Seven Common Mistakes Made By Elder Law Attorneys With Suggested Solutions

According to Aspen Publishers, there are seven common mistakes made by elder law attorneys that, though relatively easy to avoid, cause problems for the uninformed practitioner and his/her client. The publisher created a pamphlet entitled The Seven Deadly Sins of Elder Law Practice, which identifies the seven common mistakes and proposes solutions. A summary follows:

1. Failing to Obtain the Correct Information. Solution: Design an intake form which elicits all relevant client information necessary to create the most appropriate asset protection plan for the client.

2. Failing to Identify the Client. Solution: Identify the client at the outset. Most elder law attorneys elect to represent the frail elder rather than one of the children. The elder law attorney should have a meeting outside the presence of the children to determine the client’s true goals. The attorney should prepare a written engagement letter specifying who is the client. The engagement letter should be signed by the client. The attorney should also complete a competency evaluation form and an undue influence form and retain them in his file.

3. Failing to Understand the Medicare Secondary Payer Act. Solution: Under 42 U.S.C. Section 1395y(b)(2), commonly known as the Medicare Secondary Payer Act, Medicare may not make payment for medical benefits where ‘payment has been made, or can reasonably be expected to be made under a workers’ compensation law or plan of the United States or a state or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.’ By law, Medicare has a priority right of recovery from the primary payer as well as from parties in receipt of third-party payments, such as a beneficiary, provider, supplier, physician, attorney, state agency or private insurer. Accordingly, it is essential that all parties to personal injury insurance settlements ensure that Medicare’s interests are protected. The personal injury attorney may be liable for damages if he settles a third party liability case and fails to consider Medicare’s interest.

4. Failing to Understand Veterans Aid & Attendance (A&A) Rules. Solution: The elder law attorney should be familiar with the eligibility criteria of all needs-based governmental benefit programs, including those available to veterans such as A&A benefits. For example, although applicants with high monthly income in an “income cap” state may be ineligible for Medicaid to pay for assisted living facility costs, the Veterans A&A program, spend down for medical expenses is permitted to be deducted from income for purposes of determining financial eligibility. Therefore, those applicants with higher income may be eligible for A&A benefits even though they would be ineligible for assisted living facility Medicaid.

5. Failing to Understand Medicaid Estate Recovery Rules. Solution: Medicaid estate recovery applies to Medicaid recipients who die after age 55. Therefore, if no Medicaid services were delivered to the Medicaid recipient after age 55, no estate recovery is permitted.

6. Failing to Understand Strategies Pertaining to Self-Settled Special Needs Trusts. Solution: In most personal injury settlements, family members other than the disabled person have a claim. Once the case is settled, most of the parties involved don’t care how the proceeds of the settlement are allocated. The all of the parties should allocate as much as possible of the settlement to others who can provide goods and services for the special needs beneficiary, thereby avoiding the state payback provisions required by federal law to be incorporated in a self-settled special needs trust. (Actually, this is but one of several solutions available to special needs beneficiaries in this situation.)

7. Transferring Home from Parent to Child. Solution: Transferring a home outright to a child(ren) may cause an unfavorable tax treatment or unintended benefits to accrue to one child to the exclusion of others. Instead of transferring the home outright, the parent can instead transfer the home to an Intentionally Defective Grantor Trust designed in such a way as to (1) avoid having a completed gift, (2) insure that all children benefit equally from the gift upon the parent’s death, and (3) retain the parent’s $250,000 exclusion from capital gains tax on the sale of his or her principal residence.

The Aspen Publishers’ pamphlet can be found here – 7_deadly_sins