mily_WestchesterCountyEstatePlanningCounsel12--9-2010_2_
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ESTATE PLANNING FOR THE
NON-TRADITIONAL FAMILY
WHAT YOU (AND YOUR PARTNER) NEED TO KNOW TO SAFEGUARD
∙ YOUR MONEY
∙ YOUR HEALTH, and
∙ YOUR INDEPENDENCE
Presented at Westchester County Estate Planning Counsel
December 9, 2010
Peter J. Strauss, Esq.
Distinguished Adjunct Professor of Law
Epstein Becker & Green, P.C. The New York Law School
New York, New York 10177 250 Park Avenue 185 W. Broadway
pstrauss@ebglaw.com New York, New York
(212) 351-4746 Peter.Strauss@nyls.edu
4656488.2 1
The Root of the Problem
MORE INCAPACITATED OLDER
PERSONS AND PERSONS WITH
DISABILITIES
2
Sixty-five Plus in The United States
2004 2020 2030 2050
Total 282 324 350 404
Population
(In Millions)
Over 65
Percent 12.6% 16.5% 20% 24%
Number 36.4 54 70 80
Over 85
Percent 1.6% 2.1% 2.5% 5%
Number 5 6.7 9 19
3
Disabilities Affect One-fifth of All Americans
49 million – 1 in 5 – Americans have a disability
43% (21 million) are between 18 and 64 years of
age
54% (26.5 million) are over 65 years of age
1 in 10 have severe disabilities
9 million Americans have disabilities so severe they
require personal assistance to perform the activities
of daily living
4
The GOOD and BAD
While this increase in life expectancy and the
growth of our older population is a positive
development, there is a negative side. 50% of persons
over age 85 need significant assistance in daily
functioning. Chronic disease such as arthritis, hearing
impairment, hypertension, heart disease and stroke
become more prevalent.
The increasing prevalence of dementia among
older Americans is a major factor; it is estimated that
Alzheimer's disease is the cause of 70% of all
dementia.
5
The Need for Help With Everyday Activities
Increases With Age
85 and over 50%
80-84 31%
75-79 20%
70-74 11%
65-69 9%
15-64 2%
6
The Failure of Medicare
When Medicare was enacted in 1965, President
Lyndon B. Johnson stated the following prediction of
Medicare's benefits for the elderly:
"Every citizen will be able, in his productive years when
he is earning, to insure himself against the ravages of
illness in his old age. No longer will illness crush and
destroy the savings that they have so carefully put away
over a lifetime so that they might enjoy dignity in their
later years."
7
Planning Ahead:
Who Manages Your Life If You Can’t
CONSEQUENCES OF FAILURE TO
PLAN: COURT IMPOSED SYSTEMS
The absence of advance planning results in
court intervention and control. The appointment of a
guardian will be necessary. This often results in a
significant loss of independence and autonomy.
Guardianship is an unsatisfactory system of financial and
personal management in most cases.
The person who may be appointed guardian may not be the
person the incapacitated person would choose.
This is particularly true with persons who are living
together in a loving life partnership
8
Legal Issues Unique to Life Partners
Guardianship issues
Health care decisions making and
access to health care information
Inheritance rights and protection of the
life partner
Issues regarding children
Estate tax planning
9
Guardianship in New York
New York’s law is liberal on its face
A guardianship proceeding may be
commenced by
“the person with whom the person alleged to be
incapacitated resides” MHL 81.06 (5)
“a person otherwise concerned with the welfare
of the person alleged to be incapacitated” MHL
81.06 (6)
Notice is supposed to be given to the life partner,
but often is not at the beginning of a proceeding
10
Inheritance Rights
Decedent in New York survived by
Spouse and issue $50,000 + ½ of estate
Spouse and no issue 100%
Issue only 100%
No spouse or issue 100% to parents
Note: these rules apply only to assets in a person’s
individual name, not “non-probate” assets which
pass in accordance with beneficiary designations or
the dispositive provisions of a trust
11
New York’s Spousal Right of Election
1/3 OF “NET ESTATE”
Net estate is everything over which the
decedent had control or benefit during
lifetime
Joint bank accounts
Trusts
Some retirement accounts
POD/in trust for accounts
US Savings bonds
12
The surviving partner in a non-traditional
relationship with not have rights as an intestate
distributee or be entitled to a right of election by law
But, suppose the couple is married outside of New
York in where same-sex couples may marry?
See In re Estate of Kenneth Ranftle, Judge Glen,
New York County Surrogate’s Court, NYLJ Feb. 3,
2009, p. 27
Judge Glen held that the surviving spouse was the
sole distributee for purposes of probate of a will.
13
Same Sex-marriages Performed
Elsewhere and Recognized In New York
─ Other important Recent Developments
Martinez v. County of Monroe, 50 A.D.3d
189, 850 N.Y.S.2d 740 (4th Dep’t 2008), lv.
To appeal denied, 10 N.Y.3d 856 (2008)
County must grant employment benefits to a
same-sex couple married in Canada on the
basis they are granted to a heterosexual
married couple. New York must recognize
the marriage as a matter of comity;
recognition is not contrary to New York
public policy.
14
Recognition for purposes of
divorce. Beth R. v. Donna M., 19 Misc.3d
724, 853 N.Y.S.2d 501 (Sup. Ct. New York
Co. 2008); C.M. v. C.C., 2008 WL 4602380
(Sup. Ct. New York Co. 2008)
15
Executive Agency Actions
Governor Patterson’s statement on May 17, 2008: “I
am directing agency heads that we will recognize
marriages conducted outside our state right here in
New York State.”
Memorandum, May 14, 2008: to the heads of all New
York State agencies advising them undertake a
review “of your agency’s policy statements and
regulations, and those statutes whose construction is
vested in your agency, to ensure that terms such as
‘spouse,’ ‘husband’ and ‘wife’ are construed in a
manner that encompasses same-sex marriages,
unless some other provision of law would bar your
ability to do so.”
http://www.observer.com/2008/patersons-message-
same-sex-marriage
16
Executive Agency Actions, cont.
