Aging in Place in a Community

Ocean Atlantic Sotheby’s International Realty authored an excellent article, entitled, The Many Benefits of Aging in a Community, in the Cape Gazette.  I am reprinting it in it's entirety (with some links added):  

"There’s comfort in being around people who share common interests, goals, and challenges. That comfort in a community doesn’t wane with age – it actually deepens. Whether it’s proudly talking about grandchildren or lamenting the fact that our eyes aren’t as good as they used to be, it helps to be around people who not only understand what we’re saying but actually feel the same joys and concerns as well.

That’s why many boomers are deciding to move into an active adult community. In the latest 55places National Housing Survey, they were described by one out of three seniors as an “outgoing, social community of likeminded people.”

Bill Ness, Chief Executive Officer and Founder of 55places.com, explains:

“Baby boomers are now reaching the age when moving to an active adult community is the ideal opportunity for them…Many boomers now want to downsize, experience a maintenance-free lifestyle, and pursue more social opportunities. It’s exciting that there are so many choices for baby boomers.”

There’s still a desire, however, among many seniors to “age-in-place.” According to the Senior Resource Guide, aging-in-place means:

“…that you will be remaining in your own home for the later years of your life; not moving into a smaller home, assisted living, or a retirement community etcetera.”

The challenge is, many seniors live in suburban or rural areas, and that often necessitates driving significant distances to see friends or attend other social engagements. A recent report from the Joint Center for Housing Studies of Harvard University (JCHS) titled Housing America’s Older Adults addressed this exact concern:

“The growing concentration of older households in outlying communities presents major challenges for residents and service providers alike. Single-family homes make up most of the housing stock in low-density areas, and residents typically need to be able to drive to do errands, see doctors, and socialize.”

The Kiplinger report also chimed in on this subject:

“While most seniors say they want to age in place, a much smaller percentage of them actually manage to accomplish it, studies show. Transportation is often a problem; when you can no longer drive, you can’t get to medical appointments or to other outings.”

Driving may not be a challenge right now, but think about what it may be like to drive 10, 20, or 30 years down the road.

There are also health challenges brought on by a possible lack of socialization when living at home versus a community of seniors. Sarah J. Stevenson is an author who writes about seniors. In a recent blog post for A Place for Mom, she explains:

“Social contacts tend to decrease as we age for reasons such as retirement, the death of friends and family, or lack of mobility.”

[Ms. Stevenson's referenced article, "20 Facts about Senior Isolation That Will Stun You," is a sobering article about a too-often ignored subject!]

Thankfully, research from the same article suggests if you’re spending time with others in a community, thus reducing the impact of loneliness and isolation, there’s less of a risk of developing high blood pressure, obesity, heart disease, a weakened immune system, depression, anxiety, cognitive decline, Alzheimer’s disease, and early death.

Though the familiarity of our current home may bring a feeling of warmth, comfort, and convenience, it’s important to understand that staying there may mean missing out on crucial socialization opportunities. Living with adult children, joining a retirement community, or moving to an assisted living facility can help us continue to be with people we enjoy every day.

Bottom Line

“Aging-in-place” definitely has its advantages, but it could mean getting “stuck-in-place” too. There are many health benefits derived from socialization with a community of people that shares common interests. It’s important to take the need for human interaction into consideration when making a decision about where to spend the later years in life.
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Rising Gray Divorce Rate Complicating Planning

The rise in “gray divorce,” or split-ups among couples over the age of 50, is causing an increase in family conflicts and complicating financial and estate planning, according to a survey conducted by TD Wealth, the private wealth unit of TD Bank, found that gray divorce is adding another layer of complexity to an estate planning process that now often includes blended families and ever-changing domestic structures. The results were based on responses from attorneys, trust officers, accountants, charitable giving professionals, insurance advisers, elder law specialists and wealth management professionals.

“As a result of the growing divorce rate, it’s more important than ever to proactively review and discuss estate plans with clients and their families on an ongoing basis,” said Ray Radigan, head of private trust at TD Wealth.

The rate of gray divorce which has doubled since 1990, is posing a strain on retirement finances and having an impact on a variety of issues affecting older adults. The survey found that it is affecting decisions about powers of attorney (7%), determining appropriate Social Security benefits (6%) and drafting wills (5%).

VA Initiates Family Caregiving Program

ID 89103462 © Iakov Filimonov | Dreamstime.com

Department of Veterans Affairs (VA) hospitals are undertaking a new effort focused on assuring family members and loved ones caring for veterans are included in treatment.  The practice is already implemented at some facilities, but wasn't before standard policy.

