Medicaid Payment for Hospice Care

The Pennsylvania Commonwealth Court has decided two companion cases regarding payments to a hospice by the state Medicaid (Medical Assistance) program. In both cases the state Medicaid agency (DPW) was requesting reimbursement for payments it made for care provided to patients (TL) and (RH) who lived much longer than 6 months. 

The Pennsylvania Medicaid regulations incorporate the Medicare hospice requirement of certification that the patient’s prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course. (See 42 C.F.R. §418.22). 

In the TL case the Court upheld an Administrative Law Judge (ALJ) decision to order the hospice to reimburse DPW. Reimbursement was due because the patient had not shown a “decline toward death” which DPW requires for payment. (Unfortunately for the hospice it had failed to raise the issue of the appropriateness of the “decline” standard DPW was applying). 

The Court's opinion in TL includes the following statement:  “substantial compliance with Medical Assistance regulations is not sufficient, but rather ‘[s]trict compliance with regulations is required where disbursement of public funds is at issue . . . . Men must turn square corners when they deal with the Government.’” 

I expect we all have had the experience of being forced to “turn square corners” when dealing with the Government.

In the RH case the court overturned the ALJ ruling that the hospice must reimburse DPW. In RH the basis for the DPW claim was that the hospice did not review the patient’s medical records. But the court noted that DPW regulations did not require the hospice to review the patient’s medical records.

Here are links to the Court's opinions in the two cases: 

Grane Hospital TL case: http://www.pacourts.us/assets/opinions/Commonwealth/out/1354CD12_7-25-13.pdf?cb=1

Grane Hospital RH case: http://www.pacourts.us/assets/opinions/Commonwealth/out/1261CD12_7-25-13.pdf?cb=1

Three Ways to Protect your Assets from Nursing Home Costs

It’s a particularly unpleasant aspect of aging. We are likely to need long-term care services before we die.

By “long- term care” I mean the type of care you need if you have a prolonged physical illness, disability or severe cognitive impairment (such as Alzheimer’s disease) that keeps you from living independently. As a result, you need assistance carrying out basic self-care tasks.

Nearly 70 percent of seniors will receive such help sometime during their old age—usually at home, but often in a nursing home. It will last for an average of three years. One in five of us will need long term care assistance for five years or more.

The costs are crushing; the burdens on our loved ones enormous.

An elder law attorney can help ease those costs and burdens. This article will discuss three techniques that elder law attorneys use to help families protect themselves against the financial cost of long term care once the need for that care has arisen. These strategies are just part of the planning arsenal that is available. They can be used in a crisis. But, of course, it is best to plan early, rather than wait for a crisis to happen.

This planning ideas discussed below focus on utilizing the Government Medicaid program to help protect the financial security of an individual who is married to a nursing home resident. But these techniques can be adapted for unmarried individuals and for those persons, married and unmarried, who are receiving care at home.

WHO PAYS FOR LONG TERM CARE

The average cost of nursing home care in Pennsylvania is now around $100,000 a year. Not many Pennsylvania couples can afford to pay that kind of cost for long. To protect the financial security of the “community spouse” (i.e. the non-institutionalized spouse) at least some of that cost must be shifted onto a third party as soon as possible.  Potential third-party payers include Medicare, private insurance, and Medicaid.  

Most seniors have Medicare financed coverage as their primary payer of health care costs. But Medicare does not pay for long term stays in a nursing facility. For an explanation of the rules governing Medicare’s limited payment for nursing home costs see my article Getting Medicare to Pay for more of your Nursing Home Stay.

Another possible payment source is insurance. While standard health insurance doesn’t cover nursing home costs, healthy individuals can buy special long-term care insurance that does. But few seniors have this kind of coverage. It’s expensive and underwriting standards can be difficult to meet. And premiums have been increasing a lot in recent years. As a result, few seniors are covered by long term care insurance.

