Estate Planning for Your Online Assets

There is no question that our real lives have more virtual reality than ever before, and executors and successor trustees are increasingly tasked with unraveling the legal disposition of online assets, accounts, and resources.   Dispensing with tedious recitation of examples from recent articles regarding the legal and practical impediments to identifying and recovering these assets, for example or retrieve email, facebook accounts, online assets such as blogs, and the like, which are appearing more frequently each day, I posit a simple question: Is there any doubt that identifying, cataloging  and planning for the disposition of your online accounts and virtual assets is preferable to simply leaving them to whichever family member steps forward to handle your estate to figure out?

To those who appreciate the importance of this type of planning, I commend the excellent infographic, Step By Step Expert Guide To Protect Yourself Online Before You Die. With advice from Evan Carroll, author of one of my favorite websites, The Digital Beyond,  and Nate Lustig,  of  SecureSafe, the infographic defines digital assets, presents the various digital estate planning services, and discusses how to leave a digital legacy. Check it out here.

Ohio Spends Less than Budgeted for Medicaid

Ohio has spent fewer dollars on Medicaid than expected under its current two-year budget.

The following is from an article published in the Alliance Review: 

State officials have been working to rein in the cost of the $19.8 billion health program for low-income people. The slowdown in spending comes as Gov. John Kasich prepares to unveil his next two-year spending blueprint in February. 

In the budget year that ended in June, state figures show that Ohio spent $590 million less in state and federal dollars than it had anticipated. 

Medicaid spending for the current fiscal year is also tracking below projections. The state has spent about $6.2 billion on Medicaid since July. That's about $219 million -- or 3 percent less -- than it is expected to spend through November, according to the latest data available. 

Ohio Medicaid Director John McCarthy credited the slowdown to changes in provider reimbursements, more conservative budgeting and better contract negotiations. He also said a new system for processing claims has meant that the state is better at rejecting claims that should have been paid by Medicare or those that don't fit Medicaid rules.

Still, he noted that while the savings seem significant, they're still just a fraction of the federal-state program's cost.

Medicaid spending accounts for roughly a third of all funds Ohio gets from state and federal dollars, fees and other sources.

Homeless Heir to $300 Million Clark Copper Fortune Found Dead

Huguette Clark (right) c. 1917 (age approximately 11)
 with her sister Andrée (left)
 and her father William A. Clark (center)

According to Bill Dedman, an Investigative Reporter for NBC News, a relative of the reclusive heiress Huguette Clark, who stood to inherit $19 million of her $300 million fortune had he stepped forward to make a claim, has been found dead under a Union Pacific Railroad overpass in Wyoming.

"Children sledding found the body of Timothy Henry Gray, 60, Thursday afternoon in Evanston, a small mining town in southwestern Wyoming near the Utah border. The coroner said it appeared he died of hypothermia. The low temperature that day was 10 degrees, and had hit zero in the previous week. [T]here was no evidence of foul play, and Gray was wearing a light jacket. Gray's siblings said they hadn't heard from him since their mother's funeral in 1990, when he disappeared without a word.  It wasn't clear whether Gray was living under the overpass, where transients have been known to camp.

Tim Gray was an adopted great-grandson of former U.S. Sen. William Andrews Clark, known as one of the copper kings of Montana, a banker, a builder of railroads and the founder of Las Vegas. The senator's youngest daughter, Huguette Clark, was a recluse who died in 2011 in New York City at age 104, after living in hospitals for 20 years while her palatial homes sat unused. Gray was her half great-nephew."

Huquette Clark left no part of her conservatively estimated three hundred million dollar estate to her family, leaving it instead to her nurse, goddaughter, attorney, accountant, hospital, doctor, favorite museum and various employees, as well as  to an art foundation to be set up at her oceanfront estate in Santa Barbara, Calif.  None of her relatives had seen Clark in at least 40 years, though some had been in touch with her through holiday cards and occasional phone calls.  Nineteen of Clark's relatives contested her will in a New York court.  The case could go before a jury in 2013, though settlement talks have begun.