Various state agencies have followed this
direction. For example, the N.Y. State Civil
Service Department recognized foreign
same-sex marriages for benefits purposes
for public employees. This decision was
upheld in Lewis v. State Department of Civil
Service, 2009 WL 137504 (App. Div. 3d
Dep’t 2009
17
Executive Agency Actions, cont.
The New York State Department of Insurance issued a “Circular
Letter” (#27) on November 21, 2008 directing that insurance
companies must treat same-sex couples legally married
elsewhere as married for purposes of New York Insurance Law.
“…in light of the controlling authority of Martinez and several
opinions from lower New York courts consistent with that holding,
marriages between same-sex couples that are valid when entered
into outside of New York must be recognized in this State for
purposes of interpreting the Insurance Law. Thus, where an
employer offers group health insurance to employees and their
spouses, the same-sex spouse of a New York employee who
enters into a marriage legally performed outside the State is
entitled to health insurance coverage to the same extent as any
opposite-sex spouse. Moreover, the Opinion notes that its
analyses and conclusions are applicable to all other kinds of
insurance, too.”
18
Remaining Issues
Will the New York State Department of Taxation recognize same-
sex marriages performed elsewhere for tax purposes?
Marital deduction for estate tax purposes?
Joint returns for income tax purposes?
NO
Advisory Opinion, Commissioner of Taxation and Finance,
Office of Counsel dated May 12, 2010
Tax Law 607 provides that the terms of personal income tax
provisions shall have the same meaning as terms have for
federal income tax purposes.
“We conclude that since marriage to a same sex partner in not a
marriage for federal income tax purposes, it is not a marriage
for New York State personal income tax purposes”
The same rule is currently being applied for estate tax purposes
19
Federal court suit (Windsor v. United States) filed on
November 9, 2010 by a surviving spouse (Canadian same-sex
marriage) challenging DOMA (Defense of Marriage Act) and
the consequent result disallowing a marital deduction
Similar suit filed in Connecticut, Pederson v. Office of
Personnel Management
See NY Times, New challenges to DOMA Filed in Connecticut
and New York, 11-12-10
Also see The High Price of Being a Gay Couple, NY Times,
10-3-09
20
The Life Partnership Agreement
SOLVE THE PROBLEM WITH A LIFE
PARTNERSHIP AGREEMENT
YOU CAN ESTABLISH LEGAL
RIGHTS IN YOUR PARTNER
THOUGH AN ENFORCEABLE
CONTRACT
21
The Agreement
CAN DEAL WITH
Inheritance rights and obligation to name partner as
beneficiary under retirement plans and life insurance
“Equitable distribution” and “maintenance” issues if the
relationship ends
Provisions for children
Should you have an contract even if
you were married in a state where
marriage is sanctioned?
22
Should These Traditional Planning
Techniques be Used?
Should estate equalization be done via gifting?
Gift tax issues – no Marital Deduction
Suppose the relationship ends?
In “legal” marriages divorce and equitable
distribution can deal with the marriage’s termination
Resolve this through the contract
23
Wills Or Trusts?
WHAT’S THE DIFFERENCE?
AVOID PROBATE
WHO SHOULD BE TRUSTEE?
Individual
Professional trustee – Trust Company
CHANGE BENEFICIARY DESIGNATIONS!
24
Change the Balance of Power
The probate process in New York gives
great power to the persons who may object
to the Will
Don’t use the Will as the primary
testamentary vehicle!
The Revocable Living Trust gives the
surviving partner control
25
Protecting Children
Adoption
Designation of “Person in Parental relationship”
General Obligations Law 5-1551
Clearly define “children,” “issue,” and “descendants”
to include the child of your partner
26
Access to Information
Protected health care information
Sign health care proxy
Sign HIPAA release form
Access to financial information
Sign durable power of attorney
Include authority to access information
27
The Family Health Care Decisions Act
“FHCDA” - Legislative History
The clamor for reform in heath care decision making
led the New York Task Force on Life and the law in
1992 to issue a report, “When Others Must Choose:
Deciding for Patients Without Capacity,” called for a
law that would allow for surrogate decision making
by family members. Opposition was voiced by
various groups that prevented passage until 2010.
28
2010 – FHCDA Passes
On March 16, 2010, Governor Paterson signed Chapter 8 of
the Laws of 2010 which was passed by the legislature after 17
years of debate.
The Governor said “After nearly twenty years of negotiations,
New Yorkers now have the right to make health care
decisions on behalf of family members who cannot direct their
own care.”
Well, almost…
The Family Health Care Decisions Act adopts the concept of
substituted judgment decision making - existing in all other
states – to New York for patients who
• lack capacity to give informed consent
• did not leave clear and convincing instructions or evidence of
their wishes
• or did not execute a health care proxy
29
Key Purposes
The FHCDA establishes a system for decisions
making in order to
Provide consent to medical treatment
Allow for decision making at the end of life for withholding or
withdrawal of treatment
30
Applicability of FHCDA
The law applies to decisions for adult patients who
are in general hospitals or residential health care
facilities (skilled nursing homes)
Note: the statute uses the term “hospital” to refer to
both types of facilities
FHCDA does not apply to persons
who have appointed a health care agent
who have a guardians appointed under SCPA
1750-b with powers to make life-sustaining
treatment or family members who have such
powers under 1750-b
for whom treatment decisions can be made
pursuant to OMH or OMRDD regulations (PHL
section 2994-b(3)(c))
31
Determination of Incapacity
The FHCDA establishes procedures for determining when a
patient lacks capacity
Presumption of capacity, unless there is a court determination of
incapacity or an Art. 81 guardians “is authorized to decide about health
care”
Initial determination by attending physician
Concurring determination when required:
In a nursing home
In a general hospital if the surrogate’s decision involves
withdrawal or withholding of life sustaining treatment
Special credentials are required for professionals who make the
determination in the case of persons with mental retardation or mental
illness
The patient and the named surrogate must receive notice of the
determination
There are additional notification requirements for persons in mental
hygiene facilities
If the patient objects to the finding of incapacity or the choice of the
surrogate the objection prevails unless there is a court confirmation of
incapacity or concludes there is some other basis for overriding the
patient’s objection 32
Who Can Make the Decision -
The Surrogate
FHCDA sets forth a list of persons, in order of priority, who may act as
the surrogate to make decisions for an incapacitated patient
“A guardian authorized to decide about health care pursuant
to article 81 of the mental hygiene law” PHL 2994-(d)
Note: although not clear, it appears that the guardian should
be designated as the surrogate in the order of appointment
(see section 25 of Chapter 8, laws of 2010, amending MHL
section 81.22) (See slide 34)
The spouse or domestic partner (as defined in FHCDA)
An adult child
A parent
A brother or sister, or
A close friend
33
Domestic Partner
“Domestic Partner” means a person who, with respect to another
person:
(a) is formally a party in a domestic partnership or similar
relationship with the other person, entered into pursuant to the
laws of the United States or of any state, local or foreign
jurisdiction, or registered as the domestic partner of the other
person with any registry maintained by the employer of either
party or any state, municipality, or foreign jurisdiction; or
(b) is formally recognized as a beneficiary or covered person
under the other person’s employment benefits or health
insurance; or
(c) is dependent or mutually interdependent on the other person
for support, as evidenced by the totality of the circumstances
indicating a mutual intent to be domestic partners including but
not limited to: common ownership or joint leasing of real or
personal property; common householding, shared income or
shared expenses; children in common; signs of intent to marry or
become domestic partners under paragraph (a) or (b) of this
subdivision; or the length of the personal relationship of the
persons.
