One proven strategy for a married couple to protect their assets when one spouse needs Medicaid is to use a Community Spouse Will (CSW).  The following is a summary of the situations where the Community Spouse Will works, and an explanation of how it works.  First, you must be familiar with the two terms used to distinguish the spouses: 

 ·        The spouse that requires Medicaid is called an Institutionalized Spouse;

 ·     The spouse that does not require Medicaid coverage is called a Community Spouse. 

 What is a Community Spouse Will?  A CSW is a type of Last Will and Testament created by the Community Spouse to protect assets for the Institutionalized (or soon to be institutionalized) Spouse.  The CSW contains one trust for the spouse and another trust for the children (or other beneficiaries).  These Trusts take advantage of an exception in the Medicaid regulations that allows a Testamentary Trust (a Trust created under a Will) to shelter the inheritance of the Institutionalized Spouse from being a counted asset for Medicaid purposes.  This Trust helps ensure the Institutionalized Spouse does not become ineligible for Medicaid if the Community Spouse dies first.

 Why would anyone need a Community Spouse Will?  In most instances a married couple prepares Wills or revocable trusts leaving all of their assets outright to the survivor of them.  In some instances, the couple prepares no Wills at all and the deceased spouse’s assets go to the surviving spouse per the laws of intestacy.  Both situations cause a problem when the surviving spouse is on Medicaid or is expected to need Medicaid to pay for long-term care in the near future.  The surviving spouse will be over the asset eligibility level because of the inherited assets and must spend down everything to below $1,600 before becoming eligible for Medicaid.  This spenddown can all be avoided with a CSW.

 When to Use a Community Spouse Will.  A CSW should be used in the following situations:

 ·         After the Institutionalized Spouse becomes eligible for Medicaid and transfers all of his assets to the Community Spouse.  Without a CSW, if the Community Spouse dies first owning all of the assets, then the Institutionalized Spouse inherits all of the couple’s assets outright and has to spend down to $1,600 to become eligible for Medicaid.

 ·         When one spouse is diagnosed with a terminal illness and wants to protect the couple’s assets for the other spouse.  The couple transfers all of their assets into the name of the ill spouse, who then prepares a CSW to protect the assets for the surviving spouse.

 ·         When both spouses are in poor health and are likely to need Medicaid in the near future. Each spouse should prepare a Community Spouse Will. They should title their assets evenly between them, so when one spouse dies they have protected at least half of the assets.  In the future if they have advance knowledge of one spouse’s impending death and time permits, they can transfer all of the assets into the name of the dying spouse to maximize the utility of the dying spouse’s CSW.

 How Does a Community Spouse Will Work?  In Connecticut, a spouse must receive at least a life estate in one-third (1/3) of the value of the deceased spouse’s probate estate.  If a deceased spouse attempts to disinherit the surviving spouse under the Will, then Connecticut law allows the surviving spouse to claim an election for a life estate in one-third (1/3) of the value of all the probate assets.  If the surviving spouse fails to make the election, the surviving spouse will be deemed to have made a disqualifying transfer of the foregone value under the Medicaid rules.  This will result in a Medicaid penalty period if the surviving spouse is on Medicaid or applies for Medicaid within five years of the death.  

 A CSW leaves the surviving spouse the income generated by 1/3 of the assets passing under the Will.  This is the equivalent of the election against the estate, therefore, no Medicaid penalty is assessed.  The income is used to pay for the surviving spouse’s care. Upon his or her death, the balance of the trust goes to the couple’s children or other desired beneficiaries. The State cannot recoup the cost of medical assistance provided from the spouse’s trust because the spouse had no interest in the principal of the trust.  

The remaining two-thirds (2/3) of the probate assets is typically left in a fully discretionary asset protection trust for the benefit of the couple’s children or other desired beneficiaries.  Again, the State cannot recoup from this trust the cost of medical assistance provided the surviving spouse, because he or she had no interest in the principal or income of this trust.   

The SECURE Act Changes Retirement Rules
On December 20, 2019, Congress passed, and the President signed an appropriations bill (Public Law No. 116-94) that contained the SECURE Act. The word SECURE is an acronym for “Setting Every Community Up for Retirement Enhancement.” The Act fundamentally changes estate planning related to retirement accounts.
Contributing to a Traditional IRA, 401(k), 403(b) or 457 retirement plan allows you to save money for retirement without paying income taxes on the funds contributed or on the income generated by the account. You only pay income tax when you take distributions. Contributing to a Roth IRA or Roth 401(k) does not shield the contribution from income tax but allows the account to grow tax-free, and you do not pay any income tax upon receiving distributions. Federal law requires you to begin taking minimum distributions annually starting at retirement age for all retirement plans except Roth IRAs.
Prior to 2020, the law required minimum distributions to start at age 70½. You could not contribute to a retirement plan after reaching this retirement age. You had to work at least 1000 hours in a year to contribute to an employer’s retirement plan. You could not take distributions from a retirement plan for the birth or adoption of a child without paying a 10% penalty and the income tax due. A business had to set up a retirement plan by December 31st for employees to make contributions during that year. If you died before retirement age and you named a person to receive your retirement plan, the designated beneficiary could take distributions over his or her life expectancy. The life expectancy period came from the IRS Uniform Lifetime Table for the employee (“the participant”) and the participant’s spouse or from the Single Lifetime Table for the participant’s non-spouse beneficiaries. If you died after the required beginning date, your designated beneficiary could take distributions over your remaining “ghost” life expectancy under the Uniform Lifetime Table. These rules remained unchanged from 2001 to 2019.
Now, with the enactment of the SECURE Act, required minimum distributions don’t have to start until age 72. For example, if you turn 70 in 2020, you do not have to take a required minimum distribution yet. You can now contribute to a retirement plan at any age. Congress recognized that people live much longer so making retirement contributions in your 70’s could help you in your 90’s.