That leaves the Medicaid program, America’s health care safety net, as the most significant potential alternative source of long-term care financial assistance for most people.   But Medicaid has complicated financial qualification rules that can prevent a long-term care recipient from qualifying for the program. An experienced elder law attorney will be able to help families find their way through the qualification maze and qualify for Medicaid sooner rather than later.  

Here are three techniques that elder law attorneys utilize in the right circumstances. For more information on other planning strategies see my previous article, 4 Strategies to Protect Your Assets From Nursing Home Costs.

1. USING ASSETS TO PAY OFF DEBTS AND EXPENSES

By using at risk assets to pay bills prior to applying for Medicaid assistance (but after the institutionalization “snapshot date”) the community spouse can reduce demands on the assets he or she is allowed to keep under Medicaid spousal impoverishment rules. For example, a couple may elect to pay off existing debts; to prepay real estate taxes, insurance, or other large bills; or to prepay funeral expenses.

Example: John and Marian Jones have a home and $50,000 of savings when John enters a nursing home for a long term stay. Under Medicaid spousal impoverishment rules, Marian is allowed to keep $25,000 as her protected allowance and John is permitted to retain $2,000. They have $23,000 in excess resources that prevent John from being eligible for Medicaid.

After John’s admission to the nursing home, Marian spends the $23,000 excess by paying off the mortgage on the couple’s home, some credit card debt, and by making an advance payment of real estate taxes. Because Marian now has only $25,000 and John has only $2,000 left, John is eligible for Medicaid.

2. BUYING ASSETS THAT ARE NOT COUNTED BY MEDICAID

Medicaid eligibility rules do not count certain assets such as a home, a car, and personal effects. Therefore, in appropriate cases a community spouse might take money from countable savings to buy a more expensive home; repair or improve an existing home; or buy a new car, new household furnishings, or personal effects. Medicaid rules do not restrict spending countable assets on non-countable ones of equivalent value. Money spent on non-countable assets needed for the community spouse’s use can accelerate Medicaid qualification.

Example: In the John and Marian example above, after John’s admission to the nursing home, Marian could spend the $23,000 excess on a new furnace for their home and a new car.  Because of this allowable spending John is now financially eligible for Medicaid.   

3. CONVERTING COUNTABLE ASSETS TO INCOME

Some strategies are designed to convert excess assets into income for use by the community spouse. In order to avoid a Medicaid penalty the community spouse must receive something of equal value in exchange for the converted assets.

A conversion strategy that is frequently used by the attorneys at my firm Marshall, Parker and Weber involves annuities. Annuities are contractual arrangements in which an individual pays a lump sum to receive a future stream of income in return. They are offered in a bewildering variety of forms by commercial financial entities, and can involve poorly understood consequences and costs to the consumer.

Most annuities are inappropriate vehicles for Medicaid planning. But there are annuities that conform to the specific requirements of Medicaid law that can be used to protect all of a couple’s excess resources for the community spouse. Although savings are immediately and substantially reduced, the community spouse’s income is increased by a more modest but recurring amount. The at-home spouse can either spend that income or reinvest it, effectively recouping all of the assets used to purchase the annuity.

In the typical scenario, after the institutionalized spouse enters the facility, the community spouse, acting under the guidance of an elder law attorney, liquidates the couple's excess resources and uses the funds to purchase a non-assignable, non-transferable annuity that meets all of the requirements of the Deficit Reduction Act of 2005. If done correctly, there is no transfer penalty and, since the check is payable to the community spouse, the payments received are income to the community spouse and do not impact the Medicaid eligibility determination.

Example: Here is an example from a precedent setting case that was handled several years ago by attorney Matthew Parker of Marshall, Parker and Weber.

In August 2005 Robert James was admitted to Summit Health Care Facility in Wilkes-Barre, Pennsylvania. He and his wife Josephine filed a resource assessment with the PA Department of Public Welfare (DPW) that showed that the couple had total available resources of $381,443. After allowing for the community spouse and institutional spouse allowances, the couple had excess resources of $278,343. This meant that Robert was ineligible for Medicaid payments.

