Understanding DAOs, DAO Collectibles, and Their Impact on Estate Planning

The digital age has brought, for some, exciting new concepts like “DAOs” and “DAO collectibles,” which might sound technical but are easier to understand than you’d think. These digital assets are different from digital currencies, and they can play a big role in planning not just for what happens to your belongings after you pass away, but also for managing your assets while you’re alive—especially if you become unable to make decisions due to illness or incapacity. In this article, I will break it all down in plain language, explore how these assets fit into your planning, and provide practical guidance, including sample language for legal documents.

What is a DAO?

Picture a group of people who come together online to make decisions as a team, like a book club or a community project, but instead of a leader calling the shots, everyone votes, and the rules are enforced by computer code. That’s a Decentralized Autonomous Organization (DAO). A DAO runs on a blockchain- a secure, digital record-keeper, like that used for cryptocurrencies, and uses “smart contracts” (self-running programs) to handle things like voting or spending money.

For example, a DAO called “AICollective” might pool money to invest in artificial intelligence projects. Members own digital “tokens” that act like membership cards, giving them a say in decisions, such as which projects to fund. Because it’s “decentralized,” no single person is in charge, and it’s “autonomous” because the code keeps everything fair and transparent.

What is a DAO Collectible?

A DAO collectible is a unique digital item linked to a DAO, often called an NFT (Non-Fungible Token). Think of it like owning a rare comic book, baseball card, or piece of art, but it’s digital and stored on the blockchain. These collectibles might represent membership in the DAO, a piece of digital art, a virtual plot of land, or a share in something the DAO owns, like a real-world asset.

For instance, a DAO named “ArtCollective” could issue 50 NFTs, each tied to a famous painting they bought together. If you own one, you’re a member of the DAO and might vote on whether to loan the painting to a museum. These collectibles can be valuable, especially if the DAO or its assets gain popularity.

How Are DAOs Different from Digital Currencies?

Digital currencies, like Bitcoin or Ethereum, are like digital cash. You can spend, trade, or save them, and they’re “fungible”—one Bitcoin is worth the same as another, just like a dollar bill. They’re built for transactions, like buying goods or sending money.

DAOs and DAO collectibles aren’t money. A DAO is a way to organize and collaborate online, like a digital co-op. DAO collectibles are one-of-a-kind items, like owning a unique piece of art or a VIP pass, not something you’d use at a store. You might buy a collectible with digital currency (like using Ethereum to get an NFT), but the collectible’s purpose is tied to ownership, membership, or voting in the DAO.

Why Do DAOs/DAO Collectibles Matter for  Planning?

Planning for your assets has two big big goals: estate planning, which decides fundamentally who receives your belongings (money, house, digital assets) after you pass away and how they are received, often incorporating estate or income tax, and asset protection plannings, and life planning, which defines how and by whom your assets are managed during your lifetime, especially if you become incapacitated and can’t make decisions due to illness, injury, or mental decline. DAOs and DAO collectibles affect both because they’re valuable, digital, and complex. 

Here’s why they matter:

• They Can Be Valuable:  DAO collectibles, like rare NFTs, can be worth thousands or even millions. If you own tokens or NFTs tied to a successful DAO, they could be a major part of your wealth. Your estate plan needs to ensure they go to your chosen heirs, like your spouse or children, while your life plan should cover who manages them if you can’t.

• They’re Hard to Access Without Instructions:  DAO tokens and collectibles are stored in a digital wallet, protected by a private key (a super-secure password). Without access to your wallet, neither your family (after you’re gone) nor your trusted representative (during your life) can claim or manage these assets. Clear instructions in your estate and life plans are critical to avoid losing them, and to facilitate control by your trusted fiduciaries.

• DAOs Involve Ongoing Responsibilities: DAO tokens often come with voting rights or duties, like deciding how the group’s money is spent. Your plans should specify who handles these responsibilities if you’re incapacitated or after you pass. For example, do you want your trusted agent to vote in a DAO that owns property, or should your heirs inherit and decide?

• Tax and Legal Issues:  Laws around digital assets are still evolving and vary by country. When you die, your collectibles might face estate taxes, and during incapacity, someone may need to report income from DAO activities. Your plans can include guidance to handle taxes and legal requirements smoothly. Keep in mind that application and enforcement of even well settled rules and principals is uncertain, and might bring anomalous results.  

• They’re Not Like Physical Items

Unlike a car you can hand over, transferring a DAO collectible means sharing digital wallet access. Your estate plan must explain how to pass them to heirs, and your life plan needs to empower someone to manage them securely if you’re incapacitated, without risking theft by hackers.

Planning for Incapacity with Trusts or Powers of Attorney

To manage DAOs and collectibles during your lifetime, especially if you become incapacitated, you can use tools like a trust or a general durable power of attorney. A trust lets you appoint a trustee to manage your assets according to your instructions, either now or if you can’t make decisions. A power of attorney names an “agent” (someone you trust) to act on your behalf, and “durable” means it stays valid even if you lose mental capacity.  These documents, however, should be tailored to confer authority explicitly digital assets, and should identify whether the trustee or agent has unlimited or restricted authority to vote or make decisions within the DAO.  Because these are unique and fairly new assets, you probably don't want to rely on well-established fiduciary duties to guide agents and trustees; how these duties might be interpreted and applied in this new world is uncertain. 