Under the SECURE Act, you can now contribute to an employer’s retirement plan as a part-time employee. If you only work 500 hours or more for 3 consecutive years, you can participate in an employer retirement plan. Employers also have more time to set up a retirement plan. An employer can now set up a retirement plan before its income tax return is due (including extensions).

If you need additional funds at the time of the birth or adoption of a child, you can now tap up to $5,000 of your retirement plan without incurring a penalty. You still must pay the income tax due on the distribution. You must tap the retirement plan within 1 year of the birth or adoption.

The end of the stretch IRA for non-spouse beneficiaries constitutes the greatest change for estate planning purposes. Except for eligible designated beneficiaries, the retirement plan custodian must distribute the entire retirement plan to a non-spouse beneficiary within 10 years of the participant’s death. This may have a big impact on children who are in their prime earning years and don’t yet need the additional income from an inherited retirement plan. A child may now have to take all the distributions during the child’s prime working years, rather than stretching the payments out over the child’s retirement years when the child is likely in a lower tax bracket. For instance, if a decedent had a $500,000 IRA at her death and she leaves it to her only child, the child must take the entire $500,000 within 10 years. The child will pay tax on the distribution(s) at the child’s income tax rate. Thus, if a child is in the 24% income tax bracket, the child will pay $125,000 in income taxes.

Eligible designated beneficiaries include spouses, beneficiaries who are less than 10 years younger, children of the participant who have not reached age 18 and disabled or chronically ill beneficiaries. If you leave your retirement plan to your spouse, your spouse can still roll over an IRA to his or her own IRA and wait until he or she reaches age 72 to take distributions over his or her life expectancy. If you leave a retirement plan to your spouse in a trust that requires payment of the required minimum distribution, the trust does not have to begin making required minimum distributions until your spouse reaches age 72 and the distributions, thereafter, will be based on his or her life expectancy.
When the spouse dies, however, the distributions to children must be paid over 10 years.

Beneficiaries who are less than 10 years younger than the participant continue to be able to take required minimum distribution over their life expectancy. For unmarried couples, it allows the survivor to use the retirement funds for the rest of his or her life.

Leaving a retirement plan to children under age 18 will not require distribution within 10 years if they are your children. Instead, the 10-year period will not start running until they reach age 18. If you leave a retirement plan to your grandchildren, however, your grandchild will receive the entire retirement account balance within 10 years. Let’s say you have a grandson who is age 3. If you leave $50,000 of your IRA to your grandson, the probate court will have to appoint a guardian for your grandson and all the funds must come out by December 31st of the year he reaches age 13. Giving the retirement plan distribution in trust to your grandson will avoid the appointment of a guardian by a court, but it will not delay distribution of the entire amount to the Trustee by the time your grandson reaches age 13.

Leaving a retirement account to a disabled individual or a chronically ill individual will not require distribution of the account within 10 years. A beneficiary is disabled if the beneficiary cannot engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to end in death or be of indefinite duration. An individual is chronically ill if a licensed health care practitioner certifies that the individual (i) is unable to perform (without substantial assistance from another individual) at least 2 activities of daily living for a period of at least 90 days, or (ii) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment. The disabled or chronically ill beneficiary can receive required minimum distributions based on his or her life expectancy.

What about trusts for disabled or chronically ill individuals? If the disabled individual has a right to the participant’s interest in the retirement plan, then the life expectancy method applies to the distributions to the disabled or chronically ill individual.

The SECURE Act also expanded Section 529 Plans.Grandparents and parents often use 529 Plans to fund a child’s college or graduate school education. Funds contributed incur no gift tax and grow tax-free. Students incur no income tax if they use distributions for qualified education expenses, including up to $10,000 of tuition for private, pre-college education. The Act expanded 529 Plans by allowing distributions to repay education loans up to $10,000 for the designated beneficiary or his or her sibling. It also expanded the education programs to include homeschooling and apprenticeship programs.

Given these new 10-year distribution rules for non-spouse beneficiaries who do not fit into one of the exceptions, you may have to consider some new strategies for estate planning with your retirement plans. Those strategies might include:

(1) Converting your Traditional IRA or 401(k) to Roth IRA or Roth 401(k). You will have to pay the income tax, but it may be doable if your income bracket drops in retirement or you convert only a portion of the account to a Roth account each year.

(2) Buying life insurance to pay the income tax that your child will bear. Of course, you must be insurable, and the cost of the life insurance may be too great if you are over 70.

(3) Leaving Your Retirement Plan to a Charitable Remainder Trust. Your child could be the life beneficiary of the trust and anything left over goes to a charity you identify.

(4) Leave more non-retirement assets to individuals and more of your retirement assets to charity. Charities are not subject to income taxes. Thus, if you planned to leave some of your estate to charity, do it through your retirement plan. Your individual beneficiaries will not pay income taxes on the non-retirement assets they receive. Non-retirement assets receive a step-up in basis at death.

(5) Communicate with your children about these new distribution rules for retirement plans. Tell them to spread out the income taxes over 10 years by taking 10% distributions each year. Your children may also want to time distributions to coincide with years that they will have less income.

Estate planning with retirement plans can raise a lot of issues. The estate planning attorneys at Cipparone & Zaccaro, P.C. can help you understand how to navigate these new rules.

