The Basics of Elder Law and Special Needs Planning

April 25, 2018 Hilton Garden Inn

CLE Credits: 6.0, including 1.0 ethics

This program has been approved for practice and procedure credit under Maine’s reciprocal admission rule. ------Maine State Bar Association Continuing Legal Education Table of Contents ------CHAPTER ONE: SUPPLEMENTAL NEEDS TRUSTS: DRAFTING & ADMINISTRATION What are Supplemental Needs Trusts?...... 1-2 When and Why to Use Supplemental Needs Trusts in Estate Planning...... 1-2 Requirements of First Party Trusts...... 1-3 Requirements for Third Party Supplemental Needs Trusts...... 1-5 Tips for Drafting Special Needs Trusts...... 1-7 Administering Special Needs Trust...... 1-9 Conclusion...... 1-11 PowerPoint Presentation...... 1-12 Blank Note Pages...... 1-28 Jennifer L. Frank, Esq.

CHAPTER TWO: GUARDIANSHIP, CONSERVATORSHIP, AND ALTERNATIVE ARRANGEMENTS Introduction...... 2-2 Incapacity...... 2-2 Guardian vs. Conservator...... 2-2 Who May Serve as Guardian or Conservator...... 2-3 The Appointment Process...... 2-3 Temporary Guardianship or Conservatorship...... 2-3 Powers and Duties of Guardians and Conservators...... 2-4 Removal of a Guardian or Conservator...... 2-5 Compensation of Guardians and Conservators...... 2-5 The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act...... 2-5 Alternatives to Guardianship and Conservatorship...... 2-5 Conclusion...... 2-7 Uniform Law Commission: Why Your State Should Adopt the Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act...... 2-8 Uniform Law Commission: The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act...... 2-9 PowerPoint Presentation...... 2-11 Blank Note Pages...... 2-20 Jennifer L. Eastman, Esq.

CHAPTER THREE: ETHICS: REPRESENTING A FIDUCIARY AND CLIENTS WITH LIMITED CAPACITY Introduction...... 3-2 Maine Improvident Transfers of Title Act, 33 MRS §§ 1021-1025...... 3-2 Representing Fiduciaries: Agents Under Power of Attorney and Trustees after Representing the Principals and Settlors...... 3-4 Representing Clients with Limited Capacity...... 3-5 2018 Understanding the Four C’s of Elder Law Ethics...... 3-13 33 MRS Chapter 20 Improvident Transfers of Title...... 3-15 Informed and Written Consent...... 3-21 In re Estate of Agnes Marquis, May 12, 2003, Maine Supreme Judicial Court...... 3-22 Blank Note Pages...... 3-33 Martin C. Womer, Esq.

CHAPTER FOUR: MAINECARE PART I: APPLICATION PROCESS/ELIGIBILITY REQUIREMENTS Overview...... 4-2 Documents/Information Required to be Filed with MaineCare Application...... 4-3 Relevant Regulations...... 4-4 Application for Financial Assistance for Facility Costs...... 4-5 Blank Note Pages...... 4-9 Katherine E. Griffin, Esq. CHAPTER FIVE: MAINECARE PART II: ADVANCED PLANNING TECHNIQUES MaineCare (Part 2) – Advanced Planning Techniques...... 5-2 Transfers Exempt from the Penalty...... 5-3 The Reverse Half Loaf Technique...... 5-3 Planning with Annuities/Mortgages/Promissory Notes...... 5-4 Special Options: Community Spouse...... 5-4 The Appeal Process...... 5-5 Medicaid Fair Hearings Case Presentation Tips...... 5-5 Estate Recovery...... 5-6 Blank Note Pages...... 5-8 Paul D. Shapiro, Esq.

CHAPTER SIX: OTHER PUBLIC BENEFITS & ABLE ACCOUNTS PowerPoint Presentation...... 6-2 Blank Note Pages...... 6-12 Erica A. Veazey, Esq. ABLE Accounts Offer Flexibility for SSI Recipients...... 6-15 In Summary, Advantages of ABLE Accounts...... 6-16 Disadvantages to these Accounts Are...... 6-16 PowerPoint Presentation...... 6-17 Blank Note Pages...... 6-26 Barbara S. Schlichtman, Esq.

Disclaimer: This CLE material is presented for educational purposes only. It is not and does not take the place of legal advice in any specific situation nor is it offered as such by the authors, speakers, the Maine State Bar Association (MSBA), or the MSBA CLE Committee. The material is intended to be timely as of the date written and/or originally presented. Due to the rapidly changing nature of the law, information contained in these materials or presented by the speakers may become outdated. It is the responsibility of any individual using or relying on these materials to confirm their timeliness. Finally, these materials are not intended to establish practice standards or standards of care applicable to an attorney’s performance. ©2018 | Maine State Bar Association | All Rights Reserved Faculty Biographical Information ------Jennifer L. Eastman, Esq. Attorney Eastman is a partner in the Bangor law firm of Rudman & Winchell. Jennifer’s practice is concentrated in Estate Planning & Administration and Elder Law. She advises clients on all aspects of estate planning and administration, including transfers of family businesses and camps, and generational planning minimizing tax implications of transfer. Her probate practice includes guardianships and conservatorships, as well as representation of fiduciaries and trust beneficiaries. Jennifer’s experience includes assisting clients in MaineCare planning and application, and the creation of special needs trusts. Jennifer also represents clients in guardianships and conservatorships for minor children and disabled or incapacitated adults. Ms. Eastman graduated from Arizona State University in 1999 with a B.A., and William and Mary School of Law in 2003.

Jennifer L. Frank, Esq. Attorney Frank practices with the Nelson-Reade Law Office in Portland, Maine where she focuses her practice on elder law, estate planning, and special needs planning. Prior to joining the firm, she was the managing attorney for a mass tort litigation firm where she practiced for 15 years. Ms. Frank received her Bachelor of Science degree from Boston University and her Juris Doctor from Golden Gate University School of Law. Ms. Frank is a member of the Elder Law Section of the Maine Bar Association, and the National Academy of Elder Law Attorneys.

Katherine E. Griffin, Esq. Attorney Griffin joined the law firm of Toole, Powers & Griffin, P.A. as an associate attorney in 2015, in April 2018 she became a partner. She graduated from the College of the Atlantic in 2000 and the University of Maine School of Law in 2008. Prior to joining the firm she clerked for a superior court judge in Ketchikan, Alaska and worked for Disability Rights Maine and Legal Services for the Elderly. She is a native of Maine and lives in Portland.

Paul D. Shapiro, Esq. Attorney Shapiro is a shareholder of Carlin & Shapiro, P.A. He spearheads the litigation at Carlin & Shapiro, P.A., where he aggressively advocates for our clients. He has successfully appealed many of the decisions of the Maine Department of Health and Human Services and consistently holds the State accountable for following the MaineCare rules for eligibility. He also has appeared throughout the State in Probate Courts on behalf of the clients of Carlin & Shapiro. Paul continually shepherds MaineCare applications through the Department of Health and Human Services and develops complicated plans designed to preserve assets. Mr. Shapiro has been invited by different organizations throughout the State to speak on estate planning techniques, and often lectures at continuing legal education programs for attorneys. Paul graduated from Wheaton College, Cum Laude, and from the Boston University School of Law, Cum Laude. He is a member of the National Academy of Elder Law Attorneys, and is licensed to practice in both Maine and Massachusetts.

Barbara S. Schlichtman, Esq. Attorney Schlichtman is a member attorney with the Maine Center for Elder Law, LLC, with offices in Portland, Kennebunk and York. Barbara helps clients prepare themselves and loved ones for life events by designing personalized legal documents to carry out their wishes and protect their assets. A strength of Maine Center for Elder Law attorneys is their ability to plan for families who may require long-term care or special needs planning. Focusing on quality of life is important to Barbara’s practice. She develops collaborative relationships with her clients, as well as their financial advisors and other professionals to craft estate plans that meet her clients’ needs. Barbara also places a high priority on being available when crisis occurs. Barbara is on the executive committee for Legal Services for the Elderly in Maine, the Maine Justice Action Group, a member of the Academy of Special Needs Planners, and an advisor to the Peaks Island Fund, a Maine Community Foundation fund. She also teaches elder law as adjunct faculty at University of Maine School of Law. Barbara earned her Bachelor’s of Journalism degree (1989) and J.D. (1992) from the University of Missouri. Erica Veazey, Esq. Attorney Veazey is an attorney in the Bangor office of Pine Tree Legal Assistance. She is a graduate of the Uni- versity of New Hampshire. Prior to entering law school she worked in the social work field. She graduated from the University of the District of Columbia David A. Clarke School of Law in 2006. She moved to Maine and be¬gan working for Pine Tree Legal Assistance in 2007. Erica has a deep commitment to public interest law and social justice issues. Her areas of practice include landlord/tenant and housing law, public benefits, and consumer matters. Erica is a member of the Maine State Bar Association and chairs the CLE Commit¬tee. She is also a member of the John Waldo Ballou American Inn of Courts.

Martin C. Womer, Esq. Attorney Womer is the founder and a Member/Partner of the Maine Center for Elder Law, LLC in Kennebunk, Maine. He assists clients with Medicaid (MaineCare) planning and applications, planning for VA Pension with Aid and Attendance eligibility, guardianships and conservatorships, general estate planning, and trust and estate settlement. Among his favorite areas of practice are crisis Medicaid cases, advocating for MaineCare applications with complex fact patterns, and teaching. Marty received his Bachelor’s degree, Cum Laude, from Colby College (1975), and his J.D. from the University of Maine School of Law (1997). Marty has served several times (most recently in 2017) as Chair of the Elder Law Section of the Maine State Bar Association, for which he teaches seminars on long-term- care planning and is active in legislative and state rulemaking advocacy. He is a member of the National Academy of Elder Law Attorneys (NAELA) and ElderCounsel, LLC, and is an active participant on their member listserves. Marty served on the faculty of ElderCounsel’s Elder Law Immersion and Practice Building Camp from its beginning in 2010 to 2017.

Chapter------1 Supplemental Drafting & Administration Needs Trusts: | 1-1 Submitted by: Jennifer L. Frank, Esq. Jennifer L. Frank, Nelson-Reade Law Office PC, Portland Nelson-Reade Law DRAFTING DRAFTING & ADMINISTRATION SUPPLEMENTAL NEEDS TRUSTS: NEEDS SUPPLEMENTAL ------A. What are Supplemental Needs Trusts?

Special needs trusts are used to preserve eligibility for public benefits and are most commonly used for the benefit of an elderly or disabled individual. Assets can be placed in such trusts from either the person relying on the public benefit or from a third person, and the assets are then managed by an independent trustee in order to enhance the individual’s life beyond what the government benefit programs provide. Because the trust owns the assets, a trust that is properly written and funded will not affect the individual’s public benefits. The result is that the overall funds available to assist the elderly or disabled individual may be greatly increased – a situation which can make a significant difference in the individual’s quality of life. The funds in the trust “supplement” what funds are available to an individual from other sources, including government benefit programs, and that is why these trusts are known as supplemental or special needs trusts.

B. When and Why to Use Supplemental Needs Trusts in Estate Planning

There are a variety of situations in which supplemental needs trusts should be considered in estate planning for elderly or disabled individuals. Determining when to use these trusts depends upon several key factors: (1) who is to be benefited by the trust; (2) whose money or other assets will fund the trust; (3) whether the funds are to be given during life or at death; and (4) what public benefits the beneficiary of the trust currently has or may be expected to receive in the future.

1. Disabled or elder beneficiary. Receiving money in a trust involves a loss of control over the asset, so it is important to evaluate whether the loss of control is outweighed by the benefit of having assets managed inside the Trust. This is typically the case if the person is disabled and relying on means tested benefits.

2. Preservation of means-tested benefits. Means-tested programs are those which have an income or asset limit for eligibility purposes. These will be further discussed in more detail by other presenters. The two most common means-tested programs are Medicaid (MaineCare) and Supplemental Security Income (SSI). MaineCare benefits include long term care benefits for those residing in nursing homes or assisted living facilities, and so-called “community MaineCare” which provides benefits to cover health care costs for those living in the community who meet strict income and asset limits. SSI is a program that provides income to disabled or elderly individuals to ensure that they receive a minimum amount of monthly income on which to live. To receive SSI, an individual must be aged, blind or disabled within the meaning of the SSI guidelines, and must meet strict income and asset limits. The maximum countable monthly income for year 2018 is $750 per month for an individual and $1,125 per month for a couple. If an SSI recipient receives SSDI or regular unearned income that is less than the federal benefit rate, SSI pays the difference. MaineCare and SSI are often co-extensive. Thus, individuals who receive SSI are automatically entitled to MaineCare health insurance benefits. The resource limit for SSI is $2,000.00 and the resource limit for MaineCare is $10,000.

Other programs that may be means-tested, and that can affect an elder law attorney’s estate planning advice with regard to the use of supplemental needs trusts include: food stamps, public or senior housing, TANF (temporary assistance for needy families), and the Katy Beckett program. To meet a client’s goals, it is very important to have a good understanding of the specific programs that a trust beneficiary may be on or for which he or she may become eligible in the future.

3. Consider Source of Funds. There are different rules depending on whose money is funding the special needs trusts. If the disabled person’s assets are funding the Trust, then the trust is called a first party or self settled trust with much more stringent requirements. If the trust is funded by someone else for the benefit of the disabled individual, this is called a third party trust and the rules are more generous.

4. Funding by a third party can be during life or at death. A third party special needs trust can be created as a stand-alone trust during the grantor’s life or created by Will (usually called a testamentary special needs trust) or created in the Grantor’s revocable Trust to become effective at the Grantor’s death.

------1-2 | The Basics of Elder Law and Special Needs Planning 5. Common Situations where SNTs should be considered:

• When a parent, other relative or friend (other than a spouse) wishes to set aside money during his or her life for an elderly or disabled individual;

• When a person makes a Will that will benefit an elderly or disabled spouse, child or other person who currently receives, or may in the future be eligible to receive, public benefits; and

• When an individual is about to receive a settlement, inheritance, or other influx of funds that could otherwise affect the benefits the person receives or may receive in the future.

For example, if an elderly couple comes to see an attorney for estate planning, and one or both spouses is concerned about either immediate or future long term care needs, one frequently used strategy is to create new wills for both spouses that use supplemental needs trusts. Frequently, such clients have wills that leave their entire estate to each other outright, with the estate going to their children after both spouses are deceased. Because of a fear that when the first spouse dies, the surviving spouse may not be able to continue to live at home, these clients should consider whether new wills with supplemental needs trusts are more appropriate. The concept is that, instead of leaving everything to each other outright, each spouse leaves their individually owned assets to a supplemental needs trust for the benefit of the surviving spouse.The supplemental needs trust is drafted in order to make clear that its purpose is to supplement government benefit programs that may be available to the surviving spouse – such as MaineCare for long term care expenses. Although at this time, the State of Maine does not count proceeds left in a special needs trust as satisfying the elective share requirement, any funds remaining in the special needs trust after satisfaction of the elective share requirement are not countable asset and can be available to supplement the needs of the surviving spouse.

Similarly, a parent of a disabled child may consider it advisable to leave all or a portion of his or her estate in a supplemental needs trust for that child so that the child’s SSI, MaineCare or other government benefits will not be interrupted when the parent dies, but the parent’s assets will still be available, through the trustee, to enhance the life of the disabled child.

A different use of supplemental needs trusts may be considered when a person wishes to make funds available during their lifetime to an elderly or disabled individual. In some circumstances, this can be done without jeopardizing existing public benefits of that person. Similarly, funds from a personal injury settlement may be able to be stretched if a supplemental needs trust is used to insulate all or a portion of these funds from counting as assets of the individual receiving public benefits.

In short, a properly drafted supplemental needs trust allows funds to be made available to an elderly or disabled individual without unnecessarily impacting current or future public benefits.

C. Requirements of First Party Trusts

The requirements governing supplemental needs trusts vary depending upon which public benefit program the supplemental needs trust is seeking to preserve and depending upon whether one is creating a self- settled trust, or a third party trust created with funds of another individual.

1. First Party or Self-Settled Supplemental Needs Trusts

The laws and rules for MaineCare and SSI provide only two types of supplemental needs trusts that can be used when assets of an individual – for example, a lawsuit settlement or an inheritance – are used to fund the trust. In these situations only, MaineCare and SSI will not consider the assets to have been transferred to the trust so as to create transfer penalties, and the assets in the trust will not be considered fully available, and therefore the individual may be eligible for MaineCare and SSI benefits even if there are substantial assets in the trust. For an individual that receives such an inheritance or settlement, understanding how to correctly draft and fund such first party special needs trusts is vital to preserving public benefits on which the disabled person is relying.

------Supplemental Needs Trusts: Drafting & Administration | 1-3 The rules governing self-settled supplemental needs trusts designed to preserve Supplemental Security Income (SSI) are found at 42 U.S.C. § 1396p(d)(4)(A) and for MaineCare, they are found in the MaineCare Eligibility Manual (10-144 C.M.R. Ch. 332).

The key requirements for this type of trust are as follows:

a) the trust must be irrevocable;

b) the trust must be funded by the assets of the beneficiary

c) the trust must be created and funded when the beneficiary is under age 65 (any assets added to the trust after the individual turns 65 will not be considered exempt)

d) the beneficiary must be disabled as defined by the Social Security Act;

e) the trust must be established by the disabled beneficiary, a parent, grandparent, legal guardian, or a court;

f) the trust must be for the sole benefit of the disabled beneficiary; the only exception is that the trust may provide for reasonable compensation to the trustee; and

g) the trust must provide that, on the death of the beneficiary and after legal obligations of the trust (e.g., taxes, trustee fees) have been paid, the State will be repaid for any benefits provided to the individual under the MaineCare program before any remaining trust assets are distributed to remainder beneficiaries.

2. Pooled Trust for self-settled assets

The only other trust option for first party funds is a non-profit pooled disability trust. Under the rules, the requirements for this type of trust are:

a) A non-profit association must establish the trust;

b) the beneficiary who provides the assets must be disabled under the SSI criteria;

c) the association must maintain a separate account for each trust beneficiary, although it may pool trust assets for purposes of investment and management;

d) the trust account must be established solely for the benefit of the disabled individual, and must be established by the individual, the individual’s parent, grandparent, legal guardian, or a court;

e) although the rule actually states that the State must be repaid to the extent that assets remain in the beneficiary’s account at his or her death, the two pooled trusts currently approved by the Department of Health and Human Services require that one-half of any proceeds remaining in the pooled trust account of a deceased beneficiary be retained by the trust to assist with the trust’s purposes. The remaining half is then first used reimburse MaineCare, and funds left after MaineCare has been reimbursed, if any, are left to the beneficiaries named by the disabled individual at the time of the establishment of the trust fund account. up to one-half of any funds remaining in the beneficiary’s account after his/her death and after the legal obligations of the trust are paid must be repaid to the State to reimburse the State for MaineCare benefits paid on behalf of the beneficiary and the balance may be retained for charitable purposes.

The two pooled trust options in Maine are The Maine Pooled Disability Trust and the Maine Trust for People with Disabilities. The purpose of this pooled trust is to provide disabled individuals with an option for transferring their own assets into a trust that allows them to become eligible for MaineCare and/or SSI benefits and still have the transferred assets available to enhance the quality of their lives. The Maine Pooled Disability Trust requires a minimum contribution of $5,000, while The Maine Trust for People with Disabilities requires a $10,000 minimum contribution. For those under 65 who meet the criteria discussed above, the pooled trust may be particularly appropriate for modest amounts that

------1-4 | The Basics of Elder Law and Special Needs Planning do not justify the administrative expenses of an individual trust and/or for individuals who do not have appropriate family members or professionals to serve as trustee. Currently Maine imposes a penalty for transfers to the pooled trust for disabled persons 65 years or older, so if long term care becomes an issue within 5 years of the transfer, a transfer to the pooled trust can create significant eligibility issues.

The assets transferred to either of the pooled trusts are pooled with those of other individuals participating in the trust and are managed by the trustee, with an individual sub-account that tracks the assets for each participating beneficiary. Subject to the discretion of the trustee, the assets are available to enhance the individual’s life by paying for uncovered medical or other costs, “extras” such as vacations or other entertainment, and other items. Because the trust is a pooled trust, start up and administrative costs and fees are generally less than what it would cost for an individual to set up an individual trust that complies with the SSI and MaineCare rules. Also, there is a professional managing the assets and the distribution decisions rather than a lay person.

After the disabled individual dies, the Maine Pooled Disability Trust and the Maine Trust for People with Disabilities retains one-half of the deceased individual’s subaccount (to assist other disabled individuals) and then reimburses the State of Maine for MaineCare benefits paid on behalf of the beneficiary. Any amounts left are distributed to the remainder beneficiaries named by the disabled individual at the time the trust account was established. The Maine Pooled Disability Trust website is: http://mainepooleddisabilitytrust.org and the Maine Trust for People with Disabilities website is http:// www.themainetrust.com.

In summary, it is clear that there are substantial limitations on the ability to use a supplemental needs trust to preserve the disabled individual’s own assets. From a practical standpoint, the limitation on the age of the individual, the need for a specific trust grantor to establish the trust, and the requirement to repay MaineCare for any benefits provided are significant issues to consider in determining whether using one of these trusts is advisable in any particular client’s situation. When it does make sense, however, this type of supplemental needs trust can help to ensure that the disabled individual maintains or becomes eligible for means-tested public benefits, while still providing a trust fund that can be used to supplement those benefits and thereby enhance the quality of the individual’s life.