For example, if you own a valuable NFT tied to a DAO, a trust could hold it and authorize your trustee to manage voting or sales if you’re unable to.  Alternately,  or, a power of attorney could empower your agent to gain access to your digital wallet to handle your DAO responsibilities, like voting on a proposal, during a hospital stay.

Sample Language for a Power of Attorney

To ensure your agent can manage your DAOs and collectibles, your power of attorney needs specific language to cover digital assets and DAO-related actions. 

Here’s an example of what you might include in a general durable power of attorney (note: always work with a lawyer to tailor this to your situation and local laws):

Digital Assets and Decentralized Organizations: I grant my agent the authority to access, manage, transfer, sell, or otherwise deal with my digital assets, including but not limited to Decentralized Autonomous Organization (DAO) tokens, Non-Fungible Tokens (NFTs), and other blockchain-based assets stored in digital wallets or accounts. This includes the power to: (1) Access my digital wallets using private keys, seed phrases, or other authentication methods, as securely provided by me; (2) Exercise all rights and interests associated with my DAO memberships, including, but not limited to voting on proposals, participating in governance, and managing distributions or benefits; (3) Buy, sell, trade, or transfer DAO collectibles and tokens on my behalf, including engaging with smart contracts or blockchain platforms (4) Delegate tasks related to DAO participation or collectible management to third parties, as deemed necessary, while maintaining oversight of their actions.

My agent shall act in my best interests, consistent with my prior actions or stated preferences regarding these assets, and shall take reasonable steps to secure access credentials to prevent unauthorized use.

This language gives your agent permission to handle your digital assets, vote in DAOs, and manage collectibles if you can’t, while emphasizing security and your wishes.

Tips for DAOs and DAO Collectibles in Your Plans

To protect your digital assets during life and after death, consider the following:

• Inventory Your Assets: List all your digital assets, DAO memberships and collectibles, noting the DAOs, tokens, NFTs, blockchains (e.g., Ethereum), and their estimated value.

• Secure Your Wallet: Store private keys or recovery phrases safely, like in a bank vault or with a trusted attorney. Consider multi-signature wallets or key-splitting services for added security.

• Provide Clear Instructions: In your will, trust, or power of attorney, explain how to access and manage your digital assets. For example, “My son should inherit my AICollective DAO tokens and vote on my behalf, or sell them if the DAO dissolves.”

• Work with Experts: Digital asset laws are complex. Consult a lawyer familiar with blockchain and estate planning to ensure your trust or power of attorney covers everything legally.

• Review Regularly: DAO collectibles can spike or drop in value, and DAOs may change rules or close. Update your plans every year or two to reflect what you own and want.

Conclusion

DAOs are like online teams run by members and code, while DAO collectibles are unique digital treasures, like rare NFTs, tied to those teams. Unlike digital currencies (online money for spending), DAOs and collectibles are about collaboration and ownership. They matter for both estate planning—passing assets to heirs—and life planning, like managing assets if you’re incapacitated. Tools like trusts or powers of attorney, with clear language, let trusted people handle your DAOs and collectibles securely during illness or after you’re gone.

By cataloging your assets, securing your wallet, and planning with care, you can ensure your digital legacy is protected, whether it’s voting in a DAO or passing a valuable NFT to your family. A little planning now keeps your digital world safe for the future, no matter what life brings.

Revised Uniform Fiduciary Access to Digital Assets Act in Ohio

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) is a legal framework developed by the Uniform Law Commission (ULC) to govern fiduciary access to digital assets, addressing the growing need to manage electronic records after a person’s death or incapacity. Ohio adopted RUFADAA in 2017 (Ohio Rev. Code § 2137.01 et seq.), aligning with 45 other states by 2023 to provide a consistent approach to digital estate planning. Below, I’ll outline the specifics of RUFADAA, focusing on its application in Ohio, its key provisions, and critical considerations. 

Key Provisions of RUFADAA in Ohio

Definition of Digital Assets: RUFADAA defines a “digital asset” as an electronic record in which an individual has a right or interest, excluding underlying assets or liabilities unless they are electronic records themselves (Ohio Rev. Code § 2137.01(I)). This definition includes:

• Electronic Items with Monetary Value: Cryptocurrencies, domain names, online banking accounts.

• Electronic Communications: Emails, social media messages, text messages.

• Sentimental or Intellectual Property: Digital photos, videos, blogs.

This definition ensures fiduciaries can manage a wide range of digital assets but distinguishes them from the underlying value (e.g., funds in a bank account are not digital assets, but the electronic record of the account is).

Fiduciary Authority: RUFADAA applies to fiduciaries such as executors, trustees, agents under a power of attorney, and court-appointed guardians. Ohio Rev. Code § 2137.14. In Ohio, fiduciaries:

• have the right to access digital assets if the user (the account holder) had a right or interest in them, provided they are not restricted by a terms-of-service agreement (TOSA).

• are treated as authorized users under computer fraud and abuse laws, protecting them from legal liability when accessing assets within their scope of duties.

Hierarchy of Access Instructions: RUFADAA establishes a three-tier priority system for determining fiduciary access: 

• Online Tools: If the user designated access through an online tool (e.g., Google’s Inactive Account Manager or Facebook’s Legacy Contact), this takes precedence. For example, a user can specify a trusted contact to access their account after a period of inactivity or opt for permanent deletion.