 January 2020

January 1^st of each year brings changes to several key Medicaid figures, which are adjusted for inflation. Below are the Connecticut Medicaid (also known as Title XIX and Husky) figures that apply as of January 1, 2020:

UPDATED CONNECTICUT MEDICAID FIGURES FOR 2020

 On July 12, 2019, Governor Ned Lamont signed

House Bill 7104, An Act Concerning the Adoption of the Connecticut Uniform Trust Code.  It became Public Act 19-137 (CUTC). It will be effective January 1, 2020. 

Connecticut has never had a comprehensive statute covering trust law.  It relied solely on the Connecticut common law (i.e., judicial decisions) and a smattering of trust statutes to clarify the rules regarding the interpretation and enforcement of trusts.  The Estates & Probate Section of the Connecticut Bar Association tried for decades to pass the Uniform Trust Code in Connecticut.  Starting in 2020, Connecticut trust and estate lawyers will need to consult the new trust law before deciding what course of action to take.  We will attend many talks and seminars learning the new law. 

The Connecticut Uniform Trust Code covers trusts in a Will (i.e., testamentary trusts) and trusts effective during life (i.e., inter vivos trusts).  It covers Connecticut irrevocable trusts as well as revocable trusts.  It affects charitable trusts as well as private trusts.

CUTC allows the creation of directed trusts – trusts that allow the division of trust duties among a group of trustees.  For example, the person who signs the Trust (“the settlor”) can now have one Trustee manage investments and another Trustee with management experience run a business. 

CUTC made Connecticut the 19^th state to authorize domestic asset protection trusts (DAPT).  Starting January 1, 2020, you can put assets in an irrevocable trust with yourself as a beneficiary, and, certain creditors cannot attach or compel a distribution from the trust.  The Trustee must be in Connecticut.  Such a trust will not thwart child support or alimony claims.  The new DAPT cannot circumvent state or federal Medicaid laws.

The new law also allows dynasty trusts.  CUTC extends the rule against perpetuities from 90 years to 800 years.  Connecticut residents can now put their vacation home in a trust and not worry that the trust would terminate in the future.  If properly drafted, such trusts can continue for multiple generations without incurring gift, estate or generation-skipping transfer taxes.

CUTC also clarifies the rights of beneficiaries to notice of changes in a trust, trust accountings, trust administration, or any material facts necessary for the beneficiaries to protect their interests.  For instance, even if a charity is a remainder beneficiary, the Connecticut charitable beneficiary and the Connecticut Attorney General must receive notice.  As this notice provision does not apply to charitable bequests that are subject to powers of appointment, beginning in 2020, more trusts with charitable beneficiaries may include powers of appointment to allow the settlor to change the beneficiary.

 A Trustee has an affirmative duty to respond to a beneficiary’s request for information reasonably related to the administration of the trust.  For trusts created in 2020 and thereafter, Trustees must notify qualified beneficiaries of the trust’s existence, the settlor’s identity, the right to request a copy of the trust, and a

beneficiary’s right to request a trustee’s report. Trustees must report annually, and upon termination of the trust, to current beneficiaries regarding the trust properties, liabilities, receipts, disbursements and the trustee’s compensation.  Upon request of a remainder beneficiary,

Probate Courts Go Digital

 On June 12, 2019, the Probate Court

Administrator’s Office announced that the Probate Courts will start mandatory e-filing in the coming months. Attorneys will no longer file paper copies of petitions and motions in the court. Like Connecticut Superior Courts, attorneys will electronically file petitions and motions, serve them on parties and counsel, receive decrees and notices from the court, view case documents, and pay court fees.  The Probate Courts will use TurboCourt, a software system utilized in 19 other states. The new system is currently in the testing phase in several Probate Court districts. We understand that the statewide launch will not occur until 2020.  Self-represented parties will not have to   e-file, but many will want to do so given its benefits.

The Probate Court Administrator’s Office plans several webinar and live training sessions.  Attorneys will have to master the new Probate Court Rules of Procedure that e-filing will affect.  We are excited about the new e-filing system and the many benefits it will provide.

September, 2019, Issue #25

the Trust must also provide the report to the remainder beneficiary.  A beneficiary may waive the right to trustee reports or other required information.  CUTC also allows the settlor to designate a representative of a beneficiary to receive notice of the existence of a trust, the identity of the trustee, or the right to request a trustee’s report.

The new law may expand the use of inter vivos trusts.  As long as the trust has not become irrevocable, beneficiaries and Trustees of trusts created while the settlor is living can now enter into nonjudicial settlement agreements to avoid seeking probate court approval to (i) bless an accounting, (ii)  grant a trustee a necessary or desirable power, (iii) replace or appoint a trustee, (iv) determine a trustee’s compensation, (v) transfer a trust’s place of administration or (vi) waive trustee liability for certain actions.  Probate courts will retain jurisdiction of all testamentary trusts (i.e., trusts created under a Will and trusts created by the probate court). 

CUTC grants probate courts liberal powers to modify or terminate a trust.  If the Court finds that the settlor, the trustee and all of the beneficiaries consent to the modification or termination of a noncharitable irrevocable trust, the court may approve the modification or termination, even if the change is inconsistent with a material purpose of the trust.  Even if the settlor has died, if all of the beneficiaries consent to the termination or modification of the trust, the court can make the change if it is not inconsistent with the material purpose of the trust.  Courts, however, cannot modify or terminate Special Needs Trusts for disabled beneficiaries as easily as other noncharitable irrevocable trusts.  Courts can only modify Special Needs Trusts to ensure compliance with state or federal law or to change a remainder beneficiary after repayment of all state claims.  Courts, without the consent of all beneficiaries, may modify the administrative or dispositive terms of a trust if it will further the purposes of the trust.  Modifying a trust to conform to changing tax laws would clearly further the purposes of a trust.