In order to reduce their assets to the level that would qualify Robert for Medicaid benefits, on September 12, 2005, Josephine purchased for $250,000 a single premium immediate irrevocable annuity. The annuity was payable to Josephine over an eight year period in monthly amounts of $2,937.71, beginning October 1, 2005, and ending September 1, 2013. It included other provisions that are required by Medicaid law.

On September 15, 2005, Mrs. James also purchased a new automobile for $28,550. The purchase of the annuity, combined with the purchase of an automobile, reduced the couples' resources to within Medicaid resource eligibility limits.

On September 20^th Mr. James applied for Medicaid benefits. Those benefits were eventually awarded by DPW after two successful court decisions were obtained by attorney Parker. Mr. James received his Medicaid benefits and the couple saved over $6,000 each month that Mr. James resided in the nursing home. By the time Mr. James passed away, the couple had saved in excess of $100,000.

IMPORTANT NOTES

Don’t try the annuity conversion strategy without expert help from an elder law attorney who knows the rules in the Medicaid applicant's state of residence inside and out. It’s easy to make a catastrophic mistake by buying the wrong annuity or an annuity that does not contain required special Medicaid provisions or which was purchased at the wrong time.  

Medicaid qualification rules vary from state to state and change over time. This article is based on Medicaid rules in effect in Pennsylvania as of July 2013. Be sure to consult with a Medicaid experienced lawyer in the state where the Medicaid applicant resides to find out about the rules in that state and to help you get the planning assistance you need.

This article lists just a few of the planning strategies available to you under the Medicaid statute and regulations. Each family situation is different and the best solutions for you will depend on your unique circumstances. Don’t be “penny wise and dollar foolish.” Consult with an elder law attorney who is experienced in Medicaid issues.

Further Reading:

James v. Richman, United States Court of Appeals for the Third Circuit (November 12, 2008)

4 Strategies to Protect Your Assets From Nursing Home Costs

Another Appeals Court Upholds Medicaid Annuity Protections

Medicaid Annuities protect your assets if your husband or wife needs a nursing home

How to Use Community Spouse Annuities (video) 

How a Medicaid Qualifying Annuity Can Protect Your Savings if Your Spouse Enters a Nursing Home

PA enacts Small Business Inheritance Tax Exemption

Pennsylvania imposes an inheritance death tax on assets inherited by children and other non-spouse family members. The inheritance tax rates range from 4.5% to 15%.

Last year, Pennsylvania eliminated the tax on the inheritance of agricultural real estate by family members, provided the property continues to be devoted to agriculture for a period of 7 years. See my earlier article: Pennsylvania eliminates tax on inheritance of family farms if law's conditions are met.    

This year, Pennsylvania is eliminating the inheritance tax for small businesses that remain in the family. Act 52 of 2013 (HB 465), signed into law by the Governor on July 9, contains the new exemption.  

Act 52 adds Section 2111(t) to the Pennsylvania Tax Reform Code to exempt the following transfers at death from PA inheritance tax:

(1) A transfer of a qualified family-owned business interest to one or more qualified transferees is exempt from inheritance tax, if the qualified family-owned business interest:

(i) continues to be owned by a qualified transferee for a minimum of seven years after the decedent's date of death; and

(ii) is reported on a timely filed inheritance tax return.

What is a Qualified Family-Owned Business Interest?

Act 52 defines a "Qualified family-owned business interest" as follows:

(i) an interest as a proprietor in a trade or business carried on as a proprietorship, if the proprietorship has fewer than fifty full-time equivalent employees as of the date of the decedent's death, the proprietorship has a net book value of assets totaling less than five million dollars ($5,000,000) as of the date of the decedent's death, and has been in existence for five years prior to the date the decedent's death; or

(ii) an interest in an entity carrying on a trade or business, if:

(A) the entity has fewer than fifty full time equivalent employees as of the date of the decedent's death;

(B) the entity has a net book value of assets totaling less than five million dollars ($5,000,000) as of the date of the decedent's death;

(C) as of the date of decedent's death, the entity is wholly owned by the decedent or by the decedent and members of the decedent's family that meet the definition of a qualified transferee;

(D) the entity is engaged in a trade or business the principal purpose of which is not the management of investments or income-producing assets owned by the entity; and

(E) the entity has been in existence for five years prior to the decedent's date of death.

