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The Social Security Sustainability Conversation

In our practice we work with many Social Security recipients. As part of estate and special needs planning, we are always considering the impact of social security income on the client’s plan. This week I thought we would take a closer look at Social Security Programs. There has been a lot of concern about the sustainability of the program and with the Covid 19 pandemic people may be even more concerned. April 22, 2020 the Trustees of the Social Security and Medicare Trust Funds released their Annual Report.

First, who is receiving Social Security?

In 2020, about 65 million Americans will receive over one trillion dollars in Social Security benefits.

Snapshot of a Month: December 2019 Beneficiary Data –

  • Retired workers 45 million $67.7 billion $1,503 average monthly benefit
    • dependents 3.1 million $2.4 billion
  • Disabled workers 8.4 million $10.5 billion
    • dependents 1.5 million $0.6 billion
    • $1,258 average monthly benefit
  • Survivors 6 million $7 billion

Second, What Programs Does Social Security Provide?

These are the four main programs for person’s worked and contributed to Social Security:

    1. Old Age (their term not mine)- this is what we think of as the retirement income.
    2. Survivors- this is the program for widowers and surviving dependents of workers who received benefits.
    3. Disability Insurance- the program designed to pay disabled workers who worked at jobs contributing to the program and the person meets the definition for disability.

SSA has many more programs but these are the major work-related programs. 

Is Social Security Sustainable?

The short answer appears to be no it is not, at least not with current plan for administration.  However, that is not actually the answer. Every year the Trustees use multiple models to make projections on the sustainability of all programs. Both programs currently have a positive balance so that is good news. The bad news is they are being depleted and not replenished at the same rate.
Figure II.D2.—OASDI Income, Cost, and Expenditures as Percentages of Taxable Payroll [Under intermediate assumptions]

Rough projections are that if nothing is done the trust funds will be depleted by 2035. Congress knows how important this program is to the financial ability of the United States and will likely to action to protect the program. Indeed, over the years Congress has made changes to Social Security programs. 

What Options Are Being Considered?

Fortunately, lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security. There are many options being considered. Here are just a few.

    1. Delay the retirement age at which people can begin withdrawing their full benefit.
    2. Percentage reduction in benefits to bring amount paid out closer to tax revenue.
    3. Increase payroll taxes either an overall increase for employers and employees and/or raise or remove the ceiling on taxable income.
    4. Encouraging programs that increase individual saving for retirement.

The Social Security program it is a critical part of financially planning for most Americans. It is important to stay informed and to be part of the conversation about the future of the programs. I hope this gave you a start on engaging in the conversation. To keep it going below are some resources. Check back on the firm FaceBook page for our regular postings on Social Security.

You can read the full 2020 OASDI Trustees Report HERE

Or, for basic facts about Social Security click HERE 

Written by: Jennifer Kupiszewski, Esq.

Will ALTCS Take My House?

The Arizona Long Term Care System (ALTCS) is Arizona’s Long-Term Care Medicaid program.  The program covers day programs, some in home care, memory care centers, group homes, assisted living centers, nursing home care and many more services.  The purpose of ALTCS is to ensure that people with limited income and assets combined with medical needs are able to be served all while making sure the spouses of such individuals do not become destitute.

Some people are unwilling to explore the availability of using ALTCS because of the fear of losing the home.  There are usually two main concerns:  the house will make my loved one ineligible for ALTCS or, the State will take the home when my loved one dies.  

It is certainly true that to qualify for ALTCS the assets and income of the applicant must meet certain criteria. For a married couple where the spouse lives in the home, the house is an excluded resource regardless of the value of the home. The home must be the primary residence of the person receiving ALTCS. The home is also excluded from being considered a countable resource in these circumstances:

-The customer or spouse lives in the home property;

-The customer is absent from the home property due to institutionalization but the customer’s spouse or dependent relative lives in the property as his or her principle residence;

-The customer lived in the home property, is absent due to institutionalization, but intends to return to the home.

