How can I protect my house from Medicaid Estate Recovery Program (MERP) after my death?
Medicaid imposes stringent limits on income and assets of recipients, consistent with its mission to provide a health care safety net for the poor and for those whose personal resources are insufficient to pay the full cost of care. Many times assistance is provided to those who own homes, because the home is an exempt assets when determining qualification for the program. The Medicaid Estate Recovery Program reclaims funds paid on your behalf and during your life for assisted living costs. The State of Texas expects to be repaid at the time of your death from any assets you may own.
States are prohibited from making estate recoveries:
-During the lifetime of the surviving spouse (no matter where he or she lives). -From a surviving child who is under age 21, or is blind or permanently disabled (according to the SSI/Medicaid definition of “disability”), no matter where he or she lives. -In the case of the former home of the recipient, when a sibling with an equity interest in the home has lived in the home for at least 1 year immediately before the deceased Medicaid recipient was institutionalized and has lawfully resided in the home continuously since the date of the recipient’s admission. -In the case of the former home of the recipient, when an adult child has lived in the home for at least 2 years immediately before the deceased Medicaid recipient was institutionalized, has lived there continuously since that time, and can establish to the satisfaction of the State that he or she provided care that may have delayed the recipient’s admission to the nursing home or other medical institution.
If you believe that you will one day need assisted living assistance, you may want to take actions to preserve your assets now. The Medicaid program has a 5 year look back period, which means they look at all gifts or transfers that have occurred for the 5 years prior to qualifying for Medicaid. If you gave something away or transferred it to an irrevocable trust then they pull it back into your estate and you may not qualify for Medicaid.
An administration of an estate can take up to nine months or more depending upon the assets contained in the estate. Therefore, there is no reason to feel rushed or the necessity to make a distribution immediately upon being appointed. The appropriate procedures should be followed to protect you from possible litigation. If you are named the independent executor, consult an attorney to be appointed by the Court. Once you are appointed, these are your job duties:
- Notify the following that apply to the decedent: Social Security office, IRS, banks, retirement companies, investment companies, employers, etc.
- File Inventory, Appraisement and List of Claims within 90 days of qualification date. Your attorney will provide you with this form to complete and then the attorney will file the Inventory.
- Publish a notice with the local newspaper to any unknown creditors of the estate, within one month of your appointment. The attorney will usually do this for you.
- Give written notice to all beneficiaries named in the will within one month of being appointed. You will then need to file a statement of compliance with the Court. The attorney will usually prepare these forms for you.
- Give written notice by registered mail to holders of real estate liens against Estate property within two months of appointment.
- Give written notice to all known unsecured creditor’s explaining they have four months to file a claim. If a notice of claim is filed with the court within four months, you can either do nothing and the claim is deemed denied within 30 days or you can send letter denying claim. Once claim is denied, creditor has 90 days to file a litigation case or his case is forever barred. You should not pay any claims to any creditors until this step is completed and you have consulted with your attorney.
- Give the State of Texas notice of death, but only if the deceased received Medicare financial assistance from the State for such benefits as nursing home or residential care facilities.
- Liquidate all assets of the estate, sell real property, etc. unless other arrangements have been made between the heirs.
- Place all Estate funds in insured accounts in the name of the Estate. Retain in a checking account only such funds as are reasonably necessary to pay the debts of the Decedent and the expenses of administering the Estate. Place all additional funds in interest bearing accounts at the highest interest rate available. The bank will require you to have a Tax Identification Number for the decedent’s estate to change the bank account ownership into your name as Executor, so you can go to IRS.gov to obtain an Estate Tax Identification Number or my office can assist you with obtaining this TIN.
- Preserve, protect and insure, if insurable, all non‑cash assets of the Estate.
- Maintain an accurate record of all expenditures and receipts of the Estate, regardless of how long the estate remains open. Keeping good records will help you in the long run if a creditor or beneficiary questions your actions as Executor/Administrator. It will also protect you in the long run in explaining your actions to the beneficiaries or heirs.
- Make arrangements to dispose of or sell all personal property, utilizing estate sale or distributing items to beneficiaries. Hold an estate sale if necessary and sell off any vehicles, or other titled property as necessary.
- Make arrangements with realtor to sell real property, if necessary. The attorney should review all contracts for you.
