube, I would rather be assisted along rather than starved to death.

I think a lot of people might decide today that if they met one or more of these standards that they would rather be put to death in a dignified manner than continue to live until their body shuts down “naturally.”  Of course, for some people that is not true.  There are many people who, for instance, don’t particularly care for human connections.  So the drafting of these “death wishes” would have to be tailored to the individual.

I understand this is a sensitive issue.  It involves valuing life.  I understand it could become an avenue to financially driven decisions by insurance companies and greedy kids. But if you have worked with families, as I have, where loving people agree that the subject of our discussion has no quality of life and would never have wanted to live this way, you might appreciate that there must be a way to balance those concerns to allow a self-directed decision on this topic to be enforced in appropriate situations.

Just a thought.

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Attorney-Client Relationship Part III: Client Control

Litigation is a lot of things: expensive, slow, volatile and unpredictable (FYI, some of the things that from the lawyer’s perspective make it fun).  Clients would love to know from the beginning, What will this cost?, How long will it take?, and most of all: How will it come out? At that first meeting, the lawyer can’t answer any of these questions.  As the case progresses, the lawyer should be able to provide more definition –  but their answers are never without exceptions and disclaimers.  Accordingly, in litigation matters, the relationship between the client and lawyer is always a challenge.

From the lawyer’s perspective what really happens in that first meeting is that the lawyer begins to establish the ground rules of client control and client expectations.  These are the two dynamics that will ultimately determine how the case is resolved, and whether the client is satisfied with that result.

Client control is key.  It provides the lawyer with the ability to negotiate settlement discussions – not just settlement of the entire case, but resolution of the numerous interim issues that arise while the case proceeds.

Lawyers who lack client control end up going to court to fight over interim issues that should not require court involvement.  But because they can’t convince their client that this side issue isn’t worth going to court over, they end up in front of the court arguing about things that make them look unreasonable.  This doesn’t just drive up everyone’s costs, but more critically, it begins to paint a picture in the mind of the judge about which side of the case is unreasonable – and that is huge.  Judge’s don’t like unreasonable clients.

Successful lawyers don’t let themselves get suckered into these types of sideshows.  They maintain  the trust of their clients, and accordingly, the client lets the lawyer make decisions about case strategies.

Closely related to the concept of client control is the concept of client expectations.  If a lawyer promises the moon, the only two possible results in the client’s mind: I got what I deserved, or my lawyer screwed up.  Lawyers who ineffectively manage client expectations rarely have happy clients.

Successful lawyers don’t overpromise.  I always look at cases from the perspective of the other side.  What would I argue if I represented that client?  Where are the weaknesses in my own case?  With that perspective, as the case unfolds, the successful lawyer helps the client understand the risks of their case, and what might be a reasonable resolution – which is rarely (if ever) that they are going to get everything they think they deserve.

Managing clients and their expectations is a big part of handling a case.  The relationship with the client should never be allowed to get too hot, or too cold.  As the case develops, as evidence is revealed, and when the client’s expectations start to stray from reasonableness, clear and direct conversations occur to rein them back in.  These periodic adjustments are central to the ability of the client to maintain trust in the attorney, and to be prepared for a result which, although it may not be all they had hoped for, they can understand and accept.

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The Attorney-Client Relationship Part II: Arc of the Love Affair

We love our lawyers the day we hire them.  They seem smart and focused (or we would not have signed up).  But as time goes on, doubts and concerns slip in.  They don’t return our calls as fast as we would like, they misspell a name, in talking to them they don’t recall an important fact that we previously advised them about.

So here’s the deal:

If your lawyer is good, they have a lot of other things going on, a lot of other clients, and they are not necessarily preparing everything that goes out (they have staff/associates for that).  This isn’t what you should be focused on.  From the lawyer’s perspective, what matters is that they are staying on top of the case, and that you and they will be ready to peak when the critical events occur (mediation, trial, etc).

From the lawyer’s perspective, maintaining a comfortable attorney-client relationship is part of the challenge of handling the case.  For the lawyer, this is about maintaining an even keel.  Part of this has to do with client expectations (discussed below), but part of it is just staying in touch enough so that the client doesn’t feel (and in fact, isn’t being) neglected during those slow periods.

Cases go on and on.  Most major litigation matters continue for a least a year, often two or three years.   This means that there are times when the lawyer will be focussed on other matters s/he is handling.

At the end, the relationship should come together again.  When the case is mediated and/or tried, the lawyer should be everything you expect of them: focused, knowledgeable and confident.  They should be able to explain what is going on and why they are making the decisions that are being made.  They should have a well-conceived plan/a strategy.

And hopefully the result is consistent with your expectations, which is not necessarily everything you want, but at least close to what your attorney told you to expect.

