Medicaid and estate ramifications questions. Should trustee see an elder care lawyer on her own or should the family lawyer be sufficient?

Barb, I learned the same thing in undergrad classes! I thought I was asking a dumb or obvious question - sometimes it was actually an insightful question!

Rocket; good job getting good answers!

Please remember, that there is NO such thing as a stupid question. It took me until graduate school (at the age of 40) to understand that. It usually turned out that the question I asked was what everyone else in the class was wondering about, but too afraid to ask.

Thank you all! It’s starting to make much more sense now! After today’s meeting Friend B “trustee” will know much more. I linked her to all these posts.

Well there are “Trustee” in prisons
Just a little AC humor.....

Rocket - no your question isn’t silly, and it’s why you keep hearing you need an atty and an atty who has expertise in elder law issues - that’s a NAELA or CELA designation atty- and the atty who did the trust - to get background as to how Trust created and what it exactly was/is set up to do.

What I’d be concerned about is if there’s been a confusion between being a Trustee and a POA or an “Agent”.
For POA (power of atty) and Agent, you are named to do things on the behalf of a person. The degree of what you can do depends on what’s in the document. Most are DurablePOAs with the ability to sign off on financial items for them, like a dpoa with financial can sell their house, land, cars. The “Agent” term is usually in a medical or health care directive type of document.
What’s critical for POA & Agent is that upon the death of the individual, the POA or Agents ability stops cold. Then for things owned by the recently deceased, it goes into limbo till an executor is named by the court and Letters Testamentary are issued by probate court. To do this a will needs to be produced and determined to be valid by the court and judge issues orders accepting will. It’s NOT an overnight process. Just cause Suzy named executor in a will doesn’t mean she’s executor. Until Letters Testamentary are issued (they tend to be all decorative with executor name clearly done on them and will have date and county / court seal), the assets are in limbo. Executorship can be challenged too.

If at the meeting you feel that the future executor is gonna screw the NH spouse, post a ? as folks will have suggestions as to how to deal with this.

What’s to me the important part about if it was an actual Trust that was done so someone is the Trustee or the Successor Trustee, is that Trusts are their own unique separate legal entity. They are kinda like a person in that way. But a Trust does not die, so it’s unlike a person who will eventually die.  A Trust however can defund, it continues to exist but has no way to pays costs of things titled into the Trust or pay out to whatever / whomever Trust (like a Special Needs Trust) was set up to benefit. So how Trust was funded will be very important. If the now dead husband was placing $ each mo into the Trust to pay for things titled in the Trust, that’s going to be a problem as no more $. There should be some wording in the Trust as how to deal with defunding and the $ amount that can trigger a defund.

As an aside on this, I was a cotrustee on a cousins “closed” SNT (was Medicaid compliant too) which we did a planned defunding last year. It was not a DIY to defund, the atty handled all and it was a packet of paperwork. 

Rocket, your question is NOT dumb. It's a legitimate question. I'm trying unsuccessfully to imagine a situation in which a trustee exists for something other than a trust. Maybe this little bit of info will help.

Based on experience when I last worked for an estate planning firm, back in the mid 1980s, the person who creates a trust is called the Settlor, and the Trustee, unless someone else is designated to act as Trustee. Typically an additional person is named to act as Trustee when the Settlor dies. That person is the Successor Trustee.

Outside of that, there are trustees for bankruptcy proceedings, but I'm assuming that doesn't come into play here.

There can be boards of trustees, such as for an institutions of higher learning, or perhaps a nonprofit agency, or something along that line. But that would be outside the issue of estate planning.

I'm trying to think of other situations in which someone might act as a trustee for something other than a trust, but my mind is coming up blank right now.

Back to your perception that the trustee would take care of the house, pay bills and manage cost sharing for the stepmother..... If the house was funded into the trust, i.e., the deed would be written so that the owners of record would transfer title to the trust. I'd have to check ours to get the specific wording but it would generally be identify Friend A as the trustee of the trust for the benefit of John Doe.

If a deed isn't done and properly recorded to transfer title from John Doe as a single or married man (and his wife, if applicable), then title remains in the individual(s) name and the house HASN'T BEEN funded into the trust.

This would be the same for financial accounts and stocks. If they're not retitled through the institution or company that issued them, they're also NOT funded into the Trust.

There can also be a Bill of Sale which transfers generally miscellaneous things that aren't titled, such as jewelry, household goods, etc.

