There is a Shortage of Health Care Professionals Capable of Serving the Elderly Population

There is a troubling shortage of health care professionals specializing in treating and caring for the elderly, according to an article published in Kaiser Health News. This shortage includes geriatricians, physicians who specialize in the treatment of adults age 65 and older, as well as nurses, physical therapists and psychologists who know how to care for this population.

The American Geriatrics Society estimates that the nation will need approximately 30,000 geriatricians by 2030 to serve the 30 percent of older Americans with the most complicated medical problems, according to an article in Health News from NPR. There are, however, only about 7,000 geriatricians currently practicing. To meet the projected need, the society estimates medical schools would have to train at least 1,500 geriatricians annually between now and 2030, or five times as many as last year.

Dr. Todd Goldberg, a geriatrician, recently told Kara Lofton, of West Virginia Public Broadcasting:

“With the growing elderly population across America and West Virginia, obviously we need healthcare providers...The current workforce is inadequately trained and inadequately prepared to deal with what’s been called the silver tsunami — a tidal wave of elderly people — increasing in the population in West Virginia, across America and across the world really.” 

The deficit of properly trained physicians is only expected to get worse. By 2030, one in five Americans will be eligible for Medicare, the government health insurance for those 65 and older.

Dr. Goldberg teaches at the Charleston division of West Virginia University and runs one of the state’s four geriatric fellowship programs for medical residents. Geriatric fellowships are required for any physician wanting to enter the field.

For the past three years, no physicians have entered the fellowship program at WVU-Charleston. In fact, no students have enrolled in any of the four geriatric fellowship programs in West Virginia in the past three years.

“This is not just our local program, or in West Virginia,” said Goldberg. “This is a national problem.”

The United States has 130 geriatric fellowship programs, with 383 positions. In 2016, only 192 of them were filled. 

Fraudulent Transfer Claim Against Nursing Home Resident's Sons Survives

Nursing homes and state departments of Medicaid will become more proficient in developing and implementing techniques to pursue assets in resource recovery over time.  Accordingly, planning techniques must be more, not less, sophisticated.  An excellent exampleof just how devastating simple, self-help, plans lacking in sophistication can be, is the planning of the Nyce brothers.  A U.S. district court recently ruled that a nursing home can assert its case for fraudulent transfer against the brothers, who transferred their mother's funds to themselves, because the claim survived the resident's death. Kindred Nursing Centers East, LLC v. Estate of Barbara Nyce (U.S. Dist. Ct., D. Vt., No. 5:16-cv-73, June 21, 2016).

Roger and Kinsley Nyce were agents under their mother's power of attorney. Their mother, Barbara Nyce, entered a nursing home and signed an admission agreement in which she agreed to pay the nursing home or apply for Medicaid. Ms. Nyce filed for Medicaid, but the application was denied because the Nyce brothers withdrew money from Ms. Nyce's bank accounts to pay themselves. Ms. Nyce also transferred her real estate to her sons. Ms. Nyce died owing the nursing home $137,586.92.

After Ms. Nyce died, the nursing home sued her estate as well as the Nyce brothers individually for fraudulent transfer. The estate cross-claimed against the Nyces, alleging breach of fiduciary duty and conversion. The case was removed to federal court, and the Nyces moved to dismiss the claims. The Nyces argued that the estate couldn't sue for fraudulent transfer after Ms. Nyce died and that the estate's cross claim fits into the probate exception to federal jurisdiction.

The United States District Court, District of Vermont, denied the motion to dismiss. The court held that the fraudulent transfer claim survived Ms. Nyce's death because state law does not require that there be a pending claim in order for an action to survive. The court further holds that the probate exception cannot be used to dismiss widely recognized torts, such as breach of fiduciary duty.

The brothers plan for protecting their mom's assets didn't turn out to be so Nyce. 

Americans Plan Poorly- 72% Do Not Have An Updated Last Will and Testament

A Google Consumer survey by USLegalWills.com suggests that previous surveys may have under-reported the number of Americans without a Will, by not including those who have a Will that is out-of-date. The survey reported that 63% of Americans do not have a Will, showing no real change from 2014. A statistic that was not published before now reveals that am additional 9% of Americans have a Will that is out-of-date. This means that 72% of Americans do not have an up-to-date Last Will and Testament.  The survey revealed that many people have Wills crafted before they were married or had children, meaning, essentially, they have worthless Wills.  

The survey showed a positive relationship between age and the probability of having a Will:

• 18-24: 85% do not have a Will, 10% have an out-of-date Will, and 5% have an up-to-date Will;
• 23-35: 80% do not have a Will, 6% have an out-of-date Will, and 14% have an up-to-date Will;
• 35-44: 67% do not have a Will, 8% have an out-of-date Will, and 25% have an up-to-date Will;
• 45-54: 53% do not have a Will, 11% have an out-of-date Will, and 36% have an up-to-date Will;
• 55-64: 52% do not have a Will, 8% have an out-of-date Will, and 40% have an up-to-date Will;
• 65+: 35% do not have a Will, 15% have an out-of-date Will, and 50% have an up-to-date Will.

