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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 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.

Mar 26

Naming a Trust as Your IRA Beneficiary

By Jessica L. Estes

Most people with individual retirement accounts (“IRAs”) name their spouse and children as the primary and contingent beneficiaries, respectively, of their IRA.  Or, if they are not married or do not have any children, their siblings and nieces or nephews.  For the reasons outlined below, this may not be the best decision.  Though, to understand why it may not be the best decision, it is important to understand the basics of IRAs and required minimum distributions (“RMD”).  Generally, an owner’s funds in an IRA will be protected from his or her creditors, but a RMD will not be protected.  A RMD is the distribution that must be taken starting at age 70 ½, which is based on one’s life expectancy.  Once the distribution is made, that income is not protected unless state law provides otherwise.  When the owner of the IRA dies, his or her beneficiary receives an inherited IRA.

In 2014, the U.S. Supreme Court’s decision in Clark v. Rameker sent shock waves through the legal and financial planning industries.  The Court was asked to decide whether funds held in an inherited IRA were “retirement funds” within the meaning of the bankruptcy statute and thus, exempted from an individual’s bankruptcy estate.  The Court answered this question with a resounding “no” and specifically held that funds in an inherited IRA are not “retirement funds,” rendering those funds available for payment to creditors.  The Court reasoned that “retirement funds” are monies set aside for a day when one stops working; whereas, an inherited IRA consists of funds that may be used for immediate consumption.  Prior to this decision, an inherited IRA was considered “retirement funds” and protected from the reach of one’s creditors.  After this decision, though, that is not necessarily the case.

If one’s spouse inherits the IRA, they can: (1) create a new IRA in their name; (2) roll the inherited IRA into an existing IRA already in the spouse’s name; or (3) they can leave the inherited IRA in the deceased spouse’s name if the deceased spouse was younger than the surviving spouse so the payments can be stretched out for a longer period.  If the spouse chooses option 1 or 2, the funds in the account will be protected; however, if the spouse chooses option 3, likely the funds would not be protected.

Moreover, if a child inherits the IRA, they could stretch out the RMD’s based on their life expectancy rather than their parent’s life expectancy, or the child could take the money all at once.  Either way, though, the funds would not be protected from the child’s creditors, which may include a bankruptcy court, general creditors, lawsuits and judgments entered against them.  Additionally, the Supreme Court decision opens the door for Medicaid to recover against an inherited IRA since the federal law allows recovery against beneficiary- designated accounts. 

Another reason to name a trust as the beneficiary of your IRA is to protect government benefits for a spouse who may require or is currently receiving long-term care Medicaid benefits, or a disabled child receiving benefits.  If those individuals were to inherit even a small IRA, it could disqualify them from continuing to receive benefits.  Depending on the amount of the IRA, that may or may not matter, but one should be aware of the consequences of such action. 

Similarly, if a designated beneficiary (1) is a spendthrift, (2) has a drug, alcohol or gambling addiction, or (3) has creditors, or any number of other issues, naming a trust could be beneficial to preserve the funds so it is not depleted quickly.

The trust must be drafted carefully so as not to trigger a five-year payout.  If the Internal Revenue Service (“IRS”) considers the trust as the owner or beneficiary of the IRA, the trust must liquidate the IRA and distribute it within 5 years of the decedent’s death.  However, the IRS will not consider a trust the owner or beneficiary of the IRA if four requirements are met: (1) the trust is irrevocable as of the decedent’s death; (2) the trust is valid under State law; (3) the trust identifies “human” beneficiaries; and (4) the trustee provides a copy of the trust to the plan administrator or custodian within 9 months of the date of death.  If there is the possibility that a non-human can become a beneficiary (e.g. ultimate beneficiary is a church or charity), then the 5-year payout rule applies. As long as the above requirements are met, the trust will be considered a “see through” entity and any distributions paid to the beneficiary of the trust, will be taxed at that beneficiary’s income tax rate.

Also, the trust can be drafted in a way that maximizes the payout to the beneficiaries.  Likewise, it is important to decide how the RMD’s payable to the trust will be handled.  Giving the trustee the authority to decide whether to make distribution to the beneficiary or to continue to hold the RMD’s in trust provides more flexibility and creditor protection for the beneficiary.  Depending on your situation, a trust might be the better choice for your IRA beneficiary designation.

Feb 19

Parenting Plans & Separation Agreements


By: Valerie E. Anias, Esq.

On October 1, 2018, Maryland Law expanded divorce by Mutual Consent to permit couples with minor children to divorce without waiting the formerly required one-year so long as they settled all marital issues and issues concerning the children including child support, physical custody and legal custody. 

Now, more than ever, Courts are going to want to see detailed and thorough separation agreements which completely capture the settlement arrangement between parties related to the details of their marriage and children.  Parties can create an all encompassing Voluntary Property Settlement and Separation Agreement as well as a Parenting Plan in order to ensure the entirety of their agreement is completely captured.

A Separation Agreement resolves all marital issues.  You and your spouse will want ot discuss and settle various issues concerning marital property, child custody, child access schedule, and child support.  Examples of marital property are joint bank accounts, cars, real property, debt, retirement, and alimony.  

When determining custody and access, Parenting Plans encourage parents to focus on the needs of their children, how best to co-parent, and how to anticipate and/or address the various changes in their lives at the time of its creation and in the future.

            Frequently parties obtain their divorce, receive their Judgment of Absolute Divorce, and some form of an access schedule, holiday schedule, and child support.  What happens when this changes?  What about claiming the children on your taxes?  What about switching schools?  Sports?  Doctors?  The Judgment of Absolute Divorce is frequently silent on many of these issues which results in continuous litigation.  A well-drafted Parenting Plan can resolve many, if not all, of these issues.  More importantly, it allows parents to come together as parents – not as spouses.  They may no longer be spouses but they will always be parents.

            Attorneys and mediators can help you and your family create a Separation Agreement and/or Parenting Plan that best suits your family dynamic and situation.  Additionally, attorneys and mediators often know what questions to ask, problems to prepare for, things to consider that many parents in the moment don’t think about.  Most importantly, settling the disputes between the spouses when it comes to them as parents also make the divorce process less painful for children.  Their parents may not be married but their family will have consistency and a plan in place.

            Call the attorneys at ERA Law Group, LLC today at (410) 919-1790 and ask how we can help you plan for your family.