Transferring LLC Membership Interests Part 3—Involuntary Transfers

An involuntary transfer of an LLC membership interest is just that—a transfer prompted by a creditor action or the occurrence of a triggering event outside of the member’s control. An individual or entity obtaining a membership interest as a result of an involuntary transfer usually cannot fully step into the shoes of the transferring member.

This statutory protection—often called a pick your partner provision—acts as a safeguard that provides LLC members with a certain amount of personal asset protection. For example, whereas the creditor of a corporate shareholder could reach and exercise shareholder rights to their full extent, the creditor of an LLC member can reach and exercise only the economic rights associated with membership interests—not the voting or management rights. The recipient of this type of membership interest is called an assignee.

Statutory Provisions – Creditor Action

If an LLC does not specify any transfer provisions, creditor actions are subject to state LLC laws. Each state, in its LLC statute, has provisions limiting what actions a creditor can take against an LLC member for personal debt. Depending on the state, the statutory remedies available to an LLC member’s personal creditors may include:

  • A charging order, which is a court order requiring the LLC to pay all the distributions due to the member-debtor from the LLC to the creditor.
  • A foreclosure on the member-debtor’s LLC ownership interest.
  • A court order to dissolve the LLC.

These remedies protect the other LLC members from the risk of having the creditor of a debtor-member step into the debtor-member’s place and share in the control of the LLC. To a varying degree, they also address the creditor’s right to satisfaction of the debt.

Transfer Provisions – Other Triggering Events

Transfer provisions are typically specified in the LLC’s operating agreement or in a separate buy-sell agreement. There may be some overlap with creditor actions, as these are often included as triggering events in the transfer provisions.

Examples of triggering events that can be specified in an LLC’s transfer provisions include the following:

  • A deceased member’s membership interest passes to a prohibited individual or entity
  • A member’s bankruptcy or other involuntary transfer of a membership interest to the member’s creditors
  • A member’s separation or divorce, or the transfer to a member’s spouse under property division or under a divorce or separation decree
  • A member’s membership interest becomes subject to a valid court order, levy, or other transfer that the LLC is required by law to recognize
  • A member’s breach of the LLC’s confidentiality
  • A member’s failure to comply with any mandatory provision of the operating agreement
  • A member’s failure to maintain a license or other qualification that disqualifies the member from engaging in the LLC’s primary business

If a triggering event occurs, the transfer provisions may prompt a mandatory redemption of the member’s membership interest or a right of first refusal to the LLC or to the other members. If an involuntary transfer does occur, the recipient of the membership interest—the assignee—typically receives only an economic interest in the LLC with no management or voting rights.

Transferring LLC Membership Interests Part 2—Voluntary Transfers

An LLC affords its members a certain amount of personal asset protection. Part of this protection hinges on the restricted transferability of LLC membership interests.  Restricted transferability protects the non-transferring members from creditors and unwelcome new members, which upholds the integrity and value of the non-transferring members’ membership interests.

  • Most (but not all) LLCs impose requirements or restrictions on the transfer of a member’s interest.
  • If the LLC’s operating agreement is silent on the transferability of interests, you must look to state law to be sure there are no default provisions restricting transferability.

This article, part 2 in a 3-part series, focuses on voluntary membership interest transfers done with the intent to grant full membership rights to the recipient.

Step 1 – Determine the Transfer Process

The LLC’s operating agreement should specify the process for transferring a membership interest. If the LLC has a buy-sell agreement in place, that must also be consulted.

  • Find the provisions that detail allowable transfers, the steps to complete them, and the method for calculating the value of the membership interest, if any.
  • The membership interests may be freely transferable but are likely subject to restrictions set forth in the operating agreement, the buy-sell agreement, or by state law.
  • Some transfers may be permitted without prior approval of the other members, such as transfers to a member’s immediate family or to a trust for the benefit of a member or a member’s immediate family.
  • The LLC or the other members may have a right of first refusal before a transfer can be made.

If the operating agreement or buy-sell agreement doesn’t specify the process for transferring a membership interest, you will have to look to state law. Once you determine the authority governing the transfer process—the operating agreement and buy-sell agreement or state law—be sure to note all requirements and restrictions.

Step 2 – Determine the Value

Calculate the value of your membership interest. If the operating agreement or a separate buy-sell agreement doesn’t address this, you will have to work with the other LLC members to determine and agree upon the value of the membership interest.

Step 3 – Follow Transfer Process

Complete the LLC transfer process as determined in Step 1. Make sure you follow all requirements. For example, if the operating agreement requires the unanimous written consent of all LLC members (a common requirement), meet with all of the LLC members to obtain their written consent.

Step 4 – Obtain or Draft the Transfer Document

 If the LLC does not have a standard transfer document, you will need to draft a transfer document.

  • Check the operating agreement or state law to determine what the transfer document must include.
  • Typically, it must include the transferor’s name, the LLC’s name, the recipient’s name, and the percentage of the membership interest being transferred.
  • If a form is not provided by the LLC, note that the form of the transfer document is usually subject to the LLC’s approval; make sure to obtain this approval if necessary.

 Step 5 – Execute the Transfer Document; Other Documents

 Sign and date the transfer document. Make a copy for your records, for the recipient, and for the LLC.

