Posts Tagged ‘disability’

Doctor’s Report to California DMV Does Not Violate Privacy Rights

DECEMBER 5, 2016 VOLUME 23 NUMBER 45
You might have wondered about this from time to time — we have, too. If a patient really shouldn’t be driving, is his or her doctor really able to write to the Motor Vehicle Division to report the patient’s condition? Wouldn’t that be a violation of the patient’s privacy rights?

A recent California case says no — the doctor is not liable for any breach of privacy, at least not under California law. The facts of that case are interesting, and instructive.

Mitch McIntyre (not his real name) was trying to establish that he was disabled, so that he could qualify for Social Security Disability payments. He visited several physicians over an almost ten-year period, but his primary care physician was Dr. Ann Kim. His diagnoses included diabetes and unspecified cognitive deficits.

During one office appointment, Mitch told Dr. Kim that he needed to renew his commercial driver’s license. He told her that he had applied to drive a school bus, and asked if she would “sign off” on his medical certification.

Over previous years, while he was working as a bus driver, Mitch had complained to Dr. Kim and other physicians that he didn’t want to “babysit” his passengers. He had confessed to his physicians that he didn’t always follow the routes specified by his employer — he preferred his own routes. On one occasion, he acknowledged, he had taken a group of children from San Diego, California, to Tijuana, Mexico — though that was not their actual destination.

But when Mitch told Dr. Kim that he was about to start driving school buses, that was too much for her. She called Mitch, told him that she wouldn’t be signing his medical certification form, and added that, in fact, she was considering sending a letter to alert the California DMV to her concerns about his impulsivity and poor judgment. Mitch told her that he did not want her communicating with the DMV at all, and that he did not agree with her reporting her concerns.

Dr. Kim thought about her dilemma for several weeks, and then wrote a letter to DMV. Her letter reported that Mitch “is functionally illiterate, lacks the capacity to set limits on himself and fails to understand the consequences of his behavior.” She added that Mitch’s problems appear to be “the result of mild congenital or developmental brain damage that has not only affected his cognitive skills but more importantly has impaired his judgment, impulse control, insight, forethought and ability to introspect.”

Mitch’s commercial and regular driver’s licenses were suspended almost immediately after the DMV received Dr. Kim’s letter. His employment was suspended, and he was ordered to get his licenses reinstated if he wanted to continue to drive buses. He managed to get his regular license restored quickly, but it took him three months to get his commercial license reinstated — though he did manage to do so. Because he failed to meet his employer’s deadline, however, he lost his bus-driving job.

Mitch then sued Dr. Kim and her employer, alleging that she had violated state privacy laws and the federal HIPAA (Health Insurance Portability and Accountability Act) law by disclosing his medical information to DMV. The defendants moved to dismiss Mitch’s complaint, arguing that they were permitted to give such information to the Department of Motor Vehicles. While the trial court did not immediately dismiss, it ultimately threw out Mitch’s case after he had put on evidence at his trial; the defendants were not even required to put on any case.

Mitch appealed to the California Court of Appeals, which affirmed the trial judge’s dismissal. Applying California’s version of the privacy laws, the appellate judges ruled that Dr. Kim’s disclosure was specifically authorized to report her concerns about Mitch’s ability to drive. According to the appellate court, California has a policy of encouraging people (including but not limited to physicians) to report the possibility of unsafe driving — and that supported Dr. Kim’s authority to disclose medical information for the limited purpose of calling Mitch’s ability to drive into question. McNair v. City and County of San Francisco, November 22, 2016.

Mitch and Dr. Kim, of course, were operating under California’s state law — and the national HIPAA rules. As the court acknowledged in its opinion, HIPAA does not give Mitch (or any other individual) any right to bring a breach-of-confidentiality suit against a medical provider. That means that state law will be the most important consideration in addressing similar claims.

Arizona has law that seems like it would resolve a dispute similar to Mitch’s (if it had been subject to Arizona law, that is). Arizona Revised Statutes section 28-3005 spells out that:

Notwithstanding the physician-patient, nurse-patient or psychologist-client confidentiality relationship, a physician, registered nurse practitioner or psychologist may voluntarily report a patient to the department who has a medical or psychological condition that in the opinion of the physician, registered nurse practitioner or psychologist could significantly impair the person’s ability to safely operate a motor vehicle.

In fact, the Arizona Motor Vehicle Division has a web page devoted to the forms and procedures for physicians — and any regular citizens — to report unsafe drivers or concerns about anyone’s ability to drive. Physicians are encouraged to use the form on the MVD website; other concerned citizens can download a form to make their own reports, as well.

