I can’t park my car in front of my house?!
I’ve often had the duty of contacting unsuspecting homeowners to advise them of various matters related to their homes – and what they can and can’t do on their property – and my contact almost always comes as a surprise.
I’ve had to ask folks that they ‘cease and desist’ parking their car(s) on the street in front of their home on a regular basis…or that they must paint their playset in the back yard a different color…or that they must remove a fence constructed without prior permission from the governing homeowner association committee.
Homeowners are generally surprised to hear from me because they weren’t aware of the details involved in the various restrictions governing the use of their property. Many residential developments – often referred to as subdivisions – place restrictions on the use owners can make of their property. The restrictions, called restrictive covenants, are typically put in place by the developer of the community, and apply to all of the homes located within it.
The restrictive covenants are designed to maintain continuity, consistency and market price valuation in a community, and they often serve valid purposes and aren’t too terribly onerous to follow. But if you don’t know what the rules – the restrictions – are, then restrictions can become very frustrating and perhaps even lead to great expense on the part of the homeowner (e.g. a homeowner spends thousands of dollars constructing a fence only to be ordered by the court – after the additional expense of a legal battle – to remove the fence, all because he/she didn’t seek permission from the ‘architectural committee’ prior to construction).
The written document setting out all of the restrictions is typically referred to as the Declaration of Covenants, Conditions and Restrictions, or the ‘Declaration’ or ‘CC&Rs’ for short. It’s usually a very long document, written by attorneys, and much of such a document probably contains a lot of legalese and not a lot of plain English.
To be legally enforceable and effective, the Declaration is recorded in the Register of Deeds office (at least in the state of Tennessee), for the county where the property in question lies. Every deed for every piece of property in a development that is subject to a Declaration will reference the Declaration by book and page or instrument number, which is how legal notice is given to a property owner that his/her property is subject to the Declaration.
Based on my experience, most folks don’t take the time to look over the Declaration when considering the purchase of a home. And if they do, it’s after they’ve bought the house and are now subject to whatever restrictions may exist. Why does this matter? I think most of us want to know what ‘rules’ may affect what we can do with, in and to our homes. We want to understand what requires permission, and what is simply forbidden.
Restrictions can limit the number of cars that can be parked in your driveway or the street in front of your home – or prohibit them altogether. Restrictions can require items in your yard – such as a playset – to be a certain color. Restrictions can prohibit the construction of fences, swimming pools, hot tubs and other amenities.
Restrictions can also limit or prohibit you from renting your home. The presence of this kind of restriction is surprising a lot of folks right now, who may be moving to take a job (due to loss of an existing job) or who simply can’t afford the mortgage but also can’t afford to sell in the current real estate market. Renting is perhaps their best option, but only if the restrictive covenants governing their property permit it.
A new homeowner shouldn’t be seeing the Declaration and learning about restrictions the day of closing. When you’re shopping for a new home, ask your real estate agent about restrictive covenants if you’re seriously considering making an offer on a specific house. And ask questions if you don’t understand any of the language in the covenants. Without this information, you could be facing a frustrating – if not expensive – future when you learn that the fence you just had installed is prohibited and must be removed!
Personal Services Contract: a legitimate way to transfer assets for Medicaid qualification purposes
Families looking for ways to transfer assets from an elderly family member’s estate in a legitimate manner that won’t cause disqualification from receipt of Medicaid benefits should consider a ‘personal services contract’ for such purposes.
This method of asset transfer may or may not be a good fit, depending on a family’s circumstances. Generally, if the elderly family member is in need of various types of assistance (discussed below in more detail), then he or she can pay a family member to provide this assistance by way of a contract created for this purpose.
If drafted correctly, the payments made pursuant to the contract should be considered ‘qualified’ asset transfers (expenditures) under current Medicaid guidelines in Tennessee and will not trigger a disqualification of receipt of Medicaid benefits at the time of application.
At a minimum, such a contract should be in writing, and should specify the following: (1) services to be performed stated in reasonable detail; (2) value of the services, as determined in the geographical marketplace where such services are to be peformed; (3) frequency of payment – a lump sum, or periodic (weekly, monthly, quarterly).
