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Elder Law Associates is happy to deliver to you
the March issue of The Elder Law Report, a monthly
e-newsletter full of the latest legal developments and
other trends of vital interest to seniors and their
advocates.
This month's lead article is a must read. It
discusses a nursing facility that was ordered to pay
$150,000 in damages to the family of a resident for
ignoring the resident's advance directive, resulting in a
prolongation of life. The jury's decision could have a
positive and resounding impact on patient care
across the state and perhaps the country.
As always, we welcome your comments and
questions. You may send them to
Info@ElderLawAssociates.com. Please indicate if
we can include your question in our Reader
Questions & Comments column.
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Jury Says Nursing Home Failed to Honor Patient's Living Will
A Florida jury has found that in trying to keep a 92-year-
old Alzheimer's patient alive, a nursing home failed to
honor the patient's living will and advance directive
stipulating that she did not want to be sustained by
artificial means.
The jury found that the nursing home, the Joseph L.
Morse Geriatric Center in West Palm Beach, had
breached its contract with the patient, Madeline
Neumann, and awarded $150,000 in damages.
"This is a big deal," said Dr. Kenneth Goodman,
director of the University of Miami's bioethics program
and the Florida Bioethics Network. "It's a reaffirmation
that no means no. There are a lot of institutions and a
lot of health-care professionals who have acquired the
belief that you reduce liability overtreating patients.
This case shows that's a bad strategy. The whole
point is that advance directives survive your inability to
utter them."
When Ms. Neumann suffered a seizure in 1995, the
nursing home called rescue workers. She was
rushed to a hospital, where she died six days later,
but not before a number of lifesaving measures were
tried, including the insertion of a breathing tube in her
throat.
Linda Scheible, Ms. Neumann's granddaughter and
health-care surrogate, sued the nursing home for
prolonging her grandmother's life unnecessarily. After
the verdict, she said that she wanted to let those
caring for the elderly know that "they need to pay
attention to patients' end-of-life directives and wishes."
The jury cleared the nursing home's medical director
at the time, finding that he did nothing wrong when he
ordered that Ms. Neumann be taken to the hospital.
"Madeline Neumann is everybody's grandparent,
everybody's parent," said Jack Scarola, one of Ms.
Scheible's attorneys. "This is what we can expect to
happen to every single one of us. Nursing homes are
now on notice that there are economic consequences
to their neglect of these responsibilities."
Testimony in the trial, which involved Florida's first
prolongation-of-life case, lasted three weeks and was
taped by Court TV.
For a Florida Sun-Sentinel article on the case,
click here.
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Unwrapping the Confusing Gift Tax Rules
The rules surrounding taxes on gifts often create
confusion during tax season – or any other time.
Below are some of the nuts and bolts of the gift tax,
including when a gift tax form needs to be filed.
The annual gift tax exclusion for 2006 was $12,000.
This means that any person who gave away $12,000
or less to any one individual (anyone other than their
spouse) does not have to report the gift or gifts to the
IRS; any person who gave away more than $12,000 to
any one person, however, will have to file a Form 709,
the gift tax return. But just because you file a Form 709
doesn't mean you necessarily have to pay taxes; this
depends on your past gift-giving history.
The IRS allows you to give away a total of $1 million
during your lifetime before a gift tax is owed. This $1
million exclusion means that even if you have to file a
Form 709 because you gave away more than $12,000
to any one person last year, you will owe taxes only if
you have given away more than a total of $1 million in
the past. As a result, the filing of a Form 709 is only a
formality for most people. Keep in mind that any part of
the $1 million credit that is reported on the gift return
actually counts against your overall federal estate tax
exclusion, which is $2 million this year. So that means
if you give away $1 million during your lifetime, upon
your death your estate may only exclude $1 million
from taxes, not $2 million.
However, there are several ways to give away more
than $1 million over a lifetime without owing taxes.
Keep in mind that Form 709 is only required when you
give away more than the annual exclusion. So a
married couple with a married child can give away
$48,000 in one year without having to report the gift:
each parent gives the child and the child’s spouse
$12,000 each. If a couple did this for 25 years, they
would have given away $1.2 million without even
having to report the gifts, much less having them
count against their lifetime $1 million exclusion. Also it
would be possible for the couple to give away $96,000
within a short span of time -- $48,000 in December
and $48,000 in January of the next calendar year.
(Note that if both spouses have made gifts, each must
file a separate Form 709.)
