Raleigh Elder Law | Required Post about Celebrity Estate Planning

Articles detailing the "failings" of celebrity estate plans is one of the more common "click-baitish" news items you'll see related to estate planning.  The one I saw today related to Lou Reed, his 34-page will, and the fact that he should have done a revocable trust.  The article can be found here.

I bring this up for a few reasons:

1. (shamless plug) I welcome all celebrities that would like me to handle their estate planning. (/shameless plug)
   
2. Revocable trusts are amazing and affordable estate planning tools.  Admittedly, any revocable trust drafted for the estate of someone like Lou Reed wouldn't be run of the mill, and would likely have made his 34-page will look like a blog post, but the importance of one can't really be overstated.  If you have an estate that you'd like to keep private, or have real property in multiple states, or would like to provide for family members (like Mr. Reed wanted to provide for his elderly mother), a revocable trust can make the administration of your estate much easier.  BUT:
3. Just because someone does a will instead of a trust doesn't mean their estate plan is bad, or incomplete.  It is quite possible that Mr. Reed sat down with his estate planning attorney, and the attorney began discussing trusts, and Mr. Reed threw up his hands and said "I'm not interested in trusts -- I just want to do a will."  To which the attorney most likely protested, but at the end of the day, it's the client's decision.  And if Lou Reed only wanted a will, that's the end of it.  It's much better than doing nothing at all and leaving it to the laws of the State of New York.  His wishes were met through the will.  Was it the cleanest or best method?  Not in my opinion.  But just because you don't do a trust doesn't mean your estate planning was awful.  The key is having a plan, and that's something we can help with.

Raleigh Elder Law | Common Probate Pitfalls

We have a lot of clients that come in and ask the question, "What is probate?"  Probate is the process by which a deceased person's will is offered to the court (in North Carolina, this occurs in front of the Clerk of Superior Court) for approval and by which the estate is administered in accordance with the terms of the will.  There is plenty of information out there about probate and what it is (here and here, for example), so there's no need to go over it again.  What I think would be beneficial is a discussion of the most common mistakes people make in the probate process.

Common Pitfall #1: Failing to transfer all property out of the name of the decedent.  When it comes time to close the estate, it's important to make sure that all items in the name of the deceased person have been closed out and/or transferred.  Many times we will see executors come into our office because they failed to transfer title to a vehicle or close out a bank account.  If it's something that wasn't listed on the estate's 90-day inventory, it can fall through the cracks, at which point the estate will have to be reopened in order to transfer those items.

Common Pitfall #2: Paying expenses related to a home or land owned by the deceased person out of the estate.  This is any easy trap to fall into, because it seems like a no brainer that an Executor would pay things like power bills, water bills, and tax bills for a home or land that a deceased person owned.  However, this is not the case.  Under North Carolina law, legal title to real property is vested in the deceased person's beneficiaries on the day the person dies, and with legal title comes responsibility for all expenses related to the property.  From that point on, the beneficiaries are responsible for all the bills.  Some counties will allow expenses related to real property to be paid from the estate with the agreement of the beneficiaries of the estate, but it varies, and could result in the funds paid out needing to be paid back to the estate.

The best thing is for an executor to inform all the heirs of real property in writing that they are responsible for the expenses of the property going forward, and to not pay those expenses from the estate.  It will just make things easier when it comes time to close the estate.

Common Pitfall #3: Paying bills along the way instead of waiting.  It would seem counter to the Executor's job to wait on paying bills.  Your job is to wrap things up, and paying bills is part of that job.  However, North Carolina law states that if there are not enough assets in a deceased person's estate to pay all creditors fully, the claims of creditors have to be prorated.  We have seen many times where an executor, in an attempt to keep bills paid and avoid ongoing billing, will pay things along the way, and then when it comes time to settle the big bills, there isn't enough money.  This is a problem because the estate cannot be closed until the bills of the decedent are satisfied in accordance with the law, and if there isn't enough money in the estate because bills have been paid incorrectly, the Executor may be put in a situation where they have to reimburse the estate for those incorrect payments.

In North Carolina, following a person's appointment as Executor, the Executor is to run what's called a "Notice to Creditors".  This notice, run in a newspaper in the county where the person died, lets everyone know that the person has died, and tells them that if the deceased person owed them money, they have 90 days in which to make a claim with the Clerk of Court, or their claim will be forever barred.  (Note:  There are exceptions to this rule as it relates to "known" creditors, so if there's a debt you, as Executor, know about, and they do not file a claim, you can't say they are barred.  If you run into a situation where you aren't sure about a claim's validity, contact an attorney).

You should always wait until this 90-day period has run before you start paying estate bills.  This will ensure that you're paying things correctly, and will ensure that if there isn't enough money in the estate, that claims are properly prorated and satisfied as fully as possible.

There are certainly other areas that can cause problems for Executors, but these are the ones we see in our office most often.  If you're considering navigating the probate process on your own, keep these points in mind -- they may save you a lot of extra work down the road.

Raleigh Elder Law | On Cynicism, Dementia, and Irony

Apparently a new study published in the online publication Neurology has found a correlation between cynicism and dementia.  Newsweek published an article on the study, and highlighted the main finding, which seems to be this: there is strong evidence that consistent social interaction helps maintain cognitive functioning as a person ages, and cynical people tend to shy away from consistent social interaction. Therefore, cynics don't participate in the types of settings that provide cognitive stimulation, thereby removing one of the bolsters to cognitive functioning. 

