ERA Law Group

A New Era of Attorneys

Uncategorized

Aug 20

Utilizing In-Marriage QDRO’s for Estate Planning

By Jessica L. Estes

As an estate planning and elder law attorney, often the most difficult type of asset to deal with is a retirement account.  Not only must you consider the type of account it is, but you must understand the owner’s rights to the funds in the account, as well as the consequences, tax or otherwise, of accessing those funds, which can depend on age and/or other factors.  In Maryland, retirement accounts are countable assets for Medicaid purposes, which adds another layer of complication.  And, even something as simple as naming a beneficiary for the retirement account is not as simple as it may seem, especially if asset protection is your main goal.

There are many reasons why someone may need to access retirement benefits.  Perhaps one’s spouse is in a nursing home and has a substantial retirement account that will have to be “spent-down” before qualifying for Medicaid, but the family wants to preserve those monies for the spouse at home, without suffering a huge tax consequence.  Or, perhaps one spouse is older than the other spouse and wants to delay taking required minimum distributions (“RMD’s”), as the couple does not need the extra income and wants to avoid additional taxes. 

Many people may have heard the term Qualified Domestic Relations Order (“QDRO”), but only in context to a divorce, and very few understand what a QDRO really is.  Simply put, a QDRO is an order signed by an appropriate state court judge that: (1) recognizes the joint marital ownership interest in a retirement plan; (2) provides for the plan benefits between the parties – the plan participant (employee spouse) and the alternate payee (non-employee spouse); and (3) is approved, or qualified, by the retirement plan administrator. Unlike a QDRO in a divorce that transfers retirement benefits to an ex-spouse, an “in-marriage QDRO” transfers retirement benefits to a current spouse.

To be eligible for an in-marriage QDRO, the retirement account must be an Employee Retirement Income Security Act (“ERISA”) based plan, certain state pension plans, or a Federal Thrift Savings Plan.  ERISA-based plans include 401k, 401(a), 403(b), corporate pension plans, some employee stock ownership plans, profit sharing plans, and State deferred compensation 457 plans.  Plans that are not eligible for an in-marriage QDRO include military pensions, Federal pensions (FERS and CSRS), railroad retirement plans and privately sponsored non-qualified stock plans.  Although individual retirement accounts (IRA’s) and simplified employee pension plans (SEP’s) are not immediately eligible, if a limited liability company (“LLC”) was established with a solo 401k, the funds in the IRA or SEP could be transferred to the solo 401k and then qualify for the in-marriage QDRO.

If eligible for an in-marriage QDRO, a review of the plan documents is necessary to verify the amount that may be transferred, as well as the amount that should be transferred based on the family’s needs.  Similarly, an inter-spousal agreement must be drafted that is the basis for the justification of the in-marriage QDRO. The inter-spousal agreement should lay out the agreement between the spouses as to the division of the retirement funds.  Using the example of the couple wanting to delay RMD’s, the agreement may state that all the retirement account will be transferred to the younger spouse which would allow the funds to remain in the account until the younger spouse reaches age 70 ½.  Or, in the case of the couple wanting to qualify for Medicaid benefits, rather than “spend-down” the funds and pay taxes on that money, the retirement funds of the nursing home spouse would be transferred to the spouse still residing at home, which could avoid most, if not all, of the tax consequences and preserve the asset for the community spouse, while allowing the nursing home spouse to qualify for Medicaid benefits. 

As you can see, in-marriage QDRO’s can be useful tools for estate planning but require careful drafting and knowledge of the various federal and state laws.  Do not attempt this on your own;  contact a qualified attorney to assist and help you navigate these complicated rules.

Jun 18

New Rules for Veterans’ Aid and Attendance Benefit

By Jessica L. Estes

Any Veteran, or surviving spouse of a deceased Veteran, whose income is not sufficient to cover his or her long-term care expenses, may qualify for a non-service-connected improved pension benefit called Aid and Attendance through the U.S. Department of Veterans Affairs (“VA”).  This benefit provides a monthly, tax-free income for the Veteran or surviving spouse provided he or she meets the eligibility and entitlement requirements.