  • The recipient typically receives the original transfer document.
  • The LLC may have additional documents that the recipient must sign in order to be admitted as a member.
  • State law may require the operating agreement and certificate of formation to be updated with the new member information.
  • The LLC may pass the costs associated with the transfer to the new member.

Conclusion

Making a proper transfer of membership interests requires the transferor to jump through a lot of hoops. The first step in the process is determining which hoops are required. Taking the time to properly transfer membership interests ensures that the recipient obtains full membership rights and protection.

 

We offer proactive business planning strategies. We help businesses draft thorough operating agreements that provide clear directions to the LLC members—to exercise membership interest transfers and other important member rights. We also assist existing LLC members who want to properly transfer their membership interests in the absence of a thorough operating agreement.  Contact us today to learn more about our business services.

Transferring LLC Membership Interests Part 1—An Overview

Say you are a member of an LLC. You own membership interests in the LLC. But what if you want to leave the LLC? What if you get a divorce? What if you have creditors seeking immediate repayment? What can you do with your membership interests? The answer depends on how transferable those membership interests are.

A transfer of LLC membership interests can mean selling, donating, assigning, or gifting—basically one LLC member turning over his or her membership interests to another individual or entity. The transfer can be voluntary or involuntary.

● Examples of voluntary transfers include selling membership interests to a third party or to the remaining members, donating membership interests to a charity, or leaving membership interests to a trust upon death.

● Examples of involuntary transfers include those prompted by divorce, bankruptcy, and termination of employment.

The transferability of LLC membership interests is subject to competing interests. On the one hand, freely transferable membership interests can be more attractive to members because they are easier to dispose of or cash out of—in other words, the membership interests are more liquid and marketable.

On the other hand, LLC members usually want to maintain the right to “pick their partners.” If membership interests are freely transferable, the remaining members have no control over who comes in as a business partner when a member decides to transfer membership interests. Restricted transferability places limits on transfers and the status of the recipient.

Are Membership Interests Freely Transferable or Restricted?

The members decide. The good news about forming an LLC is how flexible the structure is. At the outset, the founding members can adopt transferability provisions— either in the operating agreement or in a separate buy-sell agreement.

● If neither document addresses transferability, the default provisions of state law prevail.
In other words, if the founding members fail to address transferability in the operating agreement or in a buy-sell agreement, they’ve relinquished control and subjected the members and the LLC to the state law default provisions.

● Although planning for a member’s departure from the LLC when you’re just forming it may be difficult, thinking through all the possible exit scenarios—and planning for them—is essential.

If your LLC is already up and running and you don’t have transferability provisions in place, the members can amend the operating agreement or adopt a buy-sell agreement. Look to the operating agreement for directions on how to amend the LLC’s terms.

How are Membership Interest Transfers Restricted?

While membership interests are freely transferable in the sense that any member generally can transfer his or her economic rights in the LLC (subject to the operating agreement, a stand-alone buy-sell agreement, and state law), the management or voting rights in the LLC are usually what are restricted—otherwise, other members would be forced to become “partners” with someone not of their choosing. Typically, a recipient of restricted membership interests can receive economic and management rights—a full membership interest—only with unanimous member consent.

A Perfect “Probate” Crime – Why Quitclaim Deeds Stink!

A quitclaim deed (also known as a quick claim deed) is used transfer title on real property. People on their own use them all the time and almost always create future problems. Quitclaim deeds stink, first and foremost because the deed doesn’t even say whether or not the person even owns the property and offers no guarantees as to his or her ownership interest.
Because there is no need for strong guarantees, plenty of people use them to transfer property into and out of trusts, LLCs, between husbands and wives and family members. That can be a recipe for disaster. For example, a father quitclaim’s a property to his oldest son, then dies a few months later. Upon seeing a notice in the paper, the other owner of the property shows up to claim his share. Unfortunately, the son knew nothing about another owner and now finds himself hip deep in legal problems.
Some people believe that a quitclaim is necessary if a property has lien on it. This is not true. In point of fact, a Warranty Deed and Special Warranty Deed have a “subject to” statement that says all existing claims have been disclosed, which doesn’t prevent them for being used in property transfer. A “subject to” looks something like this:
“SUBJECT TO: Current taxes and other assessments, reservations in patents and all easements, rights of way, encumbrances, liens, covenants, conditions, restrictions, obligations and liabilities that may appear of record.”
That means any liens that are publicly recorded are part of the deed. When you purchase a title insurance policy, the title company will do a search and list every commitment they find during the search.
So we’ve listed a lot of reasons why quitclaim deeds stink, but here’s the nail in the coffin. Title companies hate them! Many title companies won’t accept a quitclaim deed without additional documentation signed by the grantor. The title company has every right to question whether or not the owners actually had legal claim to the property before continuing on with the sale. Naturally, this puts a kink in the escrow process and can hold up the purchase until previous grantors (owners) have been tracked down.
In short, when in doubt, contact an experienced attorney to help you draw up a deed (Warranty Deed or Special Warranty Deed) that won’t gum up the works!