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Attorney-Client Relationship Part I: Reputation

Among lawyers, reputation is a big deal.  At least initially, clients don’t always understand or appreciate how important their attorney’s reputation (and the reputation of the opposing party’s attorney) is in a case.

Attorneys who have good (or even exceptional) reputations – that is, they are reputed to know (or to be experts in) the area of the law they are practicing in, are at an advantage when it comes to litigation.  This is because their reputation influences both the judge and the opposing counsel.

When an attorney with a reputation for being skilled files an appearance in a case, the opposing counsel knows:  This person knows what they are doing and I won’t be able to bully them or trick them.  I better have my act together or I could end up looking stupid in front of my client and the judge.

When an attorney with a reputation for being skilled enters a courtroom the judge knows: This is someone who knows what they are doing.  That means I can rely on their research and their representations about the law and facts. I can trust that they know the likely outcome of the case and will work to settle the case in a reasonable manner.  The judge also knows that a skilled attorney will always be thinking about the next phase – the appeal – and the decision the judge makes will be made with more caution when they think an appeal could be pending.

There are a lot of lawyers out there.  Some would say (and I would agree) too many.  Because of this, clients can always find someone to handle their cases less expensively.  Lawyers who have no focus to their practice or who do sloppy work, have little to offer to the client who simply wants something done cheaply – except: I will do it cheaper than the next guy/gal.

Lawyers with a reputation can say: you can get it done cheaper somewhere else, but if it is results that you want, you might want to consider paying more to hire me.

Lawyers who have established reputations understand the added value that their reputation provides, and jealously guard that reputation.  These lawyers won’t compromise their reputation for a client who wants them to advocate unreasonable positions.  Doing so is just going to hurt their reputation, which will negatively influence them in this case, and in cases to come.

Lawyers without reputations to protect will allow themselves to be controlled by clients with unreasonable objectives, because they can’t afford to lose the client.  This of course just erodes their reputation in the eyes of the judge and opposing counsel (and, in case you were wondering, attorneys talk about this kind of thing among themselves).

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The New Terror Clause Case

An unpublished Court of Appeals opinion out of Kent County offers some interesting issues regarding the scope of no contest clauses.

Decedent had three children, one of whom was developmentally disabled.  Decedent was that child’s plenary guardian.  Daughter A was the standby plenary guardian.

Decedent left a will that said that Daughter A would receive a 1/3 interest in the residue of the estate, but that her share would be forfeited if she acted as guardian for disabled sibling.

After Decedent’s death, Daughter A took steps to obtain her appointment as guardian over her disabled sibling, obtaining the appointment based on her position as standby guardian.

Personal Representative petitioned the Court to affirm the enforcement of the terror clause, and prevailed on summary disposition, which decision was upheld by the Court of Appeals in Estate of Rudy Jauw, September 13, 2012.

It is notable that in this case the terror clause was used to cause a beneficiary to lose her share of the estate for something other than challenging the validity of the instrument.  Rather, the penalty was imposed for behavior unrelated to the validity of the document itself.  Planners may want to consider other applications for this type of expanded terror clause.

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The King Lear Complex

King Lear is a fictional king of ancient times.  William Shakespeare wrote one of his darkest plays about this character.

The King was a good man.  He was getting up in years.  He had three daughters (same as me).

He decided that he wanted to retire.  The plan was to split his kingdom into three equal shares, and for him to travel from one castle to another (staying with his daughters).  He would keep a handful of his favorite knights with him.

When he explained his plan to his daughters, his youngest and best child reacted with astonishment and disgust.  This annoyed the King who abruptly cut her out of his plan and divided the kingdom between the two other children.

Predictably, the two greedy daughters soon tired of the King and his rowdy knights, and he was put out in the forest with nothing.  His pride was crushed.  Ultimately the good daughter came back and saved the kingdom, but died in the process, which in turn caused the King to die of heartbreak. (Sorry if I ruined the ending.)

In my practice I see King Lear wannabes all the time.  Older clients who think it might be a good idea to re-title all their assets into the names of their children.  They have all sorts of reasons for believing this makes sense.  I tell them about King Lear and some of the lessons his story offers for today’s elders.  These include:

Children who would endorse such a plan may not be the kind of kids you can trust.

Understandings that are not legally enforceable predictably go south.

What you have accumulated is what you need to provide for your own quality of life as you age.  Give it away at your own peril.

Sometimes the advice takes, and sometimes it doesn’t.  Sometimes I am hired by the good child who was cut out because they stood in the way of their parent’s and their folly.

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Advantage Aged

As I get older I have:

… more fat and less hair. I don’t really care about the hair, but the fat is annoying.  Advantage youth.

… fewer unexpected mind-blowing really fun experiences, more moments where I am completely content with who I am and where I am.  Wash.

… less material desires.  Advantage aged.

… more patience.  Advantage aged.

… less stress and more peace.  Advantage aged.

All in all, older is better.

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