Undue Influence and Limited Capacity Do Not Necessarily Justify Conservatorship

OCTOBER 31, 2016 VOLUME 23 NUMBER 41
In our legal practice, we frequently deal with individuals with limited capacity. Sometimes we speak of them being “incapacitated” or “incompetent.” Sometimes they are “disabled,” or qualify as “vulnerable adults,” or are subject to “undue influence.” But each of those terms means something specific, and some variations even do double duty (with two related but distinct meanings). A recent California case pointed out the confusion engendered when litigants rely on similar but different terms.

Aaron, a widower in his late 90s, lived alone after the death of his wife Barbara. He had no children of his own, though he and his wife had raised Barbara’s daughter Connie together after their marriage — when Connie was four. Aaron’s other nearest relatives were two nieces, Cynthia and Diane. He didn’t have much contact with Cynthia and Diane, though that might have been because his late wife had discouraged contact over the years they were together.

Connie was actively involved in overseeing Aaron’s care. She arranged for his doctor’s visits, went to his home at least twice a week to check on him, helped pay his bills and generally watched out for him. She was concerned about his ability to stay at home, and on several occasions she found herself summoning the local police to make welfare checks on her stepfather.

After Aaron fell in his home, refused treatment, and suffered a frightening seizure, he was diagnosed as having a subdural hematoma (from his fall). He spent some time in a hospital, but was anxious to return home. His physician noted that he had a poor score on the mental status exam administered in the hospital, and diagnosed him as having dementia. He was discharged to a nursing facility, with Connie’s help.

Aaron hated the nursing home, and the assisted living facility Connie helped move him to after that. He insisted that he could return to his own home. About this time, his nieces began to visit him, and they tried to assist. They disagreed with his placement, and niece Cynthia prepared a power of attorney for Aaron to sign, giving her authority over his personal and financial decisions. After he signed the document, he asked his attorney to write to Connie, asking her to return his keys and personal possessions so that he could return home.

Connie filed a petition for her own appointment as conservator of Aaron’s person and estate (California, confusingly, refers to guardianship of the person as conservatorship). While that proceeding was pending, Aaron went to his attorney’s office and changed his estate plan — instead of leaving everything to Connie, he would split his estate into three equal shares, with one each for Cynthia, Diane and Connie’s daughter.

The probate judge heard evidence in connection with Connie’s conservatorship petition, but denied her request. The judge found that Aaron was clearly subject to undue influence, and might lack testamentary capacity — but he didn’t need a conservator (of his person or his estate).

How could that be? Connie appealed, but the California Court of Appeals ruled that the probate judge was correct. At the time of the hearing on the conservatorship petition, according to the appellate court, Aaron was alert, oriented and able to describe his wishes. The fact that he might have been incapacitated when he signed the powers of attorney, or that he might have been subject to undue influence when he changed his estate plan, was not dispositive of the question of his capacity at the time of the conservatorship hearing. Furthermore, the mere fact of incapacity would not be enough; by the time of the trial Aaron had a live-in caregiver who could help him manage his daily needs, and that could support the probate judge’s determination that no conservator (especially of the person) would be necessary.

Aaron and his attorney also argued that Connie didn’t actually have any standing to file a court action in the first place. After all, she was his stepdaughter, and not even a blood relative. The Court of Appeals rejected that notion; any person with a legitimate interest in the welfare of a person of diminished capacity has the authority to initiate a conservatorship proceeding. Conservatorship of Mills, October 20, 2016.

So what do the various terms mean, and how are they different? “Capacity” (and “competence”) usually refers to the ability to make and communicate informed decisions. “Testamentary” capacity is a subcategory, and requires that the signer of a will must have an understanding of his or her relatives and assets, and the ability to form an intention to leave property in a specified manner. “Vulnerable adult” is a related term, but is used in most state laws to refer to a person whose capacity is diminished, and whose susceptibility to manipulation or abuse is therefore heightened. “Undue influence” can arise because of limited capacity, but refers to the actions of third persons which overpower the individual’s own decision-making ability. “Disability” is, perhaps, the least useful of the terms — attaching the term does not say much about an individual’s ability to make their own decisions, since disabilities can be slight or profound, physical or mental (or, of course, both), and subject to adaptive improvement in any case.

In Aaron’s case, it might well be that his amended estate plan will be found to have been invalid as a result of undue influence, and his new powers of attorney might be set aside on the same basis. He might even be found to have been a vulnerable adult and any transactions benefiting his nieces might be subject to challenge. But he apparently had the level of capacity necessary to make his own personal and financial decisions at the time of the hearing on the conservatorship petition.