Who are Qualified Transferees?

Act 52 defines "qualified transferee" as a decedents:

(i) husband or wife;

(ii) lineal descendants;

(iii) siblings and the sibling's lineal descendants; and

(iv) ancestors and the ancestor's siblings.

Act 52 does not define the terms “lineal descendants” and "siblings" but the terms are elsewhere defined in the inheritance tax law as follows:

 “Lineal descendants.” All children of the natural parents and their descendants, whether or not they have been adopted by others, adopted descendants and their descendants and stepdescendants.

"Sibling." An individual who has at least one parent in common with the decedent, whether by blood or by adoption.  

72 P.S.§ 9102

Losing the Exemption

A qualified family-owned business interest that was exempted from inheritance tax will lose the exemption if it is no longer owned by a qualified transferee at any time within seven years after the decedent's date of death . In that event, the inheritance tax plus interest is due.

 Each year for seven years owners of a qualified family-owned business interest exempted from inheritance tax are required to file a certification that the qualified family-owned business interest continues to be owned by a qualified transferee. A form is to be prepared by the Department of Revenue for this purpose. Owners must notify the Department within thirty days of any transaction or occurrence causing the qualified family-owned business interest to fail to qualify for the exemption. A failure to comply with the certification or notification requirements results in the loss of the exemption.

Rationale

Proponents of the new exemption argued that the Pennsylvania inheritance tax inflicts “an especially disruptive and destructive burden on family-owned businesses. The transfer of productive business assets at death often results in the sudden need to liquidate essential business resources (or sometimes the entire business) to raise the cash necessary to pay the tax bill, all at a time when the business and its employees are most vulnerable, in the aftermath of the death of a principal owner." (Memo by Representative Stephen Bloom in regard to similar legislation - The provisions of Act 52 are similar to, but do vary, from those that were contained in Rep. Bloom's House Bill 48 of 2013, which he referred to as the “Mom and Pop Shop Death Tax Elimination” legislation].

The House Committee on Appropriations estimates that the new inheritance tax small business exclusion will cost Pennsylvania $3,800,000 in lost tax revenues in the 2013-2014 fiscal year.  Overall, the inheritance tax brought in approximately $845 million in revenue in the 2012-2013 tax year.

It appears that the exemption takes effect immediately (July 9, 2013) and should apply to the estates of decedents dying on or after that date. (See Act 52 Section 44(6)). 

Limits Increased for Direct Payments to Family Members of a Decedent

Pennsylvania has updated a state law that permits small amounts to be distributed on death by court petition without the formal appointment of a personal representative. 

Even more significantly, the new law also raises the limits for direct payment of bank and similar deposit accounts and nursing home patient care accounts to family of a decedent. The provision for payment of bank deposits is made mandatory.

Act 35 (House Bill 513) was signed into law by the Governor on July 2^nd. It takes effect in 60 days.  The increased limits apply to estates of decedents dying on or after the new law’s effective date.

Small Estate Limits Increased (20 Pa. Cons. Stat. §3102)

Under prior law (20 Pa. Cons. Stat. §3102), survivors have long been permitted to use a simplified “small estate” process to authorize distribution if the decedent’s property (not counting real estate and certain other assets) was worth $25,000 or less (20 Pa. Cons. Stat. Ann. § 3102). Appointment of an executor or other personal representative is not required. The $25,000 limit had not been raised since 1994. Act 35 increases the limit to $50,000.

Direct Payments to Family Members and Funeral Directors (20 Pa. Cons. Stat. §3101)

Payments of Bank and Similar Deposits - Under another provision of Pennsylvania law (20 Pa. Cons. Stat. §3101(B)), banks and similar depository institutions have been permitted to pay up to $3,500 to family members of a decedent, provided: (1) the total accounts of the decedent held by the institution did not exceed that amount and (2) there was proof that satisfactory payment arrangements had been made for funeral services. 