Retirement Challenges Facing Women

For women, securing enough retirement income can be a daunting proposition. Generally speaking, women face two significant hurdles to overcome to achieve a comfortable flow of retirement income. One hurdle involves longevity, and the second deals with earning power.
Women have a longer life expectancy than men do in the US. The Social Security Administration has cited that “a women who turns 65 today can expect to live, on average, until 86.6, compared with age 84.3 for a man.”
Those statistics, being only averages, indicate that about 25% of those turning 65 will live past the age of 90 and even 10% will surpass age 95. That means roughly 35% of women turning age 65 today will live an additional 5 to 10 years past the SSA reported average longevity.
To avoid running out of money, retirement planning for women has to specifically address and strategize how to maintain retirement income well into their 80s and 90s. The most natural solution to avoid running out of money is to accumulate as much savings and investments early in life while working is a viable option. Reliance on a Social Security check to cover some expenses is not a certainty as the solvency and sustainability of the program is in question.
“As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.”
That is 19 years away, the day a woman turning 65 today would turn 84 years old.
If you are a woman 60 or older, you are at the forefront of a significant change in social security. The full retirement age (FRA), when you can collect your entire earned benefit, has been changed from 66 to 67. The implementation of this change will occur in two-month increments over the next six years. Essentially this means you will be receiving a reduced benefit. According to Jim Blankenship, the new reality is that as the FRA goes up “At every age along the line you are receiving a smaller benefit than you would have before assuming the same work record.”
The new reality is that a Social Security check as partial retirement income is no longer a “sure bet.” Even if the program remains solvent after 2037, the current reduction of benefits and cost of living adjustments (COLA) will not be a substantive retirement income strategy for women who live well into their 80s and 90s.
The second significant hurdle women face is that the earning power of women is still not equal to that of men. The Institute for Women’s Policy Research reports that women earn about 82 percent of what men make during a similar week of work. Among women of color, African American and Hispanic, the number was even lower at 60 percent and 55 percent respectively, as compared to a white male.
One strategy women can employ to combat this problem is to retool to jobs that have minimum wage gaps between male and female.
Changing the field in which a woman works boosts her earning power, increases her paycheck, increases her ability to save and invest more, and increases the social security benefit payable to her provided the system remains intact.
Women can also help themselves meet retirement challenges by planning early on with trusted counsel to set structure to achieve financial goals. Goals should include how best to manage personal income, IRAs, 401(k)s and benefits as well as any possible inheritance from a spouse or a parent. Inherited assets can change into retirement generating assets for future income.
Contact our office today and schedule an appointment to discuss how we can help you with your planning.

What is Long Term Care Insurance?

Long-term care insurance is very beneficial for the elderly or disabled person who need will services or support to meet their personal care or health needs. However, it is important to understand long-term care insurance before the time comes when the benefits are needed. Unfortunately, many people wait and then miss out on what long-term care insurance can offer.

Should I get long-term care insurance?
There are a few things to consider before you go out and purchase long-term care insurance. First, consider your age. Age is important because it is much cheaper to get long-term care insurance at a younger age. Older adults and those who already have existing health conditions may have more difficulty getting long-term care insurance and the premiums are guaranteed to be costly.

Second, consider your support system. In other words, do you have family who will be able to help provide for your care needs in the future? If so, then you may not need long-term care insurance. This is definitely a good time to sit down and talk about the future with your family.

Third, consider your savings and investments. This is where a financial adviser or elder law attorney can help you understand ways to pay for long-term care and whether or not long-term care insurance is right for you.

What is the cost of long-term care insurance?
The cost of long-term care insurance cannot be attached to specific numbers. The cost depends on age, gender, marital status, the insurance company, and the amount of coverage. The younger a person is when they get long-term care insurance, the lower the premiums will be. Generally speaking, long-term care insurance policies are less expensive for men than women. This is due to the fact that women generally live longer and therefore are more likely to make claims on the long-term care policies. Married people have lower premiums than single people. Just like with any type of insurance, rates for long-term care insurance will vary from one company to the next. It is important to shop around and compare the costs of long-term care insurance with a variety of carriers. The amount of coverage desired greatly affects the cost of the long-term care insurance. Better coverage with fewer restrictions will come at higher premiums. Be sure to do your homework, talk to your financial planner, and elder law attorney to help determine long-term care insurance needs.

What does long-term care insurance cover?
Once you have a long-term care policy, you are eligible for benefits if you have dementia or another cognitive impairment or you are unable to perform at least two of six activities of daily living. These activities include bathing, dressing, eating, toileting, caring for incontinence, and transferring. When a policyholder is eligible and in need of filing a claim on a long-term care insurance, a variety of services may be covered. Nursing homes and assisted living facilities may be covered services. Within those services, policies may only cover room and board or they may cover more extensive services. Long-term care insurance also covers adult day care services for those who need a program for health, social, and other support services during the day. Home care is also provided under some long-term care insurance. This service helps with activities of daily living in the policyholder’s home. When home adaptations are necessary, such as ramps or grab bars, long-term care insurance can cover these services. Care coordination and future service options are also available services with within long-term care insurance policies. You will need to understand your specific policy to determine the specifics of the services covered and to what extent they are covered.

Long-term care insurance can seem very complicated. Remember there are professionals who specialize in helping to determine long-term care insurance needs and coverages. A great place to start is with your financial advisor and elder law attorney.

If you have any questions about something you have read or would like additional information, please feel free to contact us.