34
The Extent of the Surrogate’s Authority
A surrogate may make all health care decisions for the patient
that the patient could have made if he or she had capacity
Treatment decisions can be made without the consent of a
surrogate if the patient had previously expressed a decision,
orally or in writing, including with respect to a decision about
life sustaining treatment (such a decision would need to have
been made orally before two witnesses)
The surrogate’s decisions must be based on the patient’s
wishes, including his or her religious or moral beliefs. If the
patient’s wishes are not reasonably known and cannot be
ascertained with reasonable diligence the surrogate must
decide in the patient’s best interests. PHL section 2994-d(4)
35
Decisions to Withhold or Withdraw
Life-Sustaining Treatment
There are two provisions that authorize the surrogate to make
decisions about life-sustaining treatment:
1. Life-sustaining treatment can be withdrawn if
The treatment “would be an extraordinary burden to the patient” and
The attending physician and another physician determine that
the patient is terminally ill, i.e., is suffering from an illness or injury
that can be expected to cause death within six months whether or not
treatment is provided or
is permanently unconscious
2. Life-sustaining treatment can be withdrawn if
“The provision of treatment would involve such pain, suffering or other
burden that it would reasonably be deemed inhumane or excessively
burdensome under the circumstances and the patient has an irreversible or
incurable condition, as determined by an attending physician with the
independent concurrence of another physician to a reasonable degree of
medical certainty and in accordance with accepted medical standards”
PHL 2994-d (5)
36
Questions:
Who decides if the treatment “would be” an
extraordinary burden?
Who decides if the treatment is “inhumane?”
Note that the statute states that “providing nutrition
and hydration, without reliance on medical
treatment, is not health care under this article and is
not subject to this article”
Thus, provision of food and water to a patient who
has the ability to be fed and can swallow can not be
refused
37
The FHCDA Is Flawed with Respect to
End of Life Decisions
Does the statute solve the problem of New York’s
restrictive history?
Some patients will not fall within the standards set
forth for making end of life decisions
It appears that the clear and convincing evidence
rule is still extant for such patients
38
George’s Case
George is 79 years of age and suffers from advanced ALS (Lou
Gehrig's disease). He can no longer move any muscles, can no
longer speak or communicate via the computer technology he could
formerly use to express his wishes and needs. He can no longer nod,
blink or exert pressure on someone’s hand to signal his wishes or
consent. He is being fed through a PEG tube which was inserted in
his stomach in 2007. The physicians do not believe he is
permanently unconscious nor can they state with certainty that he will
die within 6 months.
He is a widower and now resides in a nursing home.
George never signed a health care proxy or living will.
George’s daughter, Susan, has discussed with George’s treating
physician whether she could, acting as the surrogate under the
FHCDA, direct withdrawal of the PEG.
Will Susan prevail?
39
Decisions for Minor Patients
FHCDA allows a parent or guardian of a minor to make end-of-
life decisions for a minor child using the same standards set
forth for adult patients
The statute did not need to address all health care
decisions for minors since parents already had decision
making rights in this respect
With respect to end of life decisions, the standards for adults
apply
If the physician determines the minor has capacity the minor's
consent to withholding or withdrawing treatment is required.
An emancipated minor does not need parent consent but the
ethics committee must approve the decisions
40
Adult Patients Without Surrogates
The new law wisely deals with the case of a patient with no
family member or friend who can act as surrogate
For routine medical treatment, the attending physician is
authorized to make decisions for patient’s without a surrogate
For major medical treatment, the attending physician must consult
with other health care professionals and a second physician must
concur with the attending’s decision
Decisions with respect to life-sustaining treatment, however, require
(1) a court decision in accordance with FHCDA decision making
standards or (2) treatment can be withheld or withdrawn if the
attending physician and a second physician determine the treatment
provides no medical benefit and the treatment would violate accepted
medical standards
The doctrine of the requirement of informed consent has been modified!
41
Ethics Review Committees
Hospitals and nursing homes must establish an
ethics review committee (ERC) with diverse
membership.
The ERC is charged with dispute resolution and
provide advisory opinions, except ERC approval is
required
1. for decisions to withhold or withdraw life-
sustaining treatment in nursing homes
2. for decisions by an emancipated minor to forego
life-sustaining treatment
42
Moral or Religious Conscious Objections
FHCDA allows private hospitals and other providers
to refuse to honor a decision made by a surrogate
for moral or religious reasons, if:
Notice is given to the patient of the facility's
policy prior to admission
The facility or physician transfers the patient to
another facility or physician willing to honor
the decision
43
Dispute between Surrogate and Physician
Where the surrogate directs provision of life-
sustaining treatment and a hospital or physician
that does not wish to provide the treatment “shall
nonetheless comply with the surrogate’s decision
pending transfer … or judicial review….”
The surrogate trumps the provider!
Is this the New York standard in “medical futility”
cases?