Act 35 raises this amount to $10,000 and makes the payment by the bank mandatory rather than discretionary.

Patient Care Accounts – Individuals who are institutionalized and are receiving PA Medical Assistance (Medicaid) payments typically have a patient care account. For some individuals these accounts can contain as much as 8,000. Under prior law (20 Pa. Cons. Stat. §3101(C)), the facility was authorized to pay amounts from the account up to $3,500 to a licensed funeral director for burial expenses for a deceased patient.  Amounts not paid for burial expenses could be paid directly to family members up to a $4,000 aggregate limit.  

Act 35 increases the amount that can be paid to $10,000.  

The order of priority of payment to family from bank deposits and patient care accounts is:

1. Spouse
2. Child
3. Father or Mother
4. Sister or brother

Jeff’s Analysis

In my opinion the direct payment increases under 20 Pa. Cons. Stat. §3101 are the more significant of the amendments enacted by Act 35. 

In select situations a small estate proceeding under §3102 can reduce estate administration costs. However, 3102 still involves a court petition and the process can end up being nearly as complicated as a formal probate. But distributions to family members under §3101(B) and (C) can be made simply, directly, and without court involvement.

Recipients of deposit accounts under §3101 should recognize that the funds they receive may be subject to Pennsylvania inheritance tax and to possible recovery by the Department of Public Welfare through its estate recovery program (if the decedent was over age 55 and had received Medicaid long term care payments). The law makes recipients answerable to anyone prejudiced by an improper distribution. And inheritance tax law and estate recovery regulations also make recipients liable for payments due under those programs.  

Should you worry about Death Taxes?

Many Pennsylvania seniors share similar financial and estate planning goals. We want to be sure that we have enough resources to provide for our needs during our lifetime. And we want to pass a little something – as much as possible really - on to our families after our deaths.

For most of us, death taxes are a nuisance, but won’t prevent us from reaching these planning goals. Death taxes don’t affect our lifetime financial security because they only come into play when we die.  And with proper planning they won’t affect the financial security of our spouse because in most cases there is no tax on what we leave to our surviving husband or wife.

For most of us death taxes hit our families only when both spouses are gone and our home and savings pass to our children or other heirs.  At that point, they usually do take a bite.

Here is my simplified overview of how death taxes apply for Pennsylvania residents. Pennsylvania families face two forms of death tax, state and federal.  

Federal Transfer Taxes: The federal government imposes a set of taxes (estate, gift, and generation-skipping) on the transfer of wealth. Generally, there is no tax on what you leave to your spouse or charity.  And there is no tax on the first $5.25 million (in 2013) that passes to your other heirs. 

If you do have an estate of more than $5.25 million, you need to plan to avoid federal transfer taxes. The tax rates are high – the federal estate tax is 40% on the excess - but that tax can be greatly reduced or eliminated by good advance estate planning. 

While a 40% death tax is severe, it doesn’t affect many people.  Less than 1% of all estates are subject to federal estate tax. For most of us, it is not a worry. 

Pennsylvania Inheritance Tax: The Pennsylvania inheritance tax, does affect the things that most Pennsylvania residents leave to their children and grandchildren after their deaths.  It will impact most Pennsylvania families.  

Inheritance tax is imposed as a percentage of the value of a decedent's estate transferred to beneficiaries by will, heirs by intestacy (where there is no will) and transferees by operation of law (for example, by trust). There is no bottom threshold – even small estates are subject to PA inheritance tax. The tax rate varies depending on the relationship of the heir to the decedent.  

The rates for Pennsylvania inheritance tax are as follows: 

• -         0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger;
• -         4.5 percent on transfers to direct descendants and lineal heirs (see below for definitions);
• -       12 percent on transfers to siblings; and
• -         15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.