New Law Encourages Reporting of Elder Financial Abuse

President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act into law on May 24, 2018. The Act contains a section that was once a stand-alone bill from Sen. Susan Collins (R-Maine) which is designed to encourage the reporting of elder (age 65 and older) financial abuse witnessed by financial institutions. The Act does not mandate that these institutions report financial abuse directed towards elders to avoid penalties, rather it gives them an incentive to do so. The Act provides immunity from any lawsuit alleging elder financial abuse if the financial institution reports it to state or federal law enforcement agents. To qualify for immunity, a financial institution has to create and administer a training program for employees to teach the employees how to spot elder financial abuse. This Act provides immunity to financial institutions because they are often the first to witness elderly clients making unusual transactions that may be linked to a scam.

The Act was inspired by the Senior$afe program in Maine. Senior$afe encourages state regulators, financial institutions, and legal organizations to work together on educating banking and credit union workers to spot and stop elder financial abuse. When elders have a trusted third party to talk to about their finances, they are less likely to fall victim to elder financial abuse, and this program has found success in reducing the amount of elders who fall victim to these scams.

However, this isn’t an entirely new idea. In 2016, the Consumer Financial Protection Bureau (CFPB) issued a report that found how reporting elder financial abuse has already become a respected norm in hundreds of counties around the country. The report found that these counties created voluntary community-based partnerships to prevent, detect, and respond to elder financial abuse situations. These partnerships often include entities such as financial institutions, adult protective services, and law enforcement. The CFPB found that these partnerships can be incredibly effective in protecting their elderly citizens. What’s more, in states without elder financial abuse protection laws, these community efforts have created a sense of responsibility within these counties to protect their most vulnerable from financial scams, without reward or threat of prosecution against financial institutions. Following this report, the CFPB released a resource guide and best practices to help and encourage other counties across the US to adopt their own protection partnerships. Among other recommendations, the CFPB encourages communities to directly include law enforcement and financial institutions in these partnerships. Financial institutions are often the first to spot these cases, and law enforcement has an obligation to investigate once a claim is made. Also, the CFPB recommends that partnerships which serve diverse areas engage with groups that are already entrenched in the community, such as service groups or faith-based organizations.

Protecting our most vulnerable is important to providing a safe and prosperous society for all citizens. These community-based partnerships and the Economic Growth, Regulatory Relief, and Consumer Protection Act are both steps in the right direction towards protecting those who aren’t able to protect themselves. If you have any questions about something you have read, please do not hesitate to contact our office.

Solo Aging and the Challenges it Brings

For some seniors in the baby boomer generation aging brings with it new challenges in the form of solo aging. Solo aging is a senior who has no children and no younger (or healthier) family members to assist them as they age. As in generations before, baby boomers are living longer and healthier lives but for some there is no escaping the eventualities of disease like heart disease, arthritis, diabetes or dementia. Others may require extensive care following a fall that results in a broken hip or other serious injury.
In prior generations when an aging senior needed assistance with activities of daily living they would typically enter a residential facility or be treated at home, often times with a younger family member to supplement their needs. In the case of the baby boomers however, healthy family members who can provide care are in shorter supply. Solo aging requires a modified approach to the requisite standard planning around the larger family system of previous generations.
The Pew Research Center found the rate of childlessness in baby boomers to be about 20% -double the number of previous generations. This childless statistic translates to one in five baby boomers having no adult children to help them when independent living becomes difficult or impossible. This solo aging segment of the baby boomer population is typically white, highly educated, reasonably affluent, and has a desire to remain living in the United States. Any of their immediate family that could provide care is often small in number and likely to live far away. These solo agers are fiercely independent and are accustomed to making their own decisions and will not let go of their self-determination easily.
Like most seniors, the solo ager prefers to remain in their private home. Living at home in the earlier years of retirement is often a suitable arrangement but over time the downward slope of mortal decline can lead to a number of dangerous difficulties. Incorrect management of medication, poor nutrition, isolation and loneliness, alcoholism and depression, dementia, and susceptibility to scam artists are just some of the problems that can become prevalent. Without the benefit of a younger family member who can “well check” them the solo ager is at an increased risk of becoming a victim of fraud, abuse, or more serious health decline. Moreover, when the time does come for care giving and/or relocation to a more suitable and safer living environment the solo ager will not be able to rely on an adult child to help them find qualified caregivers and appropriate living arrangements as well as orchestrate the physical downsizing and relocation to a new home.
What to do? Prepare and prepare early. Even if a solo ager is healthy it is impossible to predict the future. The unexpected fall or illness happens and more often than most people think. The solo ager needs to empower a third party, through proper legal documents, to act in a fiduciary capacity in the event the senior becomes incapable of making decisions. This includes a trusted friend, extended relative or even a professional fiduciary or private guardian.
There must also be legal protection in the form of a healthcare directive and estate plan or trust in place. Without the benefits that a traditional family support system brings the solo ager must pay strict attention to the details of their life planning and seek professional counsel to make proper arrangements. The reliance must shift from immediate family to legal professional counsel to ensure the solo ager is cared for in the manner they want should the need arise. While it may seem an uncomfortable discussion at first, the solo ager should be reminded they are maintaining life control by having legal documents created to reflect their own wishes. The solo ager can garner a sense of inner peace in their retirement years knowing their plans are properly in place and that the course of their life will reflect their desires.
If you or someone you know is a solo ager, we can help. Contact our office today and schedule an appointment to plan for your future!