To read the whole article, click here.  To read more about Huguette Clark, click here.

Immortality Aided By Good Viral Email

Viral Photograph of Mr. Allen Swift alongside his 1928 Rolls-Royce

Picadilly Phantom-1 Roadster?  

Mr. Allen Swift of Springfield Massachusetts has attained a measure of immortality. He received a beautiful brand new two-tone green 1928 Rolls-Royce Picadilly Phantom-1  Roadster from his father as a graduation gift in 1928. He would go on to drive it for nearly eight decades until shortly before his death in October, 2005.  He was 102 years old.  

According to the Hartford Courant,  Mr. Swift "drove arguably the most distinctive car in town" for eight decades- a  world record for the longest period of  ownership of a new automobile.  In fact, he may be a Guinness recognized record holder. 

Upon his death, Mr. Swift donated the vehicle as part of a one million dollar donation to the Connecticut Valley Historical Museum in Springfield, Connecticut for the purpose of a establishing a new industrial heritage museum. The donation permitted the museum to establish a separate museum dedicated to industrial heritage.  According to the Hartford Courant: 

[t]he car [went] on display in Springfield in a new industrial heritage museum made possible in part by a $1 million bequest from Swift.

Mr. Swift's car will be one of the centerpieces of the collection. It still works and runs very, very quiet," said Guy McLain, director of the Connecticut Valley Historical Museum in Springfield. "His initial gift gave us the seed money to make this new museum a reality. Having that $1 million enabled us to raise the $8 million for this project."

Swift, general manager of his family's precious metals business in Hartford, drove the car carefully around town and sometimes piloted it in the town's holiday parades. Some of the town's older residents remember seeing the elegant car on the road, said Ned Skinnon, program director with the West Hartford Senior Center.

No matter where it went, the car stood out, like an emerald parrot in a flock of starlings. His model was a Piccadilly Roadster, chassis number S273FP, built in the plant that Rolls-Royce had in Springfield from 1921 through 1931 for its American market.

R.D. Shaffner, director of the Rolls-Royce Foundation in Mechanicsburg, Pa., knew Swift for 30 years, had the chance to drive his car and was pleased that Swift loaned his car to the foundation in 2003 for display when the foundation opened a new building.

He actually received this car as a graduation gift from his father in 1928 and, of course, kept it all his life - and as such earned the respect and admiration of many people - and holds the record [in Guinness] as the longest standing original owner, and I believe last surviving original owner of a Springfield car," Shaffner wrote in an e-mail response to a query about the vehicle.

Henry Hensley, chairman of the Phantom I Society, said that the Piccadilly is one of the most sought-after bodies on the early Rolls-Royce automobiles. Swift's car is one of about 2,500 Phantoms made in Springfield. About 60 percent of those made still exist, most of them in private collections.

I did not find any mention of Mr. Swift, or his bequest on the museum's website.  I also did not see the Rolls-Royce listed as an exhibit of the museum. Whether some have forgotten Mr. Swift, he has managed to attain some level of immortality.   Mr. Swift is made even more famous as a result of a viral email, often forwarded with the subject, “Oldest running car and driver in history...”  There are various versions of the email, some of which make additional wild claims, such as that the mileage on the vehicle exceeded one million miles.  The vehicle apparently had only “170,000 miles on it and an engine that still purrs like a sewing machine.”  But Snopes.com does have a thread for the email under its topic "Fauxtography," which may suggest the picture is not accurate.  Regardless, Mr. Swift is immortalized in the virtual world as the email travels from inbox to inbox. 

A good friend and client recently forwarded the email to me, but I had seen it previously several times over the past few years.  So I researched the real story, which I hope you have enjoyed. 

Nursing Home May Sue Resident's Daughter for Breach of Contract

A Connecticut trial court has ruled that a nursing home may sue a resident's daughter for breach of contract because she agreed to use her mother's assets or Medicaid to pay for the nursing home, even though she did not sign as a personal guarantor. Cook Willow Health Center v. Andrien (Conn. Super. Ct., No. CV116008672, Sept. 28, 2012).