For the first time, CUTC sets forth a procedure for making distributions upon termination of a trust.  Beneficiaries must have 30 days to object to the proposed final distribution.  The Trustee may keep a reasonable reserve for the payment of debts, expenses and taxes.  The Trustee may request a release from

liability from the beneficiary, but it will be invalid to the extent that the release was induced by improper conduct of the Trustee, or the beneficiary, at the time of the release, did not know of the beneficiary’s rights or of the material facts relating to the breach. 

The terms of a trust will usually prevail over a statute.  Yet, CUTC sets forth those provisions of CUTC that cannot be altered by trust language.  Those unalterable provisions include (i) the duty of a trustee to act in good faith and in accordance with the terms of the trust, (ii) the power of the court to modify or terminate a trust, adjust the compensation of the Trustee, or require or modify a

ESTATE PLANNING ADVISOR

 surety bond, (iii) the duty of the Trustee to notify each beneficiary who has attained the age of 25 or his representative of the existence of the trust, the identity of the trustee and the right to request a trustee’s report, (iv) the exculpation or personal liability of the Trustee, (v) the jurisdiction of the court, or (vi) the court supervision of testamentary trusts. When drafting trusts in 2020, we will include trust terms that cannot overrule CUTC provisions, but we will include trust terms that may contravene CUTC but streamline trust administration.

Consider updating your current trust if it has been a while since you reviewed it.  The new law may alter the effect of certain trust provisions.  New statutes can cloud the meaning of favorable trust provisions and clarify the meaning of unfavorable trust provisions.  You may want to explore modifying an irrevocable trust using the court’s expanded trust modification powers. 

If you have never had a trust, you have picked the right time to consider signing one.  You can tap the most current trust provisions to keep assets within your family, provide for charity, protect your assets from creditors and qualify for public benefits.  Given that the notice provisions do not apply to trusts signed before 2020, you may want to create your new trust before the end of this year.  

Finally, if you currently serve as a Trustee, you need to know the consequences of the new law.  Trustees do not want to expose themselves to greater liability by failure to follow the unalterable provisions of CUTC.  

The estate planning attorneys at Cipparone & Zaccaro, P.C. can help you understand how this new law affects you.

_____________________________________________

Joe Cipparone wrote the articles in this edition.  No taxpayer can avoid tax penalties based on the advice given in this newsletter.  This information is for general purposes only and does not constitute legal advice.  For specific questions related to your situation, you should consult a qualified estate planning attorney.   

UPDATE ON THE CONNECTICUT ESTATE TAX EXEMPTION

In a previous blog, New State Budget Increases the Connecticut Estate Tax Exemption, I reported on a change to the Connecticut estate and gift tax exemptions brought about by the budget signed by Governor Malloy on October 31, 2017.  However, these exemption figures were short lived, and have once again changed. 

Under the 2017 law, the Connecticut estate and gift tax exemption was scheduled to increase to match the federal estate and gift tax exemption beginning in the year 2020 and beyond.  However, this change was based upon a Federal Exemption amount, at the time, of only $5.49 million. 

A few months later, in December of 2017, the federal government passed the Tax Cuts and Jobs Act (TCJA), which more than doubled the federal exemption to $11.18 million for 2018.  Connecticut had not anticipated the budget impact of creating this large of a state exemption.  In response, Connecticut again revised its estate tax exemption on May 31, 2018.

Under current law, the Connecticut estate and gift tax exemptions are scheduled to change as follows:

$3.6 million in 2019

$5.1 million in 2020

$7.1 million in 2021

$9.1 million in 2022

Equal to the federal exemption amount in 2023 and beyond.

The federal estate and gift tax exemption is indexed for inflation.  The federal exemption for 2019 is currently $11.4 million.  However, the increased federal exemption under TCJA is set to expire after 2025 and revert back to the 2017 exemption amount of $5.49 million (indexed for inflation), unless congress acts to extend the law.  If you have questions about the impact the Connecticut and federal estate and gift tax exemptions may have on your family, call the attorneys at Cipparone & Zaccaro, P.C., to discuss strategies for avoiding estate and gift tax.

By Jack Reardon, J.D., LL.M., C.E.L.A.    

According to the AARP, just over half (52%) of the people in the U.S. who reach age 65 will need long-term care in their lifetime. And, with nursing home care costing about $12,000 a month, a stay in a nursing home can quickly drain the resources of even the most careful planner.

If you have researched how to qualify for Medicaid, you have learned about the five-year lookback period. The five-year lookback means that if you gift assets in the five years prior to applying for Medicaid, your ability to collect Medicaid can be delayed. So what’s a family to do if a senior has a sudden incapacitating illness such as a stroke or heart attack? How do you get help paying for nursing home care without running afoul of the law?

Fortunately, there are some ways to transfer assets that do not negatively impact Medicaid eligibility. One of those is purchasing a Single Premium Immediate Annuity for the spouse living at home (aka the community spouse). Properly structured, this annuity functions as a spend-down tool that eliminates excess countable assets, allowing the nursing home resident to become eligible for Medicaid benefits. Single premium means that the annuity is funded with one lump sum paid into it. Immediate means that payments from the annuity start immediately as opposed to some point in the future. To assure that the annuity doesn’t count as a transfer of assets, the Single Premium Immediate Annuity must be irrevocable (you can’t change your mind) and non-assignable (you can’t transfer it to anyone).