44
Other Provisions
Good faith actions of surrogates, health care providers and
ERC committee members are protected from civil and criminal
liability
Providers that refuse to honor a valid decision of a surrogate
are not entitled to compensation for treatment provided, except
Where the refusal was based on a conscious or moral
objection
Where the matter is being reviewed by the ERC
Where there is a dispute between the surrogate and another
individual on the surrogate list
Where the provider prevails in litigation concerning the
decisions
45
DNR Issues
PHL Article 29-B has been effectively rescinded for most
patients by bringing DNR decisions under the standards and
procedures established for surrogates under the FHCDA.
PHL Article 29-B has been re-named Orders Not to
Resuscitate for Residents of Mental Hygiene Facilities in order
to preserve DNR rules for patients in mental hygiene facilities
Chapter 8 creates a new PHL Article 29-CCC to incorporate
and continue the provisions regarding non-hospital DNR
orders.
Article 29-CCC requires home health agency employees and
hospice staff to honor non-hospital DNR orders
46
FHCDA and the “MEDICAL FUTILITY”
ISSUE
What if the Surrogate or a Health Care Agent acting under a proxy
demands treatment that the physician deems to be medically
inappropriate?
Section 2994-f provides:
“…if a surrogate directs the provision of life-sustaining treatment, the
denial of which in reasonable medical judgment would be likely to
result in the death of a patient, a hospital or individual health care
provider that does not wish to provide such treatment shall
nonetheless comply with the surrogate’s decision pending either
transfer of the patient to a willing hospital or individual health care
provider, or judicial review …
Similarly, paragraph 5 of section 23 of Chapter 8 amends Article 29-C
of the Public Health Law (Health Care Proxy statute), in particular
section 2989, to the same effect.
47
Article 81 Guardianship Law Changes
Section 25 of Chapter 8 amends 81.22 (8), which lists the
powers that can be granted to a personal needs guardian, to
read as follows:
(i) for decisions in hospitals as defined by subdivision
eighteen of section twenty-nine hundred ninety-four-a of the
public health law, act as the patient’s surrogate pursuant to
and subject to article twenty-nine-CC of the public health law,
and
(ii) in all other circumstances, to consent to or refuse
generally accepted routine or major medical or dental
treatment, subject to the decision-making standard in
subdivision four of section twenty-nine hundred ninety-four-d of
the public health law
48
Order of Appointment
• Should all future orders appointing a guardian designate the personal
needs guardian to be the “surrogate” under FHCDA? Yes.
• Suggested wording for the powers of the personal needs guardian”
• The guardian appointed herein is hereby designated as the surrogate
for decisions in hospitals as defined by subdivision eighteen of section
twenty-nine hundred ninety-four-a of the public health law subject to
article twenty-nine-CC of the public health law, and in all other
circumstances, to consent to or refuse generally accepted routine or
major medical or dental treatment, subject to the decision-making
standard in subdivision four of section twenty-nine hundred ninety-
four-d of the public health law
• What about guardians previously appointed? Will they be considered
to be the “surrogate”?
• Note that new PHL 2994-a (definitions) section 11 states
“Guardian of a minor” or “guardian” means a health care
guardian or a legal guardian of the person of a minor”
49
Article 81 Section 81.29(e) Repealed
Section 26 of chapter 8 repeals this section which had
provided
“Nothing in the article shall be construed either to prohibit a
court from granting, or to authorize a court to grant, to any
person the power to give consent for the withholding or
withdrawal of life sustaining treatment, including artificial
nutrition and hydration…”
FHCDA gives guardians the right to make end-of-life decisions
subject the standards set forth in the new law
50
The 2010 Palliative Care Information Act
Chapter 331, Laws of 2010, adds section 2997-c to the Public
Health Law, which provides that
“If a patient is diagnosed with a terminal illness or condition,
the patient’s attending health care practitioner shall offer to
provide the patient with information counseling regarding
palliative care and end-of-life options appropriate to the
patient, including but not limited to: the range of options
appropriate to the patient; the prognosis, risks and benefits of
the various options; and the patient’s legal rights to
comprehensive pain and symptom management at the end of
life.”
If the patient is incapacitated the information is to be provided
to the person with authority to make health care decisions
“Terminal illness or condition” means an illness or condition
which can reasonably be expected to cause death within six
months, whether or not treatment is provided
51
Recommended Resources
“The Family Health Care Decisions Act: A Summary
of key Provisions’ Robert Swidler, NYSBA Health
Law Journal, Spring 2010, Vol. 15, No.1
“New York’s Family Health Care decisions Act,”
Robert Swidler, NYSBA Journal June 2010
www.nysba.org
Under “For the Community” click on
“Family Health Care Decisions Act Resource
Center’
52
Health Care Reform, The Elderly and
Persons With Disabilities
While much depends on the effective implementation of the
Patient Protection and Affordable Care Act of 2010 as
amended by the Health Care and Education
Reconciliation Act of 2010 (2010 Health Reform), there
are many provisions that will significantly improve the
medical care services available to older Americans
2010 mid-term election results for congress and state
gubernatorial elections will effect implementation
On balance, the PPACA will have a positive effect
53
Improvements in Quality of Care and Cost Savings for
Seniors Enrolled in Medicare Advantage Plans
11 million Medicare beneficiaries are enrolled in private
Medicare HMOs under Part C, which accounts for 23% of
benefit spending
Medicare Advantage plans have been criticized because
they have received excess payments, provide poorer
care than regular Medicare and cost more per enrollee
than regular Medicare
Payments to MA plans will be reduced to levels closer to
costs of regular Medicare
Plans that provide high quality care will be eligible for
bonuses
Beginning in 2014 MA plans must spend at least 85% of
revenues on medical benefits
Congressional Budget Office estimates savings of $135
billion by 2019
54
Other Quality Improvement Provisions
Hospitals that meet performance standards will be
eligible for incentive payments
Starting in 2012, a new Hospital Readmissions Reduction
program will penalize hospitals for “excess” readmissions
A national Medicare pilot program to deal with the
problem of transitions from one setting to another is
established. The concept is that by viewing patient
needs as a continuum of care and making “bundled”
payments to providers rather than “episodic” payments
care will be improved, readmissions and costs reduced.
The program is funded for 5 years but can be extended if
it demonstrates cost saving without loss of quality.