As an aside, there’s another issue in Aaron’s court decision: the inappropriate reliance on scores obtained on short mental status examinations. Typically, medical practitioners ask a short series of questions (“What is the year?”, “Please repeat this phrase: ‘no ifs, ands or buts'” and the like) as a way of determining whether further inquiry should be made into dementia and capacity questions. Aaron variously scored 14, 18, 24 and 20 on 30-point tests administered by several interviewers, and both the probate court and the Court of Appeals seem to have thought that the results demonstrated his fluctuating capacity (and general improvement). Those scores are only suggestive of incapacity, and should be an indicator that further testing might be appropriate. There is no bright-line score for determining incapacity on the basis of those short examinations.

State Court Does Not Control Social Security Payments

MAY 12, 2014 VOLUME 21 NUMBER 17

At Fleming & Curti, PLC, we do not handle divorce cases. From time to time, though, a divorce case raises the same kinds of issues that we see in the guardianship, conservatorship and probate cases we do handle.

A recent Arizona Court of Appeals decision is a case in point. It involves the divorce of a Navajo County, Arizona, couple, Donna and Edward. When the couple divorced in 2009, Donna was awarded custody of their four children. Edward was ordered to pay child support.

When Edward began collecting Social Security benefits on his own account, the children were entitled to receive $362 each per month. Social Security named Edward as “representative payee,” which meant that the children’s checks were made payable to him and he was required to account to the Social Security Administration each year.

Donna filed a petition with the divorce court to modify the support and visitation orders. She also alleged that Edward had been taking the children’s Social Security money and spending it as he saw fit — and that she should be the representative payee since she had sole custody of the children. At some point she apparently applied to Social Security to become the payee, and the payments were switched to her name. Still, she wanted Edward to account for — and return — the payments received for a nine month period starting right after the divorce.

The judge in the divorce court agreed, and entered a judgment against Edward (and in favor of Donna) for the amount of the payments he found to have been “misappropriated.” The judge also held Edward in contempt for failing or refusing to turn over the Social Security.

Edward appealed, and the Arizona Court of Appeals briefly reviewed the interrelationship of Social Security, state law and state courts. According to the appellate judges, Arizona state courts do not have any jurisdiction to review the management of Social Security payments made to a representative payee. The proper place to challenge Edward’s use (or possible misuse) of those funds was before the Social Security Administration itself. Peace v. Peace, May 8, 2014.

The Arizona appellate court, incidentally, was very candid in its assessment of the legal principles. It noted that some state courts (not in Arizona) have decided that they do have jurisdiction over Social Security representative payees, and others have held that state courts are preempted by federal law from intervening. The Arizona opinion specifically mentions a minority opinion in a 2013 Vermont case, LaMothe v. LeBlanc, which reviewed the holdings in several states — including Alaska, Maine, North Carolina, Ohio, Iowa and Tennessee.

What is the significance of the recent Arizona holding in probate court? An analogous situation arises frequently. Suppose that a parent with a disability receives Social Security benefits, and that his or her minor child is entitled to Social Security benefits. Now suppose that a grandparent or other family member has become guardian for the child, or that a professional fiduciary has become conservator to handle a personal injury settlement. Can the Arizona probate court order the parent to turn over Social Security payments, or to prove that they were expended for the child’s benefit, or even to relinquish authority as representative payee? The Peace decision would seem to say that none of those decisions are within the purview of the probate court — the guardian’s, conservator’s or custodial parent’s dispute is with Social Security, not the state courts.

Tax Tips for Those Caring for a Child with Special Needs

MARCH 17, 2014 VOLUME 21 NUMBER 11

We last wrote about income tax issues associated with providing care and support for relatives two years ago — just before tax filing time. Since we’re just a month away from tax time 2014, it’s a good time to review and update.

What’s changed since our 2012 newsletter article on income tax issues? A couple things. But first, let’s take another look at the structure of the personal exemption and medical deductions.

You, as an individual taxpayer, get to claim a personal exemption of $3,900 for 2013 (the tax year you’ll be filing for next month). That means that, in addition to other deductions and tax rate calculations, the first $3,900 of income is tax-exempt. If you are married and filing as a couple, each spouse gets a single exemption.

You get another exemption for each person you can claim as a dependent. The easy ones: your minor children who live with you. In fact, you get to claim an exemption for your children until age 19 or (if they are in school) age 24. There are also rules governing when you claim an exemption for your minor (or student) children who do not live with you, but who depend on you for at least half of their support.

What if your child is over age 24 and still living with you? If they live with you at least half of the time, and you provide at least half of their support, you may still be able to claim an adult child as a dependent. In fact, that will be available for a parent, a sibling, a stepchild or foster child, or any descendant of any of those relatives.

There are actually two completely separate sets of rules about when you can claim a child or other relative as a dependent. The two categories are confusing because of their names: “qualifying child” and “qualifying relative.” A “child” for these purposes could be a parent or other relative (why would they make the terms easy to understand?), and a qualifying “relative” can be a child. So it’s hard to figure out exactly which category your child-or-other-relative fits into, but bear with us — there are some simple rules that will cover most of the situations.

