Planning today to protect your family's tomorrow.

If We Had Only Known…

Contributed by Thad Rauhauser, Elder Law Assistant

My mother worked a variety of jobs when I was growing up and my father worked in the shipping department of a manufacturer.  They both worked very hard, always with an eye toward the future.  They took advantage of an IRA that paid 10% interest (unimaginable today) which produced great earnings.  My father passed away in 1988.

As my mother grew older, she progressed as most aging people do:  sold the house, moved to an apartment, moved from the apartment to assisted living, and eventually moved to a skilled nursing facility.  Since I lived 150 miles away, my sister became the point person for keeping track of my mother’s medical and financial affairs.  In 2009, as my mother’s physical and mental condition deteriorated, my sister continued with the medical side of things, but I took over managing her finances.  After having new estate planning documents drawn up, pre-planning and paying for her funeral, she had about $220,000.00.  While not a lot of money to some, my mother was always in disbelief that she and my father could have saved so much.  I calculated that even with increases in her expenses and earning nothing on her investments, she had enough money to last until 2015 between assets and Social Security income.

Sometimes things don’t go according to the plan.  Her physical and mental condition worsened to the point where moving into a skilled nursing facility was unavoidable. A step we didn’t want to take because she always said, “Please don’t put me in one of those places.”  We were lucky to get her into a facility that was clean, had lots of activities, and compassionate staff that fell in love with her.  She called everyone on the staff “Chickie” (a way for her to cover that she couldn’t remember their name) and they’d call her “Chickie” right back.  The down side was that an assisted living bill at $3,250.00 per month became an almost $10,000.00 monthly skilled nursing bill overnight.  Instantly the 2015 projection became 2013.  What were we to do?  I guess the same thing everyone else does…… for her care until there is no more money and then apply for Medicaid.

Medicaid is a federal program that is administered by each state, and because of that, the rules vary from state to state.  There are two types of Medicaid, one being medical benefits for those with low incomes and the other being assistance to cover most of the cost of long term care.  Some states allow for in-home care or assisted living before skilled nursing care becomes necessary.  Delaware is fortunate that our Medicaid program will provide benefits at all three levels of long term care and that it includes the medical and prescriptions benefits of the other program.  For veterans that meet certain criteria, or their surviving spouses, there are also benefits available through the VA.

If we had only known that we could have pre-planned back when she moved from the house and been able to protect the majority of her assets to later pay for the few things that Medicaid does not cover.  If we had only known that even if we didn’t act until later (within the 5 year look back period when financial transactions have to be disclosed) that we could have still preserved part of her assets.  If we had only known that the allowed “spend down” strategies could have benefited her and her family.  If we had only known that depleting our mother’s assets paying for her care wasn’t necessary.

How could we have known?  While taking care of her finances, I learned a lot…Medicare’s Part A vs. Part B vs. Part D, 100 days of rehab Medicare benefit after 3 midnight stays in the hospital, tax implications of depleting an IRA, open enrollment, supplemental insurance plans (that have different levels too), co-pays, deductibles, “donut holes” (not the good kind) and on and on.  But even with all that, I didn’t know anything about Medicaid and the benefit it could have provided so that my mother didn’t have to go “bankrupt” paying for her care.  My mother would ask, “Is everything set up for you kids to get my money?”  She continued to ask that after all of her money was gone and I continued to tell her “yes”; which is something you do with an Alzheimers patient…just agree.  To think, for the cost of a month or two of skilled nursing care, if I had only hired an Elder Law attorney, I would have been telling the truth.  If I had only known there were Elder Law attorneys like Procino-Wells and Woodland, who specialize in Asset Protection Planning and are there to provide guidance in becoming eligible and applying for benefits.

My mother passed away in 2014.  I miss her.



Avoiding Joint Ownership of Assets

Joint Tenancy Is Not The Best Estate Planning Option

Joint ownership of assets with a person’s children or other individuals can lead to disastrous results if not used properly. “Joint tenancy” is the legal term for joint ownership and it applies to any asset that is “titled,” including bank and investment accounts, real estate, cars or boats. When a joint tenancy is created, two (or more) individuals own the asset together and, upon the death of one joint owner, the remaining owners take over that person’s interest. Many mistakenly believe that placing a home or account in joint names with their children is a fast and easy estate planning tool that avoids the hassle of probate. This may be true in limited circumstances, however joint tenancy often creates more harm than good. The following illustrates some of the most common pitfalls associated with joint ownership:

Joint Ownership Trumps Your Estate Plan – That’s right! Any property owned in joint tenancy passes automatically to the surviving owners, outside of probate, regardless of what your Will says. For example, imagine a widow with three children, two of whom live out of the area. The widow decides to place her checking account in joint names with her local daughter for convenience sake, but intends to leave her entire estate to her three children equally. When she dies, the other two children are excluded from inheriting the account as the daughter becomes the outright owner as surviving joint owner. Chances are, the widow did not intend this result; however, the daughter is under no legal obligation to share ownership of the account with her siblings or use it for her mom’s final expenses.