However, if the applicant is unmarried, the equity value of the home must not exceed $595,000 (2020) if it meets one of the criteria above. Additionally, while the property is for sale, it is also excluded. Although the rules might be confusing, in general, owning a residence is a not a reason to avoid using ALTCS services to help pay for care. 

That brings us to the second concern i.e., the State will get the house upon the death of the ALTCS recipient.  This can get complicated because ALTCS has an estate recovery program and lien rights.  Under the estate recovery program, ALTCS only recovers property that is subject to a small estate affidavit or a probate.  Therefore, a home owned with rights of survivorship and the survivor is living or where a beneficiary deed was recorded before the death of the ALTCS recipient, will avoid estate recovery.  

ALTCS also has the right to file a lien against real property. However, if a spouse is alive, a lien will not be filed.  Additionally, the State only has a right to file a lien against the real property if the ALTCS recipient was in a long-term care nursing home for 90 or more days with no intent to return home.  There are some additional exemptions to these rules as well.

While the rules are confusing, it is always beneficial to investigate whether an ALTCS application is worth pursuing.

Written by: Emily B. Kile, Esq.

The Importance of Long Term Care Planning

Why Estate Planning is so Important for Long Term Care Planning?

Daily, clients call our office and tell us, “My mom has dementia and I don’t think it is safe for her to be home alone any more and she cannot afford to have 24 hour home care or go to a group home or memory care unit”. During our consultation, I ask the family member to provide me with copies of the current estate planning document and most importantly the financial power of attorney.

Without a financial power of attorney, if mom is no longer competent to sign documents, we might have to go to Court to get permission to sell the home and manage the resulting funds. This could be true even if mom’s spouse is still living as there is no statutory right to sell a house for someone.

Additionally, if mom’s income is higher than the cap, we might need to create and fund an Income Only Trust or Miller Trust. Again, without specific authority in the documents, we could need a Court action to get that in place and unfortunately, court matters can take time and be fairly expensive.

Although accessing ALTCS (Arizona’s Medicaid program that helps pay for long term care costs) is the last resort, trying to preserve some of the assets of the person in need can still be a goal. ALTCS does not pay for hearing aids, dental care or a private room. Additionally, it can take 3-6 months to get an approval from ALTCS and typically there is no retroactive pay unless the person is in a nursing home.

The power of attorney document might allow the Agent to make gifts of mom’s property or get paid for acting as the Agent. This might allow us to do some planning to maximize the remaining assets and still obtain ALTCS benefits. While making gifts or transfers of mom’s property might delay when ALTCS will be available, doing so does not necessarily mean that benefits will never be available.

Even if the decision is made not to move forward with ALTCS planning, obtaining a reverse mortgage on the property, getting a home equity line of credit to pay for care, or just to sell the house will still require you to have a power of attorney.

Written by: Emily B. Kile, Esq.

Terms Defined: Mental Health Care Power of Attorney

What the heck is a Mental Health Care Power of Attorney?

In prior blogs, we have stated that your estate planning is valid in Arizona so long as it was valid in the State in which you signed the documents. That is still true, but Arizona has an extra requirement if you need inpatient mental health treatment.  

It might be uncomfortable to think about being admitted to a locked psychiatric hospital.  However, if you need treatment in such a setting, the mental health power of attorney or a specific provision in your health care power of attorney, might mean that a court guardianship may be avoided.  

In order for someone to try and obtain help for someone who needs inpatient treatment, this document is crucial. In most cases, someone experiencing a mental health crisis might end up at the medical hospital for an evaluation. Sometimes, the psychiatric hospital can send someone to the person’s home to perform that evaluation.  And of course, sometimes the matter is an emergency and law enforcement might need to be involved.  

In all circumstances, someone needs authority to involuntarily admit another person.  The mental health provisions in the health care power of attorney or a separate mental health care power of attorney might be sufficient to meet that goal. If the following language is in the power of attorney and is initialed by the Principal, then the Agent should have this added authority:

By initialing here, I consent to giving my agent the power to admit me to an inpatient or partial psychiatric hospitalization program, please initial here: ____ (initial if you consent)

What if your loved one did not sign a Mental Health Care Power of Attorney or the provision above? Often that means a guardianship with mental health care and treatment authority will need to be filed with the court. The State of Arizona can also petition for the authority needed to hospitalize and treat the person under some circumstances.  