D. Requirements for Third Party Supplemental Needs Trusts

Not surprisingly, the rules for third party trusts – that is, trusts established with funds of another individual other than the beneficiary – are more flexible than those for self-settled trusts. Using this type of trust in an elder law practice is far more common and allows an elderly or disabled person to inherit or receive assets of another, either during life or at death, without jeopardizing their public benefits. Money from the beneficiary, or first party funds, should never be deposited in a third party trust as this would cause the trust to be considered a first party or self settled trust, and cause the assets in the trust to be countable.

1. Stand Alone Third Party Special Needs Trust

The SSI and MaineCare rules governing third party trusts are relatively straight forward. As with first party trusts, the distribution standard should be fully discretionary so that the beneficiary is not entitled to have any part of the income or principal. Because any funds made available to the beneficiary are considered available to him/her, it is advisable that the trust leave the amount and frequency of any distributions of income or principal to the discretion of the trustee so that only “countable” distributions from the trust will count as an asset or as income to the beneficiary. Additionally, neither the beneficiary nor any responsible relative residing in the home with the beneficiary, or any any member of the assistance unit should be able to revoke the trust or change the beneficiary.

Because the third party trust is not funded with the beneficiary’s funds, no payback provision to the state is necessary. Additionally, the trust can be drafted to benefit more than one beneficiary.

------Supplemental Needs Trusts: Drafting & Administration | 1-5 2. Third Party Pooled Trust

The Maine Trust for People with Disabilities (MTPD) is the only third party pooled trust established in Maine available for individuals who reside in Maine. The Third Party Pooled Trust can only be established with funds that are not from the disabled individual; the funds must come from someone else, usually a family member or friend. The MTPD has been approved by the Maine Department of Health and Human Services (DHHS) and by the Social Security Administration as meeting their criteria for a third party special needs trust, and therefore those disabled and elderly persons with accounts in the trust are still eligible for SSI and MaineCare.

The MTPD offers similar advantages in terms of pooling of assets and sharing of trust management fees among multiple account holders as discussed above for the Maine Pooled Disability Trust. The minimum fee to establish an MTPD third party account is $10,000. These funds can be contributed during the donor’s life or at death through a will or beneficiary designation. If funded during the donor’s life, the funding must occur within 5 years of the establishment of the account. If funded at death, the funding must occur within a reasonable time from the death of the donor.

Because the MTPD is a third party trust funded with assets of others there is no requirement that any remaining trust assets be used to reimburse MaineCare after the beneficiary’s death. When the trust account is established, the party establishing the account determines who will get any remaining funds when the beneficiary dies, and that person can be another family member or individual, a charity, or even the MTPD. The MTPD website is: http://www.themainetrust.com.

3. Third Party Sole Benefit Trusts, also called Exempt Trusts –

Sometimes in an elder law practice a parent or other family member of a disabled person requires MaineCare for nursing home coverage or assisted living coverage. Part 15, Section 1.4 (II) of the MaineCare Eligibility Manual provides that a there is no transfer penalty (explained by another speaker) for assets transferred outright or in trust established for the sole benefit of a child who meets the SSI criteria of total and permanent disability or blindness. In Part 15, Section 1.4 (III), the rule also provides that there is no transfer penalty for assets transferred to a trust established for the sole benefit of an individual under 65 years of age who meets the SSI criteria of total and permanent disability. Thus, a person may transfer assets to a special needs trust for the sole benefit of a disabled person and immediately receive MaineCare without any transfer of asset penalty.

The key factor in these types of trust is that, for the transfer to the trust not to cause a transfer of asset penalty for the grantor, the trust be exclusively and for the “sole benefit” of the beneficiary. If the state agency believes that any one else can benefit from the Trust, it will not be an exempt transfer. This is accomplished in one of two ways in Maine. One method is to add an actuarially sound distribution standard. In this way, the state agency believes that the trust corpus will be completely used before the beneficiary’s death and thus satisfy the “sole benefit” criteria. A second method is to include the same payback provision that is used in first party special needs trusts.

If a practitioner is considering this option with regard to a non-countable asset, it is still important to transfer the assets to the trust for a disabled person before applying for MaineCare to avoid estate recovery.

4. Testamentary Trusts

As discussed above, testamentary special needs trusts are common for those who want to provide for a disabled beneficiary in their Will, but want to ensure that the inheritance does not impact the beneficiary’s public benefits. It is also a common planning tool for spouses who want to protect their assets from long term care costs. By leaving assets to a special needs trust for the spouse instead of to the spouse outright, any assets in the deceased spouse’s name will go into a supplemental needs trust established in a will (testamentary trust required for spouses) for the benefit of the surviving spouse, with the trustee having full discretion regarding distributions. The assets in the supplemental

------1-6 | The Basics of Elder Law and Special Needs Planning needs trust are not considered available to the surviving spouse except as and to the extent they are made available by the trustee. Thus, the trustee can determine when and whether to make distributions, ensuring that any adverse impacts to the surviving spouse’s MaineCare benefits are minimized.

When such a testamentary supplemental needs trust is used, the elder law attorney must work with the clients on a case-by-case basis to advise the clients about how to own their assets in order to take best advantage of the Will’s provisions. If, as is the case for many older couples, the home and most of the liquid assets are jointly owned, then the assets must be separated into single ownership, with the amount recommended to be in each spouse’s individual name dependent upon the health status and other factors applicable to the particular couple.

5. Conversion Trusts

Sometime a loved one wants to provide for a beneficiary, but it is not yet clear whether that beneficiary will need public benefits in the future. Generally, if a beneficiary is a minor, they do not qualify for SSI due to the deeming rules for parents, and therefore they are not relying upon any public benefits. However, the grantor may want the Trust to “convert” to a special needs trust if the beneficiary needed to rely on public benefits in the future. This can be accomplished by giving the Trustee the ability to amend the Trust in the future in order to preserve public benefits eligibility.

E. Tips for Drafting Special Needs Trusts

In addition to incorporating the required elements listed above for the type of special needs trust you are preparing, here are some additional drafting tips to consider:

1. State all requirements of the self-settled trust in the trust. For example, state that the beneficiary is disabled in accordance with the Social Security rules, state that the beneficiary is under 65, state that the trust is irrevocable and that its purpose is to supplement rather than supplant public benefits (see below regarding intent).

2. State the intent and purpose of the Trust: It is very important that the draftor clearly state that the intention that the trust estate not disqualify the beneficiary from needs based public assistance. In this way, if a court was ever asked to interpret a trust, it will interpret questionable provisions in a way that carries out the intent of the settlor.

SAMPLE LANGUAGE: The purpose of this Trust is to supplement, and not to unnecessarily supplant, whatever benefits and services the Beneficiary may from time to time be eligible to receive by reason of disability, age, or other factors, from federal, state, and local governmental and private resources, such as any private insurance carrier. This Trust was created on behalf of the Beneficiary with the recognition that governmental and charitable programs, in themselves, contain many gaps that, if unaddressed, will greatly reduce the possibility of the Beneficiary’s maintaining himself as independently as possible and having the capacity to meet his future needs for residential, personal, and other non‑medical services.

3. Use fully discretionary standard and avoid HESM standard. Any distribution standard that includes the word “support” can be interpreted to impose a duty on the trustee to use the trust assets for the support of the beneficiary and therefore, the trust assets could be deemed to be available to the beneficiary and countable toward the resource limit. Rather, the distribution standard should allow the Trustee full discretion with regard to distributions of income and principal.

SAMPLE LANGUAGE: The Trustee shall distribute from the principal or income, or both, such amounts which the Trustee, in the Trustee’s sole, absolute and unfettered discretion, may from time to time, deem reasonable or advisable to or for the benefit of the Beneficiary. Any income of the Trust not so distributed shall be added annually to the principal. The Trustee may take into account any factors it considers appropriate.

------Supplemental Needs Trusts: Drafting & Administration | 1-7 4. Consider drafting a “generous” distribution standard. There can be instances when making a disqualifying distribution to the beneficiary outweighs the loss of the public benefit. For example, sometimes Trustees will provide for food and shelter costs for the beneficiary, even though it results in reduction of the SSI benefit. If there are sufficient funds in theTrust, it is often better to allow the Trustee to make any distribution which would increase the beneficiary’s quality of life rather than limiting the distributions to only those that do not cause ineligibility for a public benefit.

SAMPLE LANGUAGE: While the Trustee is authorized to consider these other sources, and where appropriate and to the extent possible, endeavor to maximize the collection of such benefits and to facilitate distribution of such benefits for the benefit of the Beneficiary, the Trustee may also, in the exercise of the Trustee’s sole, absolute and unfettered discretion, disregard these other sources when making distributions to, or for the benefit of the Beneficiary. The Trustee may make distributions that reduce or disqualify the Beneficiary for certain public benefits if, in the Trustee’s sole, absolute and unfettered discretion, this is in the Beneficiary’s best interests.

5. Use the POMS standard regarding allowable expenses that can be paid after the beneficiary dies but before the State is paid back. If the Social Security Administration believes that the Trust authorized an inappropriate expense after the Beneficiary’s death, they will consider the entire Trust countable. Rather than paraphrase the POMS language, it is recommended to use the language directly from the POMS as a safe harbor:

SAMPLE LANGUAGE [from POMS SI 01120.203] Upon the death of the Beneficiary, the following types of administrative expenses may be paid from the Trust prior to reimbursement of medical expenses to the State pursuant to Paragraph [] of this Article []: taxes due from the Trust to the State(s) and or Federal government because of the death of the beneficiary; and reasonable fees for the administration of the Trust estate such as an accounting of the Trust to a court, completion and filing of documents, and or other required actions associated with termination and wrapping up of the Trust.

6. Direct the Trustee to pre-pay the Beneficiary’s funeral. Because the Trustee cannot pay funeral or other expenses for the beneficiary after the death of the beneficiary (as in other trusts), consider directing the Trustee to pre-pay the funeral during the term of the Trust:

7. In self-settled Trusts, avoid providing examples of “acceptable” distributions. Long paragraphs in the Trust document with examples of acceptable distributions to the Beneficiary can unwittingly cause the Trust to be a countable resource if the public benefit agency believes that the listed distribution may benefit someone other than the disabled beneficiary. Examples of acceptable distributions are not necessary and could cause the Trust to be considered a countable resource if, in future years, the public benefit agency comes up with a different interpretation of its sole benefit rules.

8. Allow broad investment power. The Trustee should be granted broad authority to invest in non-income producing assets such as a home or a motor vehicle and should be given the discretion to determine whether to charge the beneficiary for use of an asset that is not income-producing.

9. Spendthrift clause: The beneficiary cannot compel a distribution from the trust, otherwise it would make the trust countable. A standard spendthrift should always be included in a special needs trust.

10. Power to Amend – How Social Security interprets various provision of the statute authorizing special needs trusts varies over time. It is critical that every trust contain a provision allowing the trustee to amend in order to comply with Social Security and Medicaid laws

SAMPLE LANGUAGE: The Trustee is empowered to amend this Trust, without court order, so as to (i) qualify and maintain the Beneficiary’s eligibility for benefits under governmental programs, including but not limited to the Medicaid program and the Supplemental Security Income program, and (ii) meet the requirements under OBRA 1993 and conform with later changes, interpretations, or state variations in federal or state law to better effect the purposes of this Trust or (iii) obtain preferable estate or income tax treatment and conform with later changes to tax laws. ------1-8 | The Basics of Elder Law and Special Needs Planning 11. Recommend stating that the Trustee is the preferred beneficiary to ensure that the Trustee does not consider the interests of the remainder beneficiaries in making distributions.

12. Additional Funding Clause. Make sure the Trust document is clear that the beneficiary may not add to the trust after he or she turns 65 years of age.

SAMPLE LANGUAGE: Subject to the approval of the Trustee in writing, and after advice by an attorney experienced in public benefits planning, additional assets may be added to anyTrust created under this Trust Agreement. None of the Beneficiary’s assets shall be transferred to the Trust after the Beneficiary attains the age of sixty-five (65). No property may be added if the Trustee believes it will not be in the best interests of the Beneficiary.

F. Administering a Special Needs Trust

As noted above, in addition to properly drafting the special needs trust, the trustee must make trust distributions in a manner that minimizes any adverse impacts to the beneficiary’s specific public benefits. It is recommended that the elder law attorney who drafts the Trust also provide a guidance letter to the Trustee that outlines the public benefits the beneficiary is relying upon and the distribution limitations with respect to each program.

Trustees have a number of duties, including the duties to administer the trust consistent with its terms and purposes; to inform and report to the qualified beneficiaries; to invest the assets prudently; to prepare tax returns and related documents; and to terminate the trust in accordance with the trust’s terms. Special needs trusts create special issues related to trust administration. I have identified the most common issues that I see in trust administration of special needs trusts:

1. Understand the Sole Benefit Rules.

The Trustee must understand whether the Trust is a first party or third party trust, and if it’s a third party trust, whether it’s a sole benefit trust or not. The Trustee must ensure that funds are not added to the Trust that would contaminate the Trust and cause it to be a non-countable resource, and it must understand for tax reasons who to tax the income to, and it must understand whether the state is a creditor.

The most difficult problem for many trustees of a first party special needs trust or third party sole benefit trust is determining whether a distribution is indeed for the sole benefit of the beneficiary. For example, if a beneficiary cannot travel without an attendant, should theTrustee pay a family member to vacation with the beneficiary? If a trust owns the home where the beneficiary and his or her family resides, can the Trust pay for improvements that also benefit the other family members? Many times there are no solid answers to the sole benefit question, and theTrustee must endeavor to read current case law to determine the vulnerability of particular distributions.

2. Confirm the Beneficiary’s Public Benefits.

The Trustee must understand the public benefits upon which the Beneficiary is relying. Many times, Trustees assume that a special needs trust cannot pay for food and shelter, but the beneficiary is not relying upon any public benefit programs that prohibit distributions for food and shelter. Additionally, some Trustees are not familiar with how the distributions rules vary for someone relying on Section 8 housing. Materials by other speakers will provide an overview of the income and resource limits for the various means tested programs.

3. Generally make vendor distributions rather than distributions directly to the beneficiary.

Money paid directly to a beneficiary will be considered income in the month received and will cause loss of a public benefit. Distributions should generally be made directly to a vendor to avoid loss of public benefits. Examples include: purchase of computer, television, car, entertainment, recreation, phone bills, medical services, and education services.

------Supplemental Needs Trusts: Drafting & Administration | 1-9 4. Understand Social Security’s rules regarding food and shelter distributions

The Trustee of a special needs trust for a beneficiary relying upon SSI should know which expenses Social Security deems to be related to food and shelter. Distributions for food or shelter, paid directly to vendors, are called “in-kind support and maintenance” (ISM) and are valued under the presumed maximum value (PMV) rule. Shelter items include: rent, mortgage, property taxes, heating fuel, gas, electricity, water, sewerage, garbage collection services, property taxes, condominium fees and other similar household expenses. Excluded from shelter are home owner’s insurance unless required by a mortgage holder; condominium fees to the extent they are not for shelter items identified above, home repairs or upkeep (lawn or snow removal), cable and phone, and house insurance.

If a disbursement is for more than one month (ex. payment of property taxes twice a year), the payment is divided over the term that it covers. For example – payment of a $2,000 real estate tax bill for ½ year will be divided over the 6 months and the beneficiary will be treated as having received in-kind support and maintenance of $333.33 for each of the 6 months.

5. Understand Social Security’s One Third Reduction Rule

Distributions for food and/or shelter in a month are presumed to be valued at one-third of the Federal Benefit rate plus $20. For 2018, the presumed maximum value for in-kind support and maintenance is $270.00 ($750/3 = $250 +$20). For example, if a Trust pays for a beneficiary’s $1,400 rent and all other shelter expenses and all the food expenses, SSA presumes the value to be $270 and will reduce the full SSI benefit from $750 to $480.00. The SSI beneficiary can prove the actual value is less than the presumed value.

If an SSI recipient lives in another person’s household and does not pay rent or food, the maximum SSI benefit is reduced by one-third. For example, an adult child resides with her parents without any payments for shelter or food, her SSI monthly benefit is reduced from $750 to $500 for 2018.The one-third rule does not apply if the individual resides in his/her own household.

Assuming the trust has sufficient funds, paying vendor payments for shelter and food expenses is often an important way to supplement a beneficiary’s needs with a relatively modest impact on the beneficiary’s SSI benefit.

If the trust purchases and retains a home for the beneficiary, the beneficiary is considered as having an “equitable home ownership in the home” and the use of the home is not in kind support. However, if the trust pays any shelter expenses, as described above, then the payment of shelter expenses is considered in kind support and maintenance and the SSI benefit is reduced by the presumed maximum value of $270.

6. Disbursements for credit cards

Whether the payment of a credit card is income depends on what was on the credit card statement. Payment for non-food, non-shelter items, which would be partially or totally excluded as an asset the following month is not income.

Payment for a credit card bill that includes restaurant charges is in-kind support and maintenance up to the presumed maximum value rule.

7. Disbursements for gift cards and gift certificates

Generally, gift cards, debit cards and gift certificates are considered cash equivalents. If the gift card/ certificate can be used to buy food or shelter, it is unearned income; and any unearned balance the following month is a countable resource. If the gift card is for a store that does not sell food or shelter items, the card is still counted as unearned income unless there is an enforceable prohibition on the individual selling the card.

------1-10 | The Basics of Elder Law and Special Needs Planning 8. True Link customized debit card

True Link was started 4 years ago as a customized debit card to protect diminished elders from exploitation while providing them independence and integrity with the use of a debit card. True link debit cards are debit cards that are preloaded and limited in amount and use as selected by the trustee. For example, a trustee can give a beneficiary a True Link card that has a maximum amount of $400 per month, prohibits cash withdrawals, prohibits purchases at certain vendors (no bars, grocery stores) and prohibits purchases for food and shelter or other items. The True Link card is the trust beneficiary’s personal card with his/her signature and is not assignable. Thus the True Link card is not a cash equivalent. The trustee may broaden the use of the True Link card to include food and shelter and this would be considered in-kind support. The trustee via True Link’s computer program can modify the specifications at will and can review all financial activity on line.True Link debit cards have been used in many states and SSA and Medicaid offices have not considered them cash equivalents. The cost is $10 per month per card. See True Link’s website for further information: https://www.truelinkfinancial.com.

9. Consider a budget

It is recommended that a trustee of a special needs trust meet at least yearly with the beneficiary, or his/her guardian or agent under a power of attorney, to determine a budget for how the Trust can best enhance the Beneficiary’s life. A budget helps set expectations and helps ensure that the money in the Trust is used effectively for the beneficiary.

10. Consider care managers

Many special needs trust beneficiaries are not able to articulate what they need or how the Trust can best enhance their lives. By hiring a care manager, the Trustee can get important feedback to ensure that the Trust is providing for the Beneficiary in the most effective way. In addition to identifying services and support from which the Beneficiary would benefit, the care manager can help with budgeting, social outings, travel, and companionship.

Conclusion

A trustee must first determine and confirm the public benefits that the beneficiary is relying on and is potentially eligible for, as well as the value of each public benefit for the particular beneficiary. The trustee must also determine the beneficiary’s ongoing and occasional needs and the amount and type of trust assets, in order to create a plan for distributions. These steps must be reviewed from time to time. Depending on these factors and the beneficiary’s personal circumstances, a special needs trust can really make the difference in the beneficiary’s quality of life. The trustee can use the trust to enhance the quality of life and dignity of the beneficiary for the beneficiary’s life time while preserving the important public benefits. Trust administration and navigation of the public benefit world can be very complicated and at the same time very gratifying for making a positive difference in an individual’s life.

THIS IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE. LAWS RELATING TO AN ELDER LAW PRACTICE AND MAINECARE RULES ARE COMPLEX AND CHANGE ON A REGULAR BASIS. ------Supplemental Needs Trusts: Drafting & Administration | 1-11 1

SUPPLEMENTAL NEEDS TRUSTS:

Jennifer L. Frank, Esq. Nelson-Reade Law Office, P.C. Portland, Maine

What are Supplemental Needs Trusts?

 Used to preserve eligibility for public benefits  Fully discretionary  Provides professional or independent management of trust funds

------1-12 | The Basics of Elder Law and Special Needs Planning 2

When to use Special Needs Trusts

 Client wants to set aside money for an elderly or disabled individual during client’s life (consider Third Party Stand Alone Trust)

 Client wants to distribute assets at death to a person relying upon means- tested public benefits (consider testamentary special needs trusts)

 Client is relying upon means-tested public benefits and has just received a settlement or an inheritance that will impact his or her eligibility for those benefits (consider first party special needs trust)

 Client desires to give assets to disabled person, but is concerned that the transfer will cause ineligibility for MaineCare assistance for long term care costs (consider third party sole benefit trust)

 Consider ABLE account if assets under $25,000 and disabled before 26 y.o.

Key Questions for Any SNT

 1. What type of Trust – First Party or Third Party

 2. What public benefits are involved:

 SSI v. SSDI

 MaineCare and/or Medicare?

 Section 8 Housing

 Medicare Buy In?

 Food Stamps

 LiHeap

------Supplemental Needs Trusts: Drafting & Administration | 1-13 3

Types of Trusts

 First Party Special Needs Trusts – Beneficiary’s money  Individual or pooled  Trusts created by Will are excepted from first party rules

 Third Party Trusts – Other people’s money  Pooled  Individual  Establish during life  Established at death through Will or Revocable Trust  Sole Benefit Trusts

Requirements of First Party Trusts Individual “D4A” Trusts

 Requirements dictated by 42 USC § 1396(d)(4)(A)

 Irrevocable

 Established by the disabled beneficiary; a parent, grandparent, or guardian of a disabled beneficiary; or a court

 For the sole benefit of the disabled individual

 Created AND funded when the beneficiary is under the age of 65

 Pay back provision – the Trust must provide that the state will be repaid for any benefits provided to the individual under the MaineCare program before any remaining trust assets are distributed to the beneficiary

------1-14 | The Basics of Elder Law and Special Needs Planning 4

Requirements of First Party Trusts Pooled “D4C” Trusts

 A non-profit association must establish the Trust

 The Beneficiary must be disabled under SSI rules

 The association must maintain a separate account for each trust beneficiary (but may be pooled for investment or management purposes)

 Account must be for the sole benefit of disabled beneficiary and established by the disabled beneficiary; the beneficiary’s parent, grandparent, legal guardian; or the court

 Pay back provision (one-half to be paid back to the non-profit and one-half to the state)

 Maine currently imposes a transfer penalty for disabled persons 65 years or older who fund a pooled trust.