Make Sure Your Wishes Are Carried Out

The importance of making end of life preparations cannot be stressed enough. Many put off making these plans thinking there is always time. The sad reality is that none of us are guaranteed time. Others may be bothered by the thought of death itself and allow this to paralyze them when it comes to making plans and getting their affairs in order for the end of life. However, most of these same people have wishes and thoughts about where and to whom their assets are distributed. Many of them also have ideas about what they do and do not wish to have happen when their life ends. Lack of preparation and planning means that these wishes likely will not be honored. In addition, it causes additional strain and stress on the people who are left to sort out the affairs. An example of this is the story of Debbie.

Debbie was a teacher who had been retired for several years. She was aging alone. She never married and had no family around. She did have a small circle of friends. After retirement, Debbie’s health progressively declined and she had more and more difficulty caring for herself. After a few years, Debbie passed away in her home.

Previously, she had conversations with a handful of her friends telling them her wishes for the possessions and assets she had. Because of these conversations, these friends each thought she had made the proper preparations to ensure these wishes would be followed. Unfortunately, Debbie had none of the necessary end of life documents that would allow her wishes to be followed. Her friends were left to try to piece together a puzzle that only many missing pieces. Her burial was prolonged and what she did have after paying expenses to settle the estate and bury her will not end up where Debbie wanted. This scenario can, however, be avoided.

If you or your elderly loved one have not made end of life preparations, make time to do so as quickly as possible. An elder law attorney can help guide you in what you should be doing, and can make sure the proper documents are in place to carry out your wishes regarding your health, care you want (or don’t want) to receive, and who should receive your money and possessions.

The first key document to be sure you have is a will or a living trust. A will allows you to specify where your money and possessions should go upon your passing. It also allows you to choose an executor of the estate. The executor will take care of managing the estate, paying debts, and distributing property as specified. A will only takes effect upon your death.

A living trust does everything a will can do, but also allows for you to choose someone to manage your assets if you become incapacitated because it is effective during your lifetime. A living trust also provides privacy, as it is not subject to court proceedings that become open to the public like a will is. There are numerous other advantages to a living trust that can be explored with the help of an attorney.

A living will and health care power of attorney are two additional documents that take effect while you are alive. A living will specifies your wishes for end-of-life medical care. For example, you can specify whether you want to be kept alive by artificial means if you are in a terminal state. A health care power of attorney provides for someone to make health care decisions for you, in case you aren’t able to make decisions yourself. Both of these documents outline your wishes about medical treatment and care when you can’t make them for yourself, so it’s important to seek legal guidance to make sure these documents are drafted properly.

A financial power of attorney should be in the plan as well. A financial power of attorney names an agent to handle your finances in the event you are no longer able to. An agent can open and close bank accounts, write checks, and sell property if you choose to allow them the authority to do so. Like the health care power of attorney, the financial power of attorney should be created with legal advice to make sure your wishes regarding your finances are properly documented.

Having an estate plan is necessary for you to have a say in what happens if you become sick and cannot make decisions for yourself, and to determine what happens with your money and your belongings after death. An estate plan also helps those who are left to deal with the estate to do so in a more simple and straightforward manner.

If you have any questions about something you have read or would like additional information, please feel free to contact us.

Power of Attorney Misconceptions

A durable power of attorney is one of the most important estate planning documents you can have.  It allows someone who you appoint (your agent) to make decisions on your behalf in the event you become incapacitated. If you have not appointed an agent then your friends and family may not have the authority to make decisions on your behalf.  In that case, a judge may have to appoint someone for this task, which can require a court process that is expensive and tedious.

While a durable power of attorney (POA) is one of the most common estate planning documents, it is also one of the most misunderstood. This article will break down some of the common misconceptions regarding POAs and help you understand what you need to create a valid POA.

Misconception: Technology is so great now, there is no need to speak with an attorney, I can just create my own POA online.

Truth: POAs are not one-size-fits-all. Each person’s situation is unique.  If you use a cookie cutter program it may not cover specific transactions.  In order to conduct many financial transactions specific language must be used to grant proper authority.  Elder law attorneys create these documents regularly which gives them valuable experience in unique situations and can make sure you have all your bases covered.

Misconception: POAs are one-and-done documents. Once I create it I will never have to touch it again.

Truth: POAs are documents that should be updated regularly. Laws change and if you have not regularly updated your documents you may find out too late that your POA is not valid. Further, some financial institutions may not accept a POA that was not updated in the last few years for fear of a lawsuit.

Misconception: I shouldn’t make my POA active until I become incompetent (a “springing” POA).

Truth: While the timing of granting agency through a POA is a matter of personal preference an immediately effective POA should be considered.  A springing POA usually requires a finding of incompetency by at least one doctor and sometimes two.  However, there may be an emergency where a doctor will not sign off that you are incompetent. Making your POA effective immediately removes the need for a doctor to declare you incompetent.

Misconception: I don’t need a POA, I’m young and healthy, plus I don’t have many assets.