The Single Premium Immediate Annuity must be actuarially sound which means that the term of the annuity must be less than the life expectancy of the community spouse and the payments must at least equal the cost of the annuity. The annuity payments cannot exceed the life expectancy of the spouse based on Social Security tables. Single Premium Immediate Annuities cannot have balloon payments and the State must be named primary beneficiary with a child or other loved one as successor beneficiary. Additionally, a Single Premium Immediate Annuity is purchased after the date of institutionalization (DOI) but before applying for Medicaid. The date of institutionalization is the date that the spouse entering the nursing home was admitted to a hospital or nursing home for a 30-day period.

Example of How a Single Premium Immediate Annuity Protects Your Assets

Jim (age 80) and Sarah (age 76) have been married for over 50 years when Jim has a stroke. He survives but needs to be cared for around the clock. Sarah can’t take care of him so they reluctantly decide he needs to go into a nursing home.

Jim and Sarah have done their best to plan for retirement. At the time of the stroke, Jim has $2,000 monthly income and Sarah has $1,500 monthly income. They have a house and a car that are paid off and $250,000 in investments.

Jim’s nursing home costs $12,000 per month. Since the value of Jim and Sarah’s assets exceed the maximum to qualify for Medicaid, they will need to reduce their countable assets to become eligible. 

The first thing they need to do is figure out how much in assets Sarah can keep and how much they need to put into investments that are Medicaid compliant. The Community Spouse Protected Amount (CSPA) is the amount of assets Sarah can keep and enable Jim to be eligible for Medicaid. The maximum CSPA in 2019 is $126,420 and Jim can keep $1,600 for a total of $128,020.  Thus, Jim and Sarah are $121,980 over assets ($250,000 - $128,020 = $121,980).

After Jim goes into the nursing home and before applying for Title 19, Sarah purchases a Single Premium Immediate Annuity for $120,000 and they spend down the additional $1,980 on a prepaid funeral contract.  They name the State as primary beneficiary and their two children as successor beneficiaries.

Jim and Sarah apply for Title 19 after purchasing the Single Premium Immediate Annuity and disclose the annuity on their application. The Connecticut Dept. of Social Services (DSS) sends notice that they must name the state as beneficiary.

Now we need to figure out the payment structure of the annuity. Sarah’s life expectancy is 12.17 years (or 146 months). Sarah could pick a term of 146 months and get an annuity that pays $900 a month or Sarah could pick a term of 60 months and get an annuity that pays $2,500/mo.  If Sarah dies before the annuity term ends, the State of Connecticut will receive the remaining value of the annuity for the medical assistance paid for Jim. They pick the term of 60 months because they want to assure that Sarah outlives the term of the annuity.   By choosing 60 months, Sarah will receive more income.  

In the end, Sarah gets to keep the house, the car, her $1500/month of income and $2,500/month of annuity income. Jim pays his monthly applied income to the nursing home $2,000 - $60 personal allowance = $1,940.  In the end, Jim pays $1940 a month towards his care and the State pays for the rest of his care at the Medicaid rate the state pays nursing homes.  If Jim stays in the nursing home for 2 years, Jim and Sarah will have received a public benefit from the state that is worth $241,440 ($10,060 x 24 months = $241,440) to them.  Thus, a Single Premium Immediate Annuity can provide a substantial benefit to Jim & Sarah.

If you think that a Single Premium Immediate Annuity would help your family, give the elder law attorneys at Cipparone & Zaccaro, PC a call. 

In 2006, William Bassford executed a Trust entitled the “William W. Bassford Irrevocable Trust.”  Despite the title of the Trust, the Trust stated in Article Two that “notwithstanding anything herein contained, the Settlor explicitly reserves the following powers … (5) to revoke this Trust ….”  This Trust owned the home that William lived in along with his third wife, Frances.

William had three adult children: Andrew, Zelda and Jonathan.  The children’s mother died many years ago.   William later married Frances and their marriage lasted for 33 years until he died.  Sometime before William died, he suffered from several illnesses which included severe anxiety and depression, post-traumatic stress disorder from his service during World War II, mild to moderate dementia, impaired hearing and frequent urinary tract infections.  As a result of his health issues, William was hospitalized at a residential psychiatric facility.  In October of 2011, Frances filed an application for the appointment of an involuntary conservator of her husband’s person and estate.  Following a hearing, a Connecticut Probate Court appointed her to be her husband’s conservator.

On June 25, 2012, William’s trustees (who were two, long-time friends of his) conveyed the home that he lived in, from the Trust to William, so that the Trust no longer owned the property.  The property was now owned by him.  He also revoked the “Irrevocable  Trust” on this date.  William did this in conjunction with a new Will that he executed on May 7, 2012.  In this Will, he left various items of personal property to Andrew and Zelda, as well as to some of his grandchildren.  He also left $1.00 to his son Jonathan.  The remainder of his estate was left to Frances, his wife of 33 years.   William died on February 19, 2014.

After his death, his children petitioned the Probate Court where they asked the Court to construe the Trust.  The children sought a decree from the Court which declared that the Trust was irrevocable.  If the Court agreed with the children, that would invalidate the trustees’ conveyance of the property from the Trust to William.  It would also invalidate William’s revocation of his own Trust.  The Probate Court found pursuant to Article Two of the Trust, that the Trust was revocable and that William was capable of receiving title to his home.  The Court made this finding despite the fact that William was conserved by his wife.  The children then brought an appeal to the Connecticut Superior Court.  Among the issues on appeal were whether the Trust was irrevocable and whether the revocation of that Trust was improper.