Two pooled trusts in Maine for self-settled assets

The Maine Pooled Disability Trust  http://mainepooleddisabilitytrust.org The Maine Trust for People with Disabilities  http://www.themainetrust.com

BENEFITS  Minimum of $5,000 deposit for Maine Pooled Disability Trust  Minimum of $10,000 deposit for the Maine Trust for People with Disabilities  Start up costs are generally less than to set up individual SNT  Professional managing the Trust for low accounts

------Supplemental Needs Trusts: Drafting & Administration | 1-15 5

Key Points for First Party Trusts

 Created with funds of the individual

 Individual must be under 65 years of age and disabled under the SSI criteria

 Depending on amount of funds and other considerations, decide on individual trust or pooled trust

 Payback required for MaineCare expenses incurred during life of beneficiary

Types of Third Party SNTS

Stand Alone Third Party SNTS Third Party Pooled Trust Third Party Sole Benefit Trusts Testamentary Trusts Conversion Trusts

------1-16 | The Basics of Elder Law and Special Needs Planning 6

Requirements for Third Party SNT Intervivos Third Party SNTS

 No sole benefit requirement – can benefit more than one person

 No payback provision

 No age limit

 Should draft spendthrift provision

 Mandatory income and principal distributions are countable

 Should be fully discretionary

 Trustee should not be beneficiary

 Neither the beneficiary or a relative residing in the home with a beneficiary, or any member of the assistance unit should be able to revoke the trust or change the beneficiary.

Third Party SNT Distributions

 Trust assets are not considered available if the beneficiary (or any responsible relative residing in the home) cannot revoke the trust or change the beneficiary.

 Importance of making amount and frequency of distributions discretionary with the trustee

------Supplemental Needs Trusts: Drafting & Administration | 1-17 7

Requirements for Third Party SNT Third Party Pooled Trust

 Maine Trust for People with Disabilities is only third party pooled trust  Only for individuals who suffer from developmental disabilities  Minimum contribution - $10,000  No payback provision

Requirements for Third Party SNT Sole Benefit Trusts (Exempt Trusts)

 Used when Grantor is concerned that he or she may need MaineCare for long term care, and does not want to have a gifting penalty assessed.

 Federal Law: 42 U.S.C. § 1396p(c)(2)(B)(iv)

 MaineCare Eligibility Manual: Part 15, Section 1.4(III)

 (no transfer of asset penalty if assets transferred to trust established for the “sole benefit” of an individual under 65 years of age).

 In Maine, sole benefit means:

 Actuarially sound distribution plan

 Trust has a payback provision

------1-18 | The Basics of Elder Law and Special Needs Planning 8

Requirements for Third Party SNT Testamentary Trusts

 Common tool to leave assets at death for disabled child or anyone on means- tested public benefits.

 Common planning tool for married couples to protect assets from long term care costs – but only works if testamentary.

 Does not work if special needs trust is left to spouse in a revocable trust.

 Assets need to be allocated thoughtfully between spouses

Requirements for Third Party SNT Conversion Trusts

 Drafted so that third party trust can convert to a special needs trust in the future if beneficiary relies on public benefits. Can give Grantor the power to amend for this purpose.

------Supplemental Needs Trusts: Drafting & Administration | 1-19 9

Tips for Drafting Special Needs Trusts

 For Self-Settled Trusts:

 1. State all requirements of the self-settled trust in the trust instrument

 2. State the intent and purpose of the Trust

SAMPLE LANGUAGE: “The purpose of this Trust is to Supplement, and not to unnecessarily supplant, whatever benefits and services the Beneficiary may from time to time be eligible to receive . . .”

Tips for Drafting Special Needs Trusts

 3. Use fully discretionary language – Avoid using HESM

 SAMPLE LANGUAGE: “The Trustee shall distribute from the principal or income, or both, such amounts which the Trustee, in the Trustee’s sole, absolute and unfettered discretion, may from time to time, deem reasonable or advisable to or for the benefit of the Beneficiary.

------1-20 | The Basics of Elder Law and Special Needs Planning 10

Tips for Drafting Special Needs Trusts

 4. Consider drafting a “generous” distribution standard

 Allows trustee to distribute from trust even if the beneficiary will lose public benefits.

 Trustee can do what’s best for the beneficiary if the trust has sufficient funds

 Sample Language in materials

Tips for Drafting Special Needs Trusts

5. Use the POMS standard regarding allowable expenses that can be paid after the beneficiary’s death before the State is paid back.

 POMS SI 01120.203 provides a safe harbor regarding allowable expenses that can be paid from trust (taxes and accounting fees). Use that language precisely.

6. Direct the Trustee to pre-pay the Beneficiary’s funeral

------Supplemental Needs Trusts: Drafting & Administration | 1-21 11

Tips for Drafting Special Needs Trusts

 7. In self-settled trusts (first party trusts), avoid providing examples of acceptable distributions. This could cause the Trust to be considered countable.

 8. Allow broad investment power so that trustee can invest in non-income producing assets such as a home or a motor vehicle, and trustee should be given discretion about whether to charge the beneficiary for the use of the asset.

Tips for Drafting Special Needs Trusts

 9. Spendthrift Clause

 10. Power to Amend if the law changes

 11. State that the beneficiary is the preferred beneficiary

 12. Additional Funding clause

 Make sure the Trust document is clear that the beneficiary may not add to the Trust after he or she turns 65 years of age.

------1-22 | The Basics of Elder Law and Special Needs Planning 12

Administering a Special Needs Trust

 Confirm the Beneficiary’s Public Benefits

 SSDI and SSI

 Medicare and MaineCare

 QMB – Qualified Medicare Beneficiary

 Section 8 housing – sporadic and irregular distributions

 Food Assistance Program; Fuel Assistance; Real Estate Tax Refund

Administering a Special Needs Trust

 Issues with Self Settled Sole Benefit Trusts

• Trust must be administered for sole benefit of beneficiary.

• POMS SI 01120.201(revised 5/12)

• Trust provision or payment that permits payments to family members for travel not considered to be “sole benefit” unless necessary for beneficiary to obtain medical treatment, or beneficiary lives in an institutional setting and the travel is necessary to ensure safety and well-being of the beneficiary.

• Payments for extraordinary services by family members ok

------Supplemental Needs Trusts: Drafting & Administration | 1-23 13

Administering a Special Needs Trust

 Understand Social Security’s Income Rules

 Cash to beneficiary is income in the month received (reduces SSI and can affect MaineCare eligibility)

 Generally safer to only pay vendors

 Can’t pay for food and shelter

 (The big 10: food, mortgage, property taxes, rent, heating fuel, gas, electricity, water, sewer, garbage removal)

 If Trustee pays for food and shelter, SSI payment will be reduced by maximum of one-third of the benefit plus $20.00 or, reduced by the actual value, whichever is less.

 If Trust purchases a home, beneficiary is considered to have an equitable interest in the home and the use of the home is not ISM. Shelter expenses paid by the Trust would be considered ISM.

Administering a Special Needs Trust

 Credit Cards – Payment of credit cards is not income in the month received if the purchases were not food or shelter related.

 Payment for credit card bill that includes food items is ISM

 Gift Cards – generally cash equivalents. If can be used to buy food or shelter then unearned income. Cards considered income if can be sold.

 True Link customized debit card

 Debit cards that a preloaded and limited in amount where trustee can limit the types of purchases. Can prohibit bars, grocery stores. It is not assignable

------1-24 | The Basics of Elder Law and Special Needs Planning 14

Administering a Special Needs Trust

 Reimbursement to Third Parties

 Reimbursement made from a trust to a third party for funds spent on the trustee beneficiary are not income.

 Reimbursement to a family member or friend for any type of expense may be considered income

 Payment made directly to family member or friend’s credit card likely is not income.

Administering a Special Needs Trust

Trustee’s relationship to public benefits

• Who makes reports to public agencies? Beneficiary, guardian/conservator, agent, or trustee?

• When to report to public agencies – countable distribution

• upon request?

• ask permission?

------Supplemental Needs Trusts: Drafting & Administration | 1-25 15

Administering a Special Needs Trust

 Balance between making a difference and being eaten alive

 Consider Care Managers

 Annual Budgets

 Systemize distributions

 Keep up to date with public benefit changes and trends

Administering a Special Needs Trust

Dancing between public benefits to make the most of them

• Necessary or optional public benefit?

• Timing of distributions

• Example MaineCare and Section 8 Housing

------1-26 | The Basics of Elder Law and Special Needs Planning 16

Jennifer L. Frank, Esq. Nelson-Reade Law Office, P.C. 813 Washington Ave Portland, ME 04103 (207) 828-1597

------Supplemental Needs Trusts: Drafting & Administration | 1-27 NOTES

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------1-28 | The Basics of Elder Law and Special Needs Planning NOTES

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------Supplemental Needs Trusts: Drafting & Administration | 1-29 NOTES

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------1-30 | The Basics of Elder Law and Special Needs Planning Chapter------2 Submitted by: Guardianship, Conservatorship, and Alternative Arrangements | 2-1 Jennifer L. Eastman, Esq. Jennifer L. Eastman, Rudman Winchell, Bangor Rudman Winchell, ALTERNATIVE ARRANGEMENTS ALTERNATIVE GUARDIANSHIP, CONSERVATORSHIP, AND CONSERVATORSHIP, GUARDIANSHIP, ------I. Introduction Although adults are assumed to be capable of making their own decisions, there are times when circumstances render an individual incapable of making responsible decisions. If a person becomes incapacitated, and no other instrument is in place to appoint a substitute decision maker, it may be necessary for a court to appoint a guardian and/or a conservator for the individual. II. Incapacity Advanced age, illness, or disability alone is not sufficient to justify appointment of a guardian or conservator. Similarly, a court cannot determine that a person is incapacitated or order a guardianship merely because the person has made poor decisions or decisions with which the person’s family members disagree. Neither a guardianship nor a conservatorship can be ordered unless the Probate Court first makes a determination of incapacity. Under the Maine Probate Code, “incapacitated person” is defined as: [A]ny person who is impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, or other cause except minority to the extent that he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his person. 18-A M.R.S. § 5-101(1). In all proceedings for the appointment of a guardian or conservator, incapacity must be proved by the written report of a physician or licensed psychologist. Individuals of limited capacity may not need a full guardianship or conservatorship to ensure continuing care and oversight of their needs. In appropriate circumstances, the court may impose a limited order giving the guardian or conservator authority over only the specific issues or assets needed for the protection of the incapacitated person. III. Guardian vs. Conservator Guardians and conservators serve two different functions. The same person may be appointed to serve as both guardian and conservator, or the court might appoint different individuals to fill the two roles. a. Guardian A guardian is an individual or entity appointed by the Probate Court to make decisions regarding the care and welfare of an incapacitated individual. In addition to making a determination of incapacity, before appointing a guardian the court must determine that appointment of a guardian is necessary and desirable to provide continuing care and supervision of the incapacitated person. Unless the court imposes limitations on the guardian’s authority, a guardian has general authority to make decisions about the incapacitated individual’s life and well-being, including where the person lives, whom the person sees and with whom the person speaks, and what medical treatment the person receives. If the court does not appoint a conservator for the individual, the guardian may also have limited authority over the individual’s money and property. b. Conservator A conservator is an individual or entity appointed by the Probate Court to manage the money and property of an individual who is determined to be incapacitated. If the incapacitated person has a significant amount of money or property, the court will usually appoint a conservator as well as a guardian. A person under a conservatorship is referred to as a “protected person.” Before a conservator is appointed, the court must be persuaded that the person who is incapacitated has property that will be wasted or dissipated unless properly managed. A conservator has the duty to protect, invest, and use the assets for the protected person’s benefit, and must account to the court for the administration of the assets. Single-transaction authority (STA) is a type of authority that may be appropriate when full conservatorship is not needed and the ongoing responsibilities of a conservator are not desired. Upon the filing of a STA petition, the court may authorize, direct, or ratify a specific transaction necessary or desirable to achieve any security, service, or care arrangement to meet the foreseeable needs

------2-2 | The Basics of Elder Law and Special Needs Planning of the protected person if doing so is in the person’s best interest. Examples include the payment, delivery, deposit, or retention of funds or property; sale, mortgage, lease, or other transfer of property; entry into contracts for annuities, life care, deposit, or training and education; or an addition to or establishment of a trust. IV. Who May Serve as Guardian or Conservator Any competent, willing adult can serve as a guardian or conservator. The court might appoint the person who filed the petition seeking appointment of a guardian or conservator, or it might appoint another suitable person. A private agency or corporation could also serve as a guardian or conservator in appropriate circumstances. However, the law does not allow an owner, administrator, employee, or other person with a substantial financial interest in a residential care facility in which the incapacitated person is living to serve as the person’s guardian or conservator. This rule does not apply if the person affiliated with the facility is also a spouse, a domestic partner, an adult child, a parent or a person nominated in a deceased parent’s will, or a relative with whom the incapacitated person has lived for six months or more prior to the filing of the petition. The law gives preference to a person nominated in writing by the incapacitated person, a spouse or domestic partner, an adult child, or a parent, in that order, but the court may appoint another relative or close friend if there is no spouse, child, or parent who is willing and available to serve. If a suitable, private guardian or conservator cannot be found, the court may appoint a public guardian and/or conservator. If a public guardian or conservator is necessary, the Maine Department of Health and Human Services Office of Aging and Disability Services acts as the public guardian and/or conservator. V. The Appointment Process Any person who is concerned about another person’s welfare and ability to manage personal affairs and assets may file a petition in the Probate Court asking the court to appoint a guardian, a conservator, or both. The petition must be filed in the county where the person in need of a guardian or conservator lives. The person filing the petition may request that he or she be appointed guardian or conservator, or may nominate someone else to serve. Notice of the petition must be given to all “interested parties,” including the person who is allegedly incapacitated, his or her spouse and children, and in some instances, the state. The person seeking appointment as guardian and/or conservator must also file a guardianship plan and conservatorship plan stating how the incapacitated person’s needs will be met. A physician or psychologist must also evaluate the individual and file a PP-505 documenting the person’s capacity (or lack of capacity) to make personal or financial decisions. After the petition is filed, the court appoints a neutral person, called a “visitor,” who will meet with the person who is allegedly in need of a guardian or conservator. The visitor will also meet with the person who is nominated to be the guardian or conservator. After these meetings, the visitor will file with the court a report of his or her observations. If the allegedly incapacitated person expresses an interest in contesting the appointment of a guardian or conservator, the court must appoint an attorney to represent the individual if he or she has not already retained one. After the court receives all of the required reports, it will hold a hearing to decide whether the person is in fact incapacitated and whether a guardian or conservator is needed. If it is necessary, the court will issue an order appointing a guardian and/or a conservator. The court’s order will also describe the limitations, if any, on the authority of the guardian or conservator. VI. Temporary Guardianship or Conservatorship When an individual files a petition for guardianship or conservatorship with the court, he or she may indicate that an emergency exists and request the appointment of a temporary guardian or conservator to protect an individual from physical danger or threatened loss of property. If the court finds that an emergency exists, the court may appoint a temporary guardian or conservator without following the formal process described above. A temporary conservator may serve no longer than six months, however, and the court’s order will limit the authority of the temporary guardian or conservator to that which is needed to address the emergency. The court will later hold a full hearing to determine whether the incapacitated individual needs a guardian or conservator on a long-term basis.

------Guardianship, Conservatorship, and Alternative Arrangements | 2-3 VII. Powers and Duties of Guardians and Conservators a. Guardians Unless the authority is limited by the court, a guardian of an incapacitated person has all of the same powers, rights, and duties with respect to the incapacitated person that a parent has with respect to a child. Unlike a parent, though, the guardian is not personally and financially responsible for the incapacitated person. Examples of powers held by guardians include: • custody of the incapacitated person, with the right to decide where the incapacitated person will live (geographically, as well as whether the person will live at a private residence or in a hospital or other institution); • authority to make arrangements for the incapacitated person’s care, comfort, and maintenance and to arrange for the incapacitated person’s training and education; • authority to give or withhold consents or approvals related to medical or other professional care, counsel, treatment, or services for the incapacitated person, including the authority to withhold or withdraw life-sustaining treatment under certain circumstances; and • if there is no conservator, authority to receive money and tangible property on behalf of the incapacitated person and use it to provide for the person’s support and care. In addition to the above powers, a guardian has duties that he or she owes to the incapacitated person. For example, in making medical decisions for the incapacitated person, the guardian must act in accordance with the person’s individual instructions, if any, and other wishes expressed while the person had the capacity to make and communicate decisions. In addition, at the request of the court, the guardian must report on the condition of the incapacitated person. The guardian must also take reasonable care of the incapacitated person’s clothing, furniture, vehicles, and other personal belongings. This includes commencing protective proceedings on behalf of the incapacitated person when necessary. b. Conservators In general, the conservator is responsible for protecting and managing the incapacitated person’s money and property. Unless limited by the court order, a conservator generally has the power to: • invest the incapacitated person’s funds; • collect, hold, and retain the incapacitated person’s assets and, when appropriate, dispose of such assets; • continue or participate in the operation of a business on behalf of the incapacitated person; • receive money or property on behalf of the incapacitated person; • deposit the incapacitated person’s funds in a bank; • enter into leases on behalf of the incapacitated person; • sell stocks and vote securities, either in person or by proxy; • commence proceedings on behalf of the incapacitated person or defend the incapacitated person in court proceedings; • pay taxes and other expenses incurred on behalf of the incapacitated person; and • employ professionals such as attorneys, accountants, or investment advisors. In exercising his or her powers, the conservator is a fiduciary and is held to the same standards applicable to a trustee, such as the duty to act only for the incapacitated person’s benefit and to act prudently and only incur reasonable expenses for the incapacitated person. The conservator is also required to prepare a complete inventory of the incapacitated person’s property and file it with the court within 90 days of being appointed. Thereafter, the conservator must keep complete and accurate records of the administration of the incapacitated person’s property and file an annual accounting with the court.

------2-4 | The Basics of Elder Law and Special Needs Planning VIII. Removal of a Guardian or Conservator Any interested person may petition the court to terminate a guardianship or conservatorship. Regardless of whether the court imposed a guardianship or conservatorship on a general or temporary basis, the court can remove the guardian or conservator if the protected person is no longer incapacitated or the court feels removal would be in the person’s best interest. The person seeking the removal of the guardian or conservator must provide the court with evidence that the individual is no longer incapacitated or that the guardianship or conservatorship is no longer necessary. If successful, the person opposing the termination must then prove, by clear and convincing evidence, that the continuation of the guardianship or conservatorship is necessary to protect the incapacitated individual. IX. Compensation of Guardians and Conservators A guardian may only be compensated after a request made to the court or, if there is a conservator, to the conservator. The court or the conservator may authorize payment of reasonable sums for the guardian’s services and for room and board furnished to the incapacitated person by the guardian. A conservator is entitled to reasonable compensation to be paid out of the protected person’s funds without court approval. Factors in determining what constitutes “reasonable compensation” include the time, labor, and skill required to perform the services; the likelihood that serving precludes the conservator from maintaining other employment; and the experience, reputation, and ability of the conservator in performing the services. X. The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act (UGCOPAA) is a comprehensive guardianship and conservatorship statute that promotes person-centered planning to incorporate an individual’s preferences and values into a court order, and requires courts to order the least-restrictive means necessary for protection of persons who are unable to full care for themselves. The proposed act was drafted by the National Conference of Commissioners on Uniform State Laws last year, and has currently been introduced in New Mexico. Attached as Appendix A are two summaries of the Act by the Uniform Law Commission. For the full UGCOPAA, please visit uniformlaws.org. XI. Alternatives to Guardianship and Conservatorship Though a guardianship or conservatorship provides the protection of court oversight, it is not necessarily desirable because of the fact that it involves public disclosure of family matters, results in the deprivation of the incapacitated person’s rights and independence, and can be more expensive than available alternatives. Individuals with capacity may be able to execute documents, such as advance health care directives and financial durable powers of attorney, that designate decision-makers who will take over in the event the individual becomes incapacitated. In these documents, the individuals can also nominate a person to be appointed as their guardian or conservator in the event such an appointment becomes necessary. a. Advance Health Care Directives Advance Health Care Directives (AHCDs) serve multiple purposes. At their heart, AHCDs are documents in which a principal names an agent to make health care decisions on their behalf. A principal can list wishes for end-of-life care or, by not doing so, give the agent broader authority to act while still following the principal’s wishes to the extent known. If the principal’s wishes are not known, the agent must determine what is in the principal’s best interest, including considering the principal’s values. In addition, the principal can nominate the agent as his or her guardian should one ever be needed, state preferences for organ donation, and describe wishes for post-death arrangements, including naming an individual to carry out those wishes. AHCDs can be effective immediately, meaning that the document is live the moment the principal signs it. Or, they can spring into effect upon a specific event happening, such as a doctor, court, or group of individuals declaring that the principal is incapacitated. Deciding whether it is appropriate for the AHCD to be effective immediately or springing depends on the agent being named, the terms of the AHCD, how important it is to the principal to maintain sole control versus whether the principal wishes to receive assistance prior to becoming incapacitated, and how important it is to the principal to avoid a finding of incapacity. Of course, if the principal is still able to express instructions, a medical provider will still listen to the principal even if the document is effective immediately.