Truth: Every single person over the age of 18 should have a POA. You never know when something catastrophic may happen.  You need to have a plan in place to take care of you in the event you become incapacitated unexpectedly.  If you do not have these documents in place then you have no control who will be making decisions on your behalf.  It can be expensive and time consuming for your loved ones to go through the court to have one of them appointed by a judge.

POAs are absolutely essential documents that everyone should have. It is important to consult an elder law attorney who can examine your unique situation to create your POA and to keep it updated. Please do not hesitate to contact our office if you would like to speak with an attorney about creating your own POA.

3 Things to Consider When Your Special Needs Child Turns 18

Having a special needs child has many challenges. One of the toughest challenges faced by many parents is knowing how to best care for their special needs child as they reach adulthood. There are many areas that need consideration when planning for the transition of a special needs child to adulthood. Let’s take a look at some of these areas.
Education
During childhood, the public education system provides for the bulk of the care, structure, and services that a special needs child requires. However, once they are out of public education, this support and service abruptly come to an end. If parents don’t plan for this transition, it can be difficult for the child and the family. That is why the Individuals with Disabilities Education Act (IDEA) requires that at age 14, the student’s Individualized Education Plan (IEP) contain a plan with steps that will be taken to help the special needs student acquire skills that are necessary to transition from school to the workforce. Schools are required to monitor progress of the students as they acquire the specific skills. It is important for parents to understand their child’s rights and for parents of children with special needs to be advocates for their child as they turn 14 and enter this time of transition.
Employment
Special needs individuals if trained in skills specific to the workforce can find ways to have a job. For example, the local Walmart hired a young lady who has special needs to work as a cashier. The young lady while in school had an IEP. From the time the young lady was in elementary school, part of her IEP include life skills goals. These goals allowed her to learn necessary skills to get and keep a job as a cashier.
Beyond preparing your child early for the workforce, it is helpful to research companies that hire people with special needs and determine the types of skills they will need to succeed. Then, parents or other caregivers, should seek out ways to develop those necessary skills in their child. The key to employment is being prepared to help your child both during and after school. Be patient with the process. Sometimes it takes time for a special needs adult to get hired. Many special needs people do not work because they are scared that they may lose benefits if they work.
Financial
Working can be a great way for special needs adults to earn some additional income. However, it is important to keep in mind that there are limits on the amount of money a special needs person can earn without affecting Social Security Insurance (SSI) and Social Security Disability Insurance (SSDI). Once a child reaches 18, these benefits are based on his or her own assets. Other ways to protect the assets of your special needs child is by creating a first or third-party trust. This way, your special needs child can draw benefits while also having assets.
If you are the parent of a special needs child, it is important to begin planning early for the future of your child. Don’t wait until your child is 18. The public education system can be a great resource but you will need to do some planning on your own. The good news is there are organizations that can help you and your child find the right employment opportunities to match their skills. An elder law attorney who specializes in adults with special needs can be very helpful in planning for the financial future of your child with special needs.
If you have any questions about creating a secure financial future for your special needs child, call us today! Tel: 623-252-0292

Helpful Ways to Pay for Assisted Living Costs

Assisted living rent can vary from $2,000 to $5,000 monthly. Depending on what type of care your loved one needs, assisted living can be the most affordable solution when compared to a nursing home ($5,000 to $10,000 or more per month) or long-term in-home care. If closely monitored medical supervision is not necessary for your aging senior, assisted living might be the best financial choice.

One payment strategy that has become popular is to use Medicaid. If your loved one does not have many financial assets and their income levels are low, this could be the right solution for them. Medicaid varies from state to state both in name and in eligibility requirements. Many states dictate that a senior is eligible if he or she has less than $2,000 in assets, or $3,000 if married.

If you are trying to help a senior with a creative financial strategy by gifting money and other assets to family members, known as “Medicaid spend-down”, the government has a five-year look-back rule regarding financial transactions. There are strict guidelines about Medicaid spend-down. If a senior is caught incorrectly spending down resources to qualify for Medicaid, the penalties are steep, including disqualification from receiving Medicaid for a lengthy period. Also, many states do not cover assisted living under Medicaid, but require the submission of an additional wavier. Be aware that Medicaid assisted living payments are only accepted by some communities and Medicaid beds are usually limited. There can be long waiting lists to enter into a Medicaid financed assisted living facility.

If your senior has a disability, he or she may qualify for Supplemental Security Income (SSI), which is a federally administered program. SSI is the government safety net for those destitute and wholly or partially disabled by illness or injury. SSI is a monthly payment which a senior can use to pay for assisted living. To qualify for SSI, contact the appropriate local Social Security office and provide financial documentation and a doctor certification to attest to your senior’s inability to work because of a medical disability.

If your loved one or their spouse is a Veteran, residential care could be paid for in a variety of situations with Veterans benefits. There is a set of benefits available to those with disabilities or service-related injuries, and there is also another set of benefits called Aid and Attendance, made available to any Veteran or surviving spouse who is both disabled and whose income is below a certain threshold. The Veterans Administration website outlines the complicated process to access benefits. It is extremely beneficial to work with an elder law attorney who knows the details of the programs and can assist with the application.