55
The CLASS Program
A major failure of Medicare has been the absence of
benefits for long term chronic care needs
Health care reform legislation included passage of the
Community Living Assistance Services and Supports
(CLASS) program
CLASS is a voluntary program funded by automatic
employee payroll deductions
Eligibility
18 years of age and working (compensation sufficient to
qualify for 1 quarter of Social Security coverage)
Pay premiums for 5 years and work for at least 3 of the 5
years
Be unable to perform 2 of 3 activities of daily living or have a
cognitive impairment that requires substantial supervision
• No medical underwriting! Persons who may be ineligible
for long term care insurance will be able to buy-in to
CLASS
56
CLASS Premiums
Premiums will depend on age
No variation because of age, income or severity of
medical condition
Premiums are to be fixed by the Secretary of HHS
so that the program will be fully funded by premiums
and solvent for 75 years
CBO estimates monthly premiums will be $123
Premiums will remain constant unless the Secretary
finds an increase is necessary to maintain program
solvency
57
CLASS Benefits
Benefits are modest
May be used to pay for long term care costs,
including care givers, home modification,
technology, respite care
Estimated average benefit is $50 per day with
higher benefits for persons with greater needs as
determined by the Secretary of HHS
CBO used an average of $75 per day in scoring the
cost of CLASS
Eligibility for CLASS does not affect eligibility for
other programs such as Medicaid
58
New Provisions Improving Access to Medicaid
Home and Community Based Services
Medicaid has historically focused on institutional care
Health care reform includes new programs and funding to
change the balance between institutional care and home and
community based (HCBS) benefits
Two new Medicaid initiatives
Community First Choice (CFC) Option
HCBS home attendant services and supports to persons
who have institutional level of care needs
States that qualify under participation rules will receive an
increase in federal funding (via an increase of 6% in their
federal Medical Assistance Percentage)
State Balancing Incentive Payments Program
Authorizes 5 year grants to states that spent less than 50%
of Medicaid long term care funds
Other provisions modifying existing Medicaid programs
59
More Preventative Services
Certain preventative services will be available
without the annual Part B deductible or 20% co-
insurance
Existing “Welcome to Medicare” free examination
will be continued
Starting in 2011 Medicare will offer annual wellness
examinations and provision of a personalized
prevention plan for all Medicare beneficiaries totally
free
60
Health Care Reform:
THE “DEATH SQUAD” ISSUE
In 1990, Medicare was amended (when George W, Bush
was President) to define “advance directives” and require
health care providers to “maintain written policies and
procedures to document advance directives in patients’
medical records, educate staff about advance directives
and advise patients of their rights under state law to
execute advance directives
But there was no provision allowing Medicare to
reimburse physicians for advance planning consultations.
As part of health care reform, section 1233 of the new
law requires Medicare to reimburse physicians for patient
consultations about advance directives.
61
Other Initiatives
Bonuses to Medicare Advantage plans that implement new programs such as
Care management
Patient education and self-management
Medication management
Patient safety
Health information and technology
The Medicare Independence at Home program – a demonstration project to
pay physicians and nurse practitioners to provide primary care in the patient’s
home
Establishment of the Center for Medicare and Medicaid Innovations at CMS to
develop better care delivery models, such as Patient Centered Medical
Homes, new assessment tools and coordinated plans for Medicare
beneficiaries with chronic care needs and chronic care interdisciplinary teams
Development of Medicaid Health Homes (“Medical Homes”) with broad range
of services for chronically ill persons
Development of Interdisciplinary Community Health Teams to support Medical
Homes
62
Ensuring there will be sufficient providers
Health care reform has several provisions dealing
with the concern that more providers will be
needed to meet the needs of the growing senior
population
Providers will receive a 10% bonus for primary care
services to Medicare beneficiaries during 2011 – 2015
Primary care physicians treating Medicaid patients must be
paid no less than what they receive from Medicare
Medical schools that intend to train more primary care
physicians will be allowed to request additional residency
slots
Residency programs will be allowed to count training in non-
hospital settings towards training completion
Medicare funding for graduate nursing education
Rural physician and nurse practitioner training grants
National Health Care Service Corps program creates
scholarships and a loan repayment program for students
who commit to service in Community Health Centers for 2 –
4 years
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The Independent Payment Advisory Board
Established to recommend ways to reduce Medicare
spending if stating in 2014 per capita spending
exceeds certain targets
The Secretary of HHS is required to adopt the
Board’s recommendations unless Congress adopts
alternative means to achieve the same savings.
Recommendations can not “ration” or modify
benefits, eligibility, premiums or taxes
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Medicare Payroll Tax, Part B Premiums,
Itemized Deduction
In 2013, the Medicare payroll tax will be increased for
individuals earning more than $200,000 or married couples
earring more than $250,000 from 1.45% to 2.35%
Also in 2013 the “high income” taxpayers will pay a new tax on
unearned income, such as interest income, dividends,
annuities, royalties, rent and capital gains
The income thresholds for Part B premiums will be frozen at
2010 levels ($85,000 for individuals and $170,000 for married
couples)
The current medical expense deduction “floor,” now 7.5%, will
increase to 10% starting in 2013, but this increase is
postponed for taxpayers 65 or older until 2017
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The Elder Justice Act
The health reform law included the Elder Justice Act and the
Patient Safety and Abuse Prevention Act
Authorizes additional $400 million for adult protective services
programs
$100 million in state grants for development of new adult
protective programs
$325 million for state ombudsman programs
Establishes the Elder Justice Coordinating Council charged
with making recommendations to the Secretary of HHS on
coordination of agency and not-for-profit organizations in
abuse, neglect and financial exploitation
Deals with protection of nursing home patients from abusive
employees; creates a national program of criminal background
checks
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Provisions Applicable to All Persons
Changes in private health insurance
New funding for state Medicaid programs
Provisions dealing with waste, fraud and abusive
practices in the Medicare and Medicaid
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Medicare
45 Million Americans are enrolled in Medicare
Part A – Hospital Coverage (2010)
• $1,100 deductible Days 1 – 60 no co-insurance
• Days 61 – 90 $275 per day co-insurance
• Days 91 – 150 $550 per day co-insurance (lifetime
reserve days)
Part B – Physician Services
• $155 deductible
• Higher premiums for 2009
• Skilled Nursing Home co-insurance (Days 21-
100) $137.50
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2010 Medicare Part B Premiums
You Pay If Your Yearly Income Is
Single Married Couple
$96.40 $85,000 or less $170,000 or less
(If beneficiary has premium withheld from social security check;
otherwise $110.50)
$154.70 $85,001-$107,000 $170,001-$214,000
$221.00 $107,001-$160,000 $214,001-$320,000
$287.30 $160,001-$214,000 $320,001-$428,000
$353.60 Above $214,000 Above $428,000
The hidden agenda: means testing of Social Security?