------Guardianship, Conservatorship, and Alternative Arrangements | 2-5 Once the document is executed, the principal should ensure that the agent, the principal’s primary care provider, and nearby hospitals have copies of the AHCD. An emergency situation is not the time to be searching for paperwork. The principal should also have a discussion with the agent, and possibly other close family members, to ensure familiarity with the details of the principal’s preferences. b. Financial Power of Attorney In a Financial Power of Attorney (FPOA), the principal names an agent to manage the principal’s property and to make financial decisions for the principal. An expansive FPOA may give the agent authority that is as broad as or broader than could be granted in a conservatorship order. This can avoid the need for a conservatorship, though the principal may nominate the agent in the FPOA to serve as conservator should one ever be needed. Having a FPOA also avoids the need to name a child as a joint owner on a bank account, which subjects the account to the child’s creditors. For example, if a child is sued after a car accident, experiences a health crisis and has significant medical bills, or goes through a divorce, assets in the child’s name are exposed to these liabilities. With a FPOA, the child will have access to the parent’s account without these additional risks. When Maine adopted the Uniform Power of Attorney Act in 2010, the types of actions that an agent may take for a principal were effectively divided into two categories. “General” powers do not need to be listed in as much detail in the FPOA, because a grant of general authority on the topic suffices. On the other hand, the “specific” powers do need to be detailed in the document. The general powers, like selling real estate, cashing out the surrender value on a life insurance or annuity policy, operating the principal’s business, or filing a lawsuit, grant the agent a great deal of authority. The specific powers include actions that are even more expansive, but which are important to have listed for MaineCare long-term care planning purposes. These include the ability to amend or terminate a revocable trust; make a gift, including to the agent; and change beneficiary designations or rights of survivorship. A FPOA created prior to 2010 is still valid if it was validly created under prior law, but its provisions may not authorize the agent to utilize the specific powers. It is also possible to have a limited FPOA, granting the agent authority to do only one or a handful of very discrete tasks. The breadth of authority contained within a FPOA might suggest that the FPOA be designed as springing, rather than effectively immediately. But, it may be more desirable to have it be effective immediately given that one of its goals is asset management. A parent may not be incapable of managing her finances, but having her daughter assist her with them may ease her mind. A person may be unable to get to the car dealership to sign loan paperwork due to a work commitment or a health issue and want his spouse to sign on his behalf. On the other hand, unlike a physician implementing a decision for the patient she has herself recently examined, a financial institution may be less aware that the principal has wishes contrary to the agent’s attempted actions, and an agent making inappropriate or abusive decisions may get further along before being stopped. The agent’s duties are governed by the FPOA itself and Maine law. The statute on FPOAs provides that the agent must 1) act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and otherwise act as a fiduciary under the standards of care applicable to trustees, 2) act in good faith, and 3) act only within the scope of the authority granted in the FPOA. More specifically, except as otherwise stated in the FPOA, Maine statutory law provides that an agent shall: (1). Act loyally for the principal’s benefit; (2). Act so as not to create a conflict of interest that impairs the agent’s ability to act impartially; (3). Act with the care, competence and diligence ordinarily exercised by agents in similar circumstances; (4). Keep a record of all receipts, disbursements and transactions made on behalf of the principal; (5). Cooperate with a person that has authority to make health care decisions for the principal to carry out such decisions; and

------2-6 | The Basics of Elder Law and Special Needs Planning (6). Attempt to preserve the principal’s estate plan, to the extent actually known by the agent, based on all relevant factors, including: (i) The value and nature of the principal’s property; (ii) The principal’s foreseeable obligations and need for maintenance; (iii) Minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes; and (iv) Eligibility for a benefit, a program or assistance under a statute, rule or regulation. A FPOA is a critical tool for preserving assets in the event an individual needs to apply for one of MaineCare’s long-term care programs. Based on the current MaineCare program rules, there are legal strategies that can be used to preserve assets and avoid completely spending down assets (by private paying for care) before applying for MaineCare. However, there are certain actions that even a spouse cannot take on behalf of another, such as cashing out retirement assets, without a FPOA. Because of the 2010 change in the law and because not all attorneys who prepare FPOAs are familiar with what should be included for MaineCare planning purposes, it may be beneficial to have an existing FPOA reviewed by an attorney who is familiar with these considerations. c. Non-Testamentary Trusts1 There are many types of trusts that may be created to manage property and achieve different goals, including protection of assets for the grantor or the grantor’s family members, or estate tax planning. Regardless of the structure or purpose of the trust, the grantor/settlor expresses an intention to create a trust (likely through signing a trust agreement that lays out the trust’s terms), identifies a beneficiary of the trust, and names a trustee to perform specific duties. A trust facilitates management of assets if the trust creator becomes unable or unwilling to manage his or her own affairs. In the case of a revocable trust, the grantor often serves as trustee or co-trustee while he or she is still alive and has capacity, but another person or entity may also be named. When creating an irrevocable non-testamentary trust, the grantor is often intending to place property within the trust, give up control over the property, and give up the right to revoke or amend the trust so that—after waiting out the five year lookback over assets and transfers for MaineCare long-term care eligibility purposes, the property should no longer be considered owned by the individual. Along with other key provisions, it is important that someone other than the grantor serve as trustee in that situation. The basic duties as a trustee are outlined in the Maine Uniform Trust Code, but the trust document itself may impose additional requirements. Trustee duties fall into four basic categories. First, a trustee must act only in the beneficiaries’ best interests. Second, a trustee must carefully manage the trust money and property. Third, a trustee must keep the trust property separate from other property, including that trustee’s own property. Fourth, a trustee must keep good records of his or her actions as trustee. XII. Conclusion This article is only a starting point in the topic of substituted decision-making for individuals without capacity. The preferred form of substituted decision-making is the one that the affected individual has chosen for himself or herself through the use of estate planning documents. Although this article considers AHCDs, FPOAs, and non-testamentary trusts as “alternative arrangements,” these alternatives should be explored with clients first. However, unexpected circumstances and the ambiguities of life can require the need for guardianship or conservatorship through a court order. Guardianships and conservatorships are intended to protect and provide continuing care for individuals who are unable to make or communicate responsible decisions for themselves. However, it is important to remember that obtaining this authority is a serious step to take because both significantly restrict a person’s rights and freedoms to make their own medical and financial decisions.

1 This article considers types of substitute decision-making that are effective during the principal’s life, so wills and testamentary trusts—that is, trusts established within a will—are not discussed here. ------Guardianship, Conservatorship, and Alternative Arrangements | 2-7

111 N. Wabash Ave. Suite 1010 Uniform Law Commission Chicago, IL 60602 NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS (312) 450-6600 tel (312) 450-6601 fax www.uniformlaws.org WHY YOUR STATE SHOULD ADOPT THE UNIFORM GUARDIANSHIP, CONSERVATORSHIP, AND OTHER PROTECTIVE ARRANGEMENTS ACT The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act (UGCOPAA) is a guardianship law suitable for the twenty-first century. It should be adopted in every state because:

• UGCOPAA encourages person-centered planning. Under UGCOPAA, a guardian or conservator must develop an individualized plan for each person’s protection. Family and friends will receive copies of the plan and courts monitor the guardian or conservator for compliance.

• UGCOPAA promotes independence. UGCOPAA does not allow a court to impose a guardianship or conservatorship if less restrictive alternative, such as supported decision-making, would provide adequate protection. UGCOPAA also creates a mechanism for a court to order a protective arrangement instead of guardianship or conservatorship where a person’s needs could be met with this less restrictive option.

• UGCOPAA helps leverage court resources. Courts can require notice of certain suspect actions to be sent to family members or friends of a person subject to guardianship, who act as the court’s eyes and ears to prevent abuse.

• UGCOPAA protects legal rights. Persons subject to a guardianship or conservatorship order must be given notice of certain key rights, including the right to receive independent legal counsel and the right to have the order modified or terminated when appropriate. Guardians and conservators are limited in their ability to charge fees to oppose the alteration or termination of orders.

• UGCOPAA provides clear guidance to guardians and conservators. UGCOPAA includes a list of applicable fiduciary duties and provides clear standards for making decisions.

• UGCOPAA helps prevent isolation. A guardian may not restrict family members and friends from visiting or communicating with the person subject to guardianship for more than one week without a court order. Unless the court orders otherwise, the guardian is required under UGCOPAA to notify interested persons of any change in residence or significant change in health status.

• UGCOPAA was created by guardianship experts. Organizations involved in the drafting process include AARP, the Alzheimer’s Association, the National Guardianship Association, the National Center for State Courts, the National College of Probate Judges, the ARC, the ABA Commission on Law and Aging, the National Academy of Elder Law Attorneys, and the National Disability Rights Network.

For further information about UGCOPAA, please contact ULC Chief Counsel Benjamin Orzeske at (312) 450-6621 or [email protected].

The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers, judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable. ------2-8 | The Basics of Elder Law and Special Needs Planning

History. The first uniform law on guardianship was released in 1969 as Article V of the Uniform Probate Code. A few years later, it was re-published as the Uniform Guardianship and Protective Proceedings Act for states that preferred to enact only the UPC’s guardianship provisions.

Guardianship law has advanced dramatically since 1969 to better protect the rights and interests of persons legally determined to need help caring for themselves. The Uniform Law Commission has encouraged the trend toward greater independence for persons under guardianship by revising its guardianship act three times in 1982, 1997, and most recently with the approval of the newly renamed Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act (UGCOPAA) in 2017. Some version of the uniform guardianship law has been adopted in nineteen states. The modernization of guardianship law. In 2011, the National Guardianship Network organized the Third National Guardianship Summit. Held at the University of Utah, the summit brought together representatives from twenty national organizations concerned with issues of aging, intellectual impairments, mental illness, and the effective practice of guardianship law. The summit produced a set of 70 recommendations and standards approved by the participants and published the following year in the Utah Law Review. The Uniform Law Commission formed a study committee to determine which of these recommendations and standards could be codified into a statute, and in 2014 approved a drafting committee to update the existing uniform law. The drafting committee was joined by participants from most of the same national organizations that attended the 2011 summit. UGCOPAA is the result of their two-year drafting effort. A note about terminology. Throughout UGCOPAA, the term “guardian” refers to a person appointed by a court to make decisions about the care and well-being of another person. The term “conservator” refers to a person appointed by a court to manage the property of another person. Some states use other terms, and the act can be adapted to conform to local practices. UGCOPAA introduces the term “protective arrangement instead of guardianship or conservatorship” to describe a less-restrictive alternative to guardianship or conservatorship. Instead of imposing a guardianship or conservatorship for a person who would otherwise need one, a court can instead enter a limited order to address a specific need. The aim is to preserve an individual’s legal autonomy to the greatest extent possible.

Structure. UGCOPAA is organized into seven articles. Article 1 contains definitions and general provisions applicable to all types of court proceedings involving the protection of an individual. Article 2 addresses the guardianship of minors who do not have a parent able to provide care. Article 3 addresses the guardianship of adults who are unable to make decisions for themselves. Article 4 applies to conservatorships for both minors and adults who have money or property and are unable to manage it. Article 5 is entirely new and authorizes courts to enter single orders for less restrictive protective arrangements as an alternative to guardianship or conservatorship. Article 6 contains a set of optional forms intended to help a petitioner for a guardianship or conservatorship conduct a thorough assessment of an individual’s capabilities and needs, which will in turn help courts craft appropriate orders for each individual. The act also provides a sample notice for someone who is the The ULC is a nonprofit formed in 1892 to create nonpartisan state legislation. Over 350 volunteer commissioners—lawyers, judges, law professors, legislative staff, and others—work together to draft laws ranging from the Uniform Commercial Code to acts on property, trusts and estates, family law, criminal law and other areas where uniformity of state law is desirable. ------Guardianship, Conservatorship, and Alternative Arrangements | 2-9 subject of a guardianship or conservatorship proceeding. Article 7 is a set of miscellaneous provisions to help with implementation and interpretation of the uniform act.

Innovations. • Person-centered planning. Under UGCOPAA, each guardianship and conservatorship will have an individualized plan that considers the person’s preferences and values. Courts will monitor guardians and conservators to ensure compliance and approve updates to the plan in response to changing circumstances. • Express decision-making standard. UGCOPAA clarifies that a guardian/conservator is a fiduciary and must always act for the benefit of the person subject to guardianship or conservatorship. A guardian for an adult must make decisions the guardian reasonably believes the adult would make if able, unless doing so would cause harm to the adult. To the extent feasible, a guardian for an adult must promote the adult’s self-determination, encourage the adult’s participation in decisions, and take into account the values and preferences of the adult. • Enhanced notice. UGCOPAA enhances protection for individuals subject to guardianship or conservatorship without greatly increasing the costs of monitoring by allowing the court to identify other persons to receive notice of certain suspect actions, and who can therefore serve as extra sets of eyes and ears for the court. • Guaranteed visitation and communication. Without a court order, a guardian under UGCOPAA may not restrict a person under guardianship from receiving visits or communications from family and friends for more than seven days, or from anyone for more than sixty days. Unless the court orders otherwise, close family members must be notified of any change in residence. • Less-restrictive alternatives. UGCOPAA prohibits courts from issuing guardianship or conservatorship orders when a less-restrictive alternative is available, such as supported decision-making, technological assistance or an order authorizing a single transaction. • Enhanced procedural rights. UGCOPAA requires notice of key rights to individuals subject to guardianship or conservatorship, including the right to independent legal representation. The act allows any interested party to petition a court for reconsideration of an appointment and places limits on a guardian or conservator’s ability to charge fees for opposing the efforts to alter the terms of appointment. • Updated terminology. The terms “ward,” “incapacitated person,” and “disabled person” are increasingly viewed as demeaning and offensive. UGCOPAA uses neutral terms such as “respondent” for the subject of a guardianship hearing, and “individual subject to guardianship” once a court order has been issued.

Conclusion. UGCOPAA modernizes the law and protects the rights of individuals who are subject to guardianship and conservatorship. It encourages courts to impose the least-restrictive orders possible to adequately protect vulnerable minors and adults, and to monitor the protective arrangement to continuously adapt to an individual’s changing capabilities and needs. It imposes clear duties upon guardians and conservators charged with protecting others and requires regular monitoring to ensure compliance. It allows courts to address specific problems with limited orders and preserve individual rights when possible. UGCOPAA is a guardianship statute suitable for the twenty-first century and should be considered for enactment in every state as soon as possible.

For further information about the UGCOPAA, please contact ULC Chief Counsel Benjamin Orzeske at (312) 450-6621 or [email protected].

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Guardianships, Conservatorships, and Alternative Arrangements

Jennifer L. Eastman, Esq.

Guardianship and Conservatorship: In General

Guardianship: The Probate Court appoints an individual or entity to make decisions regarding the care and welfare of an incapacitated individual.

Conservatorship: The Probate Court appoints an individual or entity to manage money and property for an individual who is incapacitated.

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Guardianship and Conservatorship: Incapacity  The Maine Probate Code defines incapacity as: “impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, or other cause except minority to the extent that he lacks sufficient understanding or capacity to make or communicate responsible decisions concerning his person.” 18-A M.R.S. § 5-101(1)

 Incapacity ≠ advanced age, illness, disability

 Incapacity ≠ the individual makes bad decisions or decisions family members do not agree with

Guardianship and Conservatorship: Incapacity

 Incapacity is proven to the Probate Court through a “Physician’s Report” or PP-505.  This is a written report by a physician or psychologist regarding the individual’s diagnosis, prognosis, and ability to perform certain tasks.

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Guardianship and Conservatorship: Appointment Process

 Someone interested in the individual’s welfare files a petition with the Probate Court in the county where incapacitated individual lives.  Petition for Guardian or Petition for Conservator  Joined Petition for Guardian and Conservator  Temporary Guardian or Conservator (Emergency)  Single Transaction Authority

Guardianship and Conservatorship: Appointment Process

 Priority of Appointment as G/C  Person nominated in writing by the incapacitated person  Spouse or domestic partner  Adult child  Person who served as guardian/legal custodian when the IP was a child  Parent (or person nominated in parent’s will)  Other relative with whom IP resided  Person nominated by IP’s caretaker  DHHS as public G/C

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Guardianship and Conservatorship: Appointment Process

 Petitioner must also file an acceptance, a plan, and a PP-505.  Notice must be sent to all interested parties, including:  The alleged incapacitated individual  Individual’s spouse  Individual’s children  The State

Guardianship and Conservatorship: Appointment Process

 The Probate Court will appoint a “visitor” who is a neutral party that reports to the court regarding his or her recommendations after meeting with the alleged incapacitated individual and the nominated G/C.  The alleged incapacitated individual is entitled to court-appointed counsel if he or she wants to contest the appointment of a G/C.  A hearing is held and the burden falls on the petitioner to prove G/C is necessary.

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Guardianship and Conservatorship: Appointment Process

 An order appointing a G/C may be issued if the Probate Court finds the following:  Guardianship requires a finding that the individual lacks capacity and appointment is necessary and desirable to provide continuing care and supervision.  Conservatorship requires a finding that the individual lacks capacity and the incapacitated person has property that will be wasted or dissipated unless it is properly managed.

Guardianship and Conservatorship: Powers and Duties Guardian Conservator  Care, comfort, maintenance,  Collect, hold, retain, and training, education invest funds and property  Give/withhold consent for  File tax returns, initiate and care and treatment defend against lawsuits  Living arrangements  Employ professionals  Act in IP’s best interests  Fiduciary duties  Limited authority over  Inventory and accountings property if no conservator

------Guardianship, Conservatorship, and Alternative Arrangements | 2-15 6

Guardianship and Conservatorship: UGCOPAA

 The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act (UGCOPAA).  The Uniform Law Commission seeks to have every state adopt the UGCOPAA.  Key reforms:  Person-centered planning  Least-restrictive orders  Incorporate individual preferences and values

Alternative Arrangements: In General

 Estate planning documents can avoid the need for a G/C if an individual becomes incapacitated.  Advance Health Care Directive  Financial Power of Attorney  Trust  Benefits to executing documents while having capacity:  Avoid depriving the individual of their rights and independence  Less expensive than G/C proceedings  Asset protection strategies available to the Agent

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Alternative Arrangements: Advance Health Care Directives

 What is it?  Should it be effective immediately?  Who should be named as the agent?  What should be done with the document once it is executed?  An agent shall make a health care decision based on the principal’s individual instructions, if any, and other wishes to the extent known to the agent. Otherwise, the agent shall determine what is in the principal’s best interest. In making that determination, the agent shall consider the principal’s personal values to the extent known to the agent.

Alternative Arrangements: Advance Health Care Directives

 Maine Health Care Advance Directive Form, available on Maine Hospital Association website  Five Wishes document, available on Aging With Dignity website  Directives based on religious beliefs, including ones offered by the Roman Catholic Diocese of Portland, Jehovah’s Witnesses, the Rabbinical Assembly, and others

------Guardianship, Conservatorship, and Alternative Arrangements | 2-17 8

Alternative Arrangements: Financial Power of Attorney

 What does it cover?  Breadth of authorities: general vs. specific  Typically more expansive than a conservatorship Order  Who should be named as the agent?  Should it be effective immediately or “springing”?  Opportunities to include safeguards  Critical tool for asset preservation in the event of future incapacity

Alternative Arrangements: Financial Power of Attorney

 What are the agent’s duties in general?  Act loyally for the principal’s benefit;  Act so as not to create a conflict of interest that impairs the agent’s ability to act impartially;  Act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances;  Keep a record of all receipts, disbursements, and transactions made on behalf of the principal;  Cooperate with a person that has authority to make health care decisions for the principal to carry out such decisions; and  Attempt to preserve the principal’s estate plan, to the extent actually known by the agent.

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Alternative Arrangements: Non-Testamentary Trusts

 What is a non-testamentary trust?  Revocable (non-testamentary) trust versus irrevocable non- testamentary trust  Who can or should serve as trustee?  Grantor/settlor versus another individual  Using a professional trustee  Duties of the trustee include: control assets in the trust; administer in good faith and in accordance with the trust terms and purposes, interests of the beneficiaries, and statutes; and follow fiduciary responsibilities.

Any Questions?

Thank you.

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------2-22 | The Basics of Elder Law and Special Needs Planning Chapter------3 Submitted by: Martin C. Womer, Esq. Martin C. Womer, Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-1 Maine Center for Elder Law LLC, Kennebunk Maine Center for Elder ETHICS: REPRESENTING A FIDUCIARY A REPRESENTING ETHICS: AND CLIENTS WITH LIMITED CAPACITY WITH LIMITED CLIENTS AND ------ETHICS: REPRESENTING A FIDUCIARY AND CLIENTS WITH LIMITED CAPACITY

Submitted by Martin C. Womer, Esq. Maine Center for Elder Law, LLC, Kennebunk

I. INTRODUCTION

1. First Question Always: Who Do You Represent?

a. Duties of confidentiality and loyalty to clients.

b. Always do a firm-wide Conflicts Check before agreeing to meet with potential clients.

2. What About the Common Elder Law Scenario Where Adult Child Arranges the Meeting? Will the Child or Children Attend the Meeting with Seniors?

a. Understanding the Four C’s of Elder Law Ethics. https://www.americanbar.org/content/dam/aba/administrative/law_aging/2018_ethics_bro chure_final.authcheckdam.pdf (The 4 C’s are Client Identification, Conflicts of Interest, Confidentiality, Competency.)

b. Be on guard for dysfunctional families!

3. What if Children Engage You to Discuss Their Parents, and You Have Never Represented the Parents?

Being engaged by a child or children is fine, but you need to be clear about whether this is what the child or children intend. They may intend to be contacting you “on behalf of our parents”, even without legal authority to do so.