Services to be performed. The contract should identify the specific services, including frequency, that the family member is to perform. Generally, these services fall in the following categories:
• general bookkeeping and bill-paying, which could include preparation of tax returns;
• personal assistance, including shopping for necessities, helping with household chores, errand-running, and the like;
• caregiving services, which are generally viewed as encompassing those services similar to what is provided in an assisted living facility – eating, toileting, bathing, dressing, in addition to those activities described above as ‘personal assistance.’
It’s important to note that the agreement should not specify that the caregiver will provide any kind of medical care, as such reference could have the ultimate affect of disqualifying the elderly person from receipt of Medicaid benefits in that a third party (the caregiver) could be viewed as being legally responsible for the elderly person’s medical care.
Value of services. In determining value, it’s imperative to consult care providers in the local geographical area who offer similar services, in determining the compensation to be paid to the family member. The pay must fall within a ‘fair market value’ that should be documented at the time the agreement is entered into, whether the payment is a lump sum or paid periodically.
Timing of payment. The contract could provide for a single, lump sum payment to the caregiver, made at the time the contract is entered into by the parties. If a lump sum payment is chosen, then it must be actuarially sound – e.g. the life expectancy of the elderly person must be calculated by consulting the federal government’s life expectancy tables.
If a periodic payment schedule is used, then payment is based upon the value of the services provided within the specified time frame for payment. Further, if the payment is calculated based upon actual time spent (e.g. an ‘hourly rate’), then the person providing the services must keep accurate time records to support the payments made.
Also note that payments made pursuant to a personal services contract must be only for services performed after the contract is signed. Payments made for past services performed are subject to challenge as disqualified transfers.
Finally, it’s imperative to keep in mind that services provided as part of this kind of agreement must be substantive and that the agreement can be terminated only for cause. A sham agreement will be viewed as such by Medicaid authorities and any payments made there under will be viewed as a ‘disqualifying transfer’ under Medicaid guidelines. Ultimately, the elderly person could be disqualified from receipt of Medicaid benefits until he/she has spent the amount paid under the contract.
For more information about personal service contracts as part of sound Medicaid planning in Tennessee, please contact Caitlin Moon, cnm@csquaredlaw.com or 615.595.4044.
Change is in the air!
There’s a good reason for the time that’s passed since my last blog post – I’ve created a new law firm with another Franklin attorney, Christina Daugherty. Our new venture – C²Law :: creative legal counsel – is located at the Factory in Franklin, in a space overlooking the Artist Row area in the main building.
Christina and I were co-founders and partners at Harpeth Law Group, PLLC, which was the predecessor to my HarpethLaw practice. She moved her practice to Nashville to better serve her clients north of Franklin, but she soon realized that she missed the pace of worklife – and the great community of clients and fellow attorneys – here in Williamson County.
In our new venture, we both focus our practice on those areas in which we have depth of experience and expertise. I will continue my estate planning, elder law and business law practice, and Christina will be offering legal counsel in these areas:
- General civil + business litigation
- Family + juvenile law
- Criminal defense
- Personal injury
You can visit our brand new website for more information about what we do, and how and why we do it: www.csquaredlaw.com
I will be posting very soon with more information about our practice areas and the unique services we’re offering our clients at C²Law (pronounced ‘C squared law’). For instance, we now create an online portal for each client – called a client extranet – that gives clients instant, 24-hour SECURE access to all communication and documents in their matter. This revolutionizes communication with clients, keeping all information organized and accessible by both clients and their legal counsel. It also creates greater efficiency, which means we can do more work at less expense for our clients.
Stay tuned for further updates – and stop in to see our new space!
C²Law :: creative legal counsel
In the Factory
230 Franklin Road, Suite 12-I
Franklin, Tennessee 37064
615.595.7776
Considering a special needs trust.
With a special needs trust (otherwise known as a supplemental needs trust), you can plan for the future financial security of your child with special needs. This estate planning tool is very effective in creating a clear course for directing, protecting and preserving assets that can be used to provide for the financial security of a disabled child, regardless of age.
To create a plan that is truly protected and thus provides the greatest security, it is important to consult with an attorney experienced in this area of the law. One major goal of such a trust is to protect the trust assets from creditors of the beneficiary (the child with special needs), and to insure that the trust assets are excluded from consideration for needs-based aid and programs a child might otherwise be entitled to (such as Medicaid and Social Security benefits). An improperly-formed trust won’t provide these protections.