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Medicare
LIMITED LONG TERM CARE COSTS
Maximum of 100 days for post hospital stays of at least
3 days provided admission to the nursing home is
within 30 days of discharge and if the patient's care is
skilled; custodial care is not covered. The first 20 days
are fully covered. Days 21 through 100 have a co-
insurance of $137.50.
Home care benefits are also limited. Medicare
beneficiaries are entitled by law to up to 35 hours a
week for “part time and intermittent” benefits but in
reality get no more than a few hours a week.
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Medicare Part D –
Prescription Drug Coverage
Medicare beneficiaries in the U.S. 47 million
Medicare Beneficiaries enrolled in
Medicare Part D Plans - 27.7 million – 60%
Retirees with other “creditable coverage” 8.3 million
Other sources of coverage (i.e. V.A. benefits) 5.9 million
10% (4.7 million) of the Medicare population have no drug
coverage
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Standard Medicare Prescription Drug
Benefit, 2010
Plan Pays 15%;
Enrollee Pays Medicare Pays 80%
5% $6,440 in
Total Drug Costs
($4,550 out of pocket)
Enrollee Pays $3,610 Coverage
100% Gap (“Doughnut
Hole”)
$2,830 in
Total Drug Costs
Enrollee Plan Pays
Pays 75%
25% $310 Deductible
$447 Average Annual Premium
NOTE: Annual premium amount based on $37.25 national average monthly beneficiary premium (CBO). Amounts for
premium, coverage gap, and catastrophic coverage threshold rounded to nearest dollar.
SOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit
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Medicare Part D
Individual Out-of-Pocket Costs 2010
Deductible $310
Beneficiary share (25%)
of next $2,520 ($2,830-
$310=$2,520) 630
Gap cost 3,610
$4,550
Premium 447
Total out-of-pocket $4,997
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How Many Beneficiaries Reach the Gap?
3.4 million Part D enrollees reached the gap in 2007
This represents 12% of all enrollees
Kaiser Family Foundation estimates that 15% stopped
taking drugs when they reached the gap.
Source: Kaiser Family Foundation, Data Spotlight, “The Coverage
Gap” Nov. 2009
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Significant Reduction Of The Medicare Prescription Drug
Program (Part D) Coverage Gap
Persons who enter the “doughnut hole” in 2010 will
receive a one-time $250 rebate
Beginning in 2011, the doughnut hole will be significantly
narrowed by drug company contributions and phased in
new Medicare contributions.
Starting in 2011 there will be a 50% discount on brand
name prescription drugs (provided by the pharmaceutical
industry)
Starting in 2011, Medicare begins to contribute to the
cost of generic drugs
Starting in 2013 Medicare begins to contribute to the cost
of brand name drugs
By 2020, Part D enrollees will be responsible for only
25% of drug costs in the gap
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TAKE CONTROL!
SET UP YOUR OWN PROPERTY MANAGEMENT
SYSTEM to take over in the event you become
incapacitated
Power of Attorney
New statute effective September 13, 2010
Health Care Proxy
Health Care declaration (“Living Will”)
Revocable Living Trust
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Should You Sign Both a Living Will
and a Proxy?
Yes, the Living Will is clear and convincing
evidence of your wishes
Guides the agent’s decisions
Helps the agent deal with guilt
If there is no Health Care Proxy or the
agents have died the Living Will stands
alone and your wishes must be followed
This is particularly true for the gay or lesbian
couple
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Importance of the Gifting Provision in Power of
Attorney in Non-Traditional Relationships
Gifts of all the assets of an incapacitated
person for Medicaid planning
Other substantial gifts for tax planning?
Suppose the gifts are inconsistent with a
prior will?
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Consider: Gift Provision – Critical in Non-
Traditional Relationships
( ) I grant the following authority to my agent to make gifts pursuant to my
instructions, or otherwise for purposes which the agent reasonably deems to be in
my best interest:
(i) make gifts on my behalf, or consent to gifts made by my spouse, if I am married at that time,
whether outright or in trust, including, but not limited to, gifts of any real property I may own, to
any one or more members of a class consisting of [______________], in such proportions and
amounts, not limited to the annual federal gift tax exclusion amount pursuant to the Internal
Revenue Code to each of such persons in any year, without regard to equality, if said gifts, in the
sole and absolute discretion of my said agents, are in my best interests for any reason, including
the ultimate reduction or minimization of taxes of any kind or the creation of eligibility on my part
for government benefits or entitlements of any kind, or are for the health, support or maintenance
of any member of the aforesaid class of persons. Any gifts made pursuant to this provision shall
be deemed to be in my best interests. Such gifts may include, by way of example but not
limitation, gifts of any type, whether outright, in trust, to a Uniform Transfers to Minors Act
account or by the creation of a tuition savings account or prepaid tuition plan as defined in
section 529 of the Internal Revenue Code, to create charitable remainder trusts, charitable lead
trusts, grantor retained income and annuity trusts, personal residence trusts, any other type of
irrevocable trusts or similar transfers including but not limited to split or joint purchases or to
make loans at no or low interest, in any manner that my agents reasonably conclude will
increase the net after tax property available to [______________] and charitable organizations. I
also hereby grant my agent the power and authority, whether constituting a gift by me or not:
(a) to open, modify or terminate a deposit account in my name and other joint tenants
consisting of one or more of those individuals to whom I have authorized the agent to make gifts
in paragraph (i) above,
(b) to open, modify or terminate a Totten trust or similar "in trust for" account for one or
more of those individuals to whom I have authorized the agent to make gifts in paragraph (i)
above,
(c) to open, modify or terminate a transfer-on-death account described in EPTL 13-4.1
to 13-4.12 for one or more of those individuals to whom I have authorized the agent to make gifts
in paragraph (i) above,
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Gift Provision, cont.