When discounting younger adults, only 37% have a Will that reflects their current financial and personal situation.

Shockingly, there is an inverse relationship between income and a person's likelihood to have an updated Will.  Persons with larger incomes are more likely to have a Will that is no longer useful.  The income group least likely to have up-to-date Wills was in the $100,000+ annual income range.  The income group most likely to have up-to-date Wills was in the annual income range of $25,000-$99,999.

There were no significant differences when comparing across gender, region, or urban density.

Graphs of the survey data can be found here.

Source: ABCNewswire, "US SURVEY REVEALS THAT 72% OF AMERICANS DO NOT HAVE AN UP-TO-DATE WILL," last retrieved July 17, 2016.

"Comfort Clauses" Hobble an Irrevocable Trust for Medicaid Planning

When I counsel clients regarding irrevocable trusts, clients often discuss the possibility of provisions giving them more control over the trust. Many have attended seminars where they are told that a "safety valve" can permit the irrevocable trust to be no more cumbersome or limiting than a revocable trust. There is no "safety" valve. These provisions are usually for the purpose of comforting the owner that they are not really turning ownership and control of assets over to another. These "comfort clauses" can make the owner more comfortable, but they can also threaten the integrity of the plan.

There is little question that provisions permitting trust protectors, and changes to the trust resulting from changing circumstances should be considered, but an irrevocable trust should be somewhat uncomfortable.   An irrevocable trust can protect assets only if there is a marked change in the owner's relationship with the assets; the owner must no longer have ownership or control of the assets, or the trust will not work for its intended purpose.  If a client is not, at least initially, uncomfortable with an irrevocable trust used for asset protection, the client probably does not understand the trust.

A recent New Hampshire case demonstrates the risk of diluting an irrevocable trust with "comfort clauses." New Hampshire's highest court recently ruled that a Medicaid applicant's irrevocable trust is an available asset even though the applicant was not a beneficiary of the trust because the applicant retained a degree of discretionary authority over the trust assets. Petition of Estate of Thea Braiterman (N.H., No. 2015-0395, July 12, 2016).

Thea Braiterman created an irrevocable trust in 1994, naming herself and her son as trustees and her children as beneficiaries. In 2008, Ms. Braiterman resigned as trustee, but the trust authorized her to appoint additional and successor trustees, including the power to appoint herself. The trust also gave Ms. Braiterman the ability to appoint any part of the income of the trust to any of the trust beneficiaries. The trust also did not limit her ability to impose conditions on the appointment of principal to the beneficiaries.

Ms. Braiterman entered a nursing home and applied for Medicaid. The state determined that the trust, which was valued at $156,000, was an available asset and denied her benefits. After a hearing, Ms. Braiterman appealed the state's decision to court.

The New Hampshire Supreme Court affirms the denial of benefits, holding that the trust is an available asset due to the degree of her discretionary authority over the trust. According to the court, an irrevocable trust is a countable asset even when the applicant is not a beneficiary if there are any circumstances in which payment can be made to the applicant. The court rules that there was nothing in the trust "to preclude [Ms. Braiterman] from requiring her children, as a condition of their receipt of the Trust principal, to use those funds for her benefit."

The question is whether comfort clauses are worth the cost and expense of the trust failing to accomplish its intended purpose. 

The Ohio Family Trust Company Act Offers an Important Wealth Planning Tool

On June 14, 2016 Governor Kasich signed House Bill 229, which allows an Ohio family to establish its own trust company to serve as trustee for its family trusts.  The Act gives wealthy and ultra-wealthy families another way to preserve and grow their fortune for many generations.

Ohio now joins more than 15 states authorizing family trust companies (FTCs), which have become increasingly popular wealth planning tools. Before passage of the Act, an Ohio family selecting a trustee had to use either a commercial trustee, or one or more individuals.  This meant that an Ohio family that wanted to use an FTC was required to form and operate the FTC in another state.

The goal of most, if not all, families that have acquired substantial wealth is to preserve and grow their assets and transfer them to succeeding generations in a deliberate way that will avoid the proverb, “shirtsleeves to shirtsleeves in three generations.” [Note: This proverb is surprisingly common.  The Scottish version is "The father buys, the son builds, the grandchild sells, and his son begs."  The Japanese is, Rice paddies to rice paddies in three generations."  The Chinese state it plainly as, "Wealth never survives three generations."] Success is only possible if a family cultivates, across generations, positive and productive attitudes about money, responsibility, investing, planning, and risk and develops a resulting understanding of both the benefits and burdens of wealth. These values, skills, attitudes and insights sets families successful in managing wealth over generations apart from those that watch wealth dissipate over the generations.  