Direct descendants (4.5% rate) include all natural children of parents and their descendants (whether or not they have been adopted by others), adopted descendants and their descendants and step-descendants. Lineal heirs (4.5% rate) include grandfathers, grandmothers, fathers, mothers and their children. Children include natural children (whether or not they have been adopted by others), adopted children and stepchildren.

There are some inheritance tax exemptions written into the law. The proceeds of life insurance policies on the decedent’s life are not taxed, and special rules may apply to IRAs and other retirement plans.

Certain farm land and other agricultural property may be exempt from Pennsylvania inheritance tax, provided the property is transferred to eligible recipients. For more information about these agricultural exemptions and related requirements, see my earlier post: Pennsylvania eliminates tax on inheritance of family farms if law's conditions are met.

Inheritance tax payments are due upon the death of the decedent and become delinquent nine months after the individual's death. If inheritance tax is paid within three months of the decedent's death, a 5 percent discount is allowed.

Planning Implications:

While the Pennsylvania inheritance tax can take a bite out of your estate, it is rarely devastating. Let’s say that when you die, your leave your home and investments to your children and that the value of the inheritance is $300,000.  The PA inheritance tax would be 4 ½% of that, or $13,500, and the children would receive $286,500. 

For many Pennsylvania seniors a much bigger risk to their goals of lifetime financial security and passing along an inheritance is the possibility that their life savings will be used up paying for their care before death. Most seniors require care during an extended period of time prior to their deaths. The cost of that care, whether it is received at home, in assisted living, or in a nursing home, can quickly deplete a modest estate.

For most seniors, it’s the cost of long term care rather than death taxes that should be the focus of advance planning. Expert long term care advance planning with the help of an elder law specialist can help ensure that seniors will be able to:

    * remain financially independent,

    * maintain control,

    * maintaining privacy,

    * involve family members without burdening them,

    * maximize available government programs, and

    * leave an inheritance.

Pennsylvania seniors and their families can get expert planning guidance at any one of the four offices (Williamsport, Wilkes-Barre, Scranton and Jersey Shore) of my law firm, Marshall, Parker and Weber. The initial consultation is free of charge. 

For More Information: 

“Permanent” Gift and Estate Tax Rules Set by New Fiscal Cliff Law

Myths and Realities About the Estate Tax

Don’t Confuse Medicaid Rules with Tax Rules

Inheritance taxation of natural gas rights in Pennsylvania clarified

Pennsylvania eliminates tax on inheritance of family farms if law's conditions are met

Avoiding Living Trust Scams

“Living Trust” is the promotional name given to what lawyers would technically refer to as a revocable inter-vivos trust.  An inter-vivos trust is a trust you create during your lifetime. 

There are many kinds of inter-vivos trust.  The Living Trust is a inter-vivos trust created mainly for the purpose of having the assets you transfer to the trust avoid probate at your death.  The person setting up the trust can revoke (cancel) the trust at any time and usually names himself or herself as the Trustee (the person is charge of managing the assets owned by the trust).

You can’t take it with you, so the law has to provide methods for the things you own to pass to others after your death.  Probate is one method, the Living Trust is another.   

After you die the things that you own can pass to someone else based on ownership arrangements (e.g. joint ownership with right of survivorship) or contracts or beneficiary arrangements (e.g. assets which are payable at your death to a beneficiary) you created during your lifetime.  Assets that are not distributed by ownership or contractual arrangements will be distributed according to your Will.  If you have no Will, the state has a set of laws (the “intestate laws”) that say who gets what. 

What is Probate?

Probate is the process by which the person in charge of your estate (usually the Executor you name in your Will) gets formally authorized to act on your behalf to do what needs to be done after your death: for example, collect what you owned and what is owed to you, pay your debts and taxes, determine who gets what is left over after debts and taxes are paid, and distribute the right things to you beneficiaries in conformity with the instructions you set forth in your Will. 

But the Executor is authorized to take control only of your “probate assets” not the assets that pass outside of probate.  (Non-probate assets pass according to the separate ownership or contract arrangements the deceased had created).   