Judy Andrien admitted her mother to a nursing home and signed an admissions agreement as her mother's responsible party. She agreed to take steps to ensure the nursing home was paid out of her mother's assets or by Medicaid.

The nursing home sued Ms. Andrien for breach of contract, alleging that she did not use her mother's assets to pay the nursing home or apply for Medicaid when the assets were near depletion. Ms. Andrien filed two special defenses. She argued that the admissions agreement was void and unenforceable because it made Ms. Andrien personally liable for the cost of her mother's care. She also argued the agreement was a surety contract, so the nursing home was required to meet certain preconditions before enforcing the contract. The nursing home moved to strike Ms. Andrien's two defenses.

The Connecticut Superior Court granted the nursing home's motion to strike the special defenses. The court rules that the contract does not contain a personal guarantee, so it did not violate federal law prohibiting nursing homes from requiring a third-party guarantee as a condition of admission. The court also ruled that the contract is not a surety contract, i.e., a guarantee of one party for the obligation of another to a third party.  According to the court, the nursing home's "complaint is not based upon a breach of a promise to answer for the debt of another, but rather a breach of contract."  The contract, according to the court, "does set forth a scenario in which the responsible party would be liable for any costs of care and services for the resident incurred should the resident make a transfer rendering him/her ineligible for Medicaid payment or assistance."  The Court wrote that the Complaint alleged no facts that would indicate such a scenario, but nonetheless, set aside all of Ms. Andrien's affirmative defenses, and permitted the action to proceed.   

For the full text of this decision, click here.

Gifting to Avoid Nursing Home Costs- Too Many Planning Intentional Impoverishment

Health care costs continue to be a top retirement concern, yet few Americans know about their options or the potential dangers of improper planning. More importantly, the most common "simple" plans compromise, unnecessarily, important goals and objectives due to misconceptions. 

Gifting Assets May Risk Home Health Care 

For example, according to a recent survey of financial advisers by Nationwide Financial, 42% of financial advisers say their clients are currently considering giving away their assets to their children so they can qualify for Medicaid to avoid paying for a nursing home.  There are obviously some circumstances making such gifting appropriate.  But, many Americans do not understand the adverse consequences of relying on Medicaid to pay for their long-term care costs.  

Perhaps the most important of these is that the senior abandons control over their long term care and short term health care planning.  Such a result flies in the face of one of the most important objectives most senior's claim to have, and that is to maintain control of their care.  In fact, according to the  Nationwide Financial survey, maintaining control is the most important aspect of retirement health care planning to most seniors.

Many seniors also underestimate the risks of gifting.  Knowing their children to be responsible and loving, they assume the assets will remain as a safety net for their later needs.  But, what if a child is unfortunate, and suffers economic catastrophe through no fault of their own?  Gifting subjects assets to numerous other risks, such as the claims of creditors of children, loss through divorce or disability, and additional long-term care risks.  Moreover, most seniors have no idea what happens if their children predecease them.  Simply, gifting means, for all intents and purposes, that the senior may never see those assets again, regardless of need. 

Asset Protection Planning- "Keep it Secret; Keep it Safe."

A stark warning to those engaged in asset protection planning comes from Jay Adkisson,  a Partner in the Newport Beach, California, law firm of Riser Adkisson LLP, who practices in the areas of creditor-debtor law, in an excellent article for Forbes Magazine, entitled, "Kilker - Asset Protection Intent In Making Transfers To Protect Against Future Creditors Means Disaster When Creditor Appears." Simply, as the wizard Gandalf instructed the Hobbit Frodo, in Lord of the Rings: "Keep it secret; keep it safe."  Identifying asset protection planning as a purpose of your estate plan is, perhaps, the first step to losing the protection.  