The initiative finds medical providers at a handful of VA centers across the country reaching out to veterans to determine whether they want their caregiver in the room during treatment. On paper, the caregiver would then be involved in the entire care process, including treatment planning with doctors.

The new effort, kicking off first in three VA regions, was spurred by the Elizabeth Dole Foundation, an advocacy group for the 5.5. million spouses, parents, family members and friends who take care of injured veterans at home.  Elizabeth Dole, a former Republican senator from North Carolina and secretary of labor and transportation issued a statement reading "They [caregivers] are the first line of defense against the worst of all possible outcomes — suicides.  These heroes provide care that is extensive, intimate and around the clock."

“It’s about including the caregiver as a true partner. We know the veteran in our clinics but we don’t know what’s happening the other 23 hours of the day,” Lisa Pape, deputy chief officer for patient care services at VA told Stars and Stripes. “That caregiver is experiencing that life journey. And they can fill in the pieces and paint the picture that we’re not able to see so we want to include them.”

Too many caregivers  find roadblocks while trying to accompany patients they care for during treatment or while trying to communicate with doctors. While there’s a trial period at a handful of hospitals in the northwest and Ohio, the VA hopes a full integration within two years.

The VA cites data from a 2009 National Alliance for Caregiving study that suggests one-quarter of caregivers have difficulty coordinating care with health care providers. That study did not consider exclusively VA patients.

Community Spouse's Annuity Cannot Be Recovered by State

Estate recovery is the authority of a state to recover costs for services rendered under the State Medicaid program upon the Medicaid recipient’s death.  A Massachusetts trial court has recently illustrated the limits to estate recovery, holding that the state is not entitled to recover Medicaid benefits from a community spouse’s annuity. 

Robert Hamel, a community spouse, purchased an annuity that named the state as primary beneficiary to the extent any Medicaid benefits are paid. His daughter, Laurie Dermody, was the contingent beneficiary. Mr. Hamel’s wife, Joan, was an institutional spouse who had entered a nursing home and applied for Medicaid. The state approved her application. 

When Mr. Hamel died, the state demanded payment from the annuity as reimbursement for benefits paid on Ms. Hamel’s behalf, and the annuity company paid the state. Mr. Hamel,  had never received Medicaid benefits,  but passed away while Mrs. Hamel was in the nursing facility. The Commonwealth demanded payment under the terms of the annuity for services rendered to Mrs. Hamel, even though she was neither the owner nor the annuitant on the policy.  

The daughter, Ms. Dermody, sued the state and the annuity company, claiming that she is entitled to the remainder of the annuity contract as the contingent beneficiary. Ms. Dermody argued that Mr. Hamel purchased the annuity under the “sole benefit rule,” 42 U.S.C. § 1396(c)(2)(B), which allows transfers to a spouse for the sole benefit of the spouse. The state argued that the “ to the extent benefits are paid” language in the annuity applied to benefits paid on behalf of Ms. Hamel.

The Massachusetts Superior Court granted Ms. Dermody’s motion for summary judgment. The court held that any transaction that satisfies the sole benefit rule is exempt from the transfer penalty rules, including the requirement to name the state as the primary beneficiary of an annuity. According to the court, Mr. Hamel “was not required to name [the state] as his primary beneficiary to the extent benefits were paid on [Ms. Hamel’s] behalf, and because [Mr. Hamel] did not receive [Medicaid] benefits himself, [Ms. Dermody] is the proper beneficiary of his annuity contract.”

This is a favorable decision for Massachusetts seniors, and permits seniors a strategy to preserve their assets for the next generation. The decision is, nonetheless, only a trial court decision, and does not have the weight of an appellate or supreme court decision by the state, or of a federal court decision.  It will be interesting to watch how other courts and jurisdictions treat the court's decision in Dermody v. The Executive Office of Health and Human Services (Mass. Super. Ct., No. 1781CV02342, Jan. 16, 2020).

Trust Beneficiary Who Asked to Reform Trust Provision Violated No-Contest Clause

In a fascinating case, both legally and factually, the Wyoming Supreme Court ruled that a trust beneficiary did not state a claim for legal malpractice against the attorney who drafted the trust and acted as trustee, and that the beneficiary violated the trust’s no-contest clause by asking the court to remove a requirement regarding a successor corporate trustee. Gowdy v. Cook (Wyo., No. S-19-0005, Jan. 8, 2020).