Unexpected Exposure to Creditors, Judgments and Exes-in-Law – A joint owner can encumber the property through mortgages, liens or judgments. As well, the property is considered an asset of each owner and is therefore potentially subject to attachment by creditors. If you decide to place your home in joint tenancy with your children, you run the risk of losing your property if one of your children is on the losing end of a civil judgment. What’s more, if one of your children goes through a divorce, his or her spouse could claim an interest in the property during the division of assets. Each of these scenarios by itself could result in the requirement to sell the property to satisfy the judgment or claim, leaving you with only your interest remaining – which will be insufficient to repurchase a comparable home.

Loss of Medicaid Eligibility – If you are considering your long-term care needs, you may wish to someday apply for Medicaid benefits to cover the costs of a nursing home or assisted living facility. Under the current Medicaid eligibility rules, Medicaid could consider the placing of your home in joint ownership with another a gift and would impose a period of ineligibility for benefits based on the value of the home. You could then be required to either sell your interest (and spend that money to pay for your long-term care) or endure a potentially lengthy penalty period. Either way, a joint tenancy is generally not helpful for Medicaid planning purposes and should be avoided.

While we do not suggest that joint tenancy is to be avoided in all circumstances (e.g., it is often appropriate for married couples and can be helpful to have a jointly-owned modest checking account for bill paying purposes), this arrangement usually invites an increased risk of trouble with your estate plan. Better estate planning tools exist such as Powers of Attorney and Trusts which can accomplish the same goals intended by joint tenancy.  A comprehensive plan eliminates the unforeseen dangers joint ownership of assets may cause for you and your family.

When Medicare Won’t Cut It: Proper Use of Divestment to Qualify for Long-Term Care Benefits

Long-term care costs are on the rise, and many individuals and families are unprepared for the true daily, weekly and yearly costs of round-the-clock care in an assisted living or nursing home facility. According to 2013 data, the median daily rate for a semi-private room in a Delaware nursing home was $274, or $100,010 per year. This figure represents a five-year growth rate of 6 percent and looms over the national daily average of just $207 per day, or $75,405.

If you have worked all of your adult life to prepare a sizable, yet modest, nest egg for you and your spouse, you may balk at the notion of spending this kind of money on nursing home costs. As you can quickly deduce using simple arithmetic, a three-, four- or five-year stay in a Delaware nursing home could easily deplete and eliminate a large portion of your retirement savings – most of which you had planned to pass on to your children or grandchildren.

To add insult to injury, your Medicare coverage plan will not cover the bulk of your long-term care needs. Under current laws, Medicare benefits extend as far as short-term acute care, hospice services or limited types of skilled care (e.g., physical therapy). Even under these conditions, Medicare coverage is limited to just 100 days, only the first 20 of which are covered at 100 percent.

Based on the above information, you can see how the average retired couple anticipating eventual long-term care could wind up feeling helpless in the face of an inability to pay despite practicing a careful and meticulous savings strategy their entire lives. If you are in this situation, or believe this scenario could apply to you in the future, there are several divestment strategies that could work to your benefit, not only keeping your assets in the family but helping you qualify for Medicaid coverage – a government program which covers long-term care needs provided certain financial eligibility requirements are met. There are also special pension benefits available to veterans who meet financial and service eligibility criteria – which may be used to help fund the annual long-term care expense.

In order to qualify for government benefits like Medicaid or the VA pension, you and your spouse must show that you are indigent. Otherwise, you will be required to expend your entire life savings on long-term care prior to triggering Medicaid coverage, thereby leaving nothing in your estate to care for your surviving spouse and family. One way around this unwanted result is to meet with an elder law attorney to discuss your divestment options.

Divestment is a term referring to the voluntary transfer of your assets to another person or entity such as your children or favorite charity. You may initially believe that divestment in favor of your children is a “no-brainer” way to keep your estate intact and qualify for benefits at the same time. However, Medicaid has implemented a look-back period of five years to determine whether you made any gifts or transfers for below fair market value. If you did, you will be subject to a penalty period before your eligibility period begins wherein you will be required to self-pay for an amount of time congruent with the value of the asset you gave away. This can be a real problem in the event your children sold or squandered their gift, leaving you with no way to pay for long-term care until the penalty period ends.