4. What if the Agent Under Power of Attorney or Trustee Engages You First?

Who is the client? Is the person who is Agent under Power of Attorney (or Trustee) engaging you in his or her fiduciary capacity as Agent (or Trustee) or in his or her individual capacity as heir, devisee, beneficiary, etc.?

II. MAINE IMPROVIDENT TRANSFERS OF TITLE ACT, 33 MRS §§ 1021 – 1025

1. § 1021. Definitions

------3-2 | The Basics of Elder Law and Special Needs Planning 2. § 1022. Undue Influence 1

3. § 1023. Civil Action; Relief Available

4. § 1024. Other Common Law And Statutory Causes of Action and Relief Still Available

5. § 1025. Title Practices

See Appendix 1.

1 §1022. Undue influence 1. Presumption. In any transfer of real estate or major transfer of personal property or money for less than full consideration or execution of a guaranty by an elderly person who is dependent on others to a person with whom the elderly dependent person has a confidential or fiduciary relationship, it is presumed that the transfer or execution was the result of undue influence, unless the elderly dependent person was represented in the transfer or execution by independent counsel. When the elderly dependent person successfully raises the presumption of undue influence by a preponderance of the evidence and when the transferee or person who benefits from the execution of a guaranty fails to rebut the presumption, the elderly dependent person is entitled to avoid the transfer or execution and entitled to the relief set forth in section 1024.

2. Confidential or fiduciary relationship. For the purpose of this section, the transfer of property or execution of a guaranty is deemed to have been made in the context of a confidential or fiduciary relationship if the transferee or person who benefits from the execution of a guaranty had a close relationship with the elderly dependent person prior to the transfer or execution. Confidential or fiduciary relationships include the following: A. A family relationship between the elderly dependent person and the transferee or person who benefits from the execution of a guaranty, including relationships by marriage and adoption; B. A fiduciary relationship between the elderly dependent person and the transferee or person who benefits from the execution of a guaranty, such as with a guardian, conservator, trustee, accountant, broker or financial advisor; C. A relationship between an elderly dependent person and a physician, nurse or other medical or health care provider; D. A relationship between the elderly dependent person and a psychologist, social worker or counselor; E. A relationship between the elderly dependent person and an attorney; F. A relationship between the elderly dependent person and a priest, minister, rabbi or spiritual advisor; G. A relationship between the elderly dependent person and a person who provides care or services to that person whether or not care or services are paid for by the elderly person; H. A relationship between an elderly dependent person and a friend or neighbor; or I. A relationship between an elderly dependent person and a person sharing the same living quarters.

When any of these relationships exist and when a transfer or execution is made to a corporation or organization primarily on account of the membership, ownership or employment interest or for the benefit of the fiduciary or confidante, a fiduciary or confidential relationship with the corporation or organization is deemed to exist.

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-3

III. REPRESENTING FIDUCIARIES: AGENTS UNDER POWER OF ATTORNEY and TRUSTEES AFTER REPRESENTING THE PRINCIPALS AND SETTLORS

a. Written, Informed Consent by Principals and Settlors

See Appendix 2: Informed and Written Consent of Settlor.

b. Include Multiple Representation Provisions in ALL Engagement Agreements

Example:

Multiple Representation

A conflict can arise in the course of representing multiple clients, including a married couple or a family. This firm, its attorneys and its staff cannot take sides or be partial to one or the other client within an engagement, or represent one to the detriment of the other. Similarly, we cannot keep secrets of one from the other, but rather must be free to share information of one client with the other. Our assistance to each client needs to be a true team effort. Multiple clients certainly may have somewhat different goals and provisions in their individual plans, which most couples and families do. However, if secrets or incompatible differences arise, or we believe that a legal conflict of interest is developing, this firm and its attorneys may need to withdraw and recommend that each client consult separate attorneys. Please don’t be alarmed or put off by this forthright disclosure. Most likely we will never have to discuss this awkward topic again. By signing this Engagement Agreement, you are consenting to this firm counseling you together if this is a multiple representation.

c. Potential Need to Withdraw if Conflict Arises

a. Is there duty to inform or a prohibition against informing the other co-client?

b. Is there anything like “noisy withdrawal” when withdrawing from a client engagement due to a conflict having arisen?

d. IMPORTANCE of ongoing engagement by AGENTS and TRUSTEES in order to carry out the parents’ plans

a. Carrying out the principal’s elder law plans as designed (such as administering a trust correctly, and not applying for MaineCare prematurely) is very important.

b. Assisting the Personal Representative of your deceased client’s estate is generally much less important for the intended outcome, because a properly drafted will is self- explanatory and a Personal Representative guided by any good attorney is much less likely to undermine the decedent’s or couple’s estate plan.

------3-4 | The Basics of Elder Law and Special Needs Planning

IV. REPRESENTING CLIENTS WITH LIMITED CAPACITY

1. How to Determine Legal Capacity to Execute Documents

a. Testamentary Capacity – Applies to Wills and Revocable Trusts in Maine. 2

b. Contractual Capacity – Applies to execution of all other documents in Maine.

See Appendix 3: Estate of Agnes Marquis, 2003 ME 71.

2. ABA & APA Publication, “Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers”

See https://www.apa.org/pi/aging/resources/guides/diminished-capacity.pdf

3. Maine Rules of Professional Conduct # 1.14 Client with Diminished Capacity

(a) When a client’s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client. (b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian. (c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests.

See Comment below, http://mebaroverseers.org/regulation/bar_rules.html?id=88205 3

2 http://legislature.maine.gov/statutes/18-B/title18-Bsec601.html §601. CAPACITY OF SETTLOR OF REVOCABLE TRUST The capacity required to create, amend, revoke or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will.

3 COMMENT [1] The normal client-lawyer relationship is based on the assumption that the client, when properly advised and assisted, is capable of making decisions about important matters. When the client is a minor or suffers from a diminished mental capacity, however, maintaining the ordinary

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-5 client-lawyer relationship may not be possible in all respects. In particular, a severely incapacitated person may have no power to make legally binding decisions. Nevertheless, a client with diminished capacity often has the ability to understand, deliberate upon, and reach conclusions about matters affecting the client’s own well-being. For example, children as young as five or six years of age, and certainly those of ten or twelve, are regarded as having opinions that are entitled to weight in legal proceedings concerning their custody. So also, it is recognized that some persons of advanced age can be quite capable of handling routine financial matters while needing special legal protection concerning major transactions.

[2] The fact that a client suffers a disability does not diminish the lawyer’s obligation to treat the client with attention and respect. Even if the person has a legal representative, the lawyer should as far as possible accord the represented person the status of client, particularly in maintaining communication.

[3] The client may wish to have family members or other persons participate in discussions with the lawyer. When necessary to assist in the representation, the presence of such persons generally does not affect the applicability of the attorney-client evidentiary privilege. Nevertheless, the lawyer must keep the client’s interests foremost and, except for protective action authorized under paragraph (b), must look to the client, and not family members, to make decisions on the client’s behalf.

[4] If a legal representative has already been appointed for the client, the lawyer should ordinarily look to the representative for decisions on behalf of the client. In matters involving a minor, whether the lawyer should look to the parents as natural guardians may depend on the type of proceeding or matter in which the lawyer is representing the minor. If the lawyer represents the guardian as distinct from the ward, and is aware that the guardian is acting adversely to the ward’s interest, the lawyer may have an obligation to prevent or rectify the guardian’s misconduct. See Rule 1.2(d).

Taking Protective Action

[5] If a lawyer reasonably believes that a client is at risk of substantial physical, financial or other harm unless action is taken, and that a normal client-lawyer relationship cannot be maintained as provided in paragraph (a) because the client lacks sufficient capacity to communicate or to make adequately considered decisions in connection with the representation, then paragraph (b) permits the lawyer to take protective measures deemed necessary. Such measures could include: consulting with family members, using a reconsideration period to permit clarification or improvement of circumstances, using voluntary surrogate decision-making tools such as durable powers of attorney or consulting with support groups, professional services, adult-protective agencies or other individuals or entities that have the ability to protect the client. In taking any protective action, the lawyer should be guided by such factors as the wishes and values of the client to the extent known, the client’s best interests and the goals of intruding into the client’s decision-making autonomy to the least extent feasible, maximizing client capacities and respecting the client’s family and social connections.

------3-6 | The Basics of Elder Law and Special Needs Planning [6] In determining the extent of the client’s diminished capacity, the lawyer should consider and balance such factors as: the client’s ability to articulate reasoning leading to a decision, variability of state of mind and ability to appreciate consequences of a decision; the substantive fairness of a decision, and the consistency of a decision with the known long-term commitments and values of the client. In appropriate circumstances, the lawyer may seek guidance from an appropriate diagnostician.

[7] If a legal representative has not been appointed, the lawyer should consider whether appointment of a guardian ad litem, conservator or guardian is necessary to protect the client’s interests. Thus, if a client with diminished capacity has substantial property that should be sold for the client’s benefit, effective completion of the transaction may require appointment of a legal representative. In addition, rules of procedure in litigation sometimes provide that minors or persons with diminished capacity must be represented by a guardian or next friend if they do not have a general guardian. In many circumstances, however, appointment of a legal representative may be more expensive or traumatic for the client than circumstances in fact require. Evaluation of such circumstances is a matter entrusted to the professional judgment of the lawyer. In considering alternatives, however, the lawyer should be aware of any law that requires the lawyer to advocate the least restrictive action on behalf of the client.

*Disclosure of the Client’s Condition *

[8] Disclosure of the client’s diminished capacity could adversely affect the client’s interests. For example, raising the question of diminished capacity could, in some circumstances, lead to proceedings for involuntary commitment. Confidences and secrets relating to the representation is protected by Rule 1.6. Therefore, unless authorized to do so, the lawyer may not disclose such information. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized to make the necessary disclosures, even when the client directs the lawyer to the contrary. Nevertheless, given the risks of disclosure, paragraph (c) limits what the lawyer may disclose in consulting with other individuals or entities or seeking the appointment of a legal representative. At the very least, the lawyer should determine whether it is likely that the person or entity consulted with will act adversely to the client’s interests before discussing matters related to the client. The lawyer’s position in such cases is an unavoidably difficult one.

Emergency Legal Assistance

[9] In an emergency where the health, safety or a financial interest of a person with seriously diminished capacity is threatened with imminent and irreparable harm, a lawyer may take legal action on behalf of such a person even though the person is unable to establish a client-lawyer relationship or to make or express considered judgments about the matter, when the person or another acting in good faith on that person’s behalf has consulted with the lawyer. Even in such an emergency, however, the lawyer should not act unless the lawyer reasonably believes that the person has no other lawyer, agent or other representative available. The lawyer should take legal action on behalf of the person only to the extent reasonably necessary to maintain the status quo or otherwise avoid imminent and irreparable harm. A lawyer who undertakes to represent a

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-7 4. Suggested Standard Office Practice for Document Signings: Witnesses and Self- Proving Affidavits, Not Video

5. Clarify Who is the Client: Have Clients with Potentially Conflicting Interests Sign Informed Consent

a. See Harris et al. v. Griffith et al., a State of Washington decision dated March 5, 2018, that addresses the conflict created when an attorney inadvertently changes sides in an estate dispute. https://www.courts.wa.gov/opinions/pdf/752464.PDF

person in such an exigent situation has the same duties under these Rules as the lawyer would with respect to a client.

[10] A lawyer who acts on behalf of a person with seriously diminished capacity in an emergency should keep the confidences of the person as if dealing with a client, disclosing them only to the extent necessary to accomplish the intended protective action. The lawyer should disclose to any tribunal involved and to any other counsel involved the nature of his or her relationship with the person. The lawyer should take steps to regularize the relationship or implement other protective solutions as soon as possible. Normally, a lawyer would not seek compensation for such emergency actions taken.

REPORTER’S NOTES:

Model Rule 1.14 (2002) corresponds to M. Bar R. 3.6(j) and addresses the unique issues that arise when representing a client with diminished capacity. It is commonly understood that examples of “diminished capacity” include mental retardation, mental illness, physical illness, the aging process, and an example not included in the Maine Bar Rules, minority (youth). Because there is otherwise little substantive difference between the Maine Bar Rule and Rule 1.14, the Task Force recommended the adoption of the structure and language of the Model Rule.

Model Rule 1.14 (2002) is designed to address issues that arise when the lawyer’s duty of loyalty and confidentiality to a client with diminished capacity conflict with the lawyer’s duty to take protective action on their behalf. The Rule recognizes that, in certain circumstances, the intervention of and disclosure to a third party may be necessary for the protection of a client with diminished capacity. In practice, the line between a lawyer acting as legal counsel and as guardian ad litem may sometimes be blurred. The Task Force recognized that the Rule 1.14 describes what has been considered “best practices” in Maine.

The Task Force further recognized that there is a continuum of capacities that may be presented by clients, and thus the application of this rule is very context sensitive. Lawyers must be mindful of his or her responsibilities to the client, and at the same time, be prepared to take actions that are in the client’s best interest.

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6. Referral to Adult Protective Services if Apparent Abuse or Exploitation?

See Opinion #84. Disclosure of Client's Incapacity to Protect Own Interests http://www.mebaroverseers.org/attorney_services/opinion.html?id=91464

Issued by the Professional Ethics Commission Date Issued: March 2, 1988 Question An attorney representing a 67-year-old woman in a workers’ compensation matter believes he has reason to doubt the client’s ability to make rational financial decisions. He has given advice that has been ignored, resulting, he believes, in adverse consequences to the client. The client has a son who lives in the vicinity. The affairs causing concern include the client’s refusal to accept delivery of checks for the payment of workers’ compensation benefits and the client’s refusal to retire from employment formally (although she is not in fact working), resulting in the loss of substantial retirement benefits. The client has exhibited signs of irrationality and is uncommunicative. She has not forbidden the attorney from communicating the foregoing concerns to family members; neither has she responded to a request for permission to do so. There is no indication of the clinical reason for her condition. The Commission has been asked whether any bar rule would be violated if the inquiring attorney were to inform the son of his client that the attorney believes the client is incapable of making rational decisions concerning her affairs and that a conservatorship should be considered. Opinion The Commission concludes that if the attorney reasonably believes the client is not able to act rationally in her own interest, a limited disclosure of his concern to one or more members of the client’s family is permitted by the Bar Rules, provided the attorney further concludes that those family members have no interest in the client’s affairs adverse to that of the client.[1] The Maine Bar Rules do not provide a great deal of direct guidance to attorneys facing the kind of problem described in the question. Three principles can be identified as at least potentially involved: the attorney’s obligation to refrain from disclosing confidences and secrets of the client; the client’s right to make decisions about her affairs; and, the attorney’s duty to act in the interest of the client. The first principle is made explicit by Bar Rule 3.6(1). The second and third principles, while generally acknowledged to accompany the attorney-client relationship, are not expressed in so many words by any of the Bar Rules. Rather, they arise out of the agency relationship between lawyer and client, and are confirmed by the duty to avoid conflicts of interest and to preserve confidences and secrets of the client. [Developments in the Law—Conflicts of Interest in the Legal Profession, 94 Harvard Law Review 1244, 1252, 1260] Both the ABA Code of Professional Responsibility and the ABA Model Rules of Professional Conduct are more explicit. DR 7-101 of the Code provided, in pertinent part,

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-9 “A lawyer shall not intentionally: (1) Fail to seek the lawful objectives of his client through reasonably available means permitted by law and the Disciplinary Rules . . . “ EC 7-7 stated (with exceptions not material here) “the authority to make decisions is exclusively that of the client.” EC 7-12, however, discussed in general terms the additional responsibilities of a lawyer whose client is disabled in such a way as to impair the ability to make “a considered judgment on his own behalf,” stating that such a disability could compel the lawyer to make certain decisions for the client unless a legal representative had been appointed, in which case the lawyer would be obliged to look to the legal representative. The Model Rules are somewhat more specific. Rule 1.2 states: “A lawyer shall abide by a client’s decisions concerning the objectives of representation.” Rule 1.14(b) provides, however: A lawyer may seek the appointment of a guardian or take other protective action with respect to a client, only when the lawyer reasonably believes that the client cannot adequately act in the client’s own interest. Notwithstanding the failure of the Maine Bar Rules to achieve the detail of either the ABA Code or the Model Rules concerning the topic of this opinion we find no inconsistency in the principles involved. Neither the ABA Code of Professional Responsibility nor the Model Rules discuss the dilemma of a lawyer who must reveal a client’s disabling condition, which might fairly be considered either a confidence, a secret, or “information relating to representation of a client” [Model Rule 1.6], in order to perform the duty of making choices for an incapacitated client (as in the Code) or seeking the appointment of a guardian (as in the Model Rules). A practitioner guided by the Model Rules might find this a disclosure “impliedly authorized in order to carry out the representation” [Model Rule 1.6(a)]. Neither the ABA Code nor the Maine Bar Rules expressly provides that escape from the problem. In Opinion 69 the Ethics Committee of the Maine State Bar Association concluded that the disclosure by an attorney to the Social Security Administration of a client’s alcoholism would violate the duty to maintain confidences and secrets of a client, even though disclosure might be in the economic interest of a disabled client. The opinion assumed, however, that the clients involved had expressly directed the attorney not to disclose their condition, which in any event was more stigmatizing than a disability incident to aging. Moreover, the opinion does not indicate that the Committee considered the duty of an attorney to protect the interest of the client. Accordingly, we do not find the opinion to offer a persuasive solution to the question at hand. In the present case, there is no indication that a confidence of the client would be involved in any part of the proposed disclosure and recommendation to a relative of the client. Rule 3.6(l) defines the term “secret” as including “information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or detrimental to the client.” Apparently the client has not yet given any directions with respect to disclosure of her mental condition. Under these circumstances we do not think the attorney is required to conclude that disclosure would be embarrassing and therefore to refrain from taking action that might be in the

------3-10 | The Basics of Elder Law and Special Needs Planning client’s clear financial interest. We conclude that it is reasonable for counsel confronted with a situation such as is described in the question to subordinate the risk of disclosing a confidence or secret of the client to the risk that failure to act will cause more serious damage to the client’s interests. This Committee’s Opinion 58 emphasized the client’s right to make decisions in finding that appointed defense counsel did not have the right to enter a plea of not guilty by reason of insanity over the objection of the client, who the court had already determined to be competent. It may be that the client’s right to control the choice of objectives during the professional relationship must be honored by the attorney under all but the most extreme circumstances. There seems to be general agreement that the attorney may only participate in or contribute to an interference with that right when he reasonably concludes that the client has demonstrated an incapacity to decide. [e.g., Oregon State Bar, Desk Book for Lawyers, Opinion 237, February 29, 1973: see In re Valentine’s Guardianship, 294 P.2d 696 (Utah, 1956)] When that threshold has been crossed, however, we conclude that the attorney’s duty to act in the client’s interest takes precedence over the duty to carry out decisions the client expresses as his or her preference. What the inquiring attorney proposes here is submission of the issue of incapacity to an appropriate tribunal for decision. Consequently, reliance on the client’s right to choose objectives during the professional relationship begs the question. It goes without saying that the attorney must have far stronger grounds for acting to seek the appointment of a guardian or to suggest that family members do so than mere disagreement with the client. We conclude that the attorney’s mere withdrawal from representation is not likely to be a satisfactory resolution of the dilemma described in the question, since it leaves the client without advice when it seems to be most needed. [Cf. Mo. Bar Bull., March, 1980, Informal Opinion 1, July 17, 1979; 22 Ore. State Bar Bulletin 10, October, 1961, Opinion 100] It is possible that circumstances could arise justifying or forcing that step, such as a client’s directive that the attorney resist all attempts to obtain appointment of a conservator after the attorney himself has set the machinery in motion. Needless to say, however, any attorney considering withdrawal should be confident of having one or more of the grounds listed in Rule 3.5(c) and should take the precautions required by Rule 3.5(a).

Footnote [1] If disclosure to members of the client’s family cannot be made within these limitations, the attorney may request assistance from the Division of Adult Services, Bureau of Social Services, Department of Human Services, which provides for adult guardianship services. The ABA Model Rules of Professional Conduct, Rule 1.14(b) would allow the attorney to seek appointment of a conservator himself.

Enduring Ethics Opinion

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-11 ------3-12 | The Basics of Elder Law and Special Needs Planning Title 33: PROPERTY Chapter 20: IMPROVIDENT TRANSFERS OF TITLE

Table of Contents Section 1021. DEFINITIONS...... 3 Section 1022. UNDUE INFLUENCE...... 4 Section 1023. CIVIL ACTION; RELIEF AVAILABLE...... 5 Section 1024. OTHER COMMON LAW AND STATUTORY CAUSES OF ACTION AND RELIEF STILL AVAILABLE...... 5 Section 1025. TITLE PRACTICES...... 5

| i ------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-13 MRS Title 33, Chapter 20: IMPROVIDENT TRANSFERS OF TITLE Text current through November 1, 2017, see disclaimer at end of document.

ii | ------3-14 | The Basics of Elder Law and Special Needs Planning Maine Revised Statutes Title 33: PROPERTY Chapter 20: IMPROVIDENT TRANSFERS OF TITLE

§1021. DEFINITIONS As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings. [1987, c. 699, §1 (NEW).]

1. Dependent. "Dependent," with respect to an elderly person, means wholly or partially dependent upon one or more other persons for care or support, either emotional or physical, because the elderly person: A. Suffers from a significant limitation in mobility, vision, hearing, emotional or mental functioning or the ability to read or write; or [1987, c. 699, §1 (NEW).] B. Is suffering or recovering from a major illness or is facing or recovering from major surgery. [1987, c. 699, §1 (NEW).]

[ 1987, c. 699, §1 (NEW) .]