It is certainly scary to think you might need be hospitalized for mental health reasons, but you certainly want to be able to indicate the decision maker!  A free mental health power of attorney can be found at the Attorney General’s website:

Written by: Emily B. Kile, Esq.


Terms Defined: “Transfers” & ALTCS

What is a “Transfer” for ALTCS Purposes?

ALTCS (Arizona Long Term Care System) is Arizona’s Medicaid program that pays for long term care services. ALTCS might help cover the costs of home care, day programs, respite, assisted living centers, memory care or nursing home care. To be eligible for ALTCS benefits, the person must meet the income and assets limits while also meeting the medical criteria.

It is important to remember that ALTCS is a welfare program. As part of the application process, the applicant or his/her representative must tell ALTCS if the applicant has made any transfers or gifts within 60 months of the date of the application. “Transfers” or “gifts” refer to the applicant giving something away to someone for less than fair market value. The value of the gift will determine how long the applicant must wait before ALTCS will assist in covering the costs of care. This is called the “penalty period”, although I prefer to call it the “waiting period”.

There are some exceptions to this process. For example, any transfers between spouses has zero impact on eligibility. Transfers to disabled children or trusts for certain disabled persons also has no impact on eligibility.

However, other than a few exclusions, most transfers, whether to a charitable or religious entity or a family member or friend will unfortunately delay ALTCS eligibility. Even making tax free gifts of up to $15,000 per person per year will impact the timing of ALTCS eligibility. Please note that adding a child, or someone other than a spouse to a bank account will not impact eligibility. But, adding someone’s name to the deed to a home or other real property will.

While you must disclose any transfers made within the last 60 months, the period of ineligibility could be as low as a few days or as long as several years. Keep in mind that while the waiting period does not have time limits, the disclosure period does. For example, if you gave away $1 million and immediately applied for ALTCS, the person would need to wait approximately 11 years before ALTCS would help pay for care. If you gave away $15,000 and applied, the waiting period would be closer to two months.

ALTCS rules are complex, so please be sure you’re not making a decision that will negatively impact your end goal!

Written by: Emily B. Kile, Esq.

What You Need to Know About Paying for Long Term Care

We all know that the costs for in-home care, group homes, memory care, assisted living and nursing homes can be very expensive. And who knew there were so many choices? Medicare pays for very little, if any of those costs and unfortunately, Medicare typically does not cover “custodial care.”  However, it might cover some at-home therapies like physical therapy or occupational therapy. While Medicare might also provide benefits if you need to go to a skilled nursing or rehabilitation center after a hospitalization, it is not the solution to pay for long term care needs.  

So, what are your choices?  Of course, you can privately pay for the services.  If you have a long-term care insurance policy or another insurance policy meant to pay for long term care, that may cover some or all costs.  It is important to check your policy before you need to use it, so you are aware of exactly how it works. Do you have an “elimination period” where you are required to pay first? Does this policy cover a family member providing services to you? Will it cover at home care and assisted living centers and group homes, or just nursing home care? 

There are also two government programs designed to help with these costs—Medicaid (called the Arizona Long Term Care System or ALTCS in Arizona) and the Veteran Pension Benefit. Both ALTCS and the VA have eligibility criteria linked to annual income, resources, and medical need.  Remember that each State has a different set of rules related to the Medicaid (ALTCS) program, while the VA program rules are the same across all States.

In general, both require that the applicant have limited income, limited assets and medical needs related to a person being unable to perform his/her activities of daily living.  The diagnosis of dementia or Alzheimer Disease provide evidence of that need.  

While the VA program provides a monthly payment to help offset the costs of the care, the ALTCS program is a cost sharing program.  That means that for most people who obtain ALTCS benefits pay a portion of his/her income (SSA and pension) to the facility where he/she lives, and the State of Arizona will make up the difference.

