Family Conflict is Biggest Threat to Your Estate Plan

For the second consecutive year, family conflict is considered by professionals as the leading threat to estate planning. The three greatest threats to estate planning are family conflict, market volatility, and tax reform.  These conclusions represent the consensus of estate planning experts, at least according to a recent survey conducted by TD Wealth.

The survey included 105 respondents who attended the 53rd Annual Heckerling Institute on Estate Planning in January, including attorneys, trust officers, accountants, charitable giving professionals, insurance advisers, elder law specialists, wealth management professionals, educators and nonprofit advisers.  Nearly half of these estate planning experts identified family conflict as the biggest threat to estate planning in 2019. 

The survey explored the various causes of family conflict when engaging in estate planning, citing the designation of beneficiaries as the most common cause of conflict. Other leading factors included not communicating the plan with family members and working with blended families.

“Family dynamics have always played a critical role in estate planning. As we start to see more blended families, we expect these conversations to become even more prevalent and challenging,” said Ray Radigan, head of private trust at TD Wealth . “Estate planning comes with the responsibility of motivating families to communicate through difficult times, which requires regular dialogue and complete transparency. To minimize risk, we encourage families to invite everyone to the table to participate in open and honest conversation about their shared goals and objectives.”

Fortunately for Ohio residents, recent law changes make arbitration clauses in trusts more powerful, discouraging expensive and protracted contests.  Moreover, when combined with in terrorem ("no contest") clauses, a trust can be a powerful tool to eliminate the cost and expense of what may be unavoidable family conflict and disagreement.     

Market volatility was also identified  as a threat by respondents in 2019, with nearly a quarter of respondents identifying volatile markets as the biggest threat to estate planning this year. This was up from 12% in 2018.  According to Radigan, this is not surprising because many clients view lifetime gifting as an important component to their estate plan.

“These gifts, however, should only be made if enough assets are retained to provide support during retirement years,” Radigan said in a statement. “While market fluctuations are certainly worth watching and can cause concern for potential gift givers, we encourage our clients to keep a long-term view when investing and remember that short-term market movements are no match for a robust estate plan and a well-balanced portfolio.”

The sweeping tax overhaul enacted in 2017 is making a broad impact on estate planning, according to the survey.  Following the increase in the federal gift and estate tax exemption, estate planners are introducing various strategies to allow clients to take advantage of the exemption. About one-third of respondents propose clients consider creating trusts to protect assets, while 26% suggest clients plan to minimize future capital gains tax consequences and 21% agree to gift now while the exemption is high.

“Estate planners are now emphasizing the importance of creating trusts for the benefit of their loved ones so that assets can be protected from future claims,” Radigan said in a statement. “For example, rather than provide a child with an outright gift or bequest, many parents are creating trusts as a means of protecting assets from future divorce claims. Additionally, these trusts can be used to ultimately protect loved ones from themselves or other loved ones.”

Additionally, 40 percent of planners believe clients will continue to give the same amount to charities as they did in 2018, and 21 percent expect clients to donate more.  That is good news for charities, and welcome news to those who might be considering charitable giving since it means a consensus of planners agree that charitable giving can accomplish at least one objective in  an estate plan.  

Washington State May Be First Sate With Payroll-Funded Long Term Care Insurance Benefit.

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Numerous states are considering proposals to create a long-term care insurance programs, many funded by a payroll tax. Washington may be the first to actually enact a plan. Both the Washington State House and Senate have passed legislation, so all that’s required is a House re-vote on a Senate package that differs slightly from the House version. 

The Senate tweaked a few aspects of a proposal passed earlier by the House, so approval appears all but assured. The governor, provider associations and many others have  supported the measure, which would cap the lifetime benefit maximum at $36,500 per person. The governor has promised to sign the bill when presented. 

MyNorthwest reported in an article the sponsor's statements supporting the legislation:

"Democratic State Rep. Laurie Jinkins has introduced the Long Term Care Trust Act, which she says would work similarly to unemployment.  'What we do is create, essentially an insurance program where folks pay a premium of 0.58 of a percent, so 58 cents of every hundred dollars they earn would go into the trust. In return, any time they needed long-term care they’d be able to draw on that,' Jinkins explained. 

Workers of all ages would pay into the program, at a cost of around $24 a month for someone earning $50,000 a year.

That creates a benefit of roughly $37,000 over a person’s lifetime they could take in units of $100.

“That amount of money, for example, would pay for 25 hours a week of in-home care over the course of a year, respite care for one of your family members who was getting care; it would pay for that for maybe five years. So, it’s a pretty significant benefit for people,” Jinkins said.