2. Elderly person. "Elderly person" means a person who is 60 years of age or older.

[ 1987, c. 699, §1 (NEW) .]

3. Independent counsel. "Independent counsel" means an attorney retained by the elderly dependent person to represent only that person's interests in the transfer.

[ 1987, c. 699, §1 (NEW) .]

4. Less than full consideration. "Less than full consideration," with respect to a transfer of property, means the transferee pays less than fair market value for the property or the transfer is supported by past consideration.

[ 1987, c. 699, §1 (NEW) .]

5. Major transfer of personal property or money. "Major transfer of personal property or money" means a transfer of money or items of personal property which represent 10% or more of the elderly dependent person's estate.

[ 1987, c. 699, §1 (NEW) .]

6. Transfer. "Transfer" does not include testamentary transfers, which are outside the scope of this chapter.

[ 1989, c. 238, §1 (NEW) .]

SECTION HISTORY 1987, c. 699, §1 (NEW). 1989, c. 238, §§1,4 (AMD).

Generated 11.3.2017 §1021. Definitions | 3

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-15 MRS Title 33, Chapter 20: IMPROVIDENT TRANSFERS OF TITLE

§1022. UNDUE INFLUENCE

1. Presumption. In any transfer of real estate or major transfer of personal property or money for less than full consideration or execution of a guaranty by an elderly person who is dependent on others to a person with whom the elderly dependent person has a confidential or fiduciary relationship, it is presumed that the transfer or execution was the result of undue influence, unless the elderly dependent person was represented in the transfer or execution by independent counsel. When the elderly dependent person successfully raises the presumption of undue influence by a preponderance of the evidence and when the transferee or person who benefits from the execution of a guaranty fails to rebut the presumption, the elderly dependent person is entitled to avoid the transfer or execution and entitled to the relief set forth in section 1024.

[ 2003, c. 236, §1 (AMD) .]

2. Confidential or fiduciary relationship. For the purpose of this section, the transfer of property or execution of a guaranty is deemed to have been made in the context of a confidential or fiduciary relationship if the transferee or person who benefits from the execution of a guaranty had a close relationship with the elderly dependent person prior to the transfer or execution. Confidential or fiduciary relationships include the following: A. A family relationship between the elderly dependent person and the transferee or person who benefits from the execution of a guaranty, including relationships by marriage and adoption; [2003, c. 236, §1 (AMD).] B. A fiduciary relationship between the elderly dependent person and the transferee or person who benefits from the execution of a guaranty, such as with a guardian, conservator, trustee, accountant, broker or financial advisor; [2003, c. 236, §1 (AMD).] C. A relationship between an elderly dependent person and a physician, nurse or other medical or health care provider; [1987, c. 699, §1 (NEW).] D. A relationship between the elderly dependent person and a psychologist, social worker or counselor; [1987, c. 699, §1 (NEW).] E. A relationship between the elderly dependent person and an attorney; [1987, c. 699, §1 (NEW).] F. A relationship between the elderly dependent person and a priest, minister, rabbi or spiritual advisor; [1987, c. 699, §1 (NEW).] G. A relationship between the elderly dependent person and a person who provides care or services to that person whether or not care or services are paid for by the elderly person; [1987, c. 699, §1 (NEW).] H. A relationship between an elderly dependent person and a friend or neighbor; or [1987, c. 699, §1 (NEW).] I. A relationship between an elderly dependent person and a person sharing the same living quarters. [1987, c. 699, §1 (NEW).] When any of these relationships exist and when a transfer or execution is made to a corporation or organization primarily on account of the membership, ownership or employment interest or for the benefit of the fiduciary or confidante, a fiduciary or confidential relationship with the corporation or organization is deemed to exist.

[ 2003, c. 236, §1 (AMD) .]

SECTION HISTORY 1987, c. 699, §1 (NEW). 2003, c. 236, §1 (AMD).

Generated | 4 §1023. Civil action; relief available 11.3.2017

------3-16 | The Basics of Elder Law and Special Needs Planning MRS Title 33, Chapter 20: IMPROVIDENT TRANSFERS OF TITLE

§1023. CIVIL ACTION; RELIEF AVAILABLE

1. Civil action. A civil action may be brought to obtain relief under this chapter by an elderly dependent person, that person's legal representative or the personal representative of the estate of an elderly dependent person.

[ 2003, c. 236, §2 (AMD) .]

2. Relief available; protected transfers and executions. When a court finds that a transfer of property or execution of a guaranty was the result of undue influence, it shall grant appropriate relief enabling the elderly dependent person to avoid the transfer or execution, including the rescission or reformation of a deed or other instrument, the imposition of a constructive trust on property or an order enjoining use of or entry on property or commanding the return of property. When the court finds that undue influence is a good and valid defense to a transferee's suit on a contract to transfer the property or a suit of a person who benefits from the execution of a guaranty on that guaranty, the court shall refuse to enforce the transfer or guaranty. No relief obtained or granted under this section may in any way affect or limit the right, title and interest of good faith purchasers, mortgagees, holders of security interests or other 3rd parties who obtain an interest in the transferred property for value after its transfer from the elderly dependent person. No relief obtained or granted under this section may affect any mortgage deed to the extent of value given by the mortgagee.

[ 2003, c. 236, §2 (AMD) .]

3. Statute of limitations. The limitations imposed by Title 14, section 752, apply to all actions brought under this chapter.

[ 1987, c. 699, §1 (NEW) .]

SECTION HISTORY 1987, c. 699, §1 (NEW). 1989, c. 238, §§2,4 (AMD). 2003, c. 236, §2 (AMD).

§1024. OTHER COMMON LAW AND STATUTORY CAUSES OF ACTION AND RELIEF STILL AVAILABLE Nothing in this chapter may be construed to abrogate any other causes of action or relief at law or equity to which elderly dependent persons are entitled under other laws or at common law. [1987, c. 699, §1 (NEW).]

SECTION HISTORY 1987, c. 699, §1 (NEW).

§1025. TITLE PRACTICES This chapter does not require that language showing compliance with this chapter be included in a deed and does not require that evidence of compliance with this chapter be recorded in the registry of deeds. Any attempt to record such evidence is void and has no effect on title. [1989, c. 238, §3 (NEW).]

SECTION HISTORY 1989, c. 238, §§3,4 (NEW).

Generated 11.3.2017 §1024. Other common law and statutory causes of action and relief still available | 5

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-17 MRS Title 33, Chapter 20: IMPROVIDENT TRANSFERS OF TITLE

The State of Maine claims a copyright in its codified statutes. If you intend to republish this material, we require that you include the following disclaimer in your publication: All copyrights and other rights to statutory text are reserved by the State of Maine. The text included in this publication reflects changes made through the First Special Session of the 128th Maine Legislature and is current through November 1, 2017. The text is subject to change without notice. It is a version that has not been officially certified by the Secretary of State. Refer to the Maine Revised Statutes Annotated and supplements for certified text. The Office of the Revisor of Statutes also requests that you send us one copy of any statutory publication you may produce. Our goal is not to restrict publishing activity, but to keep track of who is publishing what, to identify any needless duplication and to preserve the State's copyright rights.

PLEASE NOTE: The Revisor's Office cannot perform research for or provide legal advice or interpretation of Maine law to the public. If you need legal assistance, please contact a qualified attorney.

Generated | 6 §1025. Title practices 11.3.2017

------3-18 | The Basics of Elder Law and Special Needs Planning INFORMED AND WRITTEN CONSENT

______

I (We)______hereby provide this informed, written consent to authorize the attorneys and staff of the XYZ Law Firm, to provide legal assistance to the current and any successor Trustees of the ______TRUST, dated ______, 20___.

This consent is provided pursuant to Rule 1.9(a) of the Maine Rules of Professional Conduct, which states:

“A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.”

______Trust Settlor Date

Please sign and return one signed original to: Maine Center for Elder Law, LLC 3 Webhannet Place, Suite 1 Kennebunk, ME 04043

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-19 MAINE SUPREME JUDICIAL COURT Reporter of Decisions Decision: 2003 ME 71 Docket: Han-02-660 Submitted On Briefs: April 9, 2003 Decided: May 12, 2003

Panel: SAUFLEY, C.J., and CLIFFORD, RUDMAN, DANA, ALEXANDER, and LEVY, JJ.

ESTATE OF AGNES MARQUIS

RUDMAN, J.

[¶1] Daniel Pelletier appeals from the judgment entered in the Hancock

County Probate Court (Patterson, J.) in favor of Robert Marquis (Marquis), the

Personal Representative of the Estate of Agnes Marquis (decedent). Pelletier

asserts the court erred in determining the decedent lacked the mental capacity to

change beneficiary designations on her two annuity policies. Marquis cross-

appeals from the court’s decision ordering the decedent’s estate to pay Pelletier’s

attorney fees in accordance with 18-A M.R.S.A. § 1-601 (1998). We are not

persuaded by Pelletier’s arguments, find no error in the Probate Court’s award of

attorney fees, and, therefore, affirm the judgment.

------3-20 | The Basics of Elder Law and Special Needs Planning 2

I. BACKGROUND

[¶2] The decedent died on July 31, 2001, at the age of eighty-one. She

never married or had children, but was survived by several nieces and nephews

who live in the greater Bangor area.

[¶3] At the time of her death, the decedent owned two annuities issued by

Metropolitan Life Insurance Company (MetLife), which lie at the heart of this

dispute. The decedent purchased the first annuity in 1985 and the second annuity

in 1996. She initially designated her estate as the beneficiary on both policies.1

[¶4] The decedent executed a will on February 19, 1997. The will left

$4,000 bequests to twelve family members and one friend. The will also provided

that the remainder of the decedent’s estate was to pass in equal shares to two

charities: the Greater Bangor Area Shelter, and the Sisters of Mercy in Name of St.

Joseph’s Convent and Hospital.

[¶5] The transaction giving rise to the present appeal transpired on

November 10, 2000, when the decedent changed the beneficiaries of her annuities

from her estate to Daniel Pelletier, her grandnephew. The decedent met with

Anthony Sivik, the MetLife office manager in Bangor, for approximately seventy-

five minutes. Sivik testified that the decedent appeared well spoken and that she

1 The decedent acquired “lump-sum” annuities. As the policy owner, she had the option of drawing periodic cash payments from the fund or cashing the policy at any time. The decedent did not draw any cash payments, and the annuities had accumulated a combined value of approximately $84,000 at the time of her death.

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-21 3

decided to make Pelletier the beneficiary on her policies because he was the only

relative who visited her on holidays and regularly helped her run errands. Sivik,

however, could not express an opinion concerning the nature and extent of the

decedent’s understanding of the annuity policies because the parties did not discuss

the policies’ exact terms during the meeting.

[¶6] In early February 2001, approximately three months after the decedent

named Pelletier as beneficiary, three of the decedent’s relatives petitioned the

Probate Court for temporary guardianship and conservatorship of the decedent

after witnessing her behavior, mental capabilities, and physical condition

deteriorate. The Penobscot County Probate Court (Woodcock, J.) granted the

petition on February 5, 2001. Pelletier thereafter filed a competing guardianship

petition because he believed that the temporary guardians were not serving in the

decedent’s best interests. Ultimately, the three temporary guardians became

permanent guardians, and the parties agreed to name Nathan Dane, Esq. to serve as

the conservator.

[¶7] After some investigation, Dane concluded that the decedent’s

November 10, 2000 change of beneficiary designation was invalid on grounds of

lack of capacity. Dane requested that MetLife void the transaction and reinstate

the estate as the proper beneficiary. MetLife declined on the grounds that a court

------3-22 | The Basics of Elder Law and Special Needs Planning 4

order was required. The decedent passed away, however, before Dane could make

the requisite filing with the court.

[¶8] In September 2001, Marquis, as the Personal Representative of the

decedent’s estate, filed a petition for declaratory relief and change of annuity

beneficiary in the Penobscot County Probate Court.2 Marquis asked the court to

void the change in beneficiaries. He asserted the decedent did not have the

requisite mental capacity to contract on November 10, 2000 and, thus, the annuities

should be paid to her estate.

[¶9] At the hearing before the Probate Court, the parties introduced

testimonial and other evidence concerning the decedent’s conduct and mental

abilities between 1999 and her death in 2001 in an attempt to discern the

decedent’s mental capacity when she changed the beneficiary designation.3 The

court found the decedent lacked the capacity to change the annuity beneficiary, and

it ordered MetLife to deliver the annuity proceeds to the estate. The court also

ordered the estate to pay Pelletier’s reasonable attorney fees, pursuant to 18-A

M.R.S.A § 1-601.

[¶10] Both parties filed notices of appeal.

2 The case was transferred from Penobscot County to Hancock County before trial.

3 The Greater Bangor Homeless Shelter and the St. Joseph’s Convent and Hospital declined to participate in the hearing.

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-23 5

II. DISCUSSION

A. The decedent’s mental capacity

[¶11] Pelletier first asserts the Probate Court failed to delineate and apply

the appropriate legal standard for determining whether the decedent possessed

sufficient mental capacity to change the beneficiary designation on her annuity

policies. He specifically contends that the testamentary capacity standard should

apply. We disagree.

[¶12] In its articulate and well-reasoned decision, the Probate Court

accurately stated that “[c]hanging the annuity beneficiary requires the same mental

capacity as does the execution of the underlying contract.” This proposition is a

correct statement of the law because an annuity is a contract, Lander v. Hartford

Life & Annuity Insurance Co., 251 F.3d 101, 104 (2d Cir. 2001), and, therefore, the

rules governing the validity and legality of contracts apply to the validity of an

annuity policy, see Rishel v. Pacific Mutual Life Insurance Co. of California, 78

F.2d 881, 884 (10th Cir. 1935).

[¶13] Hence, a party to an annuity contract must possess the mental capacity

necessary for executing a valid contract—and not that required to execute or

amend a will—when changing the beneficiary designation on an annuity policy.4

4 In Goodale v. Wilson, 134 Me. 358, 360, 186 A. 876, 877 (1936), we considered whether a decedent’s change of beneficiary on an insurance policy was void on grounds of undue influence. In making this determination, we considered evidence of the decedent’s mental capacity in order to discern his

------3-24 | The Basics of Elder Law and Special Needs Planning 6

See Stockett v. Penn Mut. Life Ins. Co., 106 A.2d 741, 742-43 (R.I. 1954) (holding

the decedent possessed sufficient capacity to execute an annuity policy even

though advanced in age, infirm, illiterate, and generally inexperienced in business

matters).

[¶14] In Maine, section 15 of the RESTATEMENT (SECOND) OF CONTRACTS

(1981) provides the standard for evaluating whether a party possesses the requisite

mental capacity to contract. Bragdon v. Drew, 658 A.2d 666, 668 (Me. 1995)

(holding a grantor’s mental incapacity alone is sufficient to rescind a deed).5

Section 15 specifically provides, in relevant part:

(1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition.

susceptibility to influence and observed that “it requires no more mental capacity to change beneficiaries in a life insurance policy . . . than it does to make a will.” Id. at 361, 186 A. at 877 (internal quotations omitted). Like an annuity, however, an insurance policy is a contract. 24-A M.R.S.A. § 3 (2000) (defining “insurance” within the Maine Insurance Code); see Pelkey v. Gen. Elec. Capital Assurance Co., 2002 ME 142, ¶ 10, 804 A.2d 385, 388 (noting “[t]he interpretation of an insurance contract is a matter of law that we review de novo”). We, therefore, now clarify our language in Goodale, noting that changing the beneficiary on a life insurance policy requires the same mental capacity as executing a valid contract. E.g., Rawlings v. John Hancock Mut. Life Ins. Co., 78 S.W.3d 291, 297 n.1 (Tenn. Ct. App. 2001).

5 Although our case law discussing and applying this section of the Restatement generally focuses on the exchange of real property, e.g., Bowden v. Grindle, 675 A.2d 968, 970 (Me. 1996), land transactions are contractual and, therefore, provide the applicable standard governing the decedent’s mental capacity to amend the beneficiary designation on her annuities.

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-25 7

[¶15] To give context to the foregoing standard, comment b states that

mental incompetency may include mental deterioration resulting from old age, or

“mental illnesses evidenced by such symptoms as delusions, hallucinations,

delirium, confusion and depression.” RESTATEMENT (SECOND) CONTRACTS § 15

cmt. b. The party asserting incompetency has the burden of proving irrational or

unintelligent behavior, and the court may consider “almost any conduct,” including

lay and expert opinions, and evidence of age, bodily infirmity, or disease. Id. at

cmt. c.

[¶16] Having determined that contractual capacity governs the present

analysis, we must next address Pelletier’s contention that the court improperly

found the decedent lacked the mental capacity to amend her annuities. We review

a trial court’s capacity determination, a question of fact, for clear error. Estate of

Siebert, 1999 ME 156, ¶ 6, 739 A.2d 365, 366-67. We will uphold the trial court’s

finding “[i]f there is any competent evidence in the record” that supports the

decision. Estate of Turf, 435 A.2d 1087, 1089 (Me. 1981).

[¶17] Sufficient evidence exists in the record to support the court’s

determination that the decedent lacked capacity to contract when she changed the

beneficiary designation on her annuities. First, the decedent’s former housekeeper,

Onida Dubois, testified that the decedent’s condition was deteriorating rapidly by

May 2000. Dubois recalled incidents when the decedent thought someone was

------3-26 | The Basics of Elder Law and Special Needs Planning 8

talking to her through the television and when the decedent stated that her dog

nursed her to health when she fell ill. Dubois also testified that she often found

uncashed checks and unpaid bills in the decedent’s house when Dubois returned

from extended absences. Second, various relatives testified that the decedent

indicated having visions of her dead brother, fearing non-existent Quakers would

enter her house in the middle of the night, and believing she was going to marry

Jesus.

[¶18] Finally, Karen Hover, M.D., stated in her deposition testimony that, in

her opinion, the decedent suffered from dementia approximately one week before

and three weeks after the decedent amended the annuity policies.6 Doctor Hover’s

opinion concerning her patient’s condition prior to and after amending the policy is

competent evidence to show the decedent’s mental competency at the time of

execution. See Appeal of Martin, 133 Me. 422, 433, 179 A. 655, 661 (1935)

(holding a “patient’s condition some time before, and some time after, making the

will is relevant, as tending to show the condition of mind when it was executed”).

6 Doctor Hover is a family practitioner who dedicates between ten and fifteen percent of her practice to elderly patients suffering from mental infirmities, including dementia. Although Hover did not testify at trial, the court admitted her deposition in evidence over Pelletier’s objection that her opinion was unreliable because she did not base her opinion on sufficiently objective scientific criteria. Pelletier reasserts, on appeal, that the court erred by admitting and relying on Hover’s deposition when making its determination concerning the decedent’s mental capacity. We, however, review the court’s decision to admit expert testimony for clear error and an abuse of discretion. State v. Fleming, 1997 ME 158, ¶ 14, 698 A.2d 503, 507. In this case, the Probate Court acted within the bounds of its discretion because Hover’s testimony was relevant, conformed to generally accepted scientific practices, and assisted the court in determining the decedent’s mental capacity. See State v. Williams, 388 A.2d 500, 504 (Me. 1978).

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-27 9

[¶19] Pelletier specifically contends that, notwithstanding this testimonial

evidence, the court erred because it did not rely on Sivik’s testimony, the only

witness presenting evidence of the decedent’s conduct and capacity on the day she

amended the annuity. He also argues the court improperly relied on the testimony

of the decedent’s former attorney, Michael Griffin, because Griffin’s observations

were too remote in time from the day that the decedent amended her annuities.

[¶20] Pelletier’s arguments are misguided, however, because evidence of

the decedent’s behavior for a reasonable period before and after she amended the

annuities is admissible to show her capacity on the day in question. See Estate of

Record, 534 A.2d 1319, 1321 (Me. 1987) (stating that evidence of a testator’s

behavior before and after the execution of a will is admissible to show his

testamentary capacity). Accordingly, the court did not commit clear error in

finding the decedent lacked the capacity to change the beneficiary designation on

her annuity policies.

B. Attorney Fees

[¶21] We next consider whether the court erred in ordering the decedent’s

estate to pay Pelletier’s attorney fees. On cross-appeal, Marquis contends that the

court misapplied the “as justice requires” standard set forth in 18-A M.R.S.A. § 1-

601. He asserts Pelletier is not entitled to the attorney fees because the estate was

------3-28 | The Basics of Elder Law and Special Needs Planning 10

entitled to the annuity proceeds, and the present lawsuit became necessary only

after Pelletier refused to surrender them.

[¶22] We review a trial court’s decision concerning the award of attorney

fees for an abuse of discretion. Estate of Deschenes, 2003 ME 35, ¶ 16, 818 A.2d

1026, 1031. Section 1-601 provides, in relevant part, that the Probate Court may

allow costs to either party, “including reasonable . . . attorney’s fees, to be paid to

either or both parties, out of the estate in controversy, as justice requires.” 18-A

M.R.S.A. § 1-601 (emphasis added). When evaluating the “as justice requires

standard,” the Probate Court’s “primary concern . . . should be whether the

litigation has been beneficial to the estate . . . .” Estate of Voignier, 609 A.2d 704,

708 (Me. 1992). Actions brought or litigated in good faith are beneficial to the

estate because they comport with section 1-601’s rationale and objective of

discouraging “speculative claims and nuisance actions.” Estate of Wright, 637

A.2d 106, 110 (Me. 1994) (upholding court’s award of fees to testator’s children

because the children initiated their suit challenging a choice of law provision in the

testator’s will in good faith).