The program qualifications are complicated so please feel free to go to our website to see more in depth information about these programs:

Written by: Emily B. Kile, Esq.

The Probate Court Process for Guardianship, in a Nutshell!

Petitioning for guardianship through the Court can be overwhelming. There are a lot of steps to take, a lot of paperwork to complete and many new people that will come into your lives. Being educated about the process can help reduce some of the “surprises” along the way. You can visit www.azcourts/probate for videos that walk you through the process and for the “do-it-yourself” Court forms and instructions.  
Guardianship is the process in obtaining a person (or entity) to make medical, housing and education decisions for an incapacitated person. It is important to understand that this is a Court process even if you and the person who needs a guardian are on the same page and no objections are expected.  You can retain your own attorney (which we of course would be thrilled to be) or you can represent yourself (pro-per).  The person in need of a guardian (the “Ward”) will be assigned an attorney by the court system (Court-appointed Attorney). If the Ward has an established relationship with an attorney, the court might allow him/her to represent the Ward in the proceedings .
If a Court-appointed Attorney is needed, it is your responsibility as the filing party to make that request through the Court. The matter also needs to be set for a hearing and all interested parties are required to get notice via personal service or certified mail. Once the hearing is set, you must also personally serve the Ward with the documents no less than 14 days before the hearing. If you do not wish to serve the Ward, then they are required to be in the courtroom to waive service at the time of the hearing; we highly recommend personal service since it is unknown if someone might be ill or unwilling to attend a hearing at the last minute.  
The court will assign a Court Investigator to the matter as well.  The Court Investigator is there to provide a report to the Court after speaking with you, the Ward and any other involved parties in the matter. The Court Investigator will file a written report prior to the hearing to give the Court a recommendation about whether you seem appropriate to serve as Guardian and whether the Ward appears to need a Guardian.  
As stated above, the matter will be set for a hearing. The hearing might be in person, by phone or by video. Given COVID-19, sometimes we will not know how the hearing will be held until a week prior to the scheduled date.  You are required to participate at the hearing and give testimony about the situation or affirm that the information in the documents already filed are still true and correct.  
Once appointed, the Court will issue the Order appointing you as Guardian and the Letters of Appointment. These are the documents can be presented to anyone requiring proof that you are the legal decision maker for the Ward. Unless you need court approval for something in the future, it is unlikely there will be any further hearings. It is important to keep in mind that you will be required to file a Health Care Professional’s Report and a Guardian Report annually. Those can be found at the following link:
If you’d like to further discuss potentially hiring our firm to represent you in a Guardianship matter, please call us at (480) 348-1590.

Nursing Homes & Assisted Living Facilities Taking Your Loved One’s Stimulus Checks?

The Federal Trade Commission (FTC) tells nursing home owners and other assisted living facilities that the resident stimulus checks are not for them!

The FTC cautions nursing homes and assisted living facilities that they are not permitted to require their residents on Medicaid to “sign over” their pandemic stimulus checks in order to pay down care bills. The government aid was for individuals, yet state attorney general’s were receiving complaints that the owners of Medicaid funded, long-term care facilities were requiring their residents to sign over stimulus checks to the facility.
For a person on Medicaid who cannot have more than $2,000 in assets, the stimulus could be a significant amount of money. It could allow the individual to receive much needed dental care or purchase clothing. These purchases are the type of economic activity the country needs and the type of personal relief the CARES was to provide. According to the CARES Act, those economic impact payments are considered tax credits and tax credits don’t count as “resources” for federal benefits programs like Medicaid. That means, nursing homes and assisted living facilities can’t take that money from residents simply because the resident is on Medicaid.
If you or someone you love is facing this issue you can direct the facility owner to look at page 3 of the Congressional Research Services’ COVID-19 and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates/Economic Impact Payments in the CARES Act here and 26 U.S.C. § 6409 of the Internal Revenue Code here.
The FTC advises anyone with concerns about inappropriate actions regarding stimulus checks to contact their state attorney generals office and report the concern to the FTC.