The best divestment strategy for you and your spouse will depend on your current portfolio, value of assets and several other factors unique to your situation. The best way to protect your assets while meeting your long-term care goals is to meet with a professional elder law attorney to discuss your options and determine your best course of action.

One Size Never Fits All: Why LegalZoom and Similar Sites Could Cause Legal Doom

In 2014, we celebrated the 25th anniversary of the World Wide Web. In 25 years, we have seen companies like rocket from a small bookseller to a global retail titan. We now pay our bills, plan vacations and read the news online – concepts completely foreign just two decades ago. With the onslaught of internet-based businesses inevitably came the notion that legal services could be just as quickly and easily delivered at the touch of a button – thereby spawning the household name “” However, services like those offered at “one-size-fits-all” legal sites are often ultimately troublesome for clients and can create a false sense of security for those who believe they downloaded the correct document containing the correct language. The following are some of the top problems you can run into with a web-based legal document service like as well as our recommendation that all legal services be produced with the help of a knowledgeable, licensed attorney.

Problem #1 – Hey, Who Drafted This Anyway?

Did you know that Delaware law contains a specific set of requirements for the contents of an advance directive? Or that all wills must be witnessed by two disinterested individuals? These formalities, along with dozens more, must be precisely followed when drafting a legal document or the document will be unenforceable under Delaware law. When using an online legal document service, there is no guarantee that the person drafting the document is licensed by the Delaware Supreme Court or, for that matter, is even a lawyer at all.

Problem #2 – I Think This Will Work….

Online legal services generally do not come with actual legal advice (unless you want to pay a significantly higher price). Therefore, users are forced to rely on their general knowledge of a topic to determine which document is right for their particular situation. While a Last Will and Testament is pretty straightforward, powers of attorney documents may not be as obvious. As well, the website may offer certain types of business or estate planning documents that are not offered or recognized under Delaware law. Only a Delaware attorney can give you the correct advice for your particular situation and you should avoid online document sites if your situation is even mildly complex.

Problem #3 – This is Ethical, Right?

Ethical problems abound in the online delivery of legal documents. For one, does an online document service create an attorney-client relationship between the site and the user? Probably not. Which means the user is not protected by Delaware’s Rules of Professional Responsibility and generally has no recourse if the service rendered is sub-par. In addition, confidentiality issues may arise when an internet user is transacting with a website for legal services. The American Bar Association recently addressed this issue in an official opinion expressing angst over the fact that an Internet Service Provider (ISP) has a right to monitor any and all transmissions over its network – encouraging legal providers to conduct random monitoring for quality control or mechanical checks only. As well, the ABA encourages all service providers to encrypt legal documents to make the chance of interception even more remote.

In sum, online legal services can create more harm than good. What seems like a cheap and effective solution to a legal problem could end up costing you in the long run. If you download a legal document in an emergency situation and realize that it is unusable, you may deeply regret the decision to forgo consulting with a licensed Delaware attorney face-to-face.

Pitfalls of Poor Estate Planning: Top 5 Problem Areas to Consider

Preparing an estate plan is often a bittersweet experience. On the one hand, you may feel gratified about the notion of leaving behind financial stability and security for your loved ones to rely upon. On the other, you may feel uncomfortable facing your own mortality and would rather quickly circumvent the estate planning process.

Both feelings are common emotional components of any estate planning process. However, what you should try and avoid at all costs – and trust us, it can cost you – is rushing through the process to the detriment of your family’s financial future. By not taking the time to carefully consider the best options for your unique situation, you could encounter depleted assets, difficulty paying for long-term care or burdening your loved ones with an insolvent estate. The following are common estate planning blunders which we urge you to avoid, as well as the possible dangers associated with each:

1. Joint Ownership: Be careful with titling assets jointly. Many times, assets are titled in the name of two or more people out of convenience sake, only to undermine an estate plan once one of those owners passes away. Regardless of the language of your estate plan, the surviving members of a joint ownership arrangement subsume your interest upon your death – which can result in unintended gifts of substantial assets.

2. Beneficiary Designations: Failing to routinely monitor and update your beneficiary designations can also undermine your estate plan. Much like jointly-titled assets, beneficiary designations on an IRA, 401(k) or life insurance policy trump the beneficiary designations in your will or trust. The individual you named as your beneficiary several years ago may not still be the person to whom you intend to transfer the asset.

3. Life Insurance Proceeds: An improperly arranged life insurance policy can result have disastrous consequences. At a minimum, your beneficiaries should be responsible, financial competent individuals who will not squander or misuse the proceeds. From there, you must take careful precautions to ensure the proceeds do not become part of your gross estate, which could lead to unnecessary taxation, inadvertent disinheritance of your intended recipient or unnecessary exposure of this asset to estate creditors.