- Pay funeral expenses and expenses of last sickness, before paying anyone. Reimburse any party who has already paid these expenses.
- Pay court costs, attorney fees and expenses incurred.
- Pay only creditors who have made a proper claim against the estate.
- Pay all delinquent child support and child support arrears, if any.
- Pay all income taxes, penalties and interest, if any.
- Pay all claims for the cost of confinement by a correctional facility, if any.
- Pay all claims for repayment to Medicare, etc. by state agencies, if necessary.
- Once you are ready to distribute to the beneficiaries or heirs, contact the attorney they can prepare Receipts and Waivers for all parties to sign upon receipt of their checks. Distribute the estate funds to the heirs and have each heir sign a statement of receipt.
- Submit a Final Account Affidavit to close the estate. This starts the statute of limitations running for four years.
Congratulations! Now you are done!
The Dallas Court of Appeals confirmed the trial court’s findings in a case concerning the termination of a parent’s rights whereby fraud was used to induce the parent to relinquish. In RE: C.T.C. a mother used fraud to get the father to relinquish his rights. The mother argued that Sec. 161.211(a) of the Texas Family Code provides that the father had only 6 months from the date the termination order was signed. The father argued that the statute was not intended when fraud was used to procure a relinquishment. The trial court agreed with the mother and they dismissed the father’s petition for bill of review for lack of jurisdiction. This Sec. 161.211(a) provides that in certain circumstances a termination of parental rights is not subject to collateral or direct attack after six months and the Court of Appeals says that it doesn’t matter if fraud was used. For More information see the Case Findings.
Many times people create trust during their lifetime and they face situations that may require amendments to the trust. If changes are required to your trust, a trust amendment is the proper way to make the changes. Handwritten marks and notes on the trust document are not considered legal changes. An amendment specifically states what paragraphs of your trust is being changed, and sets forth the new trust language. The amendment may be short, or it may be so drastic that it actually changes the entire trust, from the first word to the last.
What are some reasons why you may need to amend your trust? Some trusts are completely out-of-date, or irrelevant due to changes in the statutes, case law, or just poorly written. Some trusts may have provisions that are illegal, or contrary to the client’s wishes. Some people need their trusts revised or updated because of changes in their wealth or family circumstances.
Lengthy or complicated trust amendments may be difficult, costly, time consuming and hard to follow for future trustees. Therefore, a good estate planning attorneys will recommend a trust restatement. A trust restatement is a document which completely restates the entire trust agreement, and a new trust is created through the amendment and restatement.
Although a restatement is basically a new trust in the form of a trust amendment, the name of the old trust and the date that it was established remain the same. Therefore, there is no need to obtain a new tax identification number, move funds to new accounts, change deeds, etc.
With the many tax law changes in recent years, concerns about future ill health and incapacity, or with changes in your family situation, it is recommended to have your trust reviewed by an attorney. A simple amendment may be all that is required or it may be necessary and more efficient for the attorney to restate the entire trust.
Bowing to pressures from their shareholders, Chesapeake Energy Corp.’s directors have forced co-founder and CEO Aubrey McClendon to step down as chair, all over his personal financial dealings, including the taking of up to $1.1 billion in loans against his stakes in Chesapeake oil and gas wells. A Reuters investigation has found, McClendon also ran a lucrative business on the side: a $200 million hedge fund that traded in the same commodities Chesapeake produces. Is such behaviour to be tollerated and is it a breach of McClendon’s fiduciary duties as CEO and Chair of the Board of Directors?
a)Duty of Loyalty The duty of loyalty “requires an extreme measure of candor, unselfishness, and good faith on the part of the officer or director.” A corporate officer or director must act in good faith and must not allow his or her personal interest to prevail over the interest of the corporation. An officer or director is considered “interested” when he “makes a personal profit from a transaction by dealing with the corporation or usurps a corporate opportunity.”
b)Duty of Care Texas law imposes on corporate officers and directors a duty to exercise due care in the management of the corporation’s affairs. If they breach that duty, they are liable to the corporation for any loss it may suffer as a result of their neglect.
c)Duty of Full Disclosure The duty of full disclosure on all matters affecting the corporation, including disclosing when the officer or director will personal benefit for contracts or certain actions.
d)Duty of Obedience The duty of obedience “requires a director to avoid committing acts, i.e., acts beyond the scope of the powers of a corporation as defined by its charter or the laws of the state of incorporation.”