Nomination of Guardian within your Estate Planning

One of the most important reasons to do estate planning is to ensure that you have nominated, in writing, a guardian for your minor or disabled child. Making a decision of this nature is also a reason people never move forward with estate planning. Thinking about what will happen and who will care for your child can be extremely emotional and very scary. These feelings are understandable but should not hinder your decision to plan. Part of your responsibility as a parent is to ensure that an appropriate guardian will be available to assist your child if you cannot do so.

This situation comes up in a variety of ways. You might have a minor child and want to make sure a guardian is named if you pass away before the child turns 18. For minors, Arizona also allows you to delegate someone to be the guardian for your child for a period not to exceed six (6) months. This option works well if you plan on being out of town or have a medical condition that will make it difficult for you to make decisions for your child. If you have a disabled child, your goal might be more long range. Nominating someone to act short term or long term if something happens to you is important.

Your Last Will & Testament is one of the estate planning documents that allows you to nominate a guardian. You can name the people you trust in the order you would want them to serve. This list can be as long or as short as you have appropriate decision makers. Another option available to you is a separate nomination of guardianship form. Sometimes this separate form is easier because it allows you to change the document more easily as your life changes over the years.

If you have been appointed by the Court as guardian for a child, as time goes by, it might be in their best interest to add a co-guardian. If something happens to you, the co-guardian is already in place. If someone is appointed as a co-guardian by the Court, they will have all of the same rights and responsibilities as all other guardians. We do not have “stand by” or “successor guardians” that are appointed by the Court ,so If you wish to name a successor guardian, that nomination would take place in your Will or in a separate nomination form.

As you make these decisions, it is important to consult with those you are choosing to act as a guardian later. Review your decisions frequently and update your choices as needed. Tell the nominated guardians where you keep your child’s important papers, insurance information, identification, and information about government benefits like DDD. Draft a letter to the guardian about the child’s needs and preferences. The more information you are able to make available to the new guardian, the easier the transition should be for everyone.

Written by: Emily B. Kile, Esq.

Estate Planning with Blended Families

My Spouse Has Children from a Former Marriage; What Happens to Our Property if My Spouse Dies ?
It is not uncommon to be married to someone who has children from a prior marriage.  Maybe you both have children from prior relationships.  It is also possible that some of the children are in common and some are from prior relationships.  Whatever the situation, without a Will or Trust, the Arizona statutes may direct where your estate goes at death.
There are a variety of ways that assets can be titled.  You could own something jointly with another person or you could own real property as “tenants in common.”  Tenants in common means when one of you dies, while you still own your share, the deceased person’s share becomes part of his/her estate and does not pass to you automatically as it would if titled “with rights of survivorship.”  Titling real property as “husband and wife” also does not create “rights of survivorship.”  If you have named beneficiaries on accounts, whether on a beneficiary form or as “payable on death” or “transfer on death”, such property will be distributed to those beneficiaries.  
However, if you own real property, a bank account, investment account, retirement account or other assets and there is no joint owner, no beneficiary named and it is not titled to a Trust, your estate may need to be probated at your death.  While the probate process might not be complicated, the outcome might come as a surprise.  
Generally, if you did not enter a pre or post nuptial agreement during the marriage, all earnings received after marriage are considered community property.  All property received as a gift or inheritance, if it has not been comingled with community assets during your life, is your sole and separate property.  
Any property that is subject to the probate is divided as follows:  your surviving children will receive your half of any community property and one-half of your sole and separate property and your surviving spouse will receive the other half of your sole and separate property.  Maybe it your intent to leave 50% of the property you received from your grandmother to your surviving spouse, or maybe you wanted your surviving spouse to get all of it, or even your children to get all of it. This brings to light the importance of estate planning. 
Another aspect to pay attention to is reviewing the Will or Trust that was signed prior to the marriage.  This document may also significantly impact how your property is distributed and whether that meets your present-day goals. 
While it may be unpleasant to think about, sometimes your relationship with your spouse’s children might feel very different when that person is no longer alive. 
A little bit of planning, in writing, can go a long way to avoid problems and surprises later! 

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