Attorney Adkisson writes:  

"Taking this opinion at face value, the lesson here is simple and commonsensical but is one that is often ignored by planners: Asset protection planning should rarely be undertaken in its own name or for that stated purpose.

If the Engineer here had not admitted that he put this structure in place for asset protection purposes, and to defeat the rights of future claimants who might sue him over soil studies gone bad, then the result might have been very different on this point.

There is rarely a need to announce to the world that something was done for asset protection purposes, to call something an “asset protection trust”, to send an “asset protection” engagement letter, or any of the like. Yet, bad planners and do-it-yourselfers do it every day.

To the contrary, asset protection planning should almost exclusively be undertaken for some other purpose than creditor planning.  Do it for estate or succession planning reasons, do it for general business or financial planning reasons, do it for health reasons, do it because you’re trying to look out for an heir, but don’t state that you’re doing it for creditor reasons. (emphasis added).

There is great risk in boldly and publicly identifying an estate, business or financial plan as an asset protection plan.  Yet the market is replete with estate plans employing documents entitled "Asset Protection Trusts," or which have other, often imposing, titles such as fortress Trusts," or "The Castle Plan."  Perhaps my personal favorite is the "Complete Asset Protection Plan," which I reviewed for a client that had transferred only the personal home and a single bank account to the dubious plan, thereby rendering the supposed benefits of the plan far less than "complete." 

Proper asset protection is not easily accomplished, and it is easily lost.  If you want to incorporate asset protection planning in your estate, business, or financial plan, you are best advised to seek, and maintain a relationship with an attorney.  From conception to development, and through implementation of the plan, care must taken to ensure that the plan is as carefully protected as are the assets.  Finally, proper use of the plan as a shield requires counsel regarding presentation of the plan.

"Keep it secret; keep it safe."  It sounds simple, but it isn't.  If your assets are important enough for you to want a plan to protect them from risk of loss, they are important enough to ensure that the plan is properly drafted and implemented. 

Most Men Unaware that Early Retirement Adversely Impacts Their Spouse's Social Security Benefits

According to a recent study released by the Center for Retirement Research at Boston College (http://crr.bc.edu), most men begin drawing on their Social Security retirement benefits at age 62 or 63, rather than waiting until their full retirement age or even age 70.  The early receipt of benefits means that both the husbands and their wives will receive less each month than they would if they waited.

According to the study, written by Steven A. Sass, Wei Sun and Anthony Webb, this early election has no effect on average on the men.  On average, though men will receive a smaller benefit check each month, this will be offset by the checks they receive between the ages of 62 and normal retirement age.  Because this is based, on average, there are obviously exceptions.  For example, men who are in ill health would do better to take early retirement and men who expect to live a long time should postpone their receipt of benefits for as long as possible.

The same statements also hold true for single women, meaning on average they do about as well in terms of lifetime Social Security benefits no matter whether they start earlier and get more smaller checks or start later and receive fewer larger checks.

But for today's seniors, most wives' benefits are based on their husband's work record.  If husbands choose to take benefits before the full retirement age, their wives are penalized twice -- first while their husband's are alive when they get a reduced benefit, usually half of the husband's benefit, and second when the husband dies (which often happens due to women's greater life expectancy) when they receive their husband's benefit rather than their own.

If these decisions were based upon informed appreciation of the adverse impact upon the spouse's benefits, perhaps we could dismiss them as simple life choices. The researchers conclude, however, that they are not, that instead most retiring men simply don't understand the implications of claiming benefits early.  More education may change their behavior, although the researchers note that "financial education has not been especially effective in changing behavior." As an alternative, they suggest a number of potential policy changes, such as requiring spouses to sign off on the decision to claim Social Security before the beneficiary's full retirement age.

Interestingly, while the Social Security Administration's Web site (www.ssa.gov) has a number of excellent calculators to assist beneficiaries in deciding when to retire, none appear to calculate spousal benefits.  Based on the Boston College report, adding such calculators would be a good first step.

To read the report, go to:  http://bit.ly/10PhPBr.