An FTC provides as framework for developing these values and educating generations of family members.  Of course, the wealthy and ultra-wealthy use trusts to hold their assets, to accomplish estate and tax law planning and to ultimately distribute those assets to family members and charity.  But trusts present challenges to the very wealthy.  Assets owned by a trust are often  illiquid (such as private  equity- interests in privately-owned businesses, or they are difficult to value (such as certain real estate, mineral, oil, and gas interests, life insurance, farms and ranches, loans and notes, collectibles, and intellectual property).  These assets comprise a substantial portion of the wealth of wealthy and ultra-wealthy families.  According to analysis of estate tax returns, real estate and other “unique assets” constitute roughly half of the affluent’s investment portfolios.

These assets are typically owned by the trustee of the trust, whether it is an individual trustee or a bank or trust company. These types of assets are appropriate, albeit aggressive, investments for the family. If a bank or trust company serves as trustee, the family is often in the position of having to justify keeping these investments because of their speculative nature. If an individual or series of individuals serve as trustee, they may have difficulty administering a trust involving a business or other hard-to-value assets. You can choose anFTC as trustee instead of an individual, bank or trust company.  

 An FTC allows families to establish long-term multi-generational trustee arrangements without using a bank, investment or trust company. This means greater privacy and control for the family. Often, families want to use individual trustees instead of a bank or trust company, but because of internal family dynamics and conflict, they are hesitant to name relatives. Appointing relatives, friends or business associates necessarily means divulging private information about your finances and family to others which can be uncomfortable for both you and your friends. An FTC can help alleviate the feeling that “there is no one to turn to” when selecting trustees of your various trusts.  

Typically FTC's are governed by a board of directors. One of the primary board functions is to create a discretionary distribution committee to make all distribution decisions from all trusts. Another important board function is to name an investment committee to make all investment decisions. Both the board and the committees can be populated with a combination of individual family members and independent individuals familiar with your family such as investment advisors, attorneys or  accountants.

Because the FTC is governed by a board, it brings formality and discipline to the family governance process. The Board can manage various trusts, oversee privately-held businesses, and insure and manage collectibles, mineral interests, and intellectual property rights and interests.  Formality means that meetings must be held and minutes taken.  Board members must be accountable and act in accordance with the family values, and decisions must be made regarding investments of assets in each trust and distributions of assets from those trusts. One board makes these decisions instead of a varied group of individual trustees of your family’s separate trusts.

An FTC is defined  as a corporation or limited liability company that (1) is organized in Ohio to serve only family clients, (2) is wholly owned by family clients and is exclusively controlled by one or more family members or family entities, (3) acts as a fiduciary, and (4) does not transact business with, propose to act as fiduciary for, or solicit trust business from, a person that is not a family client.  Ohio’s legislation allows for unlicensed and licensed FTCs.  

An unlicensed FTC  may provide services only to “family members,” and since the FTC will not be audited by the Department of Financial Institutions, it must abide by certain restrictive SEC rules in order to provide investment advice without registering with the SEC as a registered investment advisor. While an unlicensed FTC is not subject to banking regulations, it is required to submit an annual affidavit to the Department of Financial Institutions confirming its compliance with the statutory limitations.

One of the limiting features of an Ohio FTC is the definition of “family member.” This definition ensures that an FTC is not serving the general public (and, in fact, solicitation of trust business is explicitly prohibited by the bill). Family members are defined as a class, all of whom have a common ancestor who is not more than 10 generations removed. This so-called designated relative must be identified at the inception of the FTC and cannot be changed. Family members also include spouses, spousal equivalents, adopted children, stepchildren and foster children. The definition also includes the following related persons/entities: family charities, family estates, irrevocable trusts with family beneficiaries, key employees, trusts formed by key employees, and business entities wholly owned and operated by family members. These rules are intended to track the SEC’s definition of a “family office.”

A licensed FTC is subject to the following requirements: (1) it must have a minimum capital balance of at least $200,000, and up to $500,000, at the discretion of Ohio’s superintendent of financial institutions; (2) it may provide services to “family members,” certain non-family members and certain affiliated entities; (3) it must maintain office space and at least one part-time employee in Ohio; (4) it must hold at least two governing board meetings per year in Ohio; (5) it must perform certain administrative activities in Ohio; and (6) it must maintain a fidelity bond and directors/officers insurance, each in the amount of $1 million. A licensed FTC is also subject to supervision by Ohio’s Department of Financial Institutions and will be audited every 18 months.

For more about the Act, go here.