CURRENT ISSUES IN THE AREAS OF ESTATE, TAX
AND PERSONAL AND BUSINESS PLANNING
The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.
Auxiliary Estate Planning Documents – Continued. The last two issues of this newsletter addressed beneficiary designations, including pay-on-death and transfer-on-death designations, as well as beneficiary designations for life insurance and IRAs and other retirement plan benefits, and health care advance directives. Please refer to those newsletters for additional information. Another very important auxiliary estate planning document that is frequently used, but often written improperly, is the financial power of attorney. In Indiana, all powers are durable unless they specifically provide otherwise. A durable power of attorney survives incapacity, since at common law, a power of attorney would become ineffective if the principal became incompetent. All powers of attorney will now survive incompetency or incapacity unless they specifically state otherwise.
A power of attorney is perhaps the most important planning document, since it deals with lifetime issues rather than deathtime concerns. A power of attorney will generally be either immediately effective or a “springing” power, which means that the power of attorney would become effective upon some future event, such as incapacity. If a power of attorney becomes effective in the event of incapacity, it will be necessary to define how that is determined. Requiring a medical determination might be the best approach, but in many instances doing so will take time and create stress and inconvenience. It is possible to write a power of attorney so that the named attorney-in-fact (i.e., the “agent”) can certify incapacity under penalty of perjury, which is appropriate if the family circumstances and relationship dynamics are such that the principal is comfortable with the attorney-in-fact having that kind of discretion. Powers of attorney should be written and tailored to meet the principal’s particular needs and concerns. Too many powers of attorney are generic, and when the time comes to use them, there is uncertainty about what the attorney-in-fact legally can do. Third parties, such as investment companies and insurance companies, frequently push back on the use of powers of attorney, in many instances because they do not understand Indiana law. Indiana law requires a third party to honor a power of attorney in the same way that the third party would be required to engage in a transaction with the principal in regard to whom the third party has a business relationship, and the failure to do so can make the third party liable for treble damages, interest, and legal fees.
A power of attorney should be written to allow certain estate planning and asset protection transactions to take place. When the principal is incapacitated, and perhaps when long term care is a concern, it will be very important for the named attorney-in-fact to be able to engage in asset protection transactions, to allow certain asset transfers, and for trusts to be created when doing so would be appropriate in the particular circumstances. Powers of attorney, while being among the most important legal documents that people ever sign, too frequently are created by means of a standard form without proper legal guidance, and then implemented improperly and ineffectively, thus creating significant problems for the principal and the principal’s family.
Revised Federal Nursing Facility Regulations. The Centers for Medicare & Medicaid Services (CMS) published a major revision of the federal nursing facility regulations on October 4, 2016, covering facilities that participate in those federal programs. It was the first major revision in 25 years, after the earlier regulations had been issued following enactment of the Nursing Home Reform Act more than 30 years ago. Phase 1 of the revised regulations took effect on November 28, 2016, and Phases 2 and 3 were scheduled to become effective on November 28, 2017 and November 28, 2019. However, on June 30, 2017, CMS announced it would delay for one year the use of enforcement remedies, including monetary penalties and denial of payment, and on November 24, 2017, CMS announced that it would delay enforcement for 18 months. The revised regulations include new and expanded requirements in several areas: person-centered care; admission, transfer, and discharge procedures; required services and quality improvement procedures; facility grievance policy; and protections from abuse, neglect and exploitation. For additional information regarding the effective date of the new requirements, see the memo from CMS Dir., Survey & Certification Group, to St. Survey Agency Dirs., Revision to State Operations Manual (SOM) Appendix PP for Phase 2, F-Tag Revisions, and Related Issues, https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertification GenInfo/Downloads/Survey-and-Cert-Letter-17-36.pdf (June 30, 2017).
Vaughn v. Wernert. A recent federal district court decision illustrates the complexity of the Indiana Medicaid rules and regulations and the morass that exists when even experienced and knowledgeable professionals seek assistance from Medicaid due to overlapping and conflicting programs and requirements. In Vaughn v. Wernert, Indiana Southern District Court, Case No. 1:16-cv-03257-JMS-DLP (January 9, 2019), the defendants were the Secretary of the Indiana Family and Social Services Administration, the Director of the Division of Aging of the Indiana FSSA, and the Director of the Office of Medicaid Policy and Planning of the Indiana FSSA. The factual details will not be outlined in this summary other than to indicate that Vaughn had been a quadriplegic since 1976 and had been able to live in her own apartment and had received Medicaid-funded services until she was hospitalized in January of 2016. When she was ready to go home, the Medicaid program would not approve her doing so because it was unable to locate a qualified home health care provider. She was essentially forced into a nursing facility. The court ruled that Vaughn had suffered and would continue to suffer irreparable injury as a result of continued institutionalization. She had been hospitalized for decubitus ulcers several times and underwent surgery when she had not had a bedsore in the 20 years preceding her hospitalization. The State of Indiana did not identify any hardship that it would suffer if injunctive relief was granted and assured the court that there were no issues concerning availability of funds. The court commented on the bureaucratic quagmire, both substantive and procedural, that the FSSA created, and found that the defendants had failed to cooperate, collaborate, communicate, and engage in a meaningful effort to secure home-based care for Vaughan. It was noted that the Division of Aging could not even see what the State plan provided because it was “fragmented in [their] system.” The court ordered the defendants to arrange within 21 days for the provision of home health and attendant care services based on a plan of care which was approved by her Area Agency on Aging case manager. All medical decision-making was left to the appropriate medical professionals.
Additional Information. Future issues of this Newsletter will address other issues of current interest. Please contact my office with any questions that you might have.