Ironically, while cynics may chose to avoid social interaction, many other elderly members of the population crave social interaction, but are deprived, either because of health or a lack of transportation.  These folks are therefore at risk of losing the same bolster that cynics may knowingly avoid.

Many local elder groups have group activities, and many counties in North Carolina provide transportation services for the elderly.  Additionally, your church or other civic group may have teams that visit people who are unable to get out.  Finally, local programs like Meals On Wheels also provide an opportunity for social interaction for the elderly.  Take time to research your area and see what programs are available if you are interested in helping provide that link between an elderly person and society.

For folks in the Raleigh area, here are some good places to get started:

http://www.resourcesforseniors.com/
http://www.wakemow.org

Important note: dementia is not the actual disease; it's a term used to describe the "symptoms associated with a decline in memory or other thinking skills severe enough to reduce a person's ability to perform everyday activities."  The Alzheimer's Association has a very good overview of dementia and the different diseases here, which is where the above definition came from.  There is no specific test for determining whether someone has dementia or one of its diseases.  If you or a loved one are having or suspect issues that are affecting your ability to conduct day-to-day activities, please consult with your physician. 

Raleigh Elder Law | How Does Estate Recovery Work?

At least once a week, I have a Client that will ask about Medicaid's Estate Recovery Program.  Admittedly, they don't use those words.  It's more commonly phrased in the way in which they've heard about it: the government selling the house or taking everything you've got.  This generalization isn't necessarily incorrect, but it oversimplifies the issue.  Hopefully this post will provide some clarification.

Estate recovery is the law, and it's codified in the North Carolina General Statutes in Chapter 108A.  A link to the statute is here.  What the statute says in simpler terms is that anyone who receives one of six types of medical care that is paid for by the North Carolina Medicaid Program will open themselves up to a claim being filed by the Program to recover the amount paid for those services on behalf of the individual.  This includes nursing home services and home and community-based services.

So how does this work in practice?  Once a person is approved for and begins receiving medical assistance that is paid for, in part, by the North Carolina Medicaid Program, they start running up a tab with the Program.  The program tracks expenditures made on behalf of the individual, and when the person receiving services dies, a letter is sent to the recipient or person responsible for the recipient that basically says "you were made aware that estate recovery was a possibility when you applied for services. Since you have passed away, your estate may be subject to estate recovery."  That letter will also normally set out the amount paid on behalf of the recipient, and what the State believes is in the estate of the recipient.  This letter is not the actual claim, however.  The actual claim will follow, and will include a copy of the tab the recipient ran up during their time in care.

Now, there are a few key points to remember.

1. If the deceased recipient's estate has a value of less than $5,000.00, the State will waive its right to estate recovery.
2. If the recipient's tab is less than $5,000.00, the State will waive its right to estate recovery.
3. If the recipient is survived by a spouse, the State will waive its right to estate recovery.

If any of these situations applies, you do not need to be concerned about estate recovery.  It is important to send a response to the State, however, outlining why they should waive their claim if the reason is either 1 or 3 above.

If one of these exemptions does not apply, you will face an estate recovery claim that will have to be satisfied.  I will outline the process for satisfying those debts in a later post, but the final important point to remember about estate recovery is this: the state cannot get any more out of your estate than it paid on your behalf.  So if your home sells for $300,000 after your death, and the State paid $50,000 on your behalf for medical services, the State is only entitled to $50,000 -- not the full amount.

So back to that oversimplification: the state will take your house, or the state will take everything you have.  The State will not take your house.  The State's claim will likely result in it being sold (depending on the decision of your Executor -- which will be discussed in my next post), but it cannot take the full amount of sale proceeds unless the sales price is only equal to or is less than the amount it paid on your behalf.

There are ways to avoid estate recovery completely with proper planning.  Call our office today and set up a time to discuss your options if you're facing a long-term care situation.

Raleigh Elder Law | How To Shop for Long Term Care Insurance

NPR had a segment on Morning Edition this week about shopping for long term care insurance.  A link to the story and the audio is here, and it has some useful information, but I really like it because within the article is a link to a federal website that shows the average annual cost of care on a state-by-state basis.  Since we're a Raleigh, NC and Burlington, NC firm, however, I want to point out the costs for North Carolina:

A private room in an assisted living facility will cost up to $36,000 per year, or $3,000 per month.

A semi-private room in a nursing home facility will cost anywhere from $64,000 to $74,000 per year, or $5,300 to $6,100 per month.

A private room in a nursing home facility will cost anywhere from $72,000 to $86,000 per year, or $6,000 to $7,100 per month.

Think about these numbers, and then think about what you are either receiving in retirement, or expect to receive in retirement.  Do you have enough to cover that cost of care?  How much does it leave your spouse with per month in income?  Chances are, not much.  That's why it's imperative that you consider these issues when you are looking at your estate plan and your finances.  What can you do to help supplement your income to cover the cost of care?  Have you checked on long term care insurance?  If you have and you either don't qualify, or you can't afford it, have you talked to an attorney that focuses their practice (like us!) on estate planning and long term care issues?

Don't let these things creep up on you.  Plan!