The plaintiff in Gowdy, Marian Jackson, hired an attorney, Dennis Cook, to draft a revocable trust for her. The trust named Gerald Gowdy as the primary beneficiary after she died and included a no-contest clause and provision that a corporate successor trustee have assets or insurance coverage of at least $100 million. Mr. Cook also drafted estate planning documents for Mr. Gowdy. After Ms. Jackson died, Dennis Cook became trustee and his brother, attorney Craig Cook, became trust protector. Mr. Gowdy complained that the trust was being mismanaged and that the Cooks had a conflict of interest regarding their management of the trust and representation of him.

Mr. Gowdy sued the Cooks for legal malpractice, arguing among other things, that Dennis violated professional rules of conduct by representing both him and Ms. Jackson. Mr. Gowdy asked the court to remove Dennis as trustee and require the Cooks to prepare an accounting. Mr. Gowdy also asked that the court reform the trust to remove the requirement in the trust that a corporate trustee have assets or insurance coverage of at least $100 million. 

The Cooks (the attorneys) filed a motion for summary judgment, which the trial court granted, ruling that Mr. Gowdy forfeited his right as a trust beneficiary under the no-contest clause! Mr. Gowdy appealed, arguing that the no-contest clause should only be applied to challenges "to distributions" under the trust.

The lower court ruled that Mr. Gowdy did not show evidence that he was damaged by the attorneys’ actions, so he did not prove legal malpractice. The court also held that Mr. Gowdy violated the no-contest clause. The court ruled that the no-contest clause is not limited to contests involving changes to the trust’s distribution scheme because, according to the plain language of the clause, it “applies to any court proceeding seeking to void, nullify, or set aside the trust or any of its provisions.”

The full case is worth a read, even for laypersons.  You can read the full decision here. 

Secure Act- As the Dust Settles

The SECURE Act was passed in late December, so the first few weeks of the year brought significant discussion about what it means, what it accomplishes, and how it effects estate and financial plans.  Fleming and Curti, PLC, in Tuscon, Arizona assembled the "most interesting articles, blog posts, and musings" regarding the Secure Act.  Among them was, of course, Attorney Robert B. Fleming's highlights,  but noted that many others were "giving similar overviews."  

Here are just a few:

• National Law Review;
• K&L Gates, global law firm;
• Kiplinger;
• Kitces’s blog, "(with a nifty summary chart)," and;
• Investment News magazine..

Natalie Choate, the universally recognized guru of estate planning and retirement plans provides a "deep dive" in the form of a 35-page analysis.

Fleming and Curti noted: 

"[a]s the days passed, more reading ensued. Nuances of the Act, some good and some not so good, were dissected and discussed. Because this is still new, expect this to continue in the months (and probably years) ahead." 

Among the interesting reads on specific Act-related topics:

• How law affects special needs trusts, including fixing the “kiddie tax” treatment for minor beneficiaries.
• One possibly unintended consequence: the Act limits the amount of Qualified Charitable Distributions (“QCDs”) the holder of a traditional IRA can make.
• Tucson attorney Brent Nelson explained that, if you really dissect the options, naming a trust as an IRA beneficiary became even more complicated.

In addition, to deal with the much-discussed loss of the “stretch” for inherited IRAs, different strategies are emerging:

• Consider the likely tax situation of the potential beneficiaries and adjust designated beneficiaries accordingly.
• If you have charitable intent, consider a charitable remainder trust.
• Think about converting to a Roth: Is it right for you?; how a conversion works with an IRA trust; and some traps to avoid.

Of course, there is a lot more out there. If you are interested in ongoing analysis, there’s The Slott Report, with almost daily posts on IRA news. Don’t believe everything you read, though. Especially right after a new law arrives, be mindful that 1) it takes a while for the dust to settle, 2) regulations, certain to come along, should clarify some things, and 3) every person’s situation is different. Plan to talk with your financial advisor and estate planning attorney.

This blog will post a separate article in a few days outlining how our office is revising trusts, and IRA beneficiary strategies as a result of the Secure Act.  The most obvious impact, of course, is the loss of the "stretch" IRA for the generation of an IRA owner's grandchildren.  IRA trusts still have utility, but the financial benefits are obviously less compelling.   There is not, however, an utter loss of the tax deferral for children or spouses, however, despite misinformation to the contrary.  The ten-year pay-out rule is not always the result, for good or ill.  Stay tuned!