Any assets NOT retitled in the name of the Trust are not "funded" into the Trust.

Does this help? It can be confusing, can't it?

What kind of trust is the trustee running? Is a medicaid approved 3rd party special needs trust? (If not, whatever the medicaid recipient is owed will need to be put into a new self-settled SNT, with her choice of trustee.)

If so, those kids can't really do anything to remove the trustee. (just be careful about assigning a trust protector...) Further, it should be expressed to them that these types of trusts are legally required to be "for the sole benefit" of the medicaid beneficiary, and have heavy restrictions on how the money can be used, how it's reported, etc. So they're probably misguided about what benefit removing you will serve them. As they'll get basically nothing out of it, except the headache of running an SNT...

As for how such a trust is ran, https://www.specialneedsalliance.org/free-trustee-handbook/ is a good starting point. But the trustee understanding and following the trust agreement and uniform trust code is ultimately what's needed.

Thank you all for your very thoughtful and detailed explanations. Now I am going to ask the dumbest question on this forum. (I will be able to hear you laughing so please be kind!):
If there is a Trustee, does that necessarily mean there’s a Trust? We had the perhaps simplistic belief that the trustee takes care of the house sale and pays the bills from funds, including the cost sharing for the stepmom in the NH.

Boy confusing. Really have never dealt with a trust but Special Needs. But wondering why Trust was set up...to protect the stepmom? I was told when applying for Medicaid, that Moms will was void. Meaning, Medicaid gets paid back first. Just had a friend die where she and husbands wills read what is mine is yours. Medicaid took what money they had left her with when he went on Medicaid for his care. The children got nothing but what was in the house. The house was sold. Money going to his care. So children may get nothing.

So why is there an Executor and a Trustee?
In theory if everything asset-wise placed into a Trust, then the death has no effect as trust continues to be its own legal entity.

Executor comes into play for assets not title into the trust or left outside the trust. 
So any idea what’s Trust assets & what’s Estates assets? 

My first ? At the meeting Would be for their atty to understand that B & the lady must have a clear delineation of what assets are in trust and what assets are subject to be included in a Estate. Also want a copy of the will. If B is trustee than B takes care of Trust asset details. Also you want this done do that B if they had to resign as trustee they have documentation as to the condition of the trust as of apparent of resignation. 

B & the lady need thier own atty. It’s not family law work, but NAELA CELA level of elder law firm and with an affiliation with estate planning atty. Mr/Ms B should hold firm this weekend that they will not sign or acknowledge anything without review of assets held by both Trust and by each individually and under community spouse laws (deceased & NH spouse). And a CPA firm to provide a document on this. Which will be then reviewed by an atty for the NHSpouse (needs NAELA or CELA level of elder law atty).

It’s already Friday so your not getting an atty today. I’d suggest you get a friend to go with you & they record the meeting on thier cell phone & take notes. I’d try to limit what I said, mostly listen. No commitments. 

BUT can Tell family that By the spouse applying for Medicaid, they allowed for Medicaid to attempt a recovery of all cost paid by the state through medicaid from any assets held singly or jointly and anything of the estate. NOTE:  Trust would be subject to its own terms as a Trust is its own unique legal entity. For Medicaid recovery it’s the MERP or MERS program. The acknowledgement to MERP was in the application and in any renewals done. You can casually mention what the Medicaid tally is likely to be. Avg Medicaid daily room & board reimbursement rate is $175.00 a day. So in NH a year, that’s $64,000.00 in theory due to the state from any assets of the estate. Could also casually say There could well be a lien placed on property by the State too...  Nothing should ever be distributed or transferred until MERP determination is done, but debts of the estate should be paid. 

If there’s a home then they will need a Release form from the state Medicaid or judges orders from probate to be able to legally transfer the property. All takes t..i..m..e

Nothing done or signed manana!

The home to me is going to be the big point of interest both for his kids, spouse and the state. Kids cause they want to sell & keep $$$. Her as she needs house  sale $ to do a required by Medicaid spend down & stay Medicaid eligibile. & MERP / State as it’s a easily lien / claim placed asset by MERP to repay costs paid.

So how much is home worth? You can easily Zillow to get an idea.
Was it owned by the man, or both of them? It really doesn’t matter in the long run as Medicaid views it as an asset of hers. 
Or does the trust own it?
If it’s the trust, what is / was being used to fund the Trust? The house has costs, what did Trust use to pay those costs. Huge trust initially and basically to get spent down till defunded? Or has investments? Or was it his SS & his income paying for items held in the trust? If it’s this it’s gonna be super sticky as his income stopped when he died.