• Legal Documents: If no online tool is used, the user’s will, trust, power of attorney, or other record governs access. For instance, a GDPOA can explicitly grant an agent authority to manage digital assets.

• Terms-of-Service Agreements (TOSA): If neither an online tool nor legal document provides direction, the custodian’s TOSA dictates access. Many TOSAs (e.g., Verizon, Yahoo) state that accounts are non-transferable and terminate upon death, potentially limiting fiduciary access.

See, Ohio Rev. Code § 2137.03 to 2137.04.

Custodian Compliance and Protections: Custodians (e.g., Google, Facebook) are the entities that store or provide digital assets. RUFADAA outlines their obligations and protections:

• Compliance Timeline: Custodians must comply with a fiduciary’s request within 60 days of receiving required documentation, such as a certified copy of the fiduciary’s authority (e.g., letter of appointment, trust certification) and account identifiers (e.g., username).  Ohio Rev. Code § 2137.07.

• Court Orders: Custodians can request a court order verifying the account belongs to the user, ensuring sufficient consent for disclosure, especially for electronic communications, which are protected under federal privacy laws like the Stored Communications Act, 18 U.S.C. § 2701 et seq.

• Limited Access: Custodians may limit disclosure to what is “reasonably necessary” for estate administration, charge fees, or refuse burdensome requests. They cannot provide access to deleted assets or joint accounts.

• Immunity: Custodians are immune from liability for good-faith compliance with fiduciary requests, protecting them from legal risks.

• Privacy and Electronic Communications:  RUFADAA balances fiduciary access with privacy.  Fiduciaries can access the “content of electronic communications” (e.g., email content, private messages) only if the user explicitly consented in a will, trust, or power of attorney. Without consent, fiduciaries may access metadata (e.g., email logs) but not the content, protecting the user’s privacy while allowing estate administration to proceed.

• Fiduciary Duties: RUFADAA applies the same legal duties to digital assets as to tangible property, including the duty of care, loyalty, and confidentiality.  Ohio Rev. Code § 2137.14. Fiduciaries cannot exceed the user’s access rights, ensuring they do not misuse their authority.

Application Challenges in Ohio 

Ohio’s adoption of RUFADAA in 2017 ensures that fiduciaries have a legal pathway to manage digital assets, but practical challenges remain.

• Documentation Requirements: Fiduciaries must provide custodians with specific documents (e.g., a certified copy of their appointment, account identifiers), which can be cumbersome, especially for multiple accounts.

• Court Involvement: If custodians resist disclosure, fiduciaries may need to seek a court order, adding time and expense to the estate administration process process.

• TOSA Conflicts: Ohio law prioritizes user directions over TOSAs, but many custodians’ agreements (e.g., Verizon’s) terminate accounts upon death, potentially conflicting with user intent unless explicitly overridden in a legal document.

Critical Examination

While RUFADAA provides a much-needed framework, it has limitations:

• Privacy vs. Access Tension: The requirement for explicit consent to access electronic communications protects user privacy but can hinder fiduciaries, especially if the user did not plan ahead. This balance may overly favor custodians, who can limit access to “reasonably necessary” information, potentially leaving sentimental assets (e.g., family photos) inaccessible.  Planning ahead, and planning capably is encouraged, but in those situations where a user does neither, or simply plans incapably or incompletely, family members will suffer.   

• Practical Barriers: The process of obtaining access—requiring documentation, court orders, and custodian compliance—can be a “headache” and an "entry barrier" for fiduciaries. This complexity may discourage fiduciaries from pursuing access, especially for less valuable assets.

• Incumbency Gaps: Incumbency gaps refer to the periods or situations in estate planning or trust administration where there is a lack of an active, legally recognized fiduciary (such as a trustee, executor, or agent under a power of attorney) to manage the estate, trust, or digital assets of a person who is incapacitated or deceased. These gaps can occur due to delays, resignations, deaths, or failures to appoint a successor fiduciary, leading to potential mismanagement, legal complications, or inability to access critical assets, including digital ones like email accounts or online financial platforms.

• Incapacity Without a Successor: In states like California, RUFADAA initially did not apply to incapacitated individuals, though Ohio’s version covers both death and incapacity. Ohio Rev. Code § 2137.03. This ensures broader applicability but highlights inconsistencies across states, as not all jurisdictions have adopted uniform provisions. Even with Ohio's broader scope, incumbency gaps remain. If a person becomes incapacitated and their agent under a General Durable Power of Attorney (GDPOA) resigns, passes away, or is otherwise unable to act, and no successor agent was named, there may be no one with legal authority to manage the person’s digital assets (e.g., accessing Gmail, paying bills online), or if the agent was the only one with access to a password manager like LastPass, an incumbency gap could prevent timely access to critical accounts.

• Death Without a Successor Trustee/Executor: Upon a person’s death, if the named executor or trustee is unavailable (e.g., predeceased, declines to serve, or is incapacitated) and no successor is appointed, there may be a delay in appointing a new fiduciary through the courts. During this gap, digital assets like Smart Home and IoT Accounts (e.g., Ring, Amazon Alexa) might go unmanaged, potentially compromising home security or functionality for aging-in-place individuals.

• Legal and Administrative Delays: Incumbency gaps often arise from the time it takes to probate a will, appoint a new trustee, or obtain court approval for a successor fiduciary. During this period, digital assets may remain inaccessible, especially if platforms like Google require a court order for access , exacerbating the issue for heirs or fiduciaries. 