Before engaging in the trust planning process, I suggest a family should consider the following issues – discuss your thoughts and feelings with each other, consult with your financial advisors, and raise these matters with your legal counsel:
•If you have more than one child, consider the division of assets among the children – a simple, equal division is not always ideal, especially if one child has special needs. The type of assets in question can also lead to a division other than in equal parts.
•Research and understand the difference between government assistance programs that may be available to your child with special needs – Medicare, Medicaid, Social Security Disability Income and Supplemental Security Income, for example.
•Review all beneficiary designations (e.g. life insurance contracts) to insure that no assets/resources pass directly to the child with special needs.
•Consult with your insurance agent to determine if a second-to-die life insurance policy is an appropriate and cost-effective way to fund a special needs trust.
•Consult with your financial advisor if using retirement accounts to fund a special needs trust – these must be structured properly in order to avoid negatively affecting a disabled child’s ability to qualify for needs-based aid.
•Create an estate plan that protects assets left for the benefit of a child with special needs. Such a plan could, and probably should, include the following:
1•a special needs trust, which is funded by parents’ assets, and which won’t be included in an asset calculation for needs-based aid if properly drafted
2•carefully choose a trustee of the special needs trust, and draft a supplemental letter to the trustee, to assist the trustee in carrying out his/her duties on behalf of your child
3•parents’ powers of attorney should permit the designated agent to make discretionary, non-support distributions to or for the benefit of a child with special needs
4•include contingent special needs provisions in all estate planning documents
Creating an effective special needs trust doesn’t require great complication or expense, but it must be drawn properly in order to achieve the desired effect. Understanding the relevant variables and carefully considering your planning choices is the first step.
For a basic overview of this topic, you can visit the following link to Justia’s article on the topic: http://www.justia.com/estate-planning/special-needs-trusts/.
Do you know where your will is? Crucial documents + information everyone should update annually.
I always urge my estate planning clients to compile the following information – and update it annually. Doing this as you gather information for your tax return is ideal – just add to your ‘to-do’ list for the first quarter of each year.
Having this information in a location accessible by your appointed power(s) of attorney and executor(s) will save incredible amounts of time, and possibly expense, should access be required. Note that this information should be kept in a secure location – if this is an institutional lock box, then make sure that someone in addition to you (and your spouse, if married) also have access.
DO NOT disseminate this information along with copies of powers of attorney and will documents, as it contains sensitive data that should be kept securely and updated at least annually.
(1) A list of key references
(a) Contact information for accountant, attorney, insurance agent
(b) Location of birth certificates, marriage license, financial records
(c) List of user names/passwords for all accounts
(2) Investments
(a) Detailed tabulation by security, to include the following:
(i) owner’s name
(ii) current value
(iii) cost basis
(iv) beneficiaries (if any)
(v) tax status (e.g. taxable, tax-exempt, tax-deferred)
(vi) account number(s) and contact person
(b) Record of each bond or certificate of deposit (CD)
(i) divide each record and organize by category (e.g. EE, I, Muni)
(ii) call or maturity date
(iii) current yield
(3) Social Security: directions on how to notify SSD upon the death of a spouse, and a record of what benefits are expected.
(4) Pension: whom to contact at the company and what the revised pension amount will be.
(5) Estimated income tax: provide a rough estimate to ensure that withholding is appropriate.
(6) Insurance: summary of each policy, to include the following:
(a) Policy number
(b) Death benefits
(c) Contact at company
(d) Any details re: medical insurance policies that will continue for the surviving spouse
(7) Estate documents:
(a) Will:
(i) With the will, keep a current list of the various people who may be needed to assist: attorney for probate, trustee for testamentary trust, accountant to prepare estate return
(ii) Keep the original documents in a location that may be accessed by someone in addition to the spouses; give copies to all people who are named as primary or alternate executors and trustees
(b) Powers of attorney (general and health care) and living will: keep copies in a location that may be accessed by someone in addition to the spouses; give copies to all primary and alternate powers of attorney and discuss with them any particular wishes you may have in regard to your health care and advance directives.