Another way for a gift to be exempted from reporting
requirements – no matter the gift's size -- is to pay for
someone else’s medical care or educational tuition. It
is important to note that the money must be paid
directly to the school, university or health care provider
to be exempt, and that pre-payments can often be
made as soon as the person is admitted to the school
(schools include not just colleges but nursery
schools, private grade schools, or private high
schools). However, if you contribute to someone
else’s 529 college savings plan, you are subject to the
$12,000 gift exclusion rule. A special regulation in the
tax code enables a donor to use up five years’ worth of
her exclusions and gift $60,000 to a 529 at one
time.
If you have given away property other than money, like
stock, you have to report that on your gift return, too, if
the value is more than $12,000. If the stock had gone
up in value since you bought it, you report the value as
of the date that you gave it away. You may want to
inform the recipient that the basis, or the amount that
you bought the stock for, becomes their basis. The
basis is used when the property is sold to determine
the profit or loss.
Finally, tax deductible gifts made to charities need not
be reported on a gift tax return unless the donor
retains some interest in the gifted property.
For more on estate taxation and gifting, click here and here.
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Are You Saving Too Much for Retirement?
Some economists are contending that many
Americans could be saving less for retirement than
the financial services industry's online calculators are
advising them to set aside.
In an article in The New York Times, these
economists say that the ostensibly objective online
calculators of firms like Fidelity and Vanguard
overstate how much money someone will need in
retirement – by as much as double the amount
actually needed.
Reports the Times: "For a middle-income
couple, that could mean trading $400,000 in
retirement money for about $3,000 a year more during
prime working years to spend on education or home
improvement."
"For a middle-class household, that’s a lot of money,"
said Laurence J. Kotlikoff, a Boston University
economics professor who is on the forefront of this
research and is selling his own retirement
calculator.
The dispute revolves around "rules of thumb" used by
the financial institutions' calculators, such as what
percentage of current income someone will need in
retirement and what fraction of assets a retiree should
spend each year. Kotlikoff says that calculators need
to take into account how people actually spend their
income while working to determine how much they
will need when retired.
“There is risk in saving too much,” Mr. Kotlikoff
said. “You could end up squandering your youth rather
than your money.”
“Even the most casual reading of the popular press
will have you convinced that Americans are heading
like lemmings over a cliff,” said John Karl Scholz, an
economics professor at the University of Wisconsin at
Madison. “Going into this, I had no idea that we’d find
any results anything like this.”
Some economists point out that financial firms have
an interest in persuading people to save much more
than they need because the companies earn fees on
managing their money.
But there are others who believe it is dangerous to
suggest to Americans – who have a negative national
savings rate -- that they may be able to get by with
saving less. John Rother, policy director with AARP,
says the economists are “not doing anyone a service
because of the tremendous amount of effort it takes to
get people to save.”
The article in the Times, was published on
January 27, 2007.
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Book Review: AARP Crash Course in Estate Planning
Michael T. Palermo, AARP Crash Course in Estate
Planning(Sterling Publishing Co., Inc., New York,
NY, 2004. 266 pages).
Price: $12.98 from Amazon. Click on book to order.
Under the assumption that estate planning
clients get better results if they are well informed, the
AARP Crash Course in Estate Planning is not
designed to replace a consultation with an attorney.
Rather, it is intended to provide individuals with a
basic understanding of estate planning before they
meet with an attorney.
Written by a practicing estate planning attorney and
certified financial planner, Crash Course is
divided into four parts. The first part explains the
basics, discussing probate, wills, trusts, durable
powers of attorney, choosing an executor, and taxes.
Part two applies the basics to real life situations, such
as planning for young children or children with
disabilities, marital deductions, and charitable
donations. For example, the book explains the basic
trust provisions that can be included in a child's trust.
Part three goes into the various ways to preserve an
estate, including asset protection, irrevocable life
insurance trusts, and limited partnerships. Finally,
part four discusses estate planning with retirement
assets.
Crash Course does a great job of providing an
overview of the estate planning process, the important
terms, and examples of what to do and not do. All this
should pay off handsomely at "exam" time -- sitting
down with an attorney to plan one's estate.
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Home Care May Not Be Cheaper than Assisted Living or a Nursing Home
When it comes to long-term care, which type of care is
cheaper? A common misperception is that receiving
care at home is less expensive than receiving care at
an assisted living facility or a nursing home. According
to Andrea Cohen, CEO of Houseworks, a private
home care agency in Boston, Massachusetts, which
type of care is the cheapest depends on the amount of
care needed. Cohen explained that home care starts
out being the most cost effective, but if continuous
care is needed, a nursing home ends up being the
least expensive option.