During the trial in the Superior Court, the Court looked to the facts surrounding the revocation of the Trust.  On June 14, 2012 – months after Frances was appointed by the Probate Court to conserve her husband – William was hospitalized at a psychiatric facility.  Although the medical records revealed that he was feeling anxious, depressed, confused and that he reported suicidal ideations, he was also alert and oriented as to person, place and time.  After his admission, his attorney visited him at the facility.  She brought her husband with her to act as a witness.  The attorney testified that she spoke to William for about 20 minutes that day and that he was alert and not confused.  She told him that upon his discharge from the facility, his written Trust revocation was ready for his signature.  The attorney testified that William was eager to sign the revocation because he felt that the new Will that he signed approximately one month before, would not have the effect that he desired unless the Trust was also revoked.  She also testified that she reviewed the provisions of the Trust with him, specifically the provision which gave him the right to revoke the Trust.  One week later, William signed the written revocation of his Trust before his attorney.

The Superior Court concluded that William had a thorough discussion with his attorney and that he thought about the revocation of his Trust for over three months before his actual revocation.  Taking these facts in conjunction with the preparation of his new Will, the Court determined that William’s desire to complete his estate plan had not wavered or changed in all that time and that he was not confused about the revocation in any way. 

As part of the process of creating his estate plan, William was also evaluated by a psychiatrist.  In late April of 2012, William met with him for a formal clinical interview.  Prior to this interview, the psychiatrist reviewed William’s medical history.  At trial, he testified that while William had dementia, his particular dementia was progressing slowly.  In addition, the psychiatrist testified that William had memory deficits and episodes of delirium during those times when he suffered from urinary tract infections.  Nevertheless, William’s treatment history proved that when he was treated for his urinary tract infections, he returned to lucidity quickly and functioned at a stable level.  Ultimately, the psychiatrist testified that in his professional opinion, William possessed the cognitive ability to know the nature and extent of his assets and how he wanted to dispose of them.

The Court also found that prior to his execution of the revocation, William directed his attorney to contact the trustees of his Trust, to let them know what he desired.  William’s attorney sent both of them a letter advising the trustees that he wished to revoke the Trust and that he wanted title to the property to be conveyed to him.  The letter also directed the Trustees to personally confer with William’s psychiatrist regarding his capacity to execute his Will.  The trustees testified that upon receiving this letter, they spoke to his psychiatrist.  They also testified that they visited William after he was hospitalized.  Both of them testified that he appeared to be his normal self and that he was able to carry on an intelligent conversation with them about his wishes.  Finally, the trustees testified that after this visit, they signed the written revocation themselves.

The Superior Court concluded that William was not confused or uncertain about what he was doing but rather, that he independently determined to proceed with the revocation of his Trust and the conveyance of his property.  Thus, he had the mental capacity legally required to effectuate this transaction.  This decision was subsequently appealed to the Connecticut Appellate Court.  The name of the case is Bassford vs. Bassford, 180 Conn.App. 331 (2018).  On appeal, that court examined the record, as well as the briefs and arguments of the parties and concluded that the judgment of the Superior Court should be affirmed.

In Bassford, three separate courts concluded that the “revocation” language of the Trust was clear and that despite how the Trust was titled, this was a revocable Trust.  In addition, the Court found that under the facts of this case, an involuntarily conserved person could revoke his Trust. 

The facts of this case are unique.  Many lawyers would argue that William’s Trust was poorly drafted, insofar as the ambiguity it created for William and his family.  The lesson from Bassford is that the language of a trust is more important than the title.  At Cipparone & Zaccaro, we exercise extreme caution when drafting Trusts.  If you would like to talk to us about preparing your estate plan, please don’t hesitate to give us a call.  We’ll take great care to put together a clear, thoughtful estate plan for you so you can avoid this kind of litigation.

The decedent, William, died on February 19, 2014.  In 2006, he executed a Will naming his three children (Andrew, Zelda and Jonathan) from a prior marriage as beneficiaries.  The children’s mother was deceased.   William was married at his death to Frances.  They were married for 33 years.  Some time before William died, he suffered from several illnesses which included severe anxiety and depression, post-traumatic stress disorder from his service during World War II, mild to moderate dementia, impaired hearing and frequent urinary tract infections.  As a result of his health issues, William was hospitalized at a residential psychiatric facility.  In October of 2011, Frances filed an involuntary application for the appointment of a conservator of her husband’s person and estate.  Following a hearing, a Connecticut Probate Court appointed her to be her husband’s conservator.

William then executed a new Will on May 7, 2012.  In this Will, he left various items of personal property to Andrew and Zelda, as well as some of his grandchildren.  He also left $1.00 to his son Jonathan.  The remainder of his estate was left to Frances, his wife of 33 years.  William died approximately two years later.

After his death, Frances filed his 2012 Will with the Probate Court.  The children contested the Will, claiming – among other things - that William lacked the testamentary capacity to execute the 2012 Will.  After a trial, the Probate Court admitted the 2012 Will finding that it had been executed properly and that he had the requisite testamentary capacity to execute it.  As part of the Court’s order admitting the Will, Frances was appointed as executrix of the estate.  The children then brought an appeal to the Connecticut Superior Court.  The issue on appeal was whether a person who was involuntarily conserved, had the capacity to make a Will?