2010 is here . . . and step-up is now carry-over
The Economic Growth and Tax Relief Reconciliation Act of 2001 covers A LOT of ground and has literally been a moving target for the past nine years. Each year various estate tax-related thresholds have changed, according to the act – one of these is the ‘step-up’ in basis for calculating taxable gain on property inherited upon the death of its owner.
‘Basis’ – as generally applied to property – is the purchase price, and is referred to when calculating the taxable gain upon sale of the property. The greater the gain in value of property, the greater the taxable gain.
In estate tax lingo, the ‘step-up’ in basis permits the value of inherited property to ‘step-up’ to the value of the property at the date of death of the owner.
As of January 1, 2010, the ‘step-up’ calculation is replaced by the ‘carry-over’ calculation. Generally, the premise of ‘carry-over’ in basis requires that the basis of inherited property remains the same as it was for the deceased owner. This has the potential effect of increasing the taxable gain when the property is sold.
When property is inherited in 2010, an heir can choose to take a ‘step-up’ in basis up to $1.3 million; for any amount over this maximum, the heir’s basis will be the smaller of deceased owner’s basis or market value as of date of death. However, a spouse can claim an additional step-up of $3 million, for a total of $4.2 million.
When planning for the proper disposition of your estate, it’s important to understand what the current tax rules are, and how they apply to your property. Since the 2001 Act expires at the end of this year (2010), perhaps these rules will be less of a moving target. But it remains to be seen what Congress will do in this area. So stay tuned, and stay informed.
You’ve created a new business entity – now what? Time to think about your BRAND.
You’ve invested incredible amounts of time, thought, energy, and probably money to create a new business. You’ve put together a polished business plan, selected an entity for your business, and are off-and-running. Now the real work begins.
Now it’s time to focus on branding what you do, who you are, and what you offer to potential customers. By creating brand recognition, you build trust with your stakeholders. You establish your business in a way that stands out and stays in the minds of others.
A simple set of steps can get you started in creating your brand:
Step 1: take your business plan and from it create a set of goals that can be clearly communicated to your stakeholders. (Stakeholders are those people who influence the success of your business – your employees, your suppliers, your potential customers, members of the community in which you work).
Creating a mission statement is a good place to start – this statement sets out in concise, clear language what your business seeks to do, to accomplish, to offer. Post this statement in a place where your stakeholders can see it. They will read it, and will relate it to your business.
Step 2: Develop a brand strategy by eliciting information from your stakeholders as to what they desire and expect from your business. (Ways to elicit this information include using an email marketing provider such as MyEmma, to conduct polls among those on your email list.)
Develop new messages based upon this information, in a way that’s consistent with your mission statement – you may find that your mission evolves over time as your business evolves to meet the expectations and needs of your customers. Flexibility is key, but the core values of your mission should remain consistent – it is consistency that builds your brand.
Step 3: With your mission statement and messages in-hand, determine how you will disseminate this information – targeted marketing, traditional print advertising (local media), social media, etc. – and develop the ‘look’ and ‘feel’ for your messages in a way that fits the media.
Step 3 ½: If you’re not already social media-savvy, now is the time to dedicate an hour or so a day to developmental reading on this topic. You can visit technorati for a directory of blogs on the topic of internet 2.0 and using social media to promote your business, or visit Amazon and search ‘social media marketing’ for a plethora of books on the topic.
Step 4: Develop specific messages that convey your brand via the media you’ve selected for marketing. The nature of the media often dictates how you communicate, which is why this is step 4 and comes after media selection.
Step 5: Engage in the creative process of realizing your messages through the specific pieces of communication required by the media you’ve selected. Different media require different types of communication, although all should have a consistent presentation of your brand that will be recognized by your stakeholders. You may create a print ad for the local paper, a video to upload onto youtube for viewing by current and potential customers, or an email campaign to be executed through MyEmma. Regardless of the medium, consistency of brand message will ensure that your business is recognized no matter how it reaches your stakeholders.
Creating the brand for your business takes effort and time, but dedicating resources to this important work is an investment that will pay off. Just as working with an experienced business attorney is crucial to selecting the best entity for your business, working with an experienced designer or marketing team in developing and disseminating your brand is a sound business decision.
Is elder planning just for the elderly?
The very term ‘elder planning’ would seem to define the scope of its reach, on first blush. But if we consider exactly what comprises effective elder planning, I propose that there are many aspects that apply regardless of age.