From first glance it looks as if McClendon did breach his fiduciary duty of Full Disclosure and Loyalty. It will be interesting to see what the shareholders think and whether a class action lawsuit is filed by them.
In Texas, a fiduciary duty can arise in two different ways, through a formal relationship or an informal relationship:
1) A formal fiduciary relationship is created where there is a legal duty created by law. In a corporation, officers’ and directors’ owe the following fiduciary duties:
a) Duty of Loyalty The duty of loyalty “requires an extreme measure of candor, unselfishness, and good faith on the part of the officer or director.” A corporate officer or director must act in good faith and must not allow his or her personal interest to prevail over the interest of the corporation. An officer or director is considered “interested” when he “makes a personal profit from a transaction by dealing with the corporation or usurps a corporate opportunity.”
b) Duty of Care Texas law imposes on corporate officers and directors a duty to exercise due care in the management of the corporation’s affairs. If they breach that duty, they are liable to the corporation for any loss it may suffer as a result of their neglect.
c) Duty of Full Disclosure The duty of full disclosure on all matters affecting the corporation, including disclosing when the officer or director will personal benefit for contracts or certain actions.
d) Duty of Obedience The duty of obedience “requires a director to avoid committing acts, i.e., acts beyond the scope of the powers of a corporation as defined by its charter or the laws of the state of incorporation.”
2) An informal fiduciary relationship is created where there is a level of reliance between parties. Share ownership does not ordinarily involve any duties to the corporation or other shareholders. In a corporation, majority shareholders may owe a fiduciary duty when the majority shareholder exercises control over the corporation, either directly as an officer, director or through a majority vote or indirectly through control and influence over the officers and directors. The peculiar duties of a controlling stockholder to deal fairly with the corporation, its stockholders, and creditors are broader than the trust-fund doctrine. It rests on his inside knowledge of the corporation’s affairs and his opportunity to manipulate them for his personal advantage. Informal fiduciary duties arise under Texas law “from a confidential relationship ‘where one person trusts in and justifiably relies upon another, whether the relation is moral, social, domestic or merely personal.’”
The Texas Supreme Court and several appellate courts in Texas have yet to recognize a cause of action for shareholder oppression, but suits by minority shareholders are on the rise. Many of these suits deal with the claims of breach of fiduciary duty, but many times they include claims for shareholder oppression. This cause of action may arise when the majority shareholders in a corporation take action that unfairly prejudices the minority, such as refusing to declare dividends, lock the minority out of the corporate office; refuse to allow an inspection of corporate documents.
Texas law does not formally recognize the concept of shareholder oppression, except in the receivership statute that mentions, but does not define, “shareholder oppression” as a ground for receivership. Tex. Bus. Orgs. Code Ann. § 11.404 (Vernon 2010). Regardless, the Texas Court of Appeals has applied this statute outside of the receivership context to create a vague cause of action with poorly-defined parameters sometimes referred to as “shareholder oppression.” Therefore, shareholder oppression becomes a fact issue for the trier of fact and is not created as a matter of law.
So if you are an officer, director or majority shareholder of a Texas corporation and you intend to take actions that may be detrimental to the minority shareholders, you should consult an attorney to ensure it does not constitute a breach of your fiduciary duty or shareholder oppression.
If a person dies in the State of Texas without a will, there several options for the person who decides to handle the estate. Choosing the correct option depends upon the assets involved and if the heirs are in agreement on certain matters.
If no formal administration of the estate is necessary, there are two options: 1. Small Estate Affidavit (estates of $50,000 or less); or 2. Proceeding to Determine Heirship. These are both pretty simple process that can be done relatively cheaply with the help of an attorney.
If a formal administration is necessary, then there are still two choices: 1. Independent Administration (if all heirs agree on the appointment of an IA); or 2. Dependent Administration (when all the heirs do not agree on the appointment of the administrator; more expensive route).
If either of these latter two options is chosen, then along with the administration filing/proceeding, the administrator will also need to file an Application to Determine the Heirs (and the appointment of an ad litem attorney to assist the Court in determining the heirs of the estate).
To determine which step is necessary, you should consult an estate planning attorney.