During the trial in the Superior Court, the Court looked to the facts surrounding the execution of the Will itself.  For example, William’s attorney brought two witnesses into his home where he signed the Will in their presence.  Both of the witnesses attested that they subscribed the Will in William’s presence and in the presence of each other; that William signed, published and declared the Will to be his Last Will and Testament in their presence; that he was able to understand the nature and consequences of his Will; and that he was not under any improper influence or restraint according to the witnesses.

Further, the attorney who prepared William’s 2012 Will testified that when she first met him in October of 2011 for the conservatorship matter, he was eloquent, well-spoken and coherent.  She testified that he was oriented as to place and time.  She testified that William was able to ask relevant and reasonable questions about the conservatorship and that he was informed about the difference between a voluntary conservatorship and an involuntary one.  The attorney also testified that he clearly wanted Frances to have full authority over his affairs.  Last, William’s attorney had met with him and him alone and that Frances was not present for any of their discussions.  

Regarding his Will, William’s attorney testified that he was clear about his desire to change it, as well as the distribution of his estate.  The attorney further testified that once the conservatorship was in place, she met with William three separate times over the course of several months to go over the new estate plan and to conduct a detailed review of his assets with him.  She further testified that every time she met with him, his wishes remained consistent regarding his new estate plan and that he never wavered or was confused about what he wanted.  Finally, the attorney testified that William’s focus was on providing for his wife.

As part of the process of creating his estate plan, William was evaluated by a psychiatrist.  Approximately two weeks before he signed his new Will, William met with him for a formal clinical interview.  Prior to this interview, the psychiatrist reviewed William’s medical history.  At trial, the psychiatrist testified that while William had dementia, his particular dementia was progressing slowly.  In addition, the psychiatrist testified that William had memory deficits and episodes of delirium during those times when he suffered from urinary tract infections.  Nevertheless, William’s treatment history proved that when he was treated for his urinary tract infections, he returned to lucidity quickly and functioned at a stable level.  Ultimately, the psychiatrist testified that in his professional opinion, William possessed the cognitive ability to know the nature and extent of his assets and how he wanted to dispose of them.

The Superior Court concluded that William had the requisite mental capacity to understand the 2012 Will, that he knew the nature and extent of his estate and thus, how he wanted his Will to dispose of his assets at his death.  This decision was subsequently appealed to the Connecticut Appellate Court.  The name of the case is Bassford vs. Bassford, 180 Conn. App. 331 (2018).  On appeal, that court examined the record, as well as the briefs and arguments of the parties and concluded that the judgment of the Superior Court should be affirmed.

The lesson in Bassford is that three separate courts concluded that an involuntarily conserved person could make a Will.  So if you are in a situation where you are conserving someone who has no estate plan or perhaps you are being conserved yourself and you wish to create a plan that reflects your wishes, it may not be too late to put something together.  At Cipparone & Zaccaro, we would be happy to analyze your unique situation, discuss your options and if appropriate to do so, recommend a plan that reflects your wishes and provides for your loved ones.  

In 2009, two sisters, Jeannine and Jennifer, brought an involuntary petition before a Connecticut Probate Court to have their father conserved. (An involuntary petition is a written application made to the Court on behalf of someone else who has diminished mental capacity and who needs help managing their personal affairs and/or their finances.) Jeannine sought appointment as the conservator of her father’s person so that she could make decisions regarding her father’s health and well-being.  Jennifer sought appointment as the conservator of her father’s estate so that she could pay his bills.  The Court granted the sisters’ petition and appointed each of them to the roles that they were seeking. 

Approximately one week later, the father’s wife and the mother of the two sisters, sued the father for a dissolution of marriage (hereinafter a “divorce”).  In the complaint, the wife, Gloria, alleged that her husband was incompetent. She named Jeannine and Jennifer as defendants, as conservators for her husband.  Approximately one month later, the sisters on behalf of their father filed a cross complaint seeking a divorce.  Some months later, Gloria filed a motion to dismiss the cross complaint, claiming that Jeannine and Jennifer could not bring a divorce action against her on behalf of their father. In their objection, the sisters claimed that a conservator does have the right to bring a divorce action on behalf of a conserved person because they were acting in his best interests.  The trial court agreed with the wife and granted her motion to dismiss. Jeannine and Jennifer appealed this decision to the Connecticut Appellate Court.  The issue for the Court was whether conservators of an involuntarily conserved person can seek a divorce on behalf of the conserved person.

This issue was decided by the Connecticut Appellate Court in 2011 in the case of Luster vs. Luster, 128 Conn.App. 259.  The Court began its analysis by comparing a conserved person to a minor.  In its analysis, the Court stated that a conserved person is similar to a minor in that they are able to pursue civil litigation only through a properly appointed representative like a conservator.  The Court reasoned that children can have limitations and restrictions imposed upon them, due to their lack of judgment.  Further, children – like incompetent people – do not have the legal ability to bring lawsuits in their own names but can only do so through a legal representative.  In addition, the law does not deprive an incompetent person from access to the courts.  Rather, the law provides that they have representatives appointed for them to ensure that their interests are protected.  Finally, the Court stated that the purpose of providing for a legal representative is to make sure that the legal disability of an incompetent person will not prohibit them from being protected under the law.

The Appellate Court also looked to Connecticut General Statutes § 45a-650(k), which stated that a conserved person shall retain all rights and authority not expressly assigned to the conservator. A conserved person cannot bring a civil action in his or her name alone but must do so only by a properly appointed representative who has a duty to protect the rights of the conserved person.  The Court also looked to other Connecticut cases which provided authority for conservators to bring suit on behalf of conserved people, in order to protect their interests.  Ultimately, the Court determined that nothing would prohibit the sisters in this case from bringing a divorce cross complaint against their mother, on behalf of their father.