[¶23] In this case, the court did not exceed the bounds of its discretion in

ordering the estate to pay Pelletier’s attorney fees. Pelletier did not initiate the

present lawsuit; rather, he sought merely to defend his contractual right to the

annuity proceeds after Marquis challenged the validity of the decedent’s change of

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-29 11

beneficiary designation. Pelletier, therefore, did not act in bad faith or pursue a

“speculative claim” or “nuisance action” of the type the legislature designed

section 1-601 to discourage. See Wright, 637 A.2d at 110.

[¶24] Moreover, as the Probate Court found, Pelletier’s defense of the

present litigation benefited the estate because it assisted the court in determining

whether the decedent’s change of beneficiary was the product of undue influence

or insufficient capacity. See Wright, 637 A.2d at 110 n.5; Estate of Brideau, 458

A.2d 745, 748 (Me. 1983) (adopting the rationale of a Florida court holding that an

estate benefits when parties litigate a will’s validity, in good faith, because the

proceedings enable the court to resolve the controversy). Accordingly, the court

acted within the bounds of its discretion and, therefore, we affirm its decision to

award attorney fees to Pelletier.

The entry is:

Judgment affirmed. Remanded to the Probate Court to calculate the amount of Pelletier’s reasonable attorney fees.

______

Attorneys for appellant:

Thomas M. Brown, Esq. Peter D. Klein, Esq. Eaton Peabody P O Box 1210 Bangor, ME 04402-1210

------3-30 | The Basics of Elder Law and Special Needs Planning 12

Attoneys for appellees:

Barry K. Mills, Esq. Hale &. Hamlin, LLC P O Box 729 Ellsworth, ME 04605-0729

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-31 NOTES

______

------3-32 | The Basics of Elder Law and Special Needs Planning NOTES

______

------Ethics: Representing a Fiduciary and Clients with Limited Capacity | 3-33 NOTES

______

------3-34 | The Basics of Elder Law and Special Needs Planning Chapter------4 Submitted by: MaineCare Application Part I: Process/Eligibility Requirements | 4-1 Katherine E. Griffin, Esq. Katherine E. Griffin, Toole, Powers & Griffin, P.A., Portland Powers & Griffin, Toole, MAINECARE PART I: PART MAINECARE APPLICATION PROCESS/ELIGIBILITY REQUIREMENTS PROCESS/ELIGIBILITY APPLICATION ------Overview

1. Introduction 2. Medical Eligibility a. Nursing Care b. Assisted Living/Residential Care 3. Financial Eligibility a. Asset limits i. Nursing Care ii. Assisted Living b. Exempt Assets c. Transfer of Assets and Transfer Penalties i. Nursing Care Penalty ii. Assisted Living Penalty d. Transfers that are Exempt from Penalty e. Preplanning to Avoid Transfer Penalties f. Gifting 4. Income a. Cost of Care b. Spousal Allowance 5. Application Process 6. Home Care

------4-2 | The Basics of Elder Law and Special Needs Planning Documents/Information Required to be Filed with MaineCare Application

• Power of Attorney or Guardian/Conservator papers, if any • Monthly statements from all bank/financial accounts for 60 months prior to application, whether are not accounts are still open. Includes checking, savings, retirement accounts, brokerage accounts, certificates of deposit, etc. • Long Term Care Policy, if any • Statement from all life insurance policies stating cash surrender value • Documentation of prepaid funeral, burial, and cemetery plots, including Mortuary Trust Agreements • Year/Make/Model of all motor vehicles, and title and registration, if any • Copy of Deed and property tax bill for all real estate • Social Security Benefits Statement and evidence of income from any other source, such as pension, annuities, VA benefits, rental income, etc. • Copies of front and back of Social Security card, Medicare card, and health insurance cards of applicant and spouse • Statement of health insurance premiums • Date of admission • Copy of resident trust statement • Whether a safe deposit box exists, and list of contents and location if one exists • Copy of birth certificate • Highest grade completed by applicant • Whether applicant or spouse served in the military • Most recent tax returns • Copy of any Trust

------MaineCare Part I: Application Process/Eligibility Requirements | 4-3 Relevant Regulations

MaineCare Eligibility Manual: https://www.maine.gov/sos/cec/rules/10/ch332.htm Part 12 Residential Care Part 13 Home and Community Based Waiver Part 14 Individuals in Medical Institutions Part 15 Transfer of Assets Part 16 Assets MaineCare Benefits Manual: https://www.maine.gov/sos/cec/rules/10/ch101.htm Chapter II Section 67 Nursing Facility Services; Section 67.02 Eligibility for Care Chapter II Section 19 Home and Community Benefits for the Elderly andAdults with Disabilities.

------4-4 | The Basics of Elder Law and Special Needs Planning MAINE DEPARTMENT OF HEALTH AND HUMAN SERVICES

Application for Financial Assistance for Facility Costs This application is for help with Nursing Facility Return to: expenses, cost of nursing care in your home or cost of care in a Residential Care Facility.

I am asking for help with: (check one) ____ Nursing Facility care ____ Support Waiver ____ Nursing care in my home ____ MR Waiver ____ Residential Care Facility

The term “YOU” as used in this application means the person who needs financial assistance.

Information about you:

Your Name (First, Middle, Last) Social Security # Birthdate Age

Mailing Address: Street, PO Box, (Include apartment number, care of, etc.) U.S. Citizen Sex

No Yes M F

City State Zip Code Telephone or Message Number

Street address and town where you actually live. Please give directions to your home.

Race: White ____ Black ____ Hispanic ____ Other ______

Marital Status: Single ____ Married ____ Separated ____ Divorced ____ Widowed ____

Medicare number: Effective date: Part A ______Part B ______

Do you have a disability? No ____ Yes ____ Do you receive SSI? No ____ Yes ____

Have you ever received SSI? No ____ Yes ____

Have you ever served in the Armed Forces? No ____ Yes ____

Information about your spouse:

Spouse’s Name (First, Middle, Last) Social Security # Birthdate Sex M __ F __

Medicare number: Effective date: Part A ______Part B ______

Does your spouse live with you? No ____ Yes ____ If no, list your spouse’s mailing address: Has your spouse ever served in the Armed Forces? No ____ Yes ____

Date received:______Date logged on:______45th day: ______------OFI NHW01 (R01/13) MaineCare Part I: Application Process/Eligibility RequirementsPage 1 | 4-5 The asset questions on pages 2 and 3 are about you and your spouse. You need to provide proof of all assets.

- Cash not in bank - Checking Account - Credit Union Shares - IRA, 401K, Keogh - Savings Account - Certificate of Deposit - Other Accounts

Name(s) on Account Type of Asset Name of Account Current Balance See Above Bank or Institution Number Or Value

If you need more space to list accounts, use a separate sheet and check here.

If you are presently in a Nursing Facility or Residential Care Facility, No ____ Yes ____ do you have a Patient Account? If so, what is the balance of your account? $______

You need to tell us about any annuities, stocks, bonds, profit sharing, trust funds and any other financial investment instruments that you or your spouse have an interest in.

Do you or your spouse have any Stocks, Bonds, Profit Sharing, Annuities, or any type of Trust Funds? No ____ Yes ____

If yes, list here:

Other: Do you or your spouse have any Life Insurance? If yes, list below: No ____ Yes ____

Owner Who is insured Company name and address Face Value Cash Value

$ $

$ $ $ $

Do you or your spouse have a Funeral Plan or Prepaid Burial? No ____ Yes ____

Does your name or your spouse’s name appear on anyone else’s Bank Account, Savings Account, Checking Account, Credit Union Account, Stocks, Bonds, Money Market Certificates or any type of

Property other than those already listed? No ____ Yes ____

Do you or your spouse have a Safe Deposit Box? No ____ Yes ____ Name of Bank:

Do you or your spouse have Land, Buildings, Timeshares, jointly-held Real Estate, or a Life Estate, including where you live? No ____ Yes ____ Do you intend to return to your residence when you no longer need care in a Nursing Facility or an Assisted Living/Residential Care Facility? No ____ Yes ____ ------4-6 | The Basics of Elder Law and Special Needs Planning Page 2 Do you or your spouse have, or jointly own, any cars, trucks, boats, campers, motorcycles, snowmobiles, ATVs, trailers, skidders, tractors, or other motorized vehicles? No ___ Yes ___

If yes, please list below:

Year Make Model Name(s) of Owner(s) Amount Owed

$ $ $

Have you or your spouse disposed of any Personal Property or Real Estate or closed any Savings, Checking, or any other Financial Accounts in the last 60 months? This includes all things you may have given away or sold during the past 60 months. (Examples of things you may have owned: money, bank accounts, checking accounts, stocks, land, buildings, camps, automobiles, boats, campers, etc.) No ___ Yes ___

If yes, please list here:

Have you or your spouse recently received, or do either of you expect to receive in the near future, any retroactive government benefits, pay raises, lawsuit settlements, inheritances, or compensation of any other kind? No ___ Yes ___

If yes, please list here:

These income questions are about you and your spouse. Please provide proof of income.

* Alimony * Other Disability Income * Railroad Retirement * Dividends or Interest * Social Security * Military Allotment * Pensions * Earnings – Wages (Retirement or Disability) * SSI * Worker’s Compensation * Civil Service Annuity * Self-Employment * Other Income * Veteran Benefits or Other Annuities (List Claim # ______)

List Type Your Income Your Spouse’s Income (See Above)

Gross Amount $ $ $ $ $ $ $ $

How often received?

Do you or your spouse receive rent money from property? No ___ Yes ___

Do you or your spouse receive money from someone who pays room and board? No ___ Yes ___ Do you or your spouse receive money from irregular income during the year? No ___ Yes ___

------MaineCare Part I: Application Process/Eligibility Requirements |P 4-7age 3 If you are in a hospital or nursing facility and your spouse is living at home, please list your spouse’s shelter expenses. (Do not include past due payments and Security Deposits.)

Lot Rent $_____per_____ Rent $_____per_____ Cooking Fuel $_____per_____ Mortgage $_____per_____ Heat $_____per_____ Water $_____per_____ Property Taxes $_____per_____ Telephone $_____per_____ Sewer $_____per_____ House Insurance $_____per_____ Electricity $_____per_____ Trash Collection $_____per_____ Is your heating cost included in your rent? No __ Yes __ Does your mortgage payment include taxes and house insurance? No __ Yes __ Does anyone else live in the household of your spouse? No __ Yes __

Do you need help with any medical bills incurred within the past three months? No __ Yes __

Which months?

Please send proof of income and assets for these months.

Do you have any medical insurance? No __ Yes __

Name of insurance company: ______Premium $ ______How often paid? ____

Please provide the latest receipt for the premium paid.

If you are now, or in the past 90 days Facility Name ______Facility Name ______have been in a Hospital, Nursing Address ______Address ______

Facility, or Residential Care Facility, Date admitted ______Date admitted ______please tell us about this. Date discharged ______Date discharged ______

Do you have a power of attorney, conservator, or court-ordered guardian? No __ Yes __

Name: ______Telephone #: ______

Address: ______

Please provide a copy of the court order or the power of attorney.

Is there someone else who knows about your financial situation, and whom we may contact to help with this application? No __ Yes __ Person’s Name: ______Relationship: ______Address: ______Telephone #: ______

If someone helped you fill out this form, please write his or her name and telephone number below: Name: Telephone #:

Assignment of Rights to Medical Payments: If MaineCare pays a bill for you, MaineCare has the right to collect for that bill from other medical support or medical insurance you may have.

Estate Recovery: If you receive MaineCare benefits and are age 55 or older, the State may make a claim on the assets of your estate to recover the money that MaineCare has paid for your care. No claim will be made if the only service you receive is the Medicare Buy-In. For more information about the Estate Recovery Program, please call MaineCare Member Services at 1-800-977-6740. I understand all the information requested on this form. I certify (under penalty of perjury) that all my answers are correct and complete to the best of my knowledge—including those concerning citizenship and alien status. I agree to give paperwork or other information to prove what I have said. I also agree that the Department of Health and Human Services and Federal officials may check with other people to verify the information I have provided.

______Signature Date ------4-8 | The Basics of Elder Law and Special Needs Planning Page 4 NOTES

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------MaineCare Part I: Application Process/Eligibility Requirements | 4-9 NOTES

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------4-10 | The Basics of Elder Law and Special Needs Planning Chapter------5 MaineCare Advanced Part II: Planning Techniques | 5-1 Submitted by: Paul D. Shapiro, Esq. Carlin & Shapiro PA, Portland Carlin & Shapiro PA, MAINECARE PART II: PART MAINECARE ADVANCED PLANNING TECHNIQUES PLANNING ADVANCED ------MaineCare (Part 2) – Advanced Planning Techniques

This section will examine advanced planning techniques, both those that interact with the lookback and transfer rules, as well as those that involve converting countable assets into non-countable assets. The final portion of this section will discuss the estate recovery procedure, and the appeals process.

The Lookback Rules and Penalty Period

A period of ineligibility is imposed on an individual who applies for MaineCare coverage for care in a nursing home or assisted living facility if the MaineCare applicant or their spouse has transferred an asset for less than fair market value. If a penalty is imposed, the MaineCare applicant is ineligible for care for long term care services for a specified period of time. It should be noted that transfer penalties are calculated differently for boarding home/assisted living facilities.

Penalties for Transfers. Any transfers (either made in trust or outright) that were made more than five years before the MaineCare application will not have any effect on eligibility. This is known as the “five year look back.” To determine the penalty period you first must add up all transfers made in the five years prior to the MaineCare application. Then you must divide that amount by the average monthly private pay rate at the time of application for a semi private room in a nursing facility. This number is set by the Department of Health and Human Services. Currently it is $8,476. This will give you a number of months of penalty, likely with a remainder.

The penalty begins to run from the later of: (1) the first day of a month during or after which the transfer for less than fair market value occurred; or (2) the first day of the month the individual would be eligible for medical assistance, but for the transfer penalty. If both spouses are in facilities, then they may split the penalty period.

The remainder portion of the penalty period is converted into a dollar amount. This is done by multiplying the number of whole months by the monthly private rate used in calculating the penalty period, and subtracting this from the total amount of the transfer. The remainder is added to the cost of care for the first month of eligibility after imposing the penalty period.

For example a $50,000 transfer will result in a 5.89 month penalty period. To calculate the value of the .89 remainder you must multiply 5 by $8,476. You then subtract this ($42,380), from the amount transferred ($50,000), leaving you with a remainder of $7,620. This amount is now added into the cost of care for the first month of eligibility, month 6.

Curing Transfers. Penalty periods may be cured by returning assets to the individual. There is no penalty as of the month in which all of the assets are returned to the individual. When only part of an asset or its equivalent is returned, a penalty period can be modified but not eliminated. A penalty will remain in effect for the period of time during which the asset had been transferred.

Hardship Waivers. A wavier of a penalty may be granted if specific conditions are met. The denial of care must “deprive the individual of medical care such that the individual’s health or life would be threatened; or deprive the individual of food, clothing, shelter, or other needs of life.”

This alone however is not sufficient. If the denial causes an undue hardship, a waiver is only granted in specific circumstances. If there was exploitation a waiver may be granted if the following conditions are met: neither the individual or spouse have means to pay, including utilizing exempt assets; the recipient of the transferred asset is unable or unwilling to return the transfer; all reasonable efforts have been made to obtain the asset; and the individual agrees, in writing, that if the asset is returned the individual will reimburse Medicaid for funds expended as a result of the approved claim of undue hardship.

------5-2 | The Basics of Elder Law and Special Needs Planning Transfers Exempt from the Penalty

If responsible individuals can be located, assets may be “gifted” to them in order to bring the applicant below the applicable asset limit for MaineCare. Part 15, Section 1.4 of the MaineCare Eligibility Manual specifically exempts from the penalty rules the following transfers:

The home if transferred to:

A child under age 21 who does or would meet SSI criteria of total and permanent disability or blindness;

A sibling who has an equity interest in the home and was residing in the home for at least one year prior to the individual going to the medical institution;

A child over age 21 who was residing in the home for at least two years prior to the individual’s entering the medical institution and was providing care which enabled the institutionalized individual to live at home rather than a medical institution for this time; and

A spouse.

Any asset if

Transferred to the individual’s child who does or would meet SSI criteria of total and permanent disability or blindness;

Transferred to a trust for the benefit of any individual under 65 years of age who does or would meet the SSI criteria of total and permanent disability;

Disposed of with the intent to be sold at fair market value, but, without being at fault, the owner did not obtain full fair market value;

Transferred exclusively for a purpose other than to qualify for Medicaid either at the time of transfer or at some future date;

Transferred to or for the sole benefit of the spouse.

The Reverse Half Loaf Technique

Remaining assets that could not be transferred under Part 15 Section 1.4 may still be “gifted” to a reliable and trustworthy individual, pursuant to a half-loaf technique. This MaineCare planning technique is most often used when there is a single person who is applying for MaineCare coverage for nursing home care and who exceeds the asset limit. It requires the transfer of assets out of the name of the MaineCare applicant. Because this strategy calls for divesting the elderly person of assets and incurring a penalty period, this device should only be used where there are family members who are trustworthy, devoted and very involved with the care of the elderly individual. Because there is a lot of risk with this strategy, it should be used as a planning tool only in selective cases.

The month that you are planning to apply for MaineCare coverage, a transfer is made of all of the assets of the MaineCare applicant, which would otherwise put the applicant over the asset limit. In some cases, if you are concerned about Estate Recovery, you may choose to transfer assets that are exempt but that are at risk of an Estate Recovery Claim.

After the assets are transferred, a MaineCare application is then submitted. After processing the application, DHHS will deny the initial application and apply a transfer penalty. The penalty, of course, is due to the recently transferred assets.

Thereafter, assets are returned to the applicant from the gifted funds in monthly increments, that are calculated to maintain the running of the penalty period. Please ntoe that if this is an application for assisted living coverage, a deductible period will be assessed.

------MaineCare Part II: Advanced Planning Techniques | 5-3 A re-application for MaineCare coverage is submitted after all of the penalty period months have passed. The actual amount of time that the elderly individual is ineligible for MaineCare coverage, in the end, will be less than the initially assessed penalty period. This is because the monthly return of funds to the elderly person constitutes a partial cure.

It is important to keep in mind that if you do this with an assisted living application, if the applicant later needs nursing facility care, and it is within five years, the nursing program will assess as separate penalty. Further while the concept described above remains the same, the process is more complicated for assisted living due to the imposition of the penalty through a deductible program.

Planning with Annuities/Mortgages/Promissory Notes

Mortgages/ promissory notes. If a client is owed funds under a note, this is a countable asset. The value of the asset is considered to be the principal to be repaid minus any repayments on principal that have been made. A client can reduce the amount of the countable asset by obtaining from two sources in the business of buying notes, stating the amount the source would pay for the note. If a client, however, chooses to use the open market value of the note, which undoubtedly would be discounted, the State will impose a penalty. The amount of the transfer is the amount by which the presumed value exceeds the current sale value. The date of the transfer is the date the note was signed by the debtor.

For notes dated February 8, 2006, or later funds used to purchase a promissory note, the loan or mortgage will be considered a transfer of assets unless the repayment term is actuarially sound with no balloon payments, deferral, and the note must prohibit cancellation of the balance upon the death of the lender.

Annuities. Annuities that are not yet annuitized (deferred annuities) are considered countable assets. The value of a deferred annuity is based on its total value, minus fees for withdrawal. Income payments from an annuity are considered countable income.

Annuities are also subject to additional rules. For annuities purchased after February 8, 2006, the purchase will be considered a transfer of assets to the remainder beneficiary. There are two exceptions to this rule.

(1) If the annuity is an Individual Retirement Annuity or purchased with the proceeds from specific retirement accounts a transfer penalty will not be imposed. This can make annuitizing an annuity a useful tactic for changing a countable asset, into countable income.

(2) If the annuity is irrevocable, non assignable, actuarially sound, with no deferral or balloon payments, it will not be treated as a transfer of assets.

Regardless of whether the annuity qualifies under (1) or (2) above, it must also name the State of Maine as the first remainder beneficiary (up to the amount paid by the State of Maine on behalf of the individual).

It is possible, because of the State of Maine’s submission for a Section 1115 waiver that these rules will be dramatically changing in the coming months, or years. The timeline for these changes is unknown still, and the exact result of the changes is also unknown. The waiver is requested permitting transfer penalties on otherwise exempt annuities, and instituting required minimum payout periods for annuities equivalent to 80% of the life expectancy of the annuitant.

Special Options: Community Spouse

Asset Limitations. The Community Spouse is the term in Mainecare planning for the applicant’s healthy spouse, who is living at home, and not receiving MaineCare long term care benefits. When an applicant is applying and has a “Community Spouse” additional exceptions and rules come into play that are designed to ensure the community spouse is not impoverished due to the institutionalization of the applicant. For nursing facilities the applicant may have $2,000 in countable assets, $8,000 in investments, and the community spouse may have an additional $119,220 in countable assets. For assisted living facilities there is no asset limit for the community spouse.

------5-4 | The Basics of Elder Law and Special Needs Planning Income Restrictions. Generally when an individual is receiving MaineCare in either a residential care facility or a nursing facility nearly all of their income is redirected towards their “cost of care.” It is important to remember that income in the name of the community spouse is not applied towards the applicant’s cost of care. Under the MaineCare nursing home program the State of Maine sometimes will allow the community spouse to keep a portion of the applicant’s monthly income, based on the expenses the community spouse has at home. This process is far more restrictive at the assisted living level, and requires the community spouse to have less than $2,000 in countable assets, and income of less than 100% of the federal poverty level.

Spousal Annuity. An effective planning strategy for a couple is to purchase an annuity with excess assets. By purchasing the annuity in the name of the community spouse, the couple is converting a countable asset (such as funds in a bank account) into an exempt asset. The payments become an income stream (that belongs to the community spouse), and the funds, that are used to purchase the annuity, are no longer seen as an available asset. The annuity must meet the strict requirements described earlier in these materials.