Providers could start collecting payment from the program beginning in January 2025. The measure covers traditional long-term care services for people needing help with at least three activities of daily living (ADLs), as well as things like in-home care and meal delivery, rides to the doctor, home modifications such as wheelchair ramps, and reimbursements to unpaid family caregivers.  Washington defines more broadly ADLs than does private insurance, which usually triggers benefits when someone requires help with two ADLs. The state would reimburse providers directly. Family caregivers could be paid, though they first would have to go through a training program. 

Premiums of 0.58% of wages would begin being withheld from employees’ checks starting in 2022. Someone earning $50,000 per year would pay a premium of about $24 per month, or $288 per year. Under the Senate version, individuals holding long-term care insurance policies would be exempt.

A participant must work and pay the premium/payroll tax for at least 10 years, with at least five uninterrupted, or three of the last six years. Thus, most current retirees would be ineligible for the program.  

Provider and consumer groups testified in favor of The Long Term Care Trust Act, and nobody testified against it, at a House Health & Wellness Committee hearing in January. Experts say 60 percent of us will need long-term care or support of some sort after we hit 65.

In a House committee hearing,  Dan Murphy, executive director of the Northwest Regional Council explained who the insurance would benefit:

“People need long-term care when they can no longer do basic things themselves. Things like bathing, dressing, getting out of a chair, a bed getting into a car, managing their medications or just even standing, walking around. That’s what we’re really talking about in the assistance lift, when folks can’t any longer do things for themselves.”

An outside study authorized by the Legislature back in 2015 found there is a significant need, with seven of 10 people over 65 years old expected to need this type of care.

Of course the program also benefits the State of Washington.  An outside study found the program would lead to big savings for Medicaid over time, close to $900 million in the 2051-53 biennium.

According to an article in Forbes, although Washington is the first state in the US to enact a public long-term care insurance program other states are considering similar legislation.  "Hawaii has provided a public cash benefit for family caregivers of frail older adults, though it is not really an insurance program. California is considering a ballot initiative on a public long-term care financing program, Michigan and Illinois are studying public programs for those not on Medicaid, and Minnesota has proposed two alternative private financing options for long-term care."  Forbes notes,  though, that the "idea is not universally popular, however. Last year, Maine voters rejected a public plan to help fund home care."

According to Forbes, Washington State is choosing a "front-end insurance model that could begin to cover benefits as soon as participants have a need. It would cover the most people, though its benefit would pay only a small fraction of the costs for someone who needs several years of care."  An alternative model, "called a catastrophic or back-end design, would require participants to pay for the first years of care, but provide lifetime coverage after that.  It would cover fewer people than a front-end plan but would focus on those with the greatest need."

The Forbes article concludes that "[t]he Washington State model would be an important experiment, and it could create momentum for other states to adopt long-term care insurance programs."

Medicare Ratings Fall for Short-Staffed Nursing Homes- One-Third of Nursing Homes See Ratings Drop

Aging in Place as a discreet planning objective is well justified and documented. Recent improvements to government reporting of data regarding quality of care at nursing homes, while welcome, only underscore the benefits of Aging in Place planning.

According to Kaiser Health News (KHN), the Centers for Medicare & Medicaid Services (CMS), gave its lowest star rating for staffing, one star on its five-star scale, to 1,638 homes, in its update to Nursing Home Compare,  According to a recent KHN article, most nursing homes were downgraded because their payroll records reported no registered-nurse hours at all for four days or more, while the remainder failed to submit their payroll records or sent data that could not be verified through an audit.  KHN characterized the recent action as an "acceleration" in the federal government's "crackdown on nursing homes that go days without a registered nurse by downgrading the rankings of one-tenth of the nation’s nursing homes on Medicare’s consumer website"

According to KHN:

"CMS has been alarmed at the frequency of understaffing of registered nurses — the most highly trained category of nurses in a home — since the government last year began requiring homes to submit payroll records to verify staffing levels. Before that, Nursing Home Compare relied on two-week snapshots nursing homes reported to health inspectors when they visited — a method officials worried was too easy to manipulate." 

CMS announced the changes last March:

"CMS is setting higher thresholds and evidence-based standards for nursing homes’ staffing levels. Nurse staffing has the greatest impact on the quality of care nursing homes deliver, which is why CMS analyzed the relationship between staffing levels and outcomes. CMS found that as staffing levels increase, quality increases and is therefore assigning an automatic one-star rating when a Nursing Home facility reports “no registered nurse is onsite.” Currently, facilities that report seven or more days in a quarter with no registered nurse onsite are automatically assigned a one-star staffing rating. In April 2019, the threshold for the number of days without an RN onsite in a quarter that triggers an automatic downgrade to one-star will be reduced from seven days to four days." 