• Custodian Discretion: Custodians’ ability to charge fees, limit access, or require court orders gives them significant control, potentially undermining user intent. This reflects a bias toward protecting tech companies rather than prioritizing fiduciary needs or user wishes.

Importance of a Plan Including a Digital Assets Inventory

RUFADAA’s hierarchy of access instructions supports the necessity of a tech-savvy estate plan specifying explicitly fiduciary access in a will, trust, or GDPOA to override TOSAs, and the use of a Digital Assets Inventory.  The user should:

• Appoint and Empower Fiduciaries:  Ensure your GDPOA, will, and trust name multiple successor agents, executors, and/or trustees to step in if the primary fiduciary is unavailable, and explicitly confer broad and specific authority to manage all aspects of digital assets and accounts.  

• Leverage Online Tools: Use platform-specific tools like Google’s Inactive Account Manager to designate trusted contacts, reducing reliance on fiduciaries during gaps, and minimizing disputes regarding fiduciary's' authority and role.

• Use Digital Asset Inventory Tools: Document access instructions in a Digital Assets Inventory Worksheet and store it securely (e.g., in LegalVault®) so any fiduciary can access it.  Identify, by completing the inventory, for each digital  asset or account an intention regarding  access and control by a fiduciary, and sign each page of the inventory.

• Regular Updates: Review and update your estate plan and inventory periodically to ensure named fiduciaries are still willing and able to serve, minimizing the risk of gaps, and track your decisions and updates on your Inventory.

• Deploy a Trust: Time is a factor when dealing with digital assets.  Successor agents appointed by a GDPOA can be stood up quickly while you are alive.  Upon your death, the choice is between at trustee that you nominate prior to your death or a court appointed fiduciary, such as a general or special executor, administrator, or commissioner.  Although it is possible that these may be nominated, qualified, appointed, and empowered "quickly," the normal course of events in a court process is anything but "quick."  In most cases, a successor trustee of a trust, if available and willing to serve, is able to be empowered to serve within a week of receiving a death certificate.  A court-appointed fiduciary is "quickly"  empowered within 30-90 days, though exceptions are possible.    

• Secure Storage:  Store access instructions securely (e.g., via LegalVault®) to facilitate fiduciary action.

Conclusion

RUFADAA in Ohio provides a structured legal framework for fiduciary access to digital assets, defining digital assets broadly, establishing a priority system for access, and balancing privacy with estate administration needs. However, its implementation can be complex, with custodians holding significant discretion and fiduciaries facing procedural hurdles. For estate planning, RUFADAA underscores the need for explicit authority in legal documents and proactive planning to ensure fiduciaries can manage digital assets effectively. Clients should be aware of both the legal pathway RUFADAA provides and its practical limitations, ensuring their estate plans are robust enough to navigate these challenges.

Google Accounts- Estate Planning Challenges

Managing Google assets in an estate plan begins with Google. Google offers a voluntary tool called the Inactive Account Manager, which allows users to designate trusted contacts to access their account data under specific conditions, such as prolonged inactivity. Additionally, Google has policies for handling requests from fiduciaries (like those with power of attorney or trustees) to access accounts, but these requests are subject to strict legal requirements and are not guaranteed to be accepted based solely on private directives like a power of attorney (POA) or trust.

Inactive Account Manager: Google’s Legacy Tool

Google’s Inactive Account Manager lets users plan for what happens to their account if they become inactive for a specified period (e.g., 3 to 18 months). Users can:

• Add up to 10 trusted contacts to be notified of inactivity.

• Choose to share specific data (e.g., Gmail emails, Google Photos, Drive files) with these contacts. The contacts receive an email with a link to download the designated data but do not gain full control of the account.

Alternatively, users can set their account to be deleted after the inactivity period.

This tool is optional and must be set up by the account holder while they are still active. It’s not a “requirement” but rather a proactive option for users to manage their digital legacy. If this tool is not set up, fiduciaries or family members must rely on Google’s postmortem request process, which is more complex and far less certain. Worse, it might necessitate probate; Google requires a court order in many case.

Google’s Stance on Private Directives (Power of Attorney or Trust)

Google does not automatically accept private directives like a power of attorney (POA) or trust to grant access to a Gmail account, whether the account holder is incapacitated or deceased. Here’s why:

• Legal Requirements for Access Requests: Google has a strict policy for handling requests to access a deceased or incapacitated user’s account. For deceased users, Google requires a U.S. court order directed to Google LLC, specifying that disclosure does not violate laws like the Electronic Communications Privacy Act (ECPA) and the Stored Communications Act (SCA). The court order must be emailed to postmortemrequests@google.com. A court order protects Google from claims of third parties or adverse regulatory actions by governmental entities. Google explicitly states that it cannot accept other forms of legal documentation, such as wills, trusts, proof of power of attorney, or small estate documents, to satisfy this requirement.

• Power of Attorney (POA) Limitations: For living but incapacitated users, a general POA does not automatically grant access to a Google accounts such as Gmail. It is important to appreciate that Google’s policies prioritize user privacy and security, and they typically require the account holder’s direct consent or a court order to release account data. Even with a POA, fiduciaries often struggle to gain access because Google may not recognize the POA as sufficient legal authority under the SCA, which governs the disclosure of electronic communications.