There are four basic eligibility requirements for the Aid and Attendance benefit: (1) the Veteran or surviving spouse must be blind, residing in a nursing home, or require the aid of another person to perform personal functions required for everyday living; (2) the Veteran’s discharge from the military must be anything other than dishonorable; (3) the Veteran must have served at least ninety (90) days on active duty for anything other than training (those days do not have to be consecutive unless service began after September 7, 1980 in which case two years continuous active duty is required, or any length of active duty if the Veteran has a service-connected disability discharge; and (4) one of those days must have been during a period of war.

Additionally, the Veteran or surviving spouse must also meet the entitlement requirements.  To be entitled to the benefit, the Veteran or surviving spouse must pass the income and asset tests. The VA counts all gross household income but allows a deduction for unreimbursed medical expenses.  The Veteran or surviving spouse’s monthly income for VA purposes (gross income minus deductions) cannot exceed the maximum monthly rates for the Aid and Attendance benefit.  Currently, the rate for a Veteran without dependents is $1,881, the rate for a Veteran with one dependent is $2,230, and the rate for a surviving spouse is $1,209. 

Previously, there was no specific amount of assets that a Veteran or surviving spouse could retain and still qualify for benefits.  Rather, it was up to a claims examiner to decide if the applicant’s net worth was excessive and a bar to entitlement of the benefit.  Now, under the new rules, there is a net-worth bright line limit of $127,061.  So, if the applicant’s countable assets plus his or her annual income for VA purposes exceed that limit, he or she will not be eligible for the benefit. 

Similarly, there is now a look-back period of 36 months.  Any transfers for less than fair market value occurring during the 36-month period immediately prior to application will be penalized if such transfer would have resulted in the applicant exceeding the net-worth limit.  However, any transfers occurring prior to October 18, 2018 will not be penalized.  The penalty period begins on the first day of the month following the last asset transfer and is calculated by dividing the total amount of assets transferred in excess of the net-worth limit by the current monthly rate for a Veteran with one dependent.  Under no circumstances, though, will the penalty period exceed five years.

As with any government benefit, the application process can be daunting.  If you need assistance filing an application for benefits, contact a VA accredited consultant or attorney.  Not only can they assist you in making sure you have a fully developed claim, but by law, they are not allowed to charge for help with filing an application.

Jun 04

How to Qualify for Long-Term Care Medicaid

By Jessica L. Estes

Long-term care Medicaid is a needs-based program that helps qualified individuals pay for long-term care costs.  Long-term care is required when an individual, for a period exceeding thirty days, is unable to perform the basic activities of daily living such as bathing, dressing, eating, toileting, walking, and transferring.  Long term care can include homecare, adult daycare, respite care and assisted living or nursing home services, but long-term care Medicaid will only cover nursing home services.  As such, an individual must be admitted to a nursing home or other long-term care facility in order to apply for long-term care Medicaid.   

Moreover, there are three eligibility criteria that an individual must meet to qualify for long-term care Medicaid: (1) technical; (2) medical; and (3) financial.  In Maryland, to be technically eligible, an individual must be (1) a resident of Maryland; (2) aged 65 or older, blind, or disabled; and (3) a United States citizen or resident alien.  For purposes of Medicaid, an individual is considered a Maryland resident from the moment they are admitted to a nursing home in Maryland, even if their primary residence is located in another state or the District of Columbia.

To be medically eligible, an individual for a period exceeding thirty days, must require skilled nursing care, assistance with at least three activities of daily living, or assistance with at least two activities of daily living if the applicant also needs assistance with an instrumental activity of daily living.  Skilled nursing care is care or treatment that can only be done by doctors or nurses such as complex wound dressings, rehabilitation, or tube feeding.  Instrumental activities of daily living are not necessary for fundamental functioning but are necessary for an individual to live independently in the community.  Instrumental activities of daily living include such things as using a telephone, shopping, preparing meals, housekeeping, or money management.

Most individuals in a nursing home will meet the technical and medical eligibility criteria; however, the financial eligibility requirements are two-fold and most people will not immediately be eligible.  There are two tests an individual must pass to be financially eligible for Medicaid: the income test and the asset test.  The income test is simple.  If a person’s gross monthly income is less than the monthly cost of care at the facility, that person will pass the income test, and because the monthly cost of care at a nursing home is so high, most do.