A life insurance policy can pay for your loved one’s assisted living. Often, seniors have a long-standing policy that was implemented to help family members upon their death, but a life insurance policy can provide financial support now. A process known as “accelerated” or “living” benefits is a “cash out” policy that can have your senior redeem 50 to 75 percent of the face value of the policy. Each amount is based on specific policy conditions as well as individual corporate rules. Some policies can only be cashed out if the policyholder is terminally ill while other companies are more flexible in cash outs. If your senior’s particular company does not allow the policy to be cashed, it can still be sold to a third-party company who usually affords the same 50 to 75 percent face value cash out. That company continues to pay the original premiums until their death, at which time the company redeems the full value of the policy. Finally, if your loved one’s policy is of lesser value, it may qualify for a life settlement option known as a “life assurance” benefit or conversion program, which allows the senior to convert between 15 and 50 percent of the policy value directly into long-term care payments.

Does your loved one have a long-term care insurance policy? It can pay for assisted living care. Policies vary, but once the determination and action is taken to collect on it, those monies can be paid directly to an assisted living facility or to the beneficiary who in turn pays the facility. It is wise to consult with an elder law attorney to help understand individual company requirements to optimize the process of collection.

An annuity can be used to pay for some or all of the senior’s assisted living. If your loved one invests a lump sum into an annuity, they will receive regular payments over a promised time period, usually the rest of their life. The annuity helps to stretch your senior’s budget and guarantee at least some money is coming in, even in the event they live longer than expected. Most annuities allow the beneficiary to continue to receive money regularly even if the purchase premium runs out. If your senior were to live a very long time, they would get more back than they put in and an added bonus is that annuities are oftentimes not fully counted as assets by Medicaid when applying for government assistance. The income is counted but not the value of the asset. It is imperative to seek the advice of an elder law attorney before opting into an annuity as they are complex financial products and a wrong decision could be disastrous.

Reverse mortgages are another strategy to pay for assisted living. If your loved one owns their home outright or has only a small mortgage on it, they can get cash value from their home equity in a lump sum or series of monthly payments. The bank will decide the valuation of the home based on multiple factors like the homes worth, interest rates and the applicant’s age. The borrower can stay in the house until death even if the loan balance exceeds the worth of the home. After death, the loan balance has to be repaid which usually means selling the home. Reverse mortgages were developed to help widows remain in their homes after the primary income earner passed away or if that spouse needed to move into assisted living, leaving the other spouse to reside in the long-time family home. Like annuities, a reverse mortgage is a complex financial product, and it is crucial to receive sound advice from a trusted professional and work with a reputable reverse mortgage company. If only one senior parent is living and they do not want a reverse mortgage, they might consider renting out their home and using a landlord to manage the property. The income from renting the house can be used to pay for assisted living expenses.

Lastly, it is possible to pay for assisted living with a bridge loan, which is a short-term loan of up to $50,000 explicitly designed to provide funds to move a loved one into an assisted living facility or continuing care retirement community. It is an unsecured (no collateral required) line of credit with the intent to finance the first few months of living expenses during the sale of the senior’s home, while the application for Veterans benefits is pending, or other actions that are taken that free up funds. Since the interest rates can range from 8.25 to 12.5 percent, this option is best as a short-term strategy. The other type of bridge loan is called the Capital Access Program. It is a lower interest lump sum loan secured by real estate or other assets that the company deems acceptable collateral. It is designed to help seniors come up with the large upfront entrance fee some senior assisted living facilities require. Both types of loans are based on the usual credit criteria: credit score, credit history, debt to income ratio, and more. The senior or an adult child can secure the loan, and up to six family members can cosign loan applications, allowing the risk to be shared among multiple family members.

If your loved one is healthy enough to successfully live in an assisted living facility, the monthly cost is likely a top factor when considering their options. These are some, but not all of the viable and creative ways to pay these costs. To fully explore the options available and what is best for your senior seek the advice of an experienced elder law attorney and make the best decision for your loved one. Contact our office today and schedule an appointment to discuss how we can help you with your planning and which strategy is best to help your senior pay for assisted living.

Lost Will and Testament

You wouldn’t believe how often a Last Will and Testament goes missing.

You also wouldn’t believe what a mess that causes for the heirs.

Most people think it is enough to keep their Will in a convenient place at home. However, that isn’t enough security for so important a document. For instance, what happens if those important papers were to perish in a fire or a flood, or if one of your heirs decides to steal the papers in order to cause problems upon your death? (of course that would never happen in your family…..) Or, if the dog ate it? Anything is possible.

That’s why you should consider placing an original signed document in a safe deposit box or other safe and secure location. In addition, it is important to also make sure to provide your Personal Representative (Executor) with sufficient information to help them find the Last Will and Testament. And don’t forget to tell them how to access it (e.g. keys, pass code).

Even more important, keep track of your original copy over the years. Do you know exactly where your Last Will and Testament (or Trust Documents) are right this second? If not, find them and put them in a place you will remember.

By the way, in Arizona, if your original Will cannot be found there is a presumption that you REVOKED IT! This will create an absolute and expensive mess as your family struggles with trying to prove that you did not revoke the Will, that a copy is valid and what your intentions were. Add to that if your Will was poorly drafted – everything you hoped to avoid is out the window.

By the way most courts no longer accept Wills for filing. And….most attorneys will not keep your original either anymore. So, it’s on you to do the safekeeping.

