We are located at:
3 Executive Park Drive, Suite 107
Bedford, NH  03110

Mailing:
P.O. Box 10239
Bedford, NH  03110-0239

Phone (603)644-0275
Fax (603)606-4258





New Law Expands Liability for Payment of Long Term Care Costs

The cost of long-term care has traditionally been paid in one of three ways: from personal savings, long term care insurance (or some combination of the two), or by Medicaid.  Medicaid is the program that pays for long-term care for people who do not have the funds to pay for the care themselves.  Medicaid is a joint federal and state welfare program that is administered in New Hampshire by the Department of Health & Human Services (“DHHS”).

 

Senate Bill 138, which became effective July 2, 2013, greatly expands the class of people who are liable for the cost of care of residents of nursing homes and assisted living facilities.  Persons who are newly liable for the cost of care include certain transferees of assets, fiduciaries who fail to apply for Medicaid benefits in a timely manner, and certain persons who control a resident’s bank account or other income who refuse to pay the resident’s portion of cost of care.

 

1.         Liability of transferees

 

Prior law provided that a person who transfers assets for less than fair market value for the purpose of qualifying for Medicaid within five years of applying for Medicaid would be disqualified from receiving Medicaid for the amount of time that the transferred assets could have paid for care.

 

Without changing that disqualification rule, the new law now holds the person who received the gift from the Medicaid applicant liable for the cost of care of a resident, up to the amount of the gift.  The long term care facility is authorized to sue the transferee for payment.  If the transferee can convince the court that the transfer was not for the purpose of qualifying for Medicaid, then the transferee will not be liable for the cost of care.

 

2.         Liability of fiduciaries

 

A fiduciary (defined in the statute as a person to whom power or property has been formally entrusted for the benefit of another, such as an attorney-in-fact [i.e., holder of a durable power of attorney for financial affairs], legal guardian, trustee, or representative payee) who controls the funds of a resident of a long term care facility and who has the authority and duty to file an application for Medicaid on behalf of the resident can be held liable for all costs of care that are not covered by Medicaid due to the fiduciary’s negligence in failing to promptly and fully complete and pursue an application for Medicaid benefits for the resident. 

 

The facility must send a written notice of its intent to file suit to anyone it intends to name as a defendant at least thirty days prior to filing suit.  If the fiduciary is a legal guardian, the facility must also send the notice to the probate court that has jurisdiction over the guardianship.  The probate court will determine whether the guardian has acted negligently, and whether the guardian should be removed for failing to have acted in the ward’s best interest.  The statute gives the probate court the authority not only to assess liability for negligence, but also to award damages.

 

3.         Liability of other persons who control funds

 

People who receive Medicaid benefits in payment of their long-term care costs must pay most of their own income to the long-term care facility, and Medicaid then supplements the resident’s payment to the facility.  The new law provides that third parties who have authority to deal with assets or income of a resident of long-term care facility, such as a joint tenant on a bank account, are liable to the facility to the extent that the person refuses to use the resident’s income or assets to pay the resident’s share of the monthly payment to the facility.  

 

As in actions against fiduciaries, the facility must send a notice of intent to file suit to the proposed defendant at least thirty days prior to filing suit.  The liability would be for amounts going forward from the receipt of the notice.

 

 

In all cases, the defendant’s liability will be determined by a judge, not by a jury.   The court has discretion to grant attachments to secure any judgment or potential judgment in order to protect facilities from non-payment or failure to cooperate in obtaining Medicaid.  Furthermore, the death of the resident will not interfere with the right of the facility to recover its cost from anyone found liable.

 

If you have any questions about your liability under this new law, please call us for an analysis of your particular situation.

 

 

Gift Tax Planning Opportunity

With apples, mums and pumpkins now filling our farm stands, we are reminded that we are approaching the end of the two-year window in which individuals may make significant gifts without paying gift tax.  Unless Congress takes action before year-end, the lifetime gift tax exemption and generation skipping transfer tax exemption of $5,120,000 each are set to expire on December 31, 2012.  Both the lifetime gift tax exemption and the generation skipping transfer tax exemption are scheduled to decrease to $1,000,000 on January 1, 2013 (with some adjustments for inflation).  If you are considering making significant gifts to take advantage of these opportunities, it is important to begin the process soon.  Appraisals of the assets to be gifted may take some time to be completed, and the gift must be completed by the end of the year.

These increased exemption amounts are especially attractive to individuals who wish to transfer interests in closely held businesses or a vacation homes to members of younger generations.   Individuals who own vacation homes in Massachusetts, Maine, or other states that impose an estate tax on real estate owned by a non-resident decedent at death, even when there is no federal estate tax liability, may find this opportunity especially attractive.

Other ways to use the increased gift tax exemption include forgiving existing loans, creating irrevocable life insurance trusts and funding those trusts with cash that could be used to pay for premiums for many years into the future, and making gifts of interests in QTIP trusts.

Married couples whose marriages are not recognized under federal law may take this opportunity to equalize their estates by making lifetime gifts to each other, without incurring any gift tax.

People who take advantage of the increased lifetime gift tax exclusion realize the additional benefit of reducing their taxable estates at the time of their death, because all appreciation in the value of the gifted assets between the time of the gift and the time of death is removed as well.  (The downside of the lifetime transfer is that the gifted assets do not receive a step-up in basis at the time of the donor’s death.)

Why Your Children Should Sign Advance Directives When They Become Adults


Many individuals first consider consulting an estate planning attorney after they have children or accumulate wealth, and wish to make a will.  Typically, an attorney’s will package includes Advance Directives, which are among the most important estate planning documents.  Advance Directives allow for the handling of an individual’s financial affairs and medical decisions in the event the individual is unable to do so, and should be considered by all persons once they become adults. 