• Practical Impediments: There are also impediments which arise the circumstances. For example, in cases where a POA holder tries to reset a password, Google’s recovery process (e.g., 2FA-sending a verification code to a linked phone number or backup email) often fails if the account holder cannot provide the necessary information due to incapacity. Google does not offer a streamlined process to bypass this with a POA.

• Trusts and Other Directives: Similarly, a trust document granting a trustee authority to manage digital assets is not sufficient on its own for Google to grant access. While a trust can confer legal authority under state laws like the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), Google’s policies prioritize federal laws like the SCA and ECPA over private directives. RUFADAA (adopted in states like Ohio and Missouri) allows fiduciaries to manage digital assets if the user has given explicit consent through an online tool, will, trust, or POA, but Google often requires a court order to comply, especially for accessing the content of communications (e.g., email contents) as opposed to non-content data (e.g., a catalog of emails).

Non-US residents: For non-U.S. residents (e.g., in the UK or Portugal), this process becomes even more challenging due to jurisdictional issues, as Google requires the court order to be issued or domesticated through a U.S. court.

Challenges and Privacy Concerns

Google’s stringent requirements reflect a broader tension between user privacy and fiduciary access. The company has stated in court filings that Gmail users have “no legitimate expectation of privacy,” citing their terms of service, which allow automated scanning of emails for features like targeted ads. This stance has been criticized by privacy advocates, as it suggests Google prioritizes its own access to data over third-party access, even by legally appointed fiduciaries. For example, even “confidential mode” does not prevent Google from accessing email contents, further complicating trust in the platform for sensitive communications.

For fiduciaries, the court order requirement can be a significant barrier, especially for international users or those without the resources to obtain a U.S. court order. Even in the U.S., the process can be time-consuming and costly, often taking 30 days or more to process, as noted in older guidelines from Google (circa 2007). This can leave fiduciaries unable to access critical information, such as financial records or health data stored in Gmail, during a time-sensitive period like incapacity, guardianship contests, or estate administration.

Recommendations for Users

Given Google’s policies, users should take proactive steps to ensure their Gmail account can be accessed by trusted individuals:

• Set Up the Inactive Account Manager: This is the most straightforward way to designate access to trusted contacts after a period of inactivity.

• Document Access Instructions Separately: Use a secure service like LegalVault® to store Gmail login credentials and two-factor authentication (2FA) details, ensuring fiduciaries can access them without violating Google’s terms of service.

• Use a Digital Assets Inventory: Inform your loved ones about your accounts and where to obtain information by preparing and maintaining a Digital Assets Inventory.

• Include Digital Assets in Estate Plans: While a POA or trust may not be sufficient for Google to grant access, these documents can still provide legal authority under RUFADAA to request access, and they can guide fiduciaries in seeking a court order if necessary.

• Consider Alternatives: For highly sensitive communications, users might explore end-to-end encrypted email services like ProtonMail, which offer greater privacy but these may have their own access challenges for fiduciaries.

Conclusion

Google does not have a prescribed designated access or legacy requirement but offers the Inactive Account Manager as an optional tool for users to plan for their digital legacy. Google does not reflexively accept private directives like a power of attorney or trust as sufficient to grant access, typically requiring a U.S. court order to comply with federal privacy laws. This approach prioritizes user privacy but can create significant hurdles for fiduciaries, especially in time-sensitive situations or for non-U.S. residents. Users should proactively manage their Gmail and Google account access through Google’s tools and secure storage solutions to ensure their digital assets are accessible to trusted individuals when needed.

Is Medicare Advantage Plan Popularity "Coerced?" The Conversation.

The growth of Medicare Advantage (MA) plans over the past 15 years- reaching 54% of Medicare beneficiaries by 2024, or roughly 33 million enrollees, is generally attributed to a combination of policy changes, market dynamics, and genuine appeal to beneficiaries. I, for one, have evolved in my thinking regarding these alternatives to traditional Medicare, initially preferring traditional Medicare, but now actively encouraging clients to explore the MA option, particularly to facilitate aging in place planning. For example, see the following articles:

• Aging in Place: New CMS Policies are Changing the Way Investors View Home Health
• 2019 Medicare Advantage Plans Incorporate Long Term Care, Aging in Place Benefits

A recent article, however, suggests that MA plans are popular because they are compelled or coerced, and the rising number of subscribers doesn't reflect a real "preference." "Medicare Advantage is covering more and more Americans − some because they don’t get to choose," published on The Conversation on April 3, 2025, by Grace McCormack and Victoria Shier, presents a critical perspective on the rapid expansion of Medicare Advantage (MA) plans in the United States. While it raises valid concerns about privatization trends, cost to taxpayers, and limited choice for some beneficiaries, the piece has several shortcomings in its analysis, including a lack of consideration and analysis of counterarguments, an overemphasis on negative framing, and insufficient exploration of the broader context driving MA’s growth. What follows are my thoughts.

The article’s central thesis is that MA’s growth is driven by a lack of choice, particularly for retirees whose employers or state governments limit subsidies to MA plans, effectively "forcing" them into privatization. While this is a legitimate point, supported by the claim that 13 states and over half of large private employers offering MA do not subsidize traditional Medicare supplements, I think it oversimplifies the decision-making process for beneficiaries. The authors imply a coercive dynamic, but fail to adequately explore why employers and states have shifted toward MA in the first place.