The following chart breaks down the differences in
expenses, depending on whether the senior requires
just a few hours of assistance a day, many hours a
day, or around-the-clock attention. (Figures are based
on average costs of care in the Boston area.)
Costs of Care (Annual)
| |
Home |
Assisted Living |
Skilled Nursing Facility |
| Intermittent Care (16 hrs/wk) |
$18,500 plus household expense |
$60,500 |
$114,000 |
| Daily Care
(40 hrs/wk) |
$46,000 plus household expenses |
$88,000 |
$114,000 |
| Continuous Care (24hrs x 7days/wk) |
$192,000 plus household expenses |
$234,500 |
$114,000 |
Source: Houseworks
One reason that assisted living can become more
expensive than home care or nursing home care is
that most assisted living facilities do not provide
personal care as part of the basic fee. Instead, most
facilities require residents to purchase such care from
the facility or an outside provider at an extra charge.
Home care may be even more expensive if the cost of
maintaining one’s home is factored in. Of course,
money is only one consideration in choosing where to
receive care. Many, if not most, seniors would prefer to
stay home if at all possible. Other factors include the
ability to access quality care, proximity to family
members, the regimentation at an institution, and
even the quality of food provided.
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Generic Will Form Leads to Unlawful Practice of Law
Filling in a generic will form for a friend or family
member may seem like a simple task, but be careful --
it could be considered the unlawful practice of law.
The Supreme Court of South Carolina recently found
that a man who helped a friend with her will engaged
in the unlawful practice of law even though he merely
filled in the blanks on a generic will form. (Franklin v.
Chavis, S.C., No. 26251, Jan. 22, 2007).
Annie Belle Weiss asked Ernest Chavis, an insurance
agent and friend, to prepare her will. Mr. Chavis used
a “Quicken lawyer disk” to generate a generic will on
his computer. He filled in the blanks per her
instructions and brought it to Ms. Weiss to sign. Ms.
Weiss's grandnieces objected to the distribution
under the will, which left most of Ms. Weiss's estate to
her nephew by marriage and named Mr. Chavis as the
personal representative of her estate.
The Supreme Court of South Carolina found that Mr.
Chavis engaged in the unlawful practice of law.
According to the court, because there was no
evidence of Ms. Weiss's involvement in the
preparation of the will — the will was not typed in front
of her and there were no notes indicating her
instructions — Mr. Chavis did more than act as a
mere "scrivener" (someone who prepares a
document on someone else's instructions). The court
noted that the fact that Mr. Chavis prepared the will for
no charge was irrelevant. Because he engaged in the
unlawful practice of law, the court determined Mr.
Chavis could not receive any fees for his service as
personal representative of the estate. The court said
that the lower court should decide whether the will is
still valid, writing that “[the will] should not be
invalidated simply because it was drafted by a
nonlawyer.”
To read the full text of the case, click here.
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Elder Law Associates PA is a boutique elder law firm
that practices exclusively in Medicaid and long term
care planning; home and community-based waiver
services; Medicaid applications; nursing home
residents’ rights litigation; asset preservation
planning with a special focus on planning in light of
the Deficit Reduction Act of 2005, including
promissory notes and personal care agreements;
disability planning, including special needs trusts and
guardianship; estate planning, including wills and
trusts; long term care insurance; advanced
directives; and probate, which encompasses estate
and trust administration. We assist clients in planning
for the possibility of disability, incapacity, home
health care, assisted living and/or nursing home
placement. Our firm enables clients to avoid
impoverishment caused by the escalating cost of
long term care, to maintain their right to make health
care decisions and to avoid unnecessary medical
treatment.
We hope you have enjoyed The Elder Law
Report. If you have questions about something
you read, elder law matters or
issues concerning persons with disabilities, we
would be delighted to hear from you. We serve as an
elder law resource to many professionals and
organizations and want to become your elder law
resource as well. You can reach us at
Info@ElderLawAssociates.com.
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Warm regards,
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If you become incapacitated who will make your
medical decisions? A health care proxy allows you to
appoint someone else to act as your agent for
medical decisions. It will ensure that your medical
treatment instructions are carried out, and it is
especially important to have a health care proxy if you
and your family may disagree about treatment. Without
a health care proxy, your doctor may be required to
provide you with medical treatment that you would
have refused if you were able to do so. 