The asset test, although simple, is not quite so easy to pass.  An individual cannot have more than $2,500 in countable assets as of the first of the month in which he or she applies for benefits.  As such, most people will need to “spend-down” their assets below that $2,500 limit to be eligible for benefits.  But, be careful!  The Medicaid qualification process is very complex and trying to navigate these rules alone, or with the assistance of a non-attorney, likely will result in wasted time, stress and frustration, and an unnecessarily large nursing home bill.  Instead, seek the advice of a competent elder law attorney who will not only obtain Medicaid benefits for his or her client, but preserve some, or all, of the client’s assets as well.

May 21

CHANGE IN THE LAW: The Before & After of “Legitimate Child,” “Presumed Parentage,” and Adoption

SB697 Bill Signing; Photo by: Patrick Siebert & Joe Andrucyk, 5/13/2019

http://govpics.maryland.gov/pages/Download.aspx?EventItem=7036&ImageItem=717545&Month=05&Day=13&Year=2019&Event=Bill+Signing&Photographer=Patrick+Siebert%2c+Joe+Andrucyk&Path=ImageHandler.ashx%3fEventID%3d7036&ImageID=717545&Thumbs=False

By: Valerie E. Anias, Esq.

On March 6, 2019, I testified before the Maryland Senate on Senate Bill 697.  Senate Bill 697 sought to redefine Parentage and to create a process for Second Parent Adoption.  On May 13, 2019, I appeared standing behind Governor Hogan to watch Senate Bill 697 be signed.    This day is a tremendous win for so many families in Maryland. 

The Before and After of a “Legitimate Child” and “Presumed Parentage”

Before: Maryland defined a “legitimate” child as one that was born as a result of a marriage between a man and woman, a child legally adopted, or a child conceived through artificial insemination with the presumed consent of the Husband.  In practice, this meant that a child born between a married man and woman was presumed the legitimate child of both, regardless of the biological makeup.  For example, if a woman in a heterosexual marriage used donor material, the husband was always the presumed parent and automatically received the title as a legal parent.  However,  lesbian couples in an identical situation – one gestational parent and one non-gestational parent – were not granted the same legal presumption.  As a result, lesbian couples in an identical situation involving artificial reproduction were forced to petition a court to grant the adoption of their child by the non-gestational parent.

After:  Effective June 1, 2019, a child born between a mother and her spouse is presumed to be the child of the spouse.  Removing the identification of “husband” removed the implication that a legitimate child could only be born between a married man and woman.  In just a few days, a child born from a mother is presumed to be the legitimate child of her spouse, regardless of sex, by virtue of being married.  This enables both spouses to be considered the legal parent without having to formally adopt the child born as a result of their marriage.  It should be noted that same-sex couples should still formally adopt their child to ensure safety as the legitimacy of the child would only be presumed in Maryland.

The Before and After of a “Second Parent Adoption”

Before:  In some states, a second-parent adoption is different from a traditional adoption proceeding of two non-biological parents.  In Maryland, however, there was no special rule or consideration for second-parent adoptions by same-sex parents or step-parents.  The statute, Maryland Rule 9-103, which requires a doctor’s letter, consent by the biological parent, proof of income, and various forms of “proof” that the adoptive parent is an appropriate candidate to adopt the child all apply. The non-gestational spouse/step-parent was forced to request the Court to approve, evaluate, and then determine their parentage of a child they have intentionally brought into this world in the same way a heterosexual married couple could have or raised as their own. 

After:  Effective June 1, 2019, the process for a step-parent or same-sex parent to adopt is much more simple and less invasive.  It provides a separate process for parents using a surrogate or for a step-parent to adopt their spouse’s child without having to navigate the waters of a traditional adoption.  It allows parents to proceed as the intended parents of the adoptee.

This law allows families to establish themselves as families without belittling their status.  It ensures children’s safety and security, by removing complex procedures and technicalities to simplify the process of recognizing their parents. Formal recognition of a parent’s “legal parentage” protects all aspects of a parent – child relationship such as ensuring that their child will be able to access that parent’s health insurance, Social Security, and other benefits as the parent’s beneficiary; whether the child will inherit after their parent’s death; or whether the parent’s relationship with their child will be legally recognized in states other than Maryland. 

Put simply, this change recognizes families as families.  Love wins.

Apr 16

Is Maryland a Community Property State?

By: Valerie E. Anias.