“Once you’re past four days [without registered nursing], it’s probably beyond calling in sick,” David Grabowski, a health policy professor at Harvard Medical School, told KHN. “It’s probably a systemic problem.”

The American Health Care Association, a trade group for nursing homes, calculated that 36% of homes saw a drop in their ratings while 15% received improved ratings. AHCA has issued a response critical of the changes, and the accuracy and fairness of the ratings. 

KHN has an interactive tool, Look-Up: How Nursing Home Staffing Fluctuates Nationwide.  The tool reveals the rating Medicare assigns to each facility for its registered nurse staffing and overall staffing levels. The tool also shows KHN-calculated ratios of patients to direct-care nurses and aides on the best- and worst-staffed days.  Because staffing is closely related to quality of care, the KHN tool is useful for those investigating, comparing, and evaluating institutional care alternatives.  

Filial Support Laws Chaos: Pennsylvania and New Jersey Laws Clash

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Filial responsibility laws make family members legally responsible for the financial support of other indigent family members.  The statutes can require children to pay for the long term care costs of their parents who need nursing home care.  These same statutes can make parents responsible for their adult imdigent children. As more states adopt or enforce existing filial responsibility laws, there will be challenging questions of law regarding the application of different state laws.  If you are a child, and your parent enters a nursing home in another state, which statute will apply; the statute of the state in which you live, or the statute of the state in which your parent resides?  

In what is possibly the first case to confront such a question, the Pennsylvania Supreme Court held that Pennsylvania’s filial support statute applies to a support claim by a Pennsylvania healthcare provider against parents domiciled in New Jersey for care provided in Pennsylvania to their disabled adult son. The Court's opinion in Melmark, Inc. v. Schutt, et al., expands the application of Pennsylvania’s filial support statute, which was applied most notably by the Pennsylvania Superior Court in Health Care & Retirement Corp. of America v. Pittas to hold that a son was liable for his mother’s nursing care bill of nearly $93,000 (to read an article regarding the Pittas case on this blog, go here).

Pennsylvania’s filial support law generally provides that a spouse, child or parent of an indigent person has “the responsibility to care for and maintain or financially assist [such] indigent person, regardless of whether the indigent person is a public charge” if the non-indigent relative has “sufficient financial ability.”  23 Pa.C.S. § 4603(a)-(c).  In the Pittas case, the Pennsylvania Superior Court held Mr. Pittas responsible for the cost of his mother’s nursing home care because he had net income in excess of $85,000 and because he did not otherwise establish that he lacked sufficient financial ability to financially support her.  

The Pittas Court also determined Pennsylvania’s filial support statute does not require that other possible sources of income be considered before proceeding against any one of the financially responsible relatives listed in the statute.   The Superior Court suggested in Pittas that there is joint and several liability under Pennsylvania’s filial support statute, such that a claimant could proceed against any one of the statutorily responsible relatives regardless of the financial ability of any other relative, even if more sufficient.  This joint and several liability has complicated estate and financial planning for individual family members, and creates chaos within families. 

“Indigent” as used in the filial support statute “includes, but is not limited to, those who are completely destitute and helpless…” and that “also encompasses those persons who have some limited means, but whose means are not sufficient to adequately provide for their maintenance and support.”

In Melmark, the Pennsylvania Supreme Court addressed a conflict between the filial support law of New Jersey, the state where the indigent son and his parents were legally domiciled, and Pennsylvania’s filial support law. New Jersey’s filial support law does not impose liability for individuals younger than 55 years of age unless the indigent person is the party’s spouse or minor child. 

Alex Melmark suffered from severe mental and physical disabilities and needed assistance with nearly all activities of daily living.  He and his parents, Dr. Clarence and Barbara Schutt, lived in Princeton, New Jersey.  However, in 2001, Alex’s parents, who were also his court appointed guardians, placed him in the Melmark non-profit residential care facility for intellectually and physically disabled persons located in Delaware County, Pennsylvania.

Due to a protracted dispute over public funding for Alex’s care, Melmark filed a filial support claim against Dr. and Mrs. Schutt in Pennsylvania under its filial support law. 

On appeal, the Pennsylvania Supreme Court addressed the conflict between Pennsylvania and New Jersey’s filial support law.  The Schutts could not be liable under New Jersey law because Alex was under age 55 and not a minor at the time care was provided, while the Schutts could be liable under Pennsylvania law because does not apply such age restriction.