For instance, they do not discuss the financial incentives for employers, such as lower administrative costs or the ability to offload retiree healthcare liabilities onto private insurers, which MA plans often market as a benefit. Nor do they consider that some beneficiaries might prefer MA’s bundled coverage (e.g., vision, dental, and hearing benefits) over traditional Medicare, even if choice is constrained.

Moreover, the article does not quantify how many individuals are truly "forced" into MA versus those who opt in voluntarily after weighing options. The statistic that 54% of Medicare beneficiaries are enrolled in MA (up from 8 million to 33 million between 2007 and 2024) is striking, but it conflates voluntary and involuntary enrollment without breaking down the proportions. This lack of granularity weakens the claim that lack of choice is a primary driver, as it could equally reflect MA’s appeal to a broad population.

The article highlights that switching from MA back to traditional Medicare is "often difficult," citing the loss of guaranteed-issue rights for Medigap plans after the initial enrollment period. This is technically accurate- outside of four states (Connecticut, Maine, Massachusetts, and New York), Medigap insurers can deny coverage or charge higher premiums based on preexisting conditions if beneficiaries leave MA after their first year. The authors do not explore the extent to which this locks people in practice, however, ignoring the initial opportunity to abandon the MA plan, and/or the opportunity a younger retiring spouse has to consider the first retiring spouse's choice and experience. For example, they do not provide data on how many MA enrollees attempt to switch and are denied Medigap, nor do they discuss the role of Special Enrollment Periods or protections for those whose MA plans are discontinued (e.g., the 63-day guaranteed-issue window mentioned in related sources).

My personal experience in planning suggests that the most of these seemingly compelled choices involve the second retiring spouse, often the wife, who has had the benefit of experience with traditional Medicare. I find that they often welcome the opportunity abandon Medicare. I wondered how accurate my experience might be, and was surprised to learn that women make up roughly 75% of public school teachers and 80% of nurses, both significant state employee groups in many states. Women have historically been well-represented in public sector jobs, particularly in fields like education and health services, which dominate state budgets. My experience might be an accurate reflection of what other planners experience.

The article's framing suggests the existence of a "trap" without acknowledging that many beneficiaries may not want to switch, either because they are satisfied with MA or because traditional Medicare’s uncapped out-of-pocket costs (absent Medigap) are less appealing. The article could have strengthened its argument by delving into beneficiary satisfaction rates or real-world examples of switching difficulties, rather than leaving the claim as a broad assertion, but I assume the former statistics, particularly, don't support the argument.

The authors draw a parallel between MA’s growth and the privatization of Medicaid, noting that 74% of Medicaid beneficiaries are in private plans, often without choice. This comparison is intriguing but underdeveloped. Medicare and Medicaid serve different populations with distinct needs: Medicare’s is older, often healthier enrollees versus Medicaid’s low-income, higher-needs population, and the dynamics of privatization differ significantly. The article does not explain why MA’s privatization mirrors Medicaid’s beyond the lack-of-choice angle, nor does it address the historical policy decisions (e.g., the 2003 Medicare Modernization Act) that incentivized MA’s expansion through higher payments and marketing flexibility.

Furthermore, the authors gloss over the political and economic forces behind MA’s rise, such as lobbying by insurance companies or bipartisan support for market-based solutions in healthcare. Without this context, the critique feels surface-level, attributing MA’s dominance to employer decisions and beneficiary inertia rather than a deliberate systemic shift.

The article relies heavily on enrollment trends (e.g., the quadrupling of MA enrollment since the mid-2000s) and broad statements about employer practices, but it lacks specific, compelling evidence to support its more critical claims. For instance, the assertion that "more patients can be denied doctor-ordered care" in MA plans alludes to prior authorization requirements but offers no statistics on denial rates or their impact on health outcomes compared to traditional Medicare.

The article focuses almost exclusively on systemic downsides—cost, coercion, and care denials—while giving short shrift to why MA might appeal to beneficiaries beyond "lower premiums and co-pays and the promise of extra benefits." Surveys, such as those from the Commonwealth Fund, show that MA enrollees often report high satisfaction with care coordination and supplemental benefits like dental and vision coverage, which traditional Medicare lacks. The authors mention these attractions briefly but dismiss them as bait without exploring whether they deliver value for some enrollees. This omission creates a lopsided critique that paints MA as a net negative, ignoring the possibility that its growth reflects genuine demand rather than just manipulation or lack of choice.

The authors assert that MA "burdens taxpayers" by costing more per enrollee than traditional Medicare, a point often echoed in critiques of privatization. They cite the growth in enrollment as increasing this burden but provide no specific figures in the article to substantiate the scale of the overpayment (though related literature, such as from The Conversation’s other pieces, suggests an additional $83 billion annually). While this is a valid concern, studies like those from MedPAC have shown MA plans receive higher risk-adjusted payments due to upcoding of diagnoses—the article does not engage with counterarguments that MA plans might reduce certain costs, such as through preventive care or reduced hospital readmissions, which some research suggests they achieve more effectively than traditional Medicare.

Additionally, the piece does not compare the total cost of traditional Medicare (including supplemental Medigap plans and Part D drug coverage, which beneficiaries often purchase separately) to MA’s all-in-one model. For many beneficiaries, the out-of-pocket savings from MA’s lower premiums and cost-sharing could offset taxpayer overpayments in practical terms, a trade-off the article ignores. By framing MA solely as a taxpayer burden, presents a one-sided narrative that overlooks potential efficiencies or benefits that might justify its higher upfront costs.