(d) to change the beneficiary of any insurance policy on my life or any annuity for my
benefit which beneficiary is one or more of those individuals to whom I have authorized the agent
to make gifts in paragraph (i) above,
(e) to procure new, different or additional contracts of insurance on my life or annuity
contracts and designate the beneficiaries thereof which beneficiary or beneficiaries is one or
more of those individuals to whom I have authorized the agent to make gifts in paragraph (i)
above,
(f) to designate or change the beneficiaries of any type of retirement benefit or plan
provided such beneficiary or beneficiaries is one or more of those individuals to whom I have
authorized the agent to make gifts in the immediately preceding sentence, and to create, change
or terminate other property interests or rights of survivorship provided such change or
termination benefits me or one or more of those individuals to whom I have authorized the agent
to make gifts in paragraph (i) above.
(g) to disclaim or renounce any property interest pursuant to the Internal Revenue Code,
section 2518 or section 2-1.11 of the New York Estates, Powers and Trusts Law or any other
similar or successor law, including disclaimers and renunciations in favor of the agent, provided
the principal has authorized gifts to the agent by expressly granting such authority to the agent in
paragraph (c) of this Statutory Gifts Rider.
(ii) To create trusts on my behalf, even though the term of such trusts may extend beyond my life,
and to amend, modify or revoke trusts I have created, to establish accounts in supplemental
needs trusts (“pooled trusts”) established by not-for-profit organizations for my benefit, to
execute participation or sponsorship agreements required by such not-for-profit organizations
and to designate beneficiaries upon my death (subject to applicable law), to fund such trusts and
accounts and to exercise any right I have to designate successor trustees under any trust I have
or may create; and
(iii) To make transfers and additions to any trusts created by me or by any other person under which
trust I may be a beneficiary.
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New Statute: Public Health Law 4201
“Disposition of Remains”
New law effective August 2, 2006 authorizes the execution of a
document called Appointment of Agent to Control Disposition
of Remains
In addition, the statute establishes a priority list of persons who
have the right to make such decisions in the absence of
execution of the new form. The first priority goes to “the
decedent’s spouse” and the second priority is given to “the
decedent’s surviving domestic partner.”
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Disposition of Remains, Cont.
§ 4201. Disposition of remains; responsibility therefor. 1. As used in this section, the following terms shall
have the following meanings, unless the context otherwise requires:
(a) "Cremation" means the incineration of human remains.
(b) "Disposition" means the care, disposal, transportation, burial, cremation or embalming of the
body of a deceased person, and associated measures.
(c) "Domestic partner" means a person who, with respect to another person:
(i) is formally a party in a domestic partnership or similar relationship with the other person,
entered into pursuant to the laws of the United States or any state, local or foreign jurisdiction, or
registered as the domestic partner of the person with any registry maintained by the employer of
either party or any state, municipality, or foreign jurisdiction; or
(ii) is formally recognized as a beneficiary or covered person under the other person's
employment benefits or health insurance; or
(iii) is dependent or mutually interdependent on the other person for support, as evidenced by
the totality of the circumstances indicating a mutual intent to be domestic
partners including but not limited to:
Common ownership or joint leasing of real or personal property; common
householding, shared income or shared expenses; children in common;
signs of intent to marry or become domestic partners under subparagraph
(i) or (ii) of this paragraph; or the length of the personal
relationship of the persons.
Each party to a domestic partnership shall be considered to be the
domestic partner of the other party. "Domestic partner" shall not
include a person who is related to the other person by blood in a manner
that would bar marriage to the other person in New York state. "Domestic
partner" shall also not include any person who is less than eighteen
years of age or who is the adopted child of the other person or who is
related by blood in a manner that would bar marriage in New York state
to a person who is the lawful spouse of the other person.
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Financing Long Term Care
DEDUCTIBILITY FOR INCOME TAX PURPOSES OF
LONG TERM CARE EXPENSES
The Health Insurance Portability and Accountability Act
of 1996, often referred to as “HIPAA” has favorably
clarified the deductibility question of the cost of long
term care. HIPAA makes it clear that the costs of
“qualified long term care services” are to be treated as
medical care for the purposes of deduction as a
medical expense under section 213 of the IRC.
Section 321 of HIPPA adds a new IRC section
7702B(c) which defines “qualified long term care
services” as follows:
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Long Term Care Insurance
Long-term care insurance for those who can afford it and for
those who can meet medical underwriting criteria may offer a
viable option for financing long-term home care and nursing home
costs
Long-term care insurance may also be used as an integral part of
an overall financial plan which can protect the assets of an
impaired senior citizen by financing the costs of nursing home
care during the Medicaid period of ineligibility after asset transfers
either outright or in trust are made
If you have long-term care insurance you may not need to
prematurely divest yourself of your assets and can keep your
ownership of assets until it appears that institutionalization is
necessary
84
Long Term Care Insurance and
Income Tax
INDIVIDUALS
Individual policyholders who itemize
deductions and have tax-qualified long term
care policies are able to claim their long term
care insurance premiums as a medical
expense deduction on their federal income
tax returns. The amount of the deduction is
based on the taxpayer’s age at the end of
the tax year and is subject to the 7.5% of
AGI limitation.
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Long Term Care Insurance
And Income Tax, cont.
Allowable medical expense deduction for 2010
Maximum Premium
Age Deduction
40 or less $330
More than 40, not
more than 50 $620
More than 50, not
$1,230
more than 60
More than 60, not
more than 70 $3,290
More than 70 $4,110
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Indemnity Policies – the first $260 a day is tax
free; any amount over $260 will be taxed as
ordinary income unless spent on a “qualified
Long Term Care expense.”
No includible income of reimbursement policy
payments
New York State Tax Credit
A credit of 20% of the premium paid during the
taxable year for Long Term Care Insurance
approved by the Superintendent of Insurance
will be allowed.