I use elder planning in general to refer to the analysis, goal-setting and implementation of strategy to plan for life’s various needs as one ages, particularly as these needs intersect with areas of the law. Simple elder planing will address, at the very least, creation of an estate plan, and organization of assets in such a way to plan for the appropriate care a person may needs as he or she ages. More advanced planning involves sophisticated structuring of assets, which often includes both estate planning (e.g. planning for disposition of one’s estate after death) and planning during life (e.g. the creation of a living trust – either revocable or irrevocable – to shelter assets for one reason or another).
A VERY important – I cannot stress how important – part of an estate plan is the most simple. It is this incredibly simple planning that all adults – regardless of age, health, financial status, etc. – should put in place and update on a regular basis. This simple planning is the part of elder planning that is not just for the elderly.
The three documents I’m referring to are a general power of attorney, a power of attorney for health care, and a living will. I refer to these documents by the names most commonly used in Tennessee, which is my jurisdiction of practice. Other jurisdictions may use different names, but the purposes are the same or very similar. I cannot overstate the difference these three simple documents can make for a family faced with managing the life and healthcare of a suddenly disabled person.
A general power of attorney gives the person you name in the document (your ‘attorney-in-fact’) the ability to make all business, financial, property and other non-healthcare related decisions on your behalf, in the event you’re unable to do so. Why is this important? Consider this scenario: A 32-year-old father of three suffers life-threatening injuries in a car accident. While he is hospitalized and unconscious, his wife discovers that many of her husband’s business accounts are in his name only. For this reason, she’s unable to pay bills timely from these funds for her husband’s business, which leads to serious financial problems both for the business and this family. Had her husband executed a general power of attorney naming his wife, she would be able to take care of all financial matters related to his business without legal action (e.g. establishing a conservatorship), thereby avoiding this unfortunate effect of his accident.
Likewise, a power of attorney for health care gives your attorney-in-fact the power to make all of your healthcare-related decisions in the event you’re unable to do so. Almost every married couple I’ve worked with in estate planning asks me the same question, “We’re married. Why would I need to give my husband [wife] power of attorney for health care?’ The answer is simple: health care providers are bound by ethical and legal regulations which can prohibit them from disclosing medical information to anyone but the person being treated. And while medical professionals must honor the wishes of the person being treated, if that person can’t speak for herself, the professional is obligated to do what he or she believes is the ‘right’ thing to do given the circumstances. This may or may not be what the patient, or the spouse, would choose. The only way to insure that your proxy’s voice is heard if you can’t speak for yourself is to give them your power of attorney for health care.
A living will works in conjunction with a power of attorney for health care. This document sets forth your wishes for care in the event your condition is deemed imminently terminal. In Tennessee, the following language is used, ‘If at any time I should have a terminal condition and my attending physician has determined there is no reasonable medical expectation of recovery and which, as a medical probability, will result in my death, regardless of the use or discontinuance of medical treatment implemented for the purpose of sustaining life, or the life process, I direct that medical care be withheld or withdrawn, and that I be permitted to die naturally with only the administration of medications or the performance of any medical procedure deemed necessary to provide me with comfortable care or to alleviate pain.’
Medical professionals are obligated to follow your wishes as set forth in the living will, and if you’re unable to communicate, your attorney-in-fact for healthcare decisions is obligated to do so on your behalf.
Very few of us who are yet to be considered ‘elderly’ think that these documents can be of any use to us. But unforeseen events happen. Young people become disabled. Having these three simple documents in place can ease the work ahead for your family, in the event you become unable to make decisions for yourself. In Tennessee, a conservatorship (a legal action whereby the court appoints someone to manage your care, with court oversight) is generally required if a disabled individual hasn’t executed power of attorney documents. (More information about the conservatorship process in Tennessee will be the topic of an upcoming blog entry.)
Of course, putting in place an appropriate will document and taking steps to manage assets in preparation for care when you’re elderly are important, as well. But it doesn’t get much more simple than signing the three documents I discuss above, and the expense is minimal – typically between $100 – $200. Considering that a conservatorship action costs many times more, and takes time to establish, this investment yields an excellent return in the event of disability.
Make it a new year’s resolution. Do a little elder planning while you’re young.