Finally, the article raises concerns about MA’s dominance but stops short of proposing solutions or grappling with the feasibility of reversing the trend. If MA’s growth is problematic, what alternatives exist? Should policymakers cap enrollment, reform payment structures, or expand traditional Medicare’s benefits to compete? The authors call for understanding "why Medicare Advantage has become so popular," yet they do not venture into this territory themselves, leaving the critique incomplete. Without engaging with potential reforms, the piece risks being a lament rather than a constructive analysis.

The article effectively and undeniably highlights real issues with Medicare Advantage, its cost to taxpayers, the constraints it imposes on some beneficiaries, and the challenges of switching back to traditional Medicare. By framing MA’s rise as largely a product of coercion and inefficiency, it overlooks the complex interplay of beneficiary preferences, market dynamics, and policy design that have fueled its growth. A more balanced and thorough critique would have integrated these factors, provided richer data, and offered a path forward, rather than leaving readers with a one-dimensional warning about "privatization’s" perils.

Irrevocable Medicaid Planning Trust Risks: State Refuses to Permit Trust Termination

In April 2011, Don and Marjorie Peterson (the Petersons) established the Peterson Family Irrevocable Trust (the trust). The Petersons’ daughter was the trustee, and their grandchildren were the beneficiaries. The Petersons’ personal residence was the only asset held in the trust. 

The intent in creating the trust was to shield their personal residence from being considered in determining Medicaid eligibility and claims arising from long-term care.  The trust had a common "comfort clause:" 

It is the specific intention of [the Petersons] to create the power in the Trustee and in said Trustee’s sole discretion under this Trust to provide income and support for [the Petersons] and Subsequent Beneficiaries and to protect the assets of the Trust pursuant to the conditions set forth in this Trust Agreement. Said income and support may include, but is not limited to, expenditures for [the Petersons’] and Subsequent Beneficiaries’ health, education, real estate purchases[,] and/or promising business opportunities. In order to protect the Trust assets, the Trustee in her sole discretion, may withhold distribution under circumstances in which [the Petersons] or Subsequent Beneficiaries will not personally enjoy said distribution; said circumstances, including but not limited to, insolvency, pending divorce[,] or other civil litigation and bankruptcy.

While in the control of the Trustee and until actually paid over to [the Petersons] thereof, the interest of [the Petersons] in the income or principal of the Trust shall not be subject to assignment or pledge by [Appellants], the claims of creditors of [the Petersons], or attachment by any legal or equitable procedure.

In re Peterson Family Irrevocable Trust, quoting the underlying court's opinion (brackets included, "Appellants" replaced with 'the Petersons").  

A "comfort clause" is a trust provision comforting the owner that they are not really turning ownership and control of assets over to third party, and that, if absolutely necessary, the trust assets can be used to support the owner. In the best cases these are requested by clients and adopted after careful advice and counsel.  In the worst cases these are deployed by drafters to make the document more "attractive" (read "sellable"), without advising the client of the risks.  "Comfort clauses" can make the owner more comfortable, but they can also threaten the integrity of the plan.  Consider the foregoing language against a more rigorous clause which follows:

The Trustee may, in its sole and absolute discretion, distribute such sums from the trust income and principal that the Trustee deems necessary or advisable to meet the health, education, and/or support needs of the  death/subsequent beneficiaries [in the case of the Petersons, the grandchildren], but shall make no distributions to or for the benefit of the Petersons. Other than the lifetime privilege to reside in any home owned by the trust while the Petersons are able to avail themselves of that privilege, under no circumstances shall the Petersons benefit directly or indirectly from the income or principal of the trust.

The latter is a much harsher statement, but it better comports with the requirements of most state Medicaid rules. 

Complicating matters, when the home was transferred to the trust, there were actual distributions made from the trust to the Petersons' estate.  According to the court, as a result of these transfers, the residence became a countable asset for Medicaid purposes.  Interestingly, neither court decision (lower court or appellate) explains what these transfers were, or how these transfers were possible given that both courts clearly state that the only asset of the trust was the Petersons' home. The courts also don't explain whether the transfers were forbidden under Pennsylvania law in place at the time the trust was settled, or whether they were made forbidden by subsequent changes to the law.

In January 2024, the Petersons filed a petition to terminate the trust, but their granddaughter, a named beneficiary, contested termination.  The Petersons based termination on two grounds.  First, the Petersons argued that the relationship between the Petersons and their daughter, the trustee, had dramatically changed thereby “rendering [the Trust’s] ongoing administration impracticable and wasteful.” Second, the Petersons argued that the trust’s purpose could not be fulfilled because, under the trust’s terms, their residence was a countable asset impacting their eligibility for Medicaid and subject to future healthcare claims under Medicaid.   