The Connecticut Appellate Court went further, however. It concluded that the sisters had a duty and responsibility to act to protect their father’s person and estate.  There were allegations in that case that contained information about the possible impact of the wife’s financial actions on the husband’s circumstances and on his possible access to medical care and housing.  In addition, there were allegations that included information about the harm he could have suffered if his daughters were not able to pursue a divorce on his behalf. Because they had a duty to protect their father’s interests, the Court held that Jeannine and Jennifer had the legal authority to do so.

Situations similar to the one described in this case happen more often than you think.  As the Court stated in Luster, there are other cases that have dealt with the issue of the conservator’s authority to act on behalf of a conserved person.  If you are a conservator you may have the legal authority – in fact, the duty – to protect a conserved person even where it may not be apparent that you have the authority to do so.  If you have any questions about your responsibilities as a conservator, feel free to contact the probate attorneys at Cipparone & Zaccaro.  We would be happy to advise you with respect to your duties. 

To qualify for Medicaid (or Title 19 as it is sometimes called), you must meet both the income and asset eligibility rules. This newsletter will cover the Connecticut income rules. (Visit our website for the Connecticut asset rules.)

To understand the income rules, you will need a little Medicaid background. A “Community Spouse” is the term used for a healthy spouse of a Medicaid applicant who is living in the community. The spouse applying for Medicaid is referred to as the “Institutionalized Spouse.” The income rules vary between Medicaid for a nursing home and Medicaid for home care. We will start with nursing home Medicaid.

First, the Community Spouse’s income is not counted and, thus, the Community Spouse may keep all of his or her income. The Institutionalized Spouse’s “Applied Income” is what is used for his or her medical expenses, including nursing home charges, with two exceptions: 1.) the Personal Needs Allowance of $60 per month; and 2.) the Community Spouse Allowance.

As with most things related to Medicaid, determining the Community Spouse Allowance is a complicated procedure. To begin: 1.) Total the Community Spouse’s rent, mortgage, real property taxes, condo fees and house / condo insurance; 2.) Add the standard Utility Allowance (see below for the latest allowance figures); 3.) Subtract the standard Shelter Allowance. This total gives us the monthly Excess Shelter Costs of the Community Spouse; 4.) Add the Excess Shelter Costs to the Minimum Monthly Maintenance Needs Allowance. This total cannot be higher than the Maximum Monthly Maintenance Needs Allowance; 5.) Subtract the Community Spouse’s actual income from this figure. If the result is a positive number, then this is the amount of the Community Spouse Allowance. The Community Spouse Allowance passes from the Institutionalized Spouse’s income to the Community Spouse each month. The Allowance reduces the Applied Income paid to the nursing home each month. The State of Connecticut will pay the balance of the nursing home bill.

Here is an example of how this calculation works. John is the Institutionalized Spouse and Margaret is the Community Spouse. John earns $4,000 per month income from social security and his pension. Margaret earns $1,000 per month in social security income.

Margaret’s mortgage is $1,000 per month. Her real estate taxes are $500 per month, and her homeowner’s insurance is $200 per month. With the average cost of nursing home care in Connecticut reaching $12,851 in July, 2018, John will need Medicaid coverage to afford this cost. The following is the calculation of the Community Spouse Allowance:

Because the Tentative Monthly Maintenance Needs Allowance is greater than the maximum Monthly Maintenance Needs Allowance of $3,090, Margaret’s MMNA is only $3,090. Then subtract Margaret’s monthly gross income of $1,000 and the total for her Community Spouse Allowance is $2,090.

Because John’s monthly gross income of $4,000 exceeds Margaret’s Community Spouse Allowance by $1,910, John keeps $1,910 per month. John receives his Personal Needs Allowance ($60 as of 7/1/18), pays his Medicare premium of $135.50 and the remaining amount, $1,714.50, is John’s Applied Income that he must pay each month toward his nursing home costs.

If John did not have sufficient income to pay the Community Spouse Allowance, Margaret could seek to keep more of the couple’s assets to generate the income shortfall. She would need to request a Fair Hearing and present evidence of her need to retain more of the couple’s assets to generate sufficient income.

If John were to apply for Medicaid to pay for home care instead of nursing home care, these are the calculations: The home care income limit for Medicaid under the Connecticut Home Care Program for Elders (changes every January 1st) is only $2,313 per month in 2019. John’s income exceeds the cap. Consequently, John would not qualify for Medicaid under the Home Care Program unless he diverts the $1,687 of excess income to a Pooled Trust. For more details on Pooled Trusts, see our blog What is a First-Party Special Needs Trust?

John could also apply for the state-funded Connecticut Home Care Program for Elders. The state-funded home care program provides the same services as the Medicaid home care program, but it requires the applicant to pay 9% of the cost of the care and has cost caps. The asset limit in 2019 is $37,926 for a single person and $50,568 for a couple. There are no income limits for the state-funded program. The maximum amount the state-funded program will pay for Category 2 (3 or more critical needs) is $2,909 per month; or, for Category 5 (1 or 2 critical needs) no more than 14 hours per week for a personal care attendant or 6 hours per week for a homemaker. The applicant pays the amount that exceeds the cap. Only access agencies that contract with the Connecticut Dept. of Social Services can provide the services. A care manager from the access agency will determine the level of care.

For more information regarding whether you or a loved one qualify for Medicaid or state-funded programs, contact the elder law attorneys at Cipparone & Zaccaro, P.C. to discuss your situation.