To get authorized to act on behalf of the decedent’s probate estate, the Executor takes the Will and a death certificate to the Register of Wills and files them.  If everything is in order, the Register of Wills gives the Executor documents (“Short Certificates”) that show that the Executor is authorized to act. The Register of Wills charges a fee for probate - in Pennsylvania it is rarely more than a few hundred dollars. 

Probate Rules Vary by State

The rules regarding probate vary from state to state.  In some states, like Pennsylvania, probate is a relatively simple and inexpensive process.  It is rare that a judge ever gets involved.  The probate laws are well established so that most potential disputes over probate assets can be resolved by reference to the Will and the law and cases decided in past years.  But a judge is available to resolve disputes if they do come up.   

At the end of his/her work, the Executor can file an account of the Executor’s actions and get Court approval and a release from further liabilities.  But more often in Pennsylvania, probate estates are settled simply by having the beneficiaries just sign an agreement saying that they are all satisfied with what the Executor did. 

In other states the probate rules are much more complicated and restrictive, and probate can result in added expense and delay.   

Unfortunately, articles written on the subject of probate in national publications often fail to recognize that probate rules vary greatly from state to state.  Thus an article written by a financial writer in Los Angeles may be based on the law in California and leave the reader with the incorrect implication that laws in other states are similar.  But probate laws are not national.  They are local.    

Living Trusts can make sense for some people in some situations

There can be both advantages and disadvantages to having a living trust as part of your estate plan. Among the advantages, living trusts can be created to:

-       Provide for effective management of some of your assets in the event of your incapacity;

-       Provide for professional management of your investments; this can be especially valuable for people who are aging, or who are inexperienced in managing financial matters;

-       Provide for the protection of same-sex and other non-traditional couples;

-       Limit the potential for a will contest;

-       Consolidate the management of properties located in more than one state.

Notice that I didn’t mention “avoiding probate” as one of the advantages of a living trust. In Pennsylvania, probate fees are low and usually less than the cost of setting up a living trust. And after your death, the procedures are pretty much the same whether your estate is based on the probate of a will or the administration of a living trust. In some states, avoiding probate may be important; in Pennsylvania, not so much.    

On the other hand, living trusts may be unnecessary, confusing, expensive to set up, and complicated to maintain. Other legal tools may make much more sense for you, depending on your situation. 

For a married couple with a modest net worth who want everything to go to the surviving, owning property jointly may be a much better alternative. And a financial power of attorney may be a more appropriate tool for most people to use to plan for possible incapacity.

Living Trusts Scams

For many years living trusts packages have been marketed to seniors by non-lawyers. The sales take place at “consumer seminars” and in homes on a wide spread basis throughout Pennsylvania.   

The non-lawyer marketers of living trusts, preying on elder consumers fears of lawyers, courts, nursing home costs, taxes, and death, sell standard living trust and related documents for more than your local lawyer would charge you for a customized plan. And the Living Trust is often used as a lead in to selling all sorts of other high cost and inappropriate investments to seniors.    

Often these scammers imply that they are connected in some way to some respected national organization like AARP. (I heard this misrepresentation with my own ears in a Williamsport seminar put on by an out of state Living Trust company). 

Promoters discourage their seminar attendees from getting independent legal advice. Attendees are told that their local lawyer will try to talk them out of the buying the promoters package and that you can’t trust your lawyer because the lawyer just wants to line his own pockets with big probate fees. 

The truth is that these marketing outfits don’t want you to consult with a lawyer because they don’t want you to know the truth. People who know the truth about probate and living trusts won’t buy what the promoter is selling.   

Don’t buy the promoters hogwash. Your best protection is to talk with a local lawyer before you throw your money away.  Be informed. Don’t get scammed. Some estate planning lawyers, like my firm, Marshall, Parker and Weber, offer a free initial consultation for new clients. Take advantage of that freebie to get the information you need to understand all of your options before you spend your money. 

More Information

Beware of Living Trust Scams (Pennsylvania Attorney General)

Pennsylvania Sues Living Trust Scheme

The Truth about Probate and Living Trusts (Allegheny County Bar Association)