Without an original copy of a signed Will, your final wishes may be called into question and if your will is not accepted for probate, the estate will be considered “intestate” and your property may go to people you did not intend. Oops!

America is Facing a Family Home Caregiver Shortage

The aging population of the United States is widely reported as the bulk of the baby boomer generation is already retired or nearing retirement. However, what has not been widely reported is how the rest of the nation will provide care for this large, aging population. According to a 2017 Merrill Lynch study, nearly 95% of caregivers are family members. These family members are providing over $500 billion worth of free care annually. For perspective, that’s three times Medicaid’s professional long term care spending. The number of family caregivers is shrinking at a time when the population that needs them is expanding at a rapid rate. In 2020, there will be over 56 million people in the U.S. age 65 and older. In 2010, that number was just 40 million.

This is a unique problem for the baby boomer generation for several reasons. The main reason is the simple fact that there is just an unusually large number of people in this generation. Unfortunately, every elder who needs care will not have a family member willing to give care. This responsibility will then fall to professional home care workers. Government statisticians project that the nation will need an additional million home care workers by 2026, an increase of 50% from 2014. Fulfilling the need for this many additional workers will be difficult, however.

Home care workers face extremely low wages, inconsistent work schedules, and there is little, if any, room for advancement in the industry. For example, the median salary for a home care worker is a minuscule $10.66/hour according to the U.S. Bureau of Labor Statistics. For comparison, that’s about the same hourly wage as a fast-food cook and about 30% less per hour than a veterinary technician makes. Looking beyond just salary, benefits are dismal, also. Only a third of home care workers are full-time and qualify for benefits. Further, there is a better chance you get injured on the job as a home care worker than if you worked in the oil and gas extraction field.

Another reason why this is such a unique problem for baby boomers is that it was more common in the past for children to stay in the same geographic area as their parents and be able to provide free care to them when it was needed. With advancements in travel and technology, it has become exponentially easier for people to move away from their parents, whether it be for job seeking reasons or simply for a change of scenery. Also, with the increasing rate of debt Americans are taking on, some family members just do not have the means to take time away from work to care for ailing family members.

There are several small initiatives taking place to help combat this shortage. In Massachusetts, the Home Aide Care Council has started a two-week training program that introduces new home care workers to what the job entails before they start their formal training as a home care worker. Also, some states are starting programs that provide opportunities for advancement. New York has a program that trains home care workers to administer routine medication, which gives them experience that can help them move into other positions in the healthcare industry.

4 Steps to Choosing the Right Nursing Home

Choosing a nursing home for a loved one is an important decision and should be carefully considered. Below are some steps designed to assist families in choosing a nursing home.

1. Identify Nursing Homes in the Area
The first step in choosing the right nursing home is to identify all the possible nursing home options in the area. Asking friends, family, and other people you trust is an excellent way to begin the search for possible options, especially if have had personal contact with the nursing home. Doctors and hospitals can also help identify nursing home options that provide the type of care a loved one may require.

Another option is using the internet to locate nursing home facilities. The Medicare website has a locator for nursing homes and even provides some comparisons of nursing homes – an important benefit highlighted in the next step below.

2. Research the Quality of Care Provided by the Nursing Home
Using comparisons like those found on the Medicare and Medicaid websites can be a very helpful starting place for gathering information on nursing homes and the quality of care provided. This information along with information from other sources like the long-term care ombudsman. Many facilities may provide survey results that can give insight into the facility’s care.

Other sites that allow consumers to post reviews, like Yelp.com, can also be an important way to compare nursing homes. While best known for its restaurant reviews, Yelp also includes reviews of skilled nursing facilities and rehabilitation centers.

3. Visit the Nursing Homes in Person
After doing ample research, it is time to visit the nursing home. Nursing homes will schedule tours for prospective residents. While there, pay close attention to the cleanliness of the facility, and the appearance of the residents. Make note of what the residents are doing and how they look. Are they engaged in activities, is there evidence of neglect, is there enough staff to attend to the patients? Ask about patient to caregiver ratios so you can compare it with other nursing homes.

Other things to consider include how the facility provides for social, religious, recreational, or cultural needs, and the types of meals they prepare. You may have the opportunity to have a meal during your visit, which will allow you to sample a meal, but also observe how the residents are treated during meal times.

Before leaving, find out who you can call if you have additional questions. Then, make a second unplanned visit at a different time or on a different day. An unplanned visit will allow you to observe the nursing home and its residents on a “normal” day.

4. Choose a Nursing Home
Making notes during the first three steps can help families go back and carefully look at the information gathered to make a decision. If more than one facility fits the needs of the loved one, then it is important to consider cost and what is most important to the family.

Once a nursing home is chosen, an agreement will need to be signed. It is important to have an elder law attorney review this agreement to make sure there are no hidden provisions, like holding a child responsible for non-payment, or a minimum number of months before a resident can apply for Medicaid.

These steps will allow families to make the best nursing home choice possible. Although, many families find themselves in sudden need of a nursing home facility after hospitalization, most have time to make preparations. If time is not a factor, following these steps can help to avoid making a decision that is not best for the loved one in need of care. Any long-term care decision is made best when families are armed with as much information as possible.