You know if you get to the meeting and it’s the Cat on a Hot Tin Roof Big Daddy “smell of mendacity” scene version 2.0 vibe, I’d get across that...
- accounting of assets to be done by cpa
- Medicaid tally to be provided by state
- appraisal of house to be done (real licensed appraiser too not Realtor)
- NH spouses atty to review all & counsel with state/MERP attys if need be
- no distribution of assets till Medicaid/ MERP determination &/or release done
- no change to trust till Medicaid/ MERP determination &/or release done

And as an aside on this, a lot of the states have an outside contractor that does MERP. HMS is the bigger one & does abt 1/3 of the states & counting. Extremely good with experienced attys.  If they detect that heirs are trying to sell assets without going through proper legal structure required by your state’s property & probate laws and the administrative code for Medicaid, they can slap a claim or lien on the property or other nasty legal ASAP. You could actually use the legal power of MERP to ensure that NH widow is taken care of. It’s kinda an unusual approach to MERP as usually heirs interest and state/MERPs are totally opposite. But for B & the lady, the deceased heirs interests are not in her favor. So having state Medicaid or its outside contractor help protect her interest could be a good thing.
Oh do I wish I could be in the room if an HMS legal went after his kids...

The best person to explain a trustee's obligations is the individual who drafted the trust, assuming that he/she is experienced in estate planning and/or elder law. A lot of the verbage is technical, but typically the duties are delineated in one or more specific articles of the trust.

Is the Executrix of the Will NOT the same person as the Trustee? If so, there definitely will need to be some coordination. In the Trusts I've seen, they're typically one and the same. Otherwise, there would be 2 people making similar decisions. Look to the Trust language to see if this can be sorted out. Sometimes authority is granted to 2 people, acting either in concert or alone. This could be critical, especially if the step-kids are hovering in the background.

My attorney recently sent out a letter advising that some trust aspects may need to be updated b/c of the recent tax law. So there also may be changes in laws that need to be addressed in management of the Trust.

Another issue is whether or not Friend A and his wife were co-Settlors (made the Trust together), or if Friend A made the Trust, with his wife as sole beneficiary, or if the kids were named as beneficiaries as well.

I would also raise the issue of potential interference and/or request for the Trustee to resign her position. This does not bode well for her if there's going to be meddling.

What she can do is consult with the attorney who made the trust on ALLl the steps, as she does them, to ensure that she's handling everything properly. And she should document actions and corresponding costs as well.

Then if the step kids start meddling, she can refer them to the attorney, with the advice that they'll have to pay for the attorney's time themselves, and not from the Trust assets.

The Will should be a pour-over Will; that links to the Trust.

I would never consider a family attorney to be an ideal source for addressing Trust issues; they're too complicated, especially the step-up and tax issues.

Another issue to raise is whether or not the Trust was properly funded. If assets haven't been retitled and transferred into the Trust, it hasn't been funded, and funds available under Trust conditions would be $0.

Funding a trust is something that isn't always done, or done properly. If there are any stocks or IRAs that are to be Trust assets, they should have been specifically retitled, which also involves the investment companies. Be sure to ask about the accelerated tax rates on investment assets, otherwise someone will be blindsided when they see how much more taxes are paid b/c of the acceleration.

But again, whether or not anything can be transferred or retitled into the Trust now depends on whether Friend A was the sole Settlor or his wife was joint Settlor with him.

Lots of complicated legal issues; Friend B should treat herself to a nice lunch or relaxing time afterward, as the meeting will probably be complex. And tell her not to worry about getting confused; these are complicated issues that I think many people don't really understand.

Best of luck in helping them wade through this situation.

The family lawyer who set up the trust may not have a Medicaid expertise. Depending on when the trust was set up, it may not be Medicaid compliant for the widow while it was compliant for the Community Spouse. You may need to use the Trustee position to hire a lawyer to protect the spouse in nursing home's Medicaid rights if the children "suddenly appeared".

I think I would ask the "family lawyer" who set up the trust to be present at the meeting (at the trust's expense), or is that who is directing this meeting? Is the lawyer who set up the will and the trust the same person?

I think this should be a talking and listening meeting, with no papers signed. Anything that needs to be signed or changed, trustee takes a copy and gets a second opinion if she's not sure of the ramifications.