Avoiding the Nursing Home - New Technologies Help Keep Seniors Safe and Healthy at Home

eNeighbor® Remote Monitoring System by  Healthsence®

A recent New York Times article explains how new technology is being used to help ensure the safety and health of elderly individuals who live at home. One such technology, called  “eNeighbor,” a system of sensors that are placed all over the home, is used to monitor the movements of elderly citizens and alert emergency responders if any non-typical movements occur, or if usual movements do not occur. The article relates the story of Bertha Branch to illustrate how eNeighbor works. Bertha is 78 and lives alone in her home. One morning, a wireless sensor under her bed detected that she had gotten out of bed, but other sensors in the house registered that she had not been to any of the other rooms in the house, including the bathroom attached to her bedroom. After it became clear that either Bertha was standing in the same spot when she normally would have already visited her bathroom or had fallen, eNeighbor system made phone calls to neighbors, family, and finally to 911. When firefighters arrived, Bertha had been on the floor, where she had fallen and found herself unable to get up, for less than an hour.

Other systems are used to remind and assist people in checking their vitals each day. The same machine can assess and record your weight, blood pressure, temperature, and send all of the information to a monitoring program. If your vitals show evidence of a risk to your health, a nurse from the monitoring program will call you and ask that you see your doctor right away. These, and other technologies also remind you to take medications, and ask questions that prompt new instructions. Machines may, for example ask questions like: “Are you experiencing more difficulty breathing today?” or “Are your ankles more swollen than usual?”

Of course, technologies like eNeighbor are new and unproven. They are also often expensive and are not yet covered by government benefits or private insurance plans. Doctors are also not yet trained to treat patients using remote data, and currently have no mechanism to be paid for doing so. And like all technologies, the devices — including motion sensors, pill compliance detectors and wireless devices that transmit data on blood pressure, weight, oxygen and glucose levels — may have unintended consequences, substituting electronic measurements for face-to-face contact with doctors, nurses and family members. 

But as similar technologies become more mainstreamed and dependable, they could be used to help ensure a higher quality of life for elderly citizens who live at home, and could allow them to stay at home much longer than they would have been able to before such technology existed.

Real the full New York Times article.

Reverse Mortgages Are Causing Some Homeowners to Lose Their Homes

A reverse mortgage can be a great tool in the right circumstances, but if you aren't careful you could end up losing your home. A recent front-page article in the New York Times lays out some of the problems homeowners are encountering with these mortgages.

You must be 62 years or older to qualify for a reverse mortgage, which allows you to use the equity in your home to take out a loan. The loan does not have to be paid back until you sell the house or die, and the loan funds can be used for anything, including providing money for retirement or to paying for nursing home expenses.

It all sounds like a no-lose proposition, but there are downsides. For example, these loans carry large insurance and origination costs, they may affect eligibility for government benefits like Medicaid, and they are not ideal for parents whose major objective is to safeguard an inheritance for their children. There also have been complaints about aggressive marketing techniques.

In addition to these drawbacks, the Times points out two more important potential pitfalls:

• Pay attention to whose name is on the mortgage. When purchasing a reverse mortgage, be sure to put both spouses' names on the mortgage. If only one spouse's name is on the mortgage and that spouse dies, the surviving spouse will be required to either pay for the house outright or move out. This might happen if only one spouse is over 62 when the mortgage is signed. According to the Times, some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way.

• Watch out for a lump-sum loan. Usually reverse mortgages come in a line of credit with a variable interest rate. This allows homeowners to take money only when they need it. According to the Times,some brokers have been pushing lump-sum loans because the brokers earn higher fees. The problem is these loans have a fixed interest rate. The interest charges are added each month, so that over time the total amount owed can surpass the amount of the original loan.

The Consumer Financial Protection Bureau, which was created in the wake of the mortgage crisis in part to scrutinize consumer mortgages, is working on new rules to better regulate reverse mortgage lenders and provide disclosures to seniors.

To read the New York Times article about reverse mortgages, click here