The Appeal Process

During the application process there may be an issue that you disagree with the caseworker on. For example, perhaps there is an asset that you feel falls into one of the exemptions discussed in Part 16 of the MaineCare Eligibility Manual, but the caseworker feels it does not. Upon receiving the written denial from the caseworker, you should file for appeal. The appeals process is covered in Part 1, Section 7 of the MaineCare Eligibility Manual, and in the Office of Administrative Hearings Regulations.

A letter, stating that you disagree with the decision, and wish to appeal, is sufficient to begin the appeals process. The appeal, under the rules, must be requested within thirty-two days of the date listed on the denial notice. However, there is case law that confirms a constitutional right to procedural due process, so proof that actual notice was not received can be sufficient to extend the thirty-two day period. There is no requirement that the request for an appeal be in writing.

I do recommend, however, preparing a more detailed letter about what you are appealing, as it can make its way to a supervisor, and potentially resolve the matter prior to a hearing. This letter should be sent directly to the caseworker who issued the decision.

For those individuals who are already receiving benefits, and receive a denial due to a change in their circumstances, appealing within the fifteen day “adverse action period” is prudent. This period begins from the date on the notice of the denial. Part 1, Section 7.2 of the MaineCare Eligibility Manual provides that if an appeal is requested during this period, then benefits continue to remain in place until the conclusion of the administrative appeal.

Medicaid Fair Hearings Case Presentation Tips

The hearing process can be as formal or informal as you, the caseworker, or the Attorney General’s office want. While there are rules for a hearing, they are fairly loose, and the hearing officer generally has fairly wide discretion in establishing the parameters of the hearing. Remember though, at a fair hearing it is treated as a de novo hearing, and thus any eligibility issues that you thought were resolved already, can be re-opened. This is a major risk when taking any matter to a hearing.

Because of the informality of the process, at least at the initial stages, presentation of the case can vary significantly. Cases can be requested to be resolved on the pleadings. When the facts are agreed upon, it is just a disagreement as to the interpretation of the rules. Even testimonial hearings often can be relatively informal, with minimal adherence to the rules of evidence, and no real discovery conducted beforehand. Finally, at the other end of the spectrum, hearings can be extremely formal affairs, with depositions and expert testimony. What the hearing is likely to look like is very dependent on what the matter is that is being appealed. This should always be considered, as the cost of conducting a hearing will vary depending on how formal the proceeding will be.

At the hearing stage, the Department is very rarely willing to negotiate. Because of this, if you have decided to appeal an issue, you should be prepared to go through with the hearing. Do not anticipate using an upcoming hearing as leverage to get a slightly more beneficial finding from the Department.

------MaineCare Part II: Advanced Planning Techniques | 5-5

There are two types of appeals that occur with a MaineCare eligibility decision. The first is the administrative appeal, already discussed above. Remember, this request must be based on a final decision. Thus, even if a caseworker tells you they anticipate assessing a penalty for a transfer, you cannot institute the appeal until their final determination has been made. After your request is made, within sixty days a hearing should be scheduled. Thus, unless an extension is specifically requested by the applicant, the appeal procedure is supposed to be extremely quick. Often in more complex appeals, you can request that the initial hearing date simply be something more akin to a pre-trial conference.

The second type of appeal is after your administrative appeal, when you can seek review of the hearing officer’s decision by the Superior Court under the Administrative Procedures Act. That process is beyond the scope of this presentation.

Estate Recovery

General Rule. After the death of a MaineCare recipient, the Department of Health and Human Services (DHHS) will assert a claim against the estate of the decedent or against the beneficiary of the decedent's estate if the decedent was fifty-five years or older when he received MaineCare benefits. The claim is limited to the amount paid by MaineCare for the decedent. The rules pertaining to estate recovery were updated on March 7, 2018. These updates will be detrimental to those seeking exemptions that may have been available under the old estate recovery rules. All MaineCare planning must account for the impact estate recovery may have on assets after the applicant’s death.

Definition of Estate. Estate includes all real and personal property in the decedent's probate estate and all other real and personal property in which the decedent had a legal interest at the time of death, to the extent of that interest. This includes assets conveyed through survivorship, life estates, living trusts, and joint tenancy. Jointly held interests in real property, however, are again specifically excluded from the definition of estate. Hence, the State will not pursue a claim against real estate that was owned by the MaineCare recipient and another in joint tenancy.

Where Claims May be Filed. The Estate Recovery Act is very broad and claims may be filed against the probate estate in probate court; in any court of competent jurisdiction against any property that the decedent had an interest as of the date of death. If claims are filed in probate court, then they are subject to the creditor claims provisions of the probate code, the time period limitation of claims.

When Claims can be filed. A claim will not be enforced by the State until the decedent has no surviving spouse and no surviving child who is younger than 21 years of age or who is blind or disabled at the time of Member’s death.

Cost of Collection. Claims must be waived if the costs of collection are likely to exceed the amount recovered.

Waivers Generally. The new rules divide waivers into two categories Undue Harship, and Undue Hardship based on Care given. Further, the rules claim that only one waiver will be granted per estate. This is a new issue, and I am not confident that this limitation is legal, as 42 U.S.C. 1396p(b)(3)(A) states that the State shall establish procedures to waive estate recovery if it would work an undue hardship. There is nothing here that seems to indicate that the State can limit how many waivers they grant to an estate, and additional requirements beyond those laid out in 42 U.S.C. 1396p are not allowed.

The waiver must be requested within 6 months of death, or within 0 days of notice of Department’s claim, whichever is later. It must be requested by a child of the applicant, or an individual 18 years of age or older. The applicant must prove a beneficial interest in the estate, and it is only this beneficial interest that will be exempted from collection. There are additional restrictions relating to the home, which are ambiguous and unclear in how the Department will seek to apply them.

The rules also include a number of limitations relating to strategically creating a hardship. Again, it is unclear how this rule could possibly be enforceable, or in what manner the Department hopes to utilize it. The limitations also include a requirement that no hardship exists if the sale of real estate will net the applicant more than $10,000.

------5-6 | The Basics of Elder Law and Special Needs Planning

These are new rules, and it is yet to be determined how the Department will attempt to utilize them. 42 U.S.C. 1396p provides latitude to the State in determining how to handle, procedurally, the waivers. However, the standards under which a waiver should be granted are promulgated by the Secretary of Health and Human Services. It is unclear at this time if these new waiver limitations are in compliance with the standards issued by the Secretary of Health and Human Services.

Undue Hardship Waiver. The applicant will need to demonstrate a dependence upon the assets of the estate. They need only meet one of the following criteria:

1) Estate assets are part of a business, including working farm, upon which the applicant was a dependent; or 2) The applicant’s household income and asset level combined is less than 180% of the Federal Poverty Income level.

Care Giver Hardship Waiver. The applicant will need to demonstrate that their current income level is below 200% of the Federal Poverty Income Level, adjusted for the person’s household size. The applicant must also show that they provided health maintenance or personal care activities during part or all of the two years immediately prior to Member’s death or institutionalization. Such care must have prevented the institutionalization of the decedent for an equivalent amount of time. The exempt amount will be based on the type of care provided, and the number of months provided, but shall not exceed $32,000.

Long Term Care Partnership Policy Exemption. If a client has a long term care partnership policy, certain assets are exempted from estate recovery procedures.

Other Claim Reduction. The Department is permitted to reduce its claim if it would deplete the estate. Such reduction would be for the purpose of reimburses heirs or devisees for the use of personal resources to protect against loss or damage to the decedent’s property during the last two years that the decedent was institutionalized. A claim reduction must be submitted within six months of death, or thirty days of notice of the Department’s claim, whichever is later.

------MaineCare Part II: Advanced Planning Techniques | 5-7 NOTES

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------5-10 | The Basics of Elder Law and Special Needs Planning Chapter------6 Other Public Benefits & Able Accounts | 6-1 ------Submitted by: Submitted Erica A. Veazey, Esq. A. Veazey, Erica Barbara S. Schlichtman, Esq. Barbara S. Schlichtman, Pine Tree Legal Assistance, Bangor Legal Tree Pine Maine Center for Elder Law LLC, Kennebunk Maine Center for Elder OTHER PUBLIC BENEFITS & ABLE ACCOUNTS ABLE & BENEFITS PUBLIC OTHER ------1

AN INTRODUCTION TO PUBLIC BENEFITS

A very basic overview of some state and federal benefits programs

Erica Veazey Pine Tree Legal Assistance

2018 Federal Poverty Level

Number of People in Federal Poverty Level Federal Poverty Level Household (monthly) (yearly) 1 $1,012 $12,140 2 $1,372 $16,460 3 $1,732 $20,780 4 $2,092 $25,100 5 $2,452 $29,420

Full time federal minimum wage is $1,258 per month/$15,080 per year Full time Maine minimum wage is $1,720 per month/$20,800 per year

------6-2 | The Basics of Elder Law and Special Needs Planning 2

FOOD STAMPS (SNAP)

FOOD STAMPS: WHAT IS IT?

Money is deposited each month directly onto an Supplement Nutrition Electronic Benefits Transfer Assistance Program (SNAP) (EBT) card, which can be used at many stores just like a debit card.

“The Food Supplement Program provides benefits that help low-income households buy the food they need for good health”- DHS website

------Other Public Benefits & Able Accounts | 6-3 3

FOOD STAMPS BENEFITS CAN ONLY BE USED ON FOOD.

What can you buy? •Food •Plants •Seeds to grow food to eat

What can’t you buy? •Any non-food item (paper products, hygiene items, cleaning supplies, etc.) •Alcohol or Tobacco •Medicines or Vitamins •Hot or Prepared Foods

INCOME AND ASSET LIMITS

Income Assets • Income limits are complicated • Households with children • Generally around 150% FPL under 18: • Amount of SNAP benefit varies • No asset limits based on amount and type of • All other households: income and household size. • $2,250-$5,000 asset limit • Benefit amount decreases as depending on household household income increases composition

------6-4 | The Basics of Elder Law and Special Needs Planning 4

PINE TREE LEGAL FOOD STAMP ESTIMATOR:

Find it at www.ptla.org

TANF: TEMPORARY ASSISTANCE TO NEEDY FAMILIES

------Other Public Benefits & Able Accounts | 6-5 5

TANF: WHAT IS IT?

TANF is “temporary help for Temporary Assistance children and their parents while the family works toward for Needy Families becoming self-supporting” -DHS Website

42 U.S.C. § 601: [A] program designed to: (1) provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; (2) end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; (3) prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and (4) encourage the formation and maintenance of two-parent families.

Cash benefit deposited monthly onto an Electronic Benefits Transfer (EBT) card, and can be used just like a debit card.

Cash can be withdrawn from an ATM, as “cash back” from a transaction, or a payment can be arranged directly from to DHS to a vendor (ex. direct payment to a landlord)

------6-6 | The Basics of Elder Law and Special Needs Planning 6

WHAT IS ASPIRE?

 Additional Support for People In  Potential ASPIRE activities Retraining and Employment

• Paid work

• Volunteer work

 ASPIRE is an education, training, • Work-study through school and work program that most parents getting TANF benefits must • Job search participate in • Job training program

• Vocational education

• Study time

WHO IS EXEMPT FROM ASPIRE?

Single parent with a child less than 1 year old

Single parent households with a disabled parent

Single parent households where the parents is needed at home to care for a disabled family member

------Other Public Benefits & Able Accounts | 6-7 7

SSI & SSDI

WHAT’S THE DIFFERENCE?

Supplemental Security Social Security Disability Income (SSI) Insurance (SSDI)

 Qualify based on disability and  Qualify based on disability and current inability to work current inability to work

 Maximum of $750 per month  Amount of benefits determined by work history  Reduced by certain types of other household income  Only other income that affects benefits are Workers Compensation This benefit is a needs based assistance. This benefits is an entitlement based upon paying into the social security system.

------6-8 | The Basics of Elder Law and Special Needs Planning 8

Other SSA Benefits Dependent Benefits Spousal Benefits

Retirement Survivor Benefits Benefits

WHAT IS IT?

A cash stipend deposited into a bank account or onto a debit card, such as the Direct Express card, which can then be used to make purchases or cash can be withdrawn from an ATM.

------Other Public Benefits & Able Accounts | 6-9 9

SUBSIDIZED HOUSING PROGRAMS

WHAT IS SUBSIDIZED HOUSING?  Government funded housing assistance  Objective of providing access to safe and affordable housing for low-income individuals and families  Rent is paid partially by the government and partially by the tenant  Tenant portion is based on income

------6-10 | The Basics of Elder Law and Special Needs Planning 10

Subsidized Housing Programs

Voucher Programs Project‐based Programs

Section 8 Public Housing BRAP Project‐based Section 8 Shelter Plus Rural Development Low Income Tax Credit

Voucher is used by the Subsidy is tied to the unit, recipient to find housing in multiple subsidized units make the private rental market up a project

THE END

------Other Public Benefits & Able Accounts | 6-11 NOTES

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------6-14 | The Basics of Elder Law and Special Needs Planning Barbara S. Schlichtman, Esq. Maine Center For Elder Law, LLC 207-467-3301 Offices in York, Kennebunk and Portland

ABLE Accounts Offer Flexibility for SSI Recipients Achieving a Better Life Experience (ABLE) Act of 2014 creates a savings option for families of individuals with disabilities. The ABLE Act authorizes the establishment of private tax-advantaged savings accounts. ABLE accounts do not affect Medicaid benefits and generally do not affect Supplemental Security Income benefits. CMS offered guidance in 2017 on these accounts through CMS State Medicaid Directors letter SMD # 17-002, which states that Medicaid agencies must disregard all funds in an ABLE account in determining eligibility A payment from an ABLE account for a qualified disability expense will not result in an SSI reduction, which is extremely valuable because ABLE accounts empower SSI recipients to pay for housing without a reduction in their SSI payment due to an in-kind support and maintenance (ISM) reduction because housing is a qualified disability expense. If a special needs trust pays for housing, the payment can be treated as ISM and reduce the monthly benefit. Section 529A(e)(5) of the Internal Revenue Code broadly defines qualified disability expenses as any expenses related to the eligible individual’s blindness or disability which may include, but are not limited to, expenses incurred for education, housing, transportation, employment training and support, and assistive technology. Watch for more guidance on qualified disability expenses. Distributions from ABLE accounts are not included in the beneficiary’s taxable income or counted as income in eligibility determinations for federal programs such as Medicaid as long as they are used for the qualified disability expenses. Any distribution from an ABLE account that is not a qualified disability expense, is considered taxable income to the beneficiary, and the IRS will assess a 10% penalty tax on the income portion of the funds used for the non-qualified expense. Another advantage of an ABLE account is that instead of being limited to $2,000 under SSI an individual can have assets in the ABLE account that are not counted for SSI eligibility, so long as the total account size does not exceed $100,000. The amount for Medicaid is capped at the maximum for 529 Plans, which is $425,000 for MaineCare. Even though the maximum amounts are relatively high, the annual contribution is somewhat low. It is $15,000 in 2018. If an ABLE beneficiary is also a beneficiary of a special needs trust, “distributions from such trusts ... to the beneficiary’s ABLE account should be treated the same as contributions to ABLE accounts from any other third party.” In relation to Medicaid eligibility, contributions from a third party, other than a parent, to an ABLE account would be treated as a “transfer,” or a gift, by the person making the contribution. However, it is expected that a contribution by a parent would be exempt as a transfer to a disabled child. Maine does not have an ABLE program; however, individuals can use programs in other states, and because there is no certification for a “qualified” program, the CMS letter states that a Medicaid agency should presume that an ABLE program established by a state is a qualified program in the absence of evidence to the contrary. In Maine, LD 1421 (HP 967) became law in 2016. It directs the Treasurer of State to study the most effective options for Maine residents to participate in tax-advantaged savings accounts for persons with disabilities.

------Other Public Benefits & Able Accounts | 6-15 In summary, advantages of ABLE accounts: • Available to pay qualified disability expenses, which can include food and shelter, without a reduction in SSI due to in-kind support and maintenance. • Gives the individual independence. • Enrollment has a low cost set-up fee. • Assets in the ABLE account are not counted for SSI eligibility purposes, so long as the total account size does not exceed $100,000 for SSI and for $425,000 for MaineCare. For Medicaid, an individual won’t lose eligibility until the account exceeds the state maximum for 529 Plans, which is $425,000 in Maine. • Income generated in an able account is tax free.

Disadvantages to these accounts are: • There is a Medicaid payback requirement. • Contributions are limited. The limit will be $15,000 aggregate from all contributors in one year in 2018. • To participate, the individual must have developed the disability prior to attaining age 26. • The total assets in the account cannot exceed $100,000; otherwise, eligibility is affected. • The use of the funds is limited to qualified disability expenses.

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THE BASICS OF ELDER LAW ABLE ACCOUNTS 2018 Barbara S. Schlichtman, Esq. Maine Center for Elder Law, LLC Kennebunk, Portland and York offices

ABLE ACT OF 2014

 An ABLE account is a new tool to shelter assets and remain eligible for SSI and Medicaid.

 It is not a replacement to special needs trusts, but a complement to planning.

 It is a “529” account for people with disabilities, it’s referred to as a 529A.

 There is a payback requirement.

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HOW TO SET UP AN ABLE ACCOUNT

 Maine does not have an active ABLE program, yet. LD 1881 authorizes state Treasurer to establish ABLE ME. On April 10, the bill was passed to be enacted as an Emergency Bill.

 Individuals can use out-of-state accounts. One account per person.

 Accounts are set up through online portals. Minimal set-up fees.

ABLE ACT OF 2014

 The Achieving a Better Life Experience Act of 2014 amends IRC section 529. Before recommending, confirm that owner was disabled before age 26.

 An ABLE account enables an individual to have extra funds without losing SSI or Medicaid.

 Contributions are cash only from any person or entity, including special needs trusts.

 The big advantage is that the individual can pay for basic needs, such as housing, from this account without receiving a reduction in SSI benefits.

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ABLE ACT OF 2014

 For example, if a special needs trust pays for housing, the payment is treated as in-kind support and maintenance (ISM) and the monthly benefit is reduced. The ABLE account eliminates this reduction.

 ABLE account can pay for “qualified disability expense,” QDE’s.

 QDE’s are defined as any expenses related to the eligible individual’s blindness or disability.

ABLE ACT OF 2014

 Stay away from buying gifts because not for benefit of person with disability.

 Gambling is also identified as a non-QDE.

 SSI POMS SI 01130.740 lists qualified disability expenses, QDEs, in a non-exclusive list.

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QUALIFIED DISABILITY EXPENSES

 Education; and administrative  Housing expenses; services;  Transportation;  Legal fees;  Employment training  Expenses for ABLE and support; account oversight and monitoring;  Assistive technology and related services;  Funeral and burial;  Health;  Basic living expenses and  Prevention and wellness;  Food not housing but is a QDE.  Financial management

HOUSING EXPENSES FOR ABLE

 Mortgage and property insurance

 Rent

 Real property taxes

 Heating fuel, gas, electricity

 Water, sewer

 Garbage removal

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DISTRIBUTIONS ARE NOT INCOME

 Do not count distributions from an ABLE account as income. They are a conversion of a resource from one form to another.

 See SI 01110.600B.4.

CONTRIBUTIONS TO ABLE ACCOUNT

 In 2018, cumulative total that can be contributed for one individual is $15,000 for non-working beneficiaries.

 If a beneficiary is able to work, he or she can contribute an additional $12,000 for a total of $27,000 a year into the account.

 Exclude contributions from a rollover ABLE Account in cumulative total, must be from family member.

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MAXIMUM BALANCES

 For eligibility, exclude distributions that were made for a non-housing QDE, but have not been spent. This can go into multiple months.

 For eligibility, include distributions that were made for housing expenses or non-QDE’s, but have not been spent into next month.

 Eligibility is affected for SSI if ABLE balance is over $100,000 and for MaineCare, $425,000.

SIGNATURE AUTHORITY

 Signature authority can belong to parent, legal guardian or agent under durable power of attorney.

 Useful for minors or those who need help managing an asset.

 Signature authority does not equal ownership.

 STABLE account doesn’t require legal guardianship for parents. This may vary among programs.

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PRACTITIONER TIPS

 CMS has told agencies not to count as asset.

 If DHHS mistakenly counts an ABLE Account, this requires advocacy from you.

 Encourage clients to use the linked debit card rather than commingling ABLE funds with non- ABLE funds. It will make their (your) lives easier.

 Enforcement is through IRS audit to ensure expenses are for QDE’s.

MARCH 2018 POMS UPDATES TO SI 01130 TRANSMITTAL NO. 74

 Subsection A – Partnerships identified that states can use to administer ABLE accounts and addresses duplicate ABLE accounts.

 Subsection B – Changed the references of QDE for housing to housing expenses, and updated the 2018 per done gift exclusion to $15,000.

 Subsection C – Clarified the treatment of contributions to an ABLE account.

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 Subsection D – Simplified the QDE examples.

 Subsection E – Explained when the states begin reporting data to SSA monthly. POMS includes a list of the data that states will begin sharing with SSA. POMS describes the actions technicians would have the ability to do and explain steps to view and process the information.

 Subsection G – Explained how to handle and record debit card information for the technician.

GO-TO RESOURCE

 ABLE National Resource Center

 I recommend the state-comparison tool, which allows you to compare three states at a time. http://www.ablenrc.org/  http://www.ablenrc.org/news/social-security- administration-releases-updated-guidance-able

 POMS update: http://policy.ssa.gov/poms.nsf/lnx/0501130740

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LEAVE ‘EM LAUGHING …

Three elder law attorneys are out walking.

First one says, 'Windy, isn't it?' Second one says, 'No, it's Thursday!' Third one says, 'So am I. Let's go get a beer.‘

Thanks for your time!

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