Although it may be difficult for parents to think of their 18-year-old sons or daughters as adults – especially when the parents are trying to rouse them from bed to attend high school classes, or paying for their college education and all the extras that such an education entails -- those young people are adults in the eyes of the law.  If a young adult should become incapacitated as a result of injury or illness, the parent has no legal authority to make medical decisions for the adult child, or to handle the child’s financial affairs.   The parent’s only recourse is to petition the Probate Division of the Circuit Court to be appointed Guardian of the Person or Guardian of the Estate, or both.   A Guardian of the Person would make decisions about the Ward’s medical treatment, schooling, and living situation.  A Guardian of the Estate would handle the Ward’s financial affairs, including managing the Ward’s assets, entering into contracts on behalf of the Ward, and perhaps bringing a lawsuit to recover for the Ward’s injuries.


The Guardianship process is focused on protecting the person who is under Guardianship, who is known as the Ward.  When a petition for Guardianship is filed, the Court must appoint an attorney to represent the Ward.   If a Guardian of the Person is appointed, the Guardian must file Annual Reports informing the Court of the Ward’s physical condition, and any changes in the Ward’s living arrangements over the preceding year.  If a Guardian of the Estate is appointed, the Guardian must file a corporate surety bond and Annual Accounts that report every financial transaction that occurred during the preceding year.

Everyone over the age of 18  should execute Durable Powers of Attorney to avoid the time, expense, and intrusion of a Guardianship.  Although some young adults are ready to sign Living Wills, which are documents that state that the Principal does not wish to be kept alive by artificial means if near death or permanently unconscious, most are not ready to make that type of decision.  They do not have to do so.  If the young adult executes a Durable Power of Attorney for Health Care and authorizes his or her agent to make those terminal care decisions, the agent will be able to decide what is best if and when the time comes.  

If you have children or grandchildren who have reached the age of 18 and who have not executed Durable Powers of Attorney, you should encourage them to do so.  A young adult who executes Durable Powers of Attorney becomes the client of the attorney.  His or her communications with the attorney are subject to attorney-client privilege, and cannot be shared by the attorney with any third party, including the child’s parents.  Of course, as is the case with any other client, the young adult is free to share any information that he or she wishes to disclose.


Changes to New Hampshire Trust Laws effective September 1, 2011

Changes affecting no contest provisions

 

In order to deter litigation over an estate plan, individuals may incorporate a no-contest, or in terrorem, provision into their will or trust.  Such provisions usually provide that a beneficiary who acts in a manner considered by the person making the will or trust to be a contest is deemed to forfeit his or her interest in the will or trust.  On September 11, 2011, a new law regarding the definition and enforcement of no-contest, or in terrorem, provisions in wills and trusts will come into effect.  The new law allows individuals to incorporate into their wills and trusts provisions that make the following actions by a beneficiary subject to forfeiture of the beneficiary’s gift:

 

            Any action to contest the validity of the will or trust;

 

            Any action to set aside or vary the terms of the will or trust;

 

            Any action to challenge the acts of the fiduciary (executor or trustee) in the performance of his or her fiduciary duties; or

 

            Any action or proceedings that frustrate or defeat the intention of the person who created the will or trust.

 

The new law also changes the legal standard in New Hampshire for avoiding the forfeiture clause.  Until now, a challenge to a will or trust containing a no-contest provision would not result in forfeiture if the challenge was brought in good faith and for probable cause.  Under the new law, the forfeiture will occur upon any action contesting the validity of a will or trust unless the beneficiary is ultimately successful in proving that the will or trust is invalid.  Forfeiture will also occur upon any action challenging the fiduciary’s performance of his or her duties unless the beneficiary is ultimately successful in proving that the fiduciary breached his or her duties.  The new law implies that forfeiture will result, without exception, from:  1) any action to set aside or vary the terms of a will or trust; or 2) any action other than a challenge to the validity of a will or trust, or a challenge to the fiduciary’s conduct, that frustrates or defeats the intention of the person who created the will or trust.

 

The forfeiture provision applies to actions undertaken by a fiduciary if the fiduciary is also a beneficiary of the will or trust, unless the person creating the will or trust makes an exception for the fiduciary.  All of the changes apply to any contest brought after September 11, 2011, regardless of when the no contest provision was created.  If you have included a no-contest clause in your will and/or trust, we recommend that you review the clause with your attorney to discuss how the changes in the law affect your estate plan.

 

Changes regarding the creation of testamentary trusts

 

The use of testamentary trusts (trusts created within wills) has declined in recent years, largely due to the increased privacy and lower administrative expense associated with the use of inter vivos trusts (trusts created during the grantor’s lifetime).  Testamentary trusts have historically been subject to probate court supervision, and require the posting of a bond to protect the trust property.  Effective January 1, 2012, a will may establish a testamentary trust and waive the annual probate court accounting requirements.  However, accountings must still be provided to the beneficiaries, the trust filings would be a matter of public record, and the trust would incur the expense of a probate bond is required by the court. 

 

Codification affirming that the grantor’s intent is paramount

Several sections of the Uniform Trust Code have been amended to affirm that the interests of the beneficiaries are determined by referencing the grantor’s intention.  There have been cases from other states that made changes to a trust instrument based upon the arguments that the changes would be better for the beneficiaries than the provisions made by the grantor.  The new laws solidify New Hampshire’s long-standing common law that the grantor’s intent must be honored.