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The Public-Private Partnership
New York has enacted a plan that allows you
to keep your assets when you apply for
Medicaid if you have a “partnership” long term
care policy
Your spouse’s assets are also protected
Problems: No income protection for the
recipient; Medicaid benefits only in New York
Connecticut also has a “partnership” plan –
Asset protection only for amount of insurance
88
Using Your Life Insurance to Pay for
Long-Term Care Costs
“LIVING BENEFITS” RIDERS
“LIFE SETTLEMENTS” (“VIATICAL
SETTLEMENTS”)
89
Living Benefits Riders - also known as
“Accelerated Benefits” Riders
You may be able draw down the face value of
your life insurance policy on a discounted
basis to pay for long term care
Many insurance companies provide riders
allowing for withdrawal of the face value of a
policy in the event you
Are terminally ill
Need permanent institutionalization or
Need ongoing care at home
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Life Settlements (Viatical Settlements)
It may be possible for you to sell your life
insurance policy to a private company which
will buy the death benefit on a discounted
basis
The discount will depend on the life
expectancy and health of the insured
The funds you receive will not be counted as
income if you take the benefits because you
are a “qualified taxpayer” – meaning you are
unable to perform at least 2 “activities of daily
living”
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Excerpt from the Brochure of a
Life Settlement Company:
LIFE SETTLEMENT ELIGIBILITY
To be eligible for a Life Settlement, an individual must have a life insurance policy in excess of
$50,000 and be over 65 years of age.
IDEAL PROSPECTS
Age Policy Size Policy Health
65-69 $50,000 + Any Serious health issue(s)
70-79 $50,000 + Any Some health issue(s)
80 plus $50,000 + Any Overall good health
DEFINITIONS
Life Settlement: For insured individuals 65 and older or other policy owners who are looking to
sell their life insurance policy for a net percentage of the face value.
Viatical Settlement: For individuals diagnosed with a terminal illness with 2 years life
expectancy or under who want to liquidate their in-force life insurance policy.
VALUE LIFESM EXAMPLES
Age: 78 & 80 67 82
Face Value: $2,000,000 $1,200,000 $250,000
Cash Value: $163,562 $20,000 $5,000
Sold For: $400,000 $210,000 $149,000
Reason: Lapsing Gift to Kids Estate Changes
Commission: $80,000 $56,000 $10,000
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Reverse Mortgages
If you are over age 62 you may be able to borrow on the equity in your
home without having to repay to loan until you sell it or die
Interest accumulates
The older you are the more you can borrow
Leading program is HUD’s Home Equity Conversion Program (“HECM”).
Loan can be obtained based home values capped at $625,000. The
borrower can obtain a loan based on a percentage of the home’s value
(no more that $625,000) based on a loan-to-value determined by taking
age less 5.
Example: Home actual value $1 million
Age 75
75 – 5 = 70% x $625,000 $437,000
Private bank “jumbo” reverse mortgages are presently not available
It has been possible to get a reverse mortgage on a cooperative
apartment in New York for “jumbo” loans, but HUD does not yet permit
this for HECM loans although this is pending
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Congregate Care Communities
Certain congregate care facilities may
provide long term health care benefits for
residents at reasonable costs.
94
Medicaid - The Payor of Last Resort
The Medical Assistance program, commonly known as “Medicaid,” was
created in 1965 by the same legislation that created the Medicare program.
Medicaid is a health insurance program for the poor, providing benefits to
persons of limited financial means.
To be eligible
You can own no more than $13,1001 of ‘countable’ assets
Be a resident
Be medically in need
Certain property is exempt (not countable) in determining an individual's
eligibility including
Your home – subject to new caps of the value of equity (up to $750,000)
Your home remains exempt so long as you; your spouse; or a minor,
blind or disabled child resides there
An automobile
Essential personal property
Funds in qualified deferred compensation plans if you are in payout
status
1New York. Most states the exemption is only $2,000.
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Some Good News - Trusts for Disabled
Persons Are Possible
Medicaid law recognizes the need to protect
persons with disabilities during their lifetimes,
even when they have assets
You can put your assets in a trust where
income and principal can be used for you if
You are under 65 years of age
The trust includes a provision that
Medicaid is repaid from the trust when
you die (the “pay back” provision)
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Trusts for Disabled Persons, cont.
You can do this even if you are over 65 if you use a
trust established and managed by a not-for-profit
organization
These trusts are called Supplemental Needs Trusts
There are no waiting periods for transfers to a
supplemental needs trust for persons under age 65
For person over 65 years of age, the penalty rules
apply and there will be a transfer of asset period of
ineligibility for nursing home Medicaid benefits
97
Estate Tax Issues
No Marital Deduction
Full use of the estate tax exemptions
Life insurance
“Second to die” policies
Annual exclusion gifts
Gifts for educational & medical purposes
Copyright 2010 Peter J. Strauss
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Biography of Peter J. Strauss
Peter J. Strauss, is Distinguished Adjunct Professor of Law at the New York Law
School, where he teaches Elder Law and is Co-Director of the Guardianship Clinic.
He is also Senior Counsel of Epstein Becker & Green, P.C., a national law firm,
based in its New York office. He has practiced trusts and estate law since 1961 and
has special expertise in the legal problems of aging and persons with disabilities and
is a frequent lecturer on those issues.
Mr. Strauss is a prolific author and has written articles for various publications
including the New York Law Journal and Bottom Line Personal and has addressed
many national professional and consumer organizations. He is co-author of “Aging
and the Law” a treatise for professionals published by Commerce Clearing House,
Inc. and a consumer book, “The Complete Retirement Survival Guide: Everything
You Need to Know To Safeguard Your Money, Your Health and Your
Independence,” (Facts-on-File, Inc. Professor Strauss has taught Elder Law at New
York Law School he since 1990 and is co-director of the Elder Law Clinic which he
founded in 2003. He is a founding member (1988) and a Fellow of the National
Academy of Elder Law Attorneys.
Mr. Strauss has special interest in issues involving capacity for the execution of legal
documents and the legal issues and rights of persons with respect to health care
treatment at the end of life. He also handles guardianship matters and is known for
his work concerning special needs trusts for persons with disabilities.
Among the accolades Mr. Strauss has received are his designation in 2007, 2008,
2009 and 2010 as one of the New York Metropolitan area’s “Super Lawyers” and
“Best Lawyers.’
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