After a hearing, the court denied the Petersons’ petition to terminate the trust. On appeal, the Peterson's abandoned their first argument. It is intriguing to consider, though, whether the first argument, which clearly does not constitute grounds to terminate the trust, might be the actual basis of the Petersons' dispute. Unfortunately, disagreement with a trustee does not constitute grounds to terminate a trust; an inherent risk with irrevocable trust planning is that circumstances may change. Seeking removal of a trustee for breach of fiduciary duty or other infirmity would accomplish the same goal without necessitating termination of the trust. I will also note for the interested that the simple drafting solution to this type of scenario is a trust protector- an independent third party that can remove a trustee without cause. See, e.g., Unpacking Trustees- Primary, Successor, and Special Trustees, Trust Protectors and More. Even a decanting provision might have provided an alternate solution making "termination" unnecessary (let me know if you want me to write an article explaining "decanting").  The bottom line is that changes in circumstances won't always justify termination or reformation of a trust instrument. 

The Pennsylvania Superior Court addressed the sole remaining legal basis for termination: whether the Petersons’ mistaken belief that their trust worked for its intended purpose was an “unanticipated circumstance” under Pennsylvania’s Uniform Trust Act, 20 Pa. Stat. and Cons. Stat. Ann § 7740.2(a), which would permit the court to terminate the trust.  The Petersons contend that when they created the trust, their mistaken belief that it would preclude their residence from being considered for Medicaid eligibility and used to satisfy Medicaid healthcare claims was  an unanticipated circumstance.

The Court mostly agreed with the Petersons arguments. In its review, the court stated that a plain reading of section 7740.2(a) revealed that a trust may be terminated if, due to unanticipated circumstances, termination would further the purposes of the trust. The court noted substantial precedent establishing that the intent of a trust’s settlor, as set forth in the language of the trust instrument, must prevail. The court also found that the plain language of the trust agreement demonstrated the Petersons’ intention to create a trust that would provide income and support for their healthcare needs and protect their assets from creditors. Although the trust’s language did not explicitly provide that it was intended to shield the trust assets from Medicaid claims, it did specifically state that it was intended to protect the trust assets from claims arising from the Petersons’ debts or obligations, which would include claims for healthcare services provided by Medicaid.

The court agreed with the Petersons’ assertion that their personal residence may have been exempt from claims asserted under Medicaid if it had remained titled in their names instead of being held by the trust, and that due to the transfer of ownership to the trust, the residence was a countable asset if one or both of them applied for Medicaid.  The court agreed that the trust "no longer" protected the home from healthcare claims made under Medicaid. The court determined, however, that the Petersons’ misunderstanding of the legal consequences of the trust at the time of its creation was a "mistake of law" rather than an “unanticipated circumstance”—i.e., unforeseen facts about the future—that would permit the court to terminate the trust under section 7740.2(a). Accordingly, the court affirmed the lower court order denying the Petersons’ petition to terminate the trust.  

IF either the husband or wife ends up in a nursing home, and is forced to apply for Medicaid, the community (healthy) spouse could lose his or her home, or be forced to spend down its value.  This is a tragic result given that Medicaid protects the home for the community spouse when owned by both spouses.  In other words, if the Petersons had done nothing, the community spouse would have been able to rely upon the home being there for him or her for as long as they could enjoy it.  

More, the trust may have encouraged, rather than discouraged, family discord.  Rather than representing a unifying plan for the best interest of the Petersons and their family, the planning may have played a role in fracturing familial relationships.  The evidence is that a grandchild contested termination of the trust, in essence opposing their grandparents' wishes.  This is always a possibility with or without any estate plan, but family discord should always be a consideration, and granting grandchildren interests, rights, and privileges should always be considered carefully.  Without knowing the circumstances, it is difficult to make hard assessments, but one has to wonder why a daughter was made a fiduciary of the parent's assets, but not a beneficiary.  This anomaly might be well justified, or a warning sign of future problems, which might have been resolved with reconsideration of the plan or alternate drafting.          

Bottom line: irrevocable trusts have advantages and disadvantages, costs, expenses, and risks.  My experience is that these are rarely discussed thoroughly  or considered carefully.  Extra care must be taken when planning while both spouses are alive and healthy, especially given the protections built into Medicaid to protect spouses.  Any planning to avoid Medicaid spend down puts assets at risk of losing the already existing protections.  

It was not clear whether the subject trust was drafted by an attorney.  If it was drafted by an attorney, it may have been crafted or drafted poorly, or it may have been thoroughly misunderstood by the clients.  Even when provided clear written explanations of the limitations, risks, and costs of plans, sometimes clients misunderstand.  

If the Petersons drafted the trust themselves, or utilized a drafting service such as those available on the internet, they received the product they paid for.  Irrevocable trusts, like any complex legal document, should only be crafted and drafted by a competent lawyer representing YOU after s/he understands YOUR goals, circumstances and needs.  YOU deserve legal representation. YOU deserve to have YOUR rights and interests protected.  IF these rights and property interests are so valuable that you choose a complex plan to protect them, retain a lawyer to protect you. A computer, some software, a nameless, faceless representative behind a website, or an "estate planning professional" at a seminar  do not, and cannot serve this role.  Read the disclaimers!  

For more about the case: In re Peterson Family Irrevocable Trust, No. 772 WDA 2024, 2025 Pa. Super. 60 (Pa. Super. Ct. Mar. 13, 2025)(last accessed 4/3/2025).  

For more about the dangers of comfort clauses: 

• Irrevocable Trust Assets Found Available Resources for Medicaid in Arkansas 
• Irrevocable Trust Fails to Protect Assets from Availability for Medicaid 
• "Comfort Clauses" Hobble an Irrevocable Trust for Medicaid Planning