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The New Elective Share Law Adds a Layer of Complexity for Planning for Long-Term Care

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By Elizabeth Boehmcke

As of January 1, 2017, the Virginia Legislature amended our state’s formula for determining the surviving spouse’s elective share rights in the augmented estate. Under prior law, a surviving spouse was entitled to one-third of the decedent’s estate, augmented by certain transfers delineated by statute, such as life insurance, retirement accounts and gifts to others. Under the new law, the amount of the elective share is based on a sliding scale related to the length of the marriage and takes into consideration the assets of both the decedent and the surviving spouse. In theory, for long-term marriages (defined as those of 15 years or more), the idea is that the spouses operate like a partnership and that each spouse contributes equally to the marriage in one fashion or another and so both are entitled to share equally in the assets. Although the new law is worthy of extensive discussion on various points, I want to focus primarily on how it affects our clients who are planning for incapacitated or potentially incapacitated spouses and also planning for the possibility of needing public long-term care benefits, like Medicaid.

Traditionally, we have encouraged clients who see a realistic probability of needing to plan for not only the incapacity of a spouse who may survive them but also for the possibility that such spouse would be using public benefits at the time to consider the creation of a supplemental needs trust (“SNT”) in the Will of the first to die. However, because the surviving spouse has the right to receive an elective share outright, there has always been the concern that the failure to exercise that right created a transfer which would be attract a penalty for Medicaid purposes or, at the very least, would result in a Medicaid payback at the death of the surviving spouse. The new statute has created some alternatives.

The new statute provides that, if the surviving spouse is incapacitated at the death of the first spouse or within the time required for making the election for the elective share, then a conservator or an agent under a durable power of attorney may make the election for the survivor. In that case, the court is required to put the amount of the elective share in a trust for the benefit of the survivor. The trust as described in the statute both protects the survivor’s eligibility for public benefits and allows the assets remaining at the survivor’s death to pass to the beneficiaries chosen by the deceased spouse (typically children). Because the elective share amount is required to be placed in trust by the court, the surviving spouse cannot be considered to have made a transfer to which Medicaid could lay claim.

The statute further provides that if the surviving spouse is not incapacitated within the time required for making the election for the elective share, then assets placed in a trust with certain provisions will qualify for the elective share amount. Again, in this situation, because the elective share amount cannot be deemed to have been transferred by the survivor, Medicaid can make no claim on the assets held in the trust. However, in order to meet the requirements, the surviving spouse must be entitled to all the income of the trust for life and to principal in the discretion of a non-adverse trustee. This means that the income generated by the trust may be used to help pay for the survivor’s care. Careful financial planning can limit the amount of income available to be used for care and to ensure that public benefits remain available to the survivor.

By carefully thinking through the contingencies that could arise on the death of the first spouse, depending on the capacity of the surviving spouse, we can create multiple trusts that maximize the protection of assets for the survivor and his or her access to public benefits. This may result in the creation of multiple trusts on the death of the first spouse to die – one to hold the augmented estate share and one to hold the balance of the assets, probably in an SNT. In addition, if the surviving spouse is incapacitated at or near the death of the first to die, the survivor’s agent under a durable power of attorney will need to file certain papers with the court in a timely manner. However, the added complexity is worth it when you consider the additional protection available for both the surviving spouse and the remainder beneficiaries.

The changes in the elective share statute will affect almost all of our married clients. Your current documents may contain trusts created to accommodate the old rules or you may not yet have considered whether you need to worry about long-term care public benefits for the survivor of you. In either event, changing laws highlight the need for regularly checking in with your estate planning attorneys at the Hook Law Center to determine whether your plan should be updated. Please give us a call to arrange an appointment for one of our knowledgeable attorneys to review your plan and discuss how the changes in the law may affect you.

Kit KatAsk Kit Kat – Dogs’ Duty

Hook Law Center:  Kit Kat, what can you tell us about our faithful friends, dogs, and how they help science?

Kit Kat:  Well, dogs have always been helpful to mankind in a myriad of ways. They serve on police forces, help the military, guard residences, and are beloved family pets. However, in New York City, they are helping in a different way. Scientists there are studying their fecal waste, or in common parlance, their poop! What could that possibly tell us, you might ask? Well, it turns out a lot! An animal feces study, funded by the Alfred P. Sloan Foundation, is trying to examine the microbial life of New York City’s pets and pests. Not only is dogs’ waste being collected, but they are also collecting fecal samples from cats, rats, mice, pigeons, and cockroaches. The specimens must be fresh (no more than a day old), so the scientists and their assistants wander through the city’s five boroughs collecting. In the case of dogs, if they find the owner nearby, they get the owner to sign a form with certain information, along with the fecal sample. They are expending a lot of effort—rats and mice are trapped, and the posteriors of live pigeons are swabbed. Cat waste comes from shelters, feral cats, and pet felines. In early May, they will extract DNA from the samples, and determine if any patterns emerge.

The study is a collaborative effort with scientists from New York University and Fordham University participating. Dr. Jane Carlton, director of NYU’s Center for Genomics and Systems Biology and lead scientist in the study, says, ‘Characterizing the world around us is very important, especially the microbial world we can’t see.’ They will be comparing information they obtain from different parts of the city, and across species. Are there geographical differences, differences among the species, or does diet and age play a role? Stay tuned for the results of this fascinating undertaking! (Andy Newman, “Dogs Do Their Duty for Science,” The New York Times, (NY Region, Pet City section), April 7, 2017)

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Posted on Monday, May 8th, 2017. Filed under Newsletter.