4. Liquidity: Lack of liquidity in an estate creates problems for your executor or trustee. This problem occurs due to improperly funded trusts or leaving the bulk of your estate with joint owners or tied up in real property and other non-liquid assets. Many estates take up to a year or longer to settle and during that time your executor and trustees must arrange for the payment of taxes, debts, administration costs, and the maintenance of property– all of which are particularly difficult without access to cash.

5. No Plan at All: Probably the poorest of all poor estate planning practices is to forgo creating a plan entirely. You may have heard of famous celebrities dying “intestate” as a result of not having an estate plan in place. When a person dies without at least a simple estate plan in place, they expose their families to unnecessary expenses, conflict, and complications. They leave the fate of their estate up to state law to determine who will be in control of their estate and who will inherit their property.

Each and every one of the above pitfalls is avoidable through careful, thorough planning.

Advice for Keeping the Family Beach House in the Family

You remember it fondly: the weeks of anticipation waiting for school to wind down. The hurried packing of whatever non-winter clothes you can find. The race to the car, followed by the dreaded drive to the coast – which seemed to take longer each year. Then, finally, you were there: your home away from home. Your beautiful, perfect, unadulterated beach cottage where you spent your childhood summers covered in sea salt, sunkisses and sand. You wouldn’t trade those memories for all the money in the world and you eagerly anticipate the day when you can take your children or grandchildren to the same spot to relive the same surfside memories through their youthful eyes.

That is, of course, assuming succession, maintenance, tax and ownership issues do not require you and your family to reluctantly give up your home to the highest bidder while watching your childhood sanctuary wash away like shoreline sand pebbles to the tide.

Family beach house issues are common in Delaware. Just ask the litigants in In re Estate of Branson, a case centered on a hotly-contested family cottage located in South Bethany Beach. In this case, five feuding children presented the Court of Chancery with various legal assertions as to who rightfully owned the cottage subsequent to mother’s passing – with one outspoken sibling claiming his brothers made a verbal promise to sell him the home (which the court overruled).

How then can a family avoid these interruptions and achieve a succession plan that not only anticipates tax exposure but allows for a peaceful and serene experience between family members paying homage to the tranquil beach property involved? Fortunately, with the help of an experienced estate planning attorney, you can explore several options for avoiding expensive litigation or a heartbreaking sale of your family home.

Fee Simple Transfer

The fee simple transfer is just that: simple. You pass your ownership rights by deed to your children or other family members as joint tenants or tenants in common thereby ensuring ownership is secure and in the hands of your intended beneficiaries. This practical, inexpensive solution is not without drawbacks, however, and may trigger certain gift tax problems as you would likely make the transfer to your family for free or well below market value.

Other downsides include the increased risk of exposure to children’s creditors or possible claims by a donee’s soon-to-be ex-spouse. While gifts are generally excluded from the purview of marital property for purposes of division in divorce, money contributed during the marriage for maintenance, improvements or property tax can work to convert the asset to marital property, thus making it eligible for division in the event of dissolution.

Placing the Home in Trust

Placing the family beach home in a revocable living trust or qualified personal residence trust (QRPT) is a viable option allowing you to maintain control of the property while redirecting ownership, at least partially, from yourself to the trust. This arrangement may reduce your personal tax liability as transactions purposed for the beach home may be deductible by you as the grantor as if you owned the property outright. By naming a responsible successor trustee, you could ensure proper management of the property in the event of your disability, incapacity or death. Lastly, a home held in trust is not subject to the rigorous oversight of probate administration.

Placing the home in a QPRT allows the grantor to gift the property to beneficiaries while retaining personal use for a term of years – much like a gift in fee simple with a reserved life estate, but with a lower tax liability.

Unfortunately, both the revocable living trust and the QPRT are considered part of the grantor’s gross estate at death. If you are nearing the federal estate tax exemption threshold, this arrangement could quickly put you over the limit, thereby triggering exposure to a substantial estate tax.

Placing the Home in a Family Entity

Setting up a family partnership, corporation or limited liability corporation is another option for some families. This unique arrangement triggers its own share of tax considerations, but allows grantors to maintain control of the property during their lifetime. This could be an attractive option for the business-minded grantor interested in a formal structure organized pursuant to an ironclad agreement. It may also create a comfortable shield from creditors or claims from the aforementioned soon-to-be ex-in-law.


With the right amount of pre-planning and family cooperation, you can hold on to your priceless family beach home while avoiding unnecessary tax assessments and familial strife. If you are interested in the best course of action to protect your family property as you consider your estate plan, contact us for an appointment to review your options.