The Supreme Court held that Pennsylvania’s filial support law applied and that the Schutts could be liable under this statute. In its conflicts of law analysis the Court noted, in pertinent part, that Pennsylvania had a stronger interest in applying its law as all of the relevant facts occurred in Pennsylvania, notably that the Schutts voluntarily brought their son Mark to reside at the Melmark facility in Delaware County and personally funded other services for his benefit in Pennsylvania.

Ohio is a filial responsibility state, although it does not enforce the law, at the time of this writing, in Medicaid resource recovery.  Missouri is not, at least since 2014, a filial responsibility state.  

More:

Filial Responsibility- Complicating Estate, Retirement and Asset Protection Planning

Filial Responsibility Laws Lead to Chaos

Filial Responsibility Laws Complicate Estate and Financial Planning

Conveyance to Son Was Fraudulent, But His Siblings May Also Be Liable Under Filial Support Law

Elderly Couple May Be Responsible for Adult Son's Unpaid Medical Bills

Man Can't Challenge Discharge of Brother's Debt for Mom's Care under Filial Responsibility Law

Use of Filial Responsibility to Collect a Nursing Home Debt Survives Federal Challenges

Security Risks while at Nursing Homes and Assisted Living Facilities

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Among the reasons suggesting Aging in Place as a discreet objective of any estate and financial plan is security. Most people find their homes well secured and safe. Further, home invasions are rare, and security threats easily and inexpensively managed.

Security while at any institution is always an additional concern, and the risk is out of your control.  Of course security from other residents and even from staff, is a concern of which most are aware.  Violence is visited on residents from both staff and other residents, and this violence is entirely avoidable if non-institutional care is an option.  One research study concluded:

"Common violence encountered in the long-term care service industry is residents assaulting staff or each other. Maintaining adequate security in these facilities can be challenging for a variety of reasons including campus design, residents who may suffer from dementia or other cognitive impairments, the potential for criminal activity due to patient valuables and residents’ inability to recall details."

Most aren't aware, however, that there are existential security threats to any institution, simply because it is a place where people and things of value are aggregated.  Whether from the possibility of terrorism, or robbery, institutions must consider, confront, and protect against unique security risks, risks that are distinct from those you face at home.  

Nursing homes and assisted living facilities also present unique security challenges in confronting the risk:

The armed intruder or active shooter is an external threat that has occurred in assisted living and skilled nursing facilities in multiple geographic locations. Of concern in this type of incident is the limitations of the traditional response of Run, Hide, Fight, when considering the resident population of skilled nursing and assisted living facilities. Aside from the ethical issues of many nurses and other healthcare providers not wanting to leave their patients or residents, the residents themselves will be vulnerable due to conditions such as mobility issues and cognitive functioning. Numerous types of violence should be considered from a security perspective when examining the threat of an armed intruder or active shooter such as; violence directed toward a group or person (administrators, medical staff), domestic violence, and mercy killings. This type of violence may begin at another location and end on the campus or inside the facility.

Dean Conner, Violence and Security in Skilled Nursing/Assisted Care Facilities (IAHSS-F RS-18-04, December 3, 2018).

The objective of breaching the security of a single home is obviously less, and ordinarily would suggest there is no sufficient incentive for invasion.  Hence, homes are generally less attractive targets.

A recent drug robbery at an Alabama nursing home is an object lesson in the security threats faced by institutions, and the risks the elderly and their families must consider in selecting institutional care.  Two masked intruders recently invaded Consult America Cottage Hills, in  Pleasant Grove, Alabama, brandishing handguns and demanding the contents from the locked narcotic box.  Police estimate the pair made off with about $5,000 in narcotics, WBRC reported.  According to the report, Lieutenant Danny Reid told WBRC that such robberies usually occur in bunches, that he was convinced that the couple knew what they were doing, skipping over any blood pressure medications:

“Nursing homes are pretty soft targets,” he said Wednesday. “We have plenty of good leads I think. We’ll continue to work it. I’m actually reaching out to some local law enforcement in other cities to see what they have in regards to nursing home robberies ’cause usually this is going to be a pattern,” he added later.

Police are reviewing surveillance footage from the incident and believe that the pair are a man and a woman. An employee at Cottage Hills declined to comment to WBRC on the investigation when reached.  

"Soft target" assisted living facilities and nursing homes will only become more valuable and frequent targets as the nation battles the current opioid crisis, and as those who are ill-willed find success. It is only a matter of time before this lawlessness visits injury or death upon a resident.