No.  Maryland is not a Community Property state.  This is a question I am often asked by new clients.  If client’s don’t ask, they often assume that Maryland is a Community Property state and are disappointed when they learn that’s not the case.  Community Property means that any property that is owned by spouses is marital property.  For divorcing couples in Community Property states, any property that either spouse owned prior to their marriage or property acquired after the separation would not be considered marital.  Additionally, all Community Property is split evenly, 50/50, between the spouses.  In Maryland, this is not true. 

Maryland is an Equitable Distribution state.  In an Equitable Distribution state, all property (with very few and narrow exceptions) acquired during the marriage is marital property, regardless of who paid for it.  Additionally, property that is non-marital can easily become marital depending on how it is treated.  In other words, any property may be considered marital property.  Yes, that includes the house you purchased 5 years before you got married.  Yes, that includes an inheritance you received during the marriage and put into your joint account.  Yes, that includes the new car you bought after you separated.  Yes, yes, yes.  Finally, in an Equitable Distribution state, property needs to be divided fairly and fairly does not mean equally.   

For example, Jamie and Taylor Smith bought a home after they were married and upon their divorce it has approximately $100,000.00 in equity.  In addition, Jamie bought a new car after separating from Taylor.  In a Community Property state, each party would receive $50,000.00 of the home but Jamie’s car would not be marital because it was purchased after their separation and therefore, Jamie would keep the car.  In Maryland, both the house and the car would be marital because it was acquired during the marriage.  How that property is divided would be dependent upon the circumstances.  Perhaps Taylor earns $30,000.00 per year and Jamie earns $250,000.00 per year.  The Court may be inclined to give Taylor $75,000.00 of the equity in the home and the car and leave Jamie with $25,000.00 of the equity of the property.  Whatever the division, the Court is only concerned with having an equitable, or fair, division not an equal division.

Understanding what is and is not marital property is important.  It is even more important to understand how to keep non-marital property from becoming marital property.  One easy way to do this is to enter into a Prenuptial or Postnuptial Agreement. Any agreement should be drafted by a qualified attorney to ensure you are receiving the protections necessary to effectuate your goals.

Apr 09

Personal Care Contracts

By: Jessica L. Estes

If you currently provide care for a chronically ill, disabled, or aged family member, likely you spend, on average, twenty hours per week providing that care.  This is in addition to your own personal commitments, which may, and often do, include managing a full-time job and your own family.  Not only can this be overwhelming, but it can be extremely stressful.  Moreover, family caregivers usually are not paid, as they feel some responsibility to provide this care solely out of love and affection.  

But what happens when they can no longer provide adequate care for their loved one?  The loved one may not have the resources to afford in-home, assisted living or nursing home care.  And, unless the loved one has less than $2,500 in countable assets, they will not qualify for Medicaid benefits.  Although one can “spend-down” assets below the $2,500 limit, Medicaid does not allow reimbursement for the care you provided.  If you are reimbursed and your loved one files an application for Medicaid benefits, that reimbursement will be considered a gift subject to penalty and your loved one may not qualify for benefits for a very long time.

However, a family caregiver may be compensated for their services without any impact to their loved one’s Medicaid benefits if they have a personal care contract.  A personal care contract is an agreement between a caregiver (one who provides care) and a care recipient (one who needs care) detailing the services to be provided for a set amount each month.  To avoid a Medicaid penalty, the personal care contract should be written, signed and dated before you begin providing services or receiving payment.  Also, the personal care contract should specify which services will be included and which will be excluded.  Services can include meals, lodging, furnishings, utilities, laundry, housekeeping, personal assistance (bathing, dressing, grocery shopping, transportation to/from medical appointments, etc.), medical care and costs, and materials and supplies necessary to perform the services.

Additionally, the personal care contract should include the amount the caregiver will charge the care recipient for these services.  You cannot, though, be paid more than someone with your equivalent experience and skills who does this professionally in your general area.  For Medicaid purposes, though, the caregiver should keep a log of the services they are performing on a daily basis and a record of the payments received for these services.  In the event the care recipient applies for Medicaid, the caseworker will want to see a record of the services provided and the payments made, which should be in accordance with the contract.  As long as the services and payments are in accordance with the personal care contract, Medicaid will not penalize payments made to the family caregiver.

Finally, because this is a legal contract, I recommend having a qualified elder law attorney draft the contract for you, especially if Medicaid benefits might be needed in the future.