Did your child (or other relative) live with you for at least half of 2013? Did you provide at least half of his or her support? If either of those questions can be answered “yes,” then you might well be able to claim them as a dependent and get that extra personal exemption on your tax return. Is your relative permanently and totally disabled? If so, then the exemption is probably available. The central question in most cases: did you provide at least half of your relative’s support?

A couple rules are still important to understand: your dependent can not also be someone else’s dependent — even their own. If they claim a personal exemption on their own tax return, you can not claim another one. You (and they) should figure out which exemption is more valuable as part of your analysis of whether you provide half of their support.

Note that for income tax purposes all sorts of relatives can be a “child.” Illogically, even your parents can qualify under the “qualifying child” exemption. While you’re reading about the tax terms, keep in mind that they might not make plain English-language sense.

In addition to the personal exemption, there are other tax benefits available to someone who is providing support and assistance for a family member with special needs or high medical costs. If you itemize your deductions, you can claim expenses for medical costs. Once again, be careful about assuming the tax code is using plain language — all sorts of things are possibly included as medical expenses.

For instance, if a doctor tells you that you should modify your home by, say, building a therapy pool or installing air conditioning, you might be able to deduct those costs. It may be necessary to figure out how much the improvements increase the value of your home and make appropriate adjustments — though that is not always required. Improvements to enhance accessibility, for instance, do not need to have an enhanced value calculation. This area is tricky: be sure you consult with your attorney or accountant before claiming a deduction for home improvement or modification.

Another medical deduction that is often overlooked: seminars and conventions where you learn more about care of your child with special needs. Do you go to the annual meeting of advocates for your child’s particular disability? If his or her doctor writes a letter indicating that you can learn better caretaking measures there, you may be able to deduct the cost of travel, registration and incidentals incurred at the seminar (but not food and hotel costs). Check with your tax preparer for details applicable to your particular situation.

Does your child benefit from acupuncture, chiropractic treatment or recognized religious healing? The costs may be deductible. Does your child have a guide dog or other assistance animal? Those costs are deductible — including procuring, training, veterinary bills, even food. How about legal bills for your child’s guardianship or other expenses? Sorry, probably not — unless they are necessary to authorize mental health care.

Back to our beginning question: what has changed since our 2012 article? Two important things, at least:

  1. The personal exemption, $3,700 in 2011 (that was the important figure in our 2012 article), is $3,900 for 2013. It will almost certainly go up again for 2014, which will mean a new number if we repeat this information next Spring.
  2. The deduction for medical expenses required your total deductions to be more than 7.5% of your income two years ago. That figure increased for current tax returns (for 2013): you now have to have deductions for more than 10% of your income in order to itemize at all.

What other income tax advice can we offer for taxpayers who take care of a child or other family member with special needs? There are a few things to look out for:

  • Supplemental Security Income (SSI) and VA Disability payments are not treated as income at all. That simplifies tax filing (and reduces taxes) for some special needs trust beneficiaries with income from their trusts that might otherwise be taxable.
  • You may be able to claim a credit for the cost of caretakers for your spouse or dependent if the expenses are necessary to allow you to work. Look at IRS form 2441 and ask your tax preparer for more details. Note that this is not a deduction subject to the 10% threshold — this is a tax credit.
  • If you do claim your child with special needs as a dependent in 2014 (that is, on the return you file next year), you will need to be sure to have him or her covered by health insurance — although Medicare or Medicaid will satisfy this requirement if he or she is on either program.
  • Is there a special needs trust in place? It will have specific tax consequences that you need to discuss with your tax preparer and/or your attorney.

Maine Service Cutback Leaves Disabled Minor Without Program

FEBRUARY 6, 2012 VOLUME 19 NUMBER 5
Here’s an anecdote that we expect to see repeating itself over the next few years. It involves a fifteen-year-old boy with severe disabilities, and the Maine state Medicaid program. It also involves Maine’s efforts, like those of other states (including Arizona), to trim its eligibility roles for Medicaid, and the real problems that creates for individuals needing services.

CT (his full name is edited out of the reported court case) requires full-time, one-on-one adult supervision to prevent him from injuring himself. His mother applied for and got him on Maine’s program for home and community-based services, so that he could be cared for in a residential center or even at home rather than being institutionalized. That was in 2005 — two years after CT had been placed in a New Hampshire residential facility after failed trials in programs at his family home and in New Jersey.

CT’s mother assumed that getting him eligible for assistance from the State of Maine would mean that he would begin getting services — but that didn’t happen. The problem wasn’t his eligibility, but the availability of programs. He was placed on a waiting list in case a suitable placement opened up, but only twelve children in the state were getting services under the program and it didn’t look too promising.

Just after CT got eligible Maine decided to try to cut its Medicaid program by withdrawing its home and community-based services. Since those programs operate under a special waiver, it would be simple — Maine just stopped running a waiver program. But rather than re-institutionalize all patients already in the community, Maine announced that it would simply cut off new entries into the program, but would not remove services to those already receiving services.

Program officials assured CT’s mother that he would stay on the waiting list for placement. She received a letter from a program official telling her that Maine would “honor our mutual commitment to the children currently receiving, or those having already been approved for services in this waiver program.” Problem was, that letter was incorrect. Because CT was only eligible, not actually receiving services, he would be cut off from any future possible placement under the program.

Four years later CT’s mother finally got a residential home in Maine to make a proposal to care for CT. The proposal was contingent on funding through the waiver program he had been eligible for during those four years. Unfortunately, the Maine Medicaid agency denied the request, pointing to the 2005 cut-off of all new service requests.

CT’s mother appealed, arguing that she had relied on the state’s misrepresentations and that CT was injured by the reversal. The agency denied her again, and a judge upheld that denial. She appealed to the Maine Supreme Court.

The Supreme Court Justices upheld the denial of services for CT. They analyzed the arguments by applying the legal principle of “equitable estoppel.” Under that doctrine, the courts can give relief to someone who has relied on another person’s representations if that reliance has worked to their detriment. The courts can order a result that would not be possible under contractual or other theories, in order to prevent a miscarriage of justice.

There are at least two problems with the application of equitable estoppel to CT’s case, however. First, there is a general rule that one can not assert equitable estoppel claims against the state itself. If an agent of the state misrepresents state policy, that does not usually create a right to recover on behalf of someone who was injured by relying on that misrepresentation.

The second problem with applying equitable estoppel principles to CT’s case is more serious, though. The Supreme Court noted that, though CT (through his mother) relied on the state’s misrepresentation, he was not injured by that reliance. Yes, he was injured — by the withdrawal of eligibility that had previously been extended. But that injury did not occur because he relied on the state’s misrepresentation — it occurred because the state cut back its program.

The Court notes that if CT’s mother had found him a placement shortly after his eligibility, she could have gotten him into the waiver program before it was closed. But the Justices did not see any persuasive evidence that she would have found such a placement but for the misrepresentations that he would remain eligible for future placements if they opened up. Mrs. T v. Commissioner of Department of Health and Human Services, February 2, 2012.

What might CT’s mother have done if she had known how his eligibility would be cut off? She might have found him a placement in Maine more quickly, but in Maine, as in other states, there simply were not enough providers to take care of all the state’s residents with disabilities. As state budgets shrink, we can expect to see variations of CT’s story play out in other states as programs and services are withdrawn from a vulnerable and needy population.

Why You Should Not Create a Special Needs Trust

JANUARY 16, 2012 VOLUME 19 NUMBER 3
Let’s say you have a child with “special needs,” or a sister, brother, mother or other family member. You have not created a special needs trust as part of your own estate plan. Why not?

We know why not. We have heard pretty much all the explanations and excuses. Here are a few, and some thoughts we would like you to consider:

I don’t have enough money to need a special needs trust. Really? You don’t have $2,000? Because that’s all you have to leave to your child outside a special needs trust to mess with their SSI and Medicaid eligibility.

I can’t afford to pay for the special needs trust. We apologize that it can be expensive to get good legal help. But the cost of preparing a special needs trust for your child is likely to be way, way less than the cost of providing a couple month’s worth of care. That is what is likely to happen if you die without having created a special needs trust, since it will take several months of legal maneuvering to get an alternative plan in place. Even if there is no loss of benefits, the cost of fixing the problem after your death will be several times that of getting a good plan in place now.

I’ve already named my child as beneficiary on my life insurance/retirement account/annuity. Ah, yes — our favorite alternative to good planning. If your child is named directly as beneficiary, you may have avoided probate but complicated the eligibility picture. Their loss of benefits will occur immediately on your death, rather than waiting the month or two it would have taken to get the probate process underway. This just might be the worst plan of all.

It’ll all be found money to my kids. I’ll let them take care of it if I die. We have bad news for you: “if” is not the right word here. That aside, you should understand that a failure to plan means you are stuck with what’s called the law of “intestate succession.” That means (in Arizona — if you are not in Arizona you might want to look up your state’s law) that if you die without completing your estate plan, your spouse gets everything unless you have children who are not also your spouse’s children. If you are single, your kids get everything equally. If your child on public benefits gets an equal share of your estate, we will probably need to either (a) spend it all quickly or (b) put it into a “self-settled” special needs trust. That means more restrictions on what it can be used for, and a mandatory provision that the trust pays back their Medicaid costs when they die. All their Medicaid costs. Including anything Medicaid has provided before your death. Wouldn’t you like to avoid that result? It’s simple: just see us (or your lawyer if that’s not us) about a “third-party” special needs trust. The rules are so much more flexible if you plan in advance.

My child gets Social Security Disability (or Dependent Adult Child) Benefits and Medicare. Good argument. Because those programs are not sensitive to assets or income, your child might not need a special needs trust as much as a child who received Supplemental Security Income (SSI) and Medicaid (or AHCCCS or ALTCS, in Arizona). But keep these three things in mind:

  1. Even someone who gets most of their benefits from SSD and Medicare might qualify for some Medicaid benefits, like premium assistance and subsidies for deductibles and co-payments. Failure to set up a special needs trust might affect them, even if not as much as another person who receives, say, SSI and Medicaid.
  2. Even someone receiving Medicare will have some effect from having a higher income. Premium payments are already sensitive to income, and future changes in both Medicare and Social Security might result in reduced benefits for someone who has assets or income outside a special needs trust.
  3. If your child has a disability, it might be that a trust is needed in order to provide management of the inheritance you leave them. If they are unable to manage money themselves the alternative is a court-controlled conservatorship (or, in some states, guardianship). That can be expensive and constraining.

I’m young. We agree. And we agree that it’s not too likely that you will die in the next, say, five years (that’s about the useful life of your estate plan, though your special needs trust will probably be fine for longer than that). But “not too likely” is not the same as “it can’t happen.” You cut down your salt and calories because your doctor told you it’d be a good idea — even though your high blood pressure isn’t too likely to kill you in the next five years, either. We’re here to tell you that it’s time to address the need for a special needs trust.

I’m going to disinherit my child who receives public benefits and leave everything to his older brother. That will probably work. “Probably” is the key word here. Is his older brother married? Does he drive a car? Is he independently wealthy? These questions are important because leaving everything to your older child means you are subjecting the entire inheritance to his spouse, creditors, and whims. And have you thought out what will happen if he dies before his brother, leaving your entire inheritance to his wife or kids? Will they feel the same obligation to take care of your vulnerable child that he does?

I’ll get to it. Soon. OK — when?

I don’t like lawyers. We do understand this objection. Some days we’re not too fond of them, either. But they are in a long list of people we’d rather not have to deal with but do: doctors, auto mechanics, veternarians, pest control people, parking monitors. Some days we think the only other human being we really like is our barista. We understand, though, that if we avoid our doctor when we are sick the result will not be positive. Same for the auto mechanic when our car needs attention. Also for the vet and all the rest. In fact, the only one we probably could avoid altogether is the barista, and we refuse to stay away on principle.

Seriously — lawyers are like other professionals. We listen to your needs, desires and information, and we give you our best advice about what you should do (and how we can help). Most of us really like people. In fact, all of us at Fleming & Curti, PLC, really like people — it’s a job requirement. We want to help, and we have some specialized expertise that we can use to assist you. Give us a chance to show you that is true.

We also know a good barista.

What Preparation Do I Need For My Son’s 18th Birthday?

APRIL 4, 2011 VOLUME 18 NUMBER 12
My son will be 18 in a little more than a year. He is in high school, in the special education program. What do I need to do to prepare for his eighteenth birthday?

Excellent question. Assuming it is limited to legal matters (those are the only ones we’re particularly good with), we have a number of things for you to consider:

Guardianship. You may need to seek a guardianship in order to maintain your ability to make medical decisions for your son. You will undoubtedly begin hearing from all sorts of concerned (and mostly well-informed) people about how difficult and expensive that process is, and how you need to get a head start on it. Relax. The news is mostly good.

Arizona, like a number of other states, gives family members the ability to make medical decisions for an incapacitated relative. Parents have a high priority under Arizona law. Of course, if you are no longer married to your son’s other parent, that can mean a conflict over who will be first. It may be perfectly obvious to you, but the law assumes you and your ex have equal rights until a court decides otherwise — and a childhood custody order does not resolve the question.

Assuming you get along with your ex, or you are still married to your son’s other parent, does that mean no guardianship is necessary? Not exactly. There are some circumstances where it still might be appropriate to seek guardianship; you will want to consult with a lawyer who knows something about guardianship to review the concerns and options.

Some parents go ahead and file for guardianship even if it may not be completely necessary. They reason that they want the security of knowing they have legal authority, and that is not a foolish mistake. Other parents reason that they want to maintain as much autonomy and self-determination for their children as possible, despite whatever limitations they might have. That is also not a foolish point of view. What does that mean? Every family circumstance is a little bit different, and good advice is needed.

If you do decide to file for guardianship, there probably is no rush. The Arizona legislature is right now considering changes that would allow you to file before your son turns 18, but until those changes are final (perhaps by September of this year) you can’t really file until after that anyway. The process will take about six weeks, and probably cost about $1,500 to $2,000 in legal and filing fees. That assumes, of course, that it is clear that your son needs a guardian, and that he doesn’t disagree.

One thing that would help with the decision-making process, and get everything going more quickly: get a letter from your son’s physician that indicates whether the doctor thinks he can make medical and personal decisions on his own. That letter will be necessary for the permanent hearing anyway, and it will help us counsel you on whether and how to proceed.

Child Support. Is there an old child support order requiring your ex to pay you monthly? Arizona permits child support to continue past age 18 if the child is disabled. You need to jump on this issue right away.

One caveat: child support (whether it is paid to you, directly to your son or to someone else on his behalf) will probably keep him from getting Supplemental Security Income (SSI) payments — unless you plan carefully. This is not a simple issue, and few divorce lawyers have dealt with the kind of planning necessary to keep child support and SSI both coming in. We need to talk about this one at some length.

Social Security. Is your son now receiving Supplemental Security Income (SSI) payments? If not, it may be because of your assets and income, which are imputed to him for eligibility purposes. If that is the case, your assets and income will no longer count once he turns 18. If he is “disabled” (and that’s different from “has a disability”) then it would be good to get that established and get SSI benefits flowing immediately.

Promptly after your son’s 18th birthday you should apply for SSI for him. If he gets it, he will automatically qualify for AHCCCS (Arizona’s Medicaid program). That will also help assure that he gets services from the Division of Developmental Disabilities (DDD) if his disability is developmental.

There are a number of things to keep in mind once your son’s SSI eligibility is set:

  • If he lives with you without paying rent (or paying toward the costs of his food and shelter), his SSI will be reduced by about $250 per moth (the number changes with the maximum SSI benefit rate). If that happens, you might consider charging rent as a way of increasing his benefit — but it won’t change his eligibility for AHCCCS.
  • In any event, it is important to get his disability established by Social Security before he turns 22. If you do, then he will probably qualify for dependents’ and survivors’ benefits under your Social Security account. That means that when either of his parents retires, his SSI may suddenly switch to Social Security (or a combination of Social Security and SSI) and he will qualify for Medicare coverage instead of (or in addition to) his AHCCCS coverage. Similiarly, upon the death of either parent his benefit will probably bump up again.
  • If you help your son secure employment, perhaps in a family business or other friendly and unchallenging environment, he may lose his future eligibility for Social Security benefits on your account. That might not be best for him long term. Same result if he marries — it can cut off his future dependents’ or survivors’ benefits.

Graduation. You may want to have your son graduate with his high school class. It is often a matter of pride and self-respect, and friends and family may have encouraged that perspective for years. Unfortunately, graduation might not be best for your son.

Programs offered through the school systems are often more appropriate, more easily available and better staffed than those offered to adult participants in DDD-sponsored programs. Usually students who have been identified as developmentally disabled can stay in high school until age 22; that is often in their best interests. You might talk to lawyers familiar with the local social service scene, and to parents of other children who have been through the graduation decision.

UTMA Accounts. Do you have an old Uniform Transfer to Minors Act account you (or maybe your parents) set up for your son years ago? It’s time to deal with that, too. The good news: you actually still have a couple years. Rather than ending at 18, they mostly end at age 21. But when that day arrives, the UTMA account will keep your son from receiving SSI benefits and maybe even AHCCCS. Let’s get that problem dealt with in advance.

Estate Planning. When your son was still a minor it was important that you sign a will identifying your choice for his guardian if you had died. Thank goodness you are going to make it to his majority — but the problem hasn’t gone away. You still need to do your own estate planning, or to update it if you have already done it.

Have you created a special needs trust to receive any share you intend to leave to him? Do you have life insurance, IRAs or retirement accounts, bank accounts or even real estate listing him as beneficiary? You need to get on this project right away — you are now almost two decades older than you were when you first thought about his future care.

How to Leave Your IRA to a Trust — And Why You Might

OCTOBER 4, 2010 VOLUME 17 NUMBER 31
Last week we wrote about how you can go about leaving your IRA (or 401(k), 403(b), etc.) to a child with a disability. In passing we mentioned that the discussion about how to leave your IRA to any trust could wait for another day. Today is that day. Let’s tackle this as a Q&A session (or, if you prefer, we can call it a FAQ list).

Can I name a trust as beneficiary of my IRA?
Yes. That was easy.

Are the rules the same for 401(k), 403(b) and other retirement accounts?
Generally, yes. If you have more esoteric retirement accounts, talk to someone to make sure you are doing the right thing. What the heck — talk to an expert in any case. Our purpose here is just to give you some background and introduce the language and issues, not to give you direct legal advice.

Before you tell me how to do it, why would I want to name a trust as beneficiary of my IRA?
There are several reasons you might:

  • If you have a child who is a spendthrift, or married to a spendthrift, or who is involved in tax issues or legal proceedings, you might want the retirement account to be protected against creditors.
  • If you worry that your child might get divorced and want to keep your retirement account out of the divorce calculations and proceedings, a trust might help protect the account (and, for that matter, other assets you are considering leaving to that child).
  • You might just want to delay the withdrawal of your retirement account as long as possible. Of course, you could name your child as beneficiary and trust him or her to withdraw the money as slowly as is permissible. With a trust you can help assure that “stretch-out” of the IRA.

Why is my banker/broker/accountant telling me I can’t name a trust as beneficiary?
That used to be the rule, and lots of professionals are not yet caught up. There are also a couple of special rules that apply when you name a trust as beneficiary — though they are not at all hard to comply with, so it’s not clear why advisers get hung up on those rules. Finally, even though the rules permit naming a trust as beneficiary they do not require all account custodians to go along — so your broker might be telling you that, while the rules permit naming a trust, your account can not take advantage of those rules.

If I want to name a trust as beneficiary, what must I do?
There are a handful of requirements. The important ones: give the IRA custodian a copy of the trust (that, by the way, can be taken care of later — but you can do it now if you want), name only one income beneficiary for the trust, and make sure your beneficiary designation comports with the trust set-up and your larger plans. That probably means you should get competent professional assistance, but that’s usually a good idea for your estate planning anyway.

Are there bad things that happen if I name a trust as beneficiary?
Yes, but not very bad. Depending on the ages of all the beneficiaries and potential beneficiaries, you might have shortened the stretch-out time to a period less than the life expectancy of the primary beneficiary.

Uh, could you please repeat that — in English?
Of course. Let’s use an illustration.

Suppose you have three children: Abigail, Ben and Candy. You are OK with Abbie and Ben getting their shares of your IRA in their names — you trust them to make sound judgments about how quickly to withdraw the money, and you don’t want to bother with a trust for them. Candy is a different story. The details of that story don’t matter: you just want to put Abigail in charge of deciding whether to withdraw more than the minimum amount each year from Candy’s share of the IRA.

You can name a trust for the benefit of Candy as beneficiary of 1/3 of your IRA (naming Abbey and Ben as the other two beneficiaries outright). But what will happen if Candy dies before the IRA is closed out?

As it happens, Candy does not have children. You decide to have the trust say that upon Candy’s death the remaining trust interest in “her” share of your IRA will go to Abigail and Ben. Abigail is ten years older than Candy. That all means that Candy will have to make her IRA withdrawals using Abigail’s age and life expectancy.

But wait. Candy does have children?
Well, why didn’t you say so? That makes it even easier. You can have the trust provide that if Candy dies before the last IRA withdrawal her children become the beneficiaries of the trust (and, indirectly, the IRA). As before, we use the oldest potential beneficiary as the determining age — and we are going to assume for the sake of this piece that Candy is older than all of her children. No effect on Candy’s withdrawal rate. But note that if Candy does die, her children will still have to withdraw from the IRA at Candy’s rate, not their own.

What about estate taxes?
Now you’re talking about a whole different kettle of fish (or something). As you know, the estate tax situation is in flux right now, and some states have their own estate tax rules. That makes it very hard to generalize, and unnecessarily complicates this discussion. Suffice it to say that your IRA will be part of your estate for estate tax purposes, and just because there is income tax due on it does not mean that there won’t also be an estate tax liability attached to it. But if your entire estate is worth less than $1 million, you probably are not going to care very much. Stay tuned for a new number to be inserted in that sentence sometime before the end of 2010.

That sounds pretty simple. Could you please make it more complicated?
We’d be happy to, but it’s not required. We could give you information about what lawyers call “conduit” trusts and “accumulation” trusts. We could explain why you can’t have the money go to a charity upon Candy’s death. We could even try to give you some better names for your imaginary children (while still adhering to the A, B and C convention). But for most of our clients, those complications are unnecessary.

The bottom line: it is not that hard to name a trust as beneficiary of your IRA, 401(k) or other qualified retirement plan. You just need to review the rules, and understand why you might want to do such a thing.

It is also permissible to consider all that, try to get the rules straight, and then decide not to bother. One thing that we don’t want to allow you to do, though: ignore the issue, prepare a will that seems to handle all of your assets, and then have an IRA beneficiary designation that doesn’t agree with the rest of your estate plan, imposes an undue burden on your children and beneficiaries, or fails to address your child’s disability, money problems or legal or financial situation.

We hope this has helped demystify a subject that lawyers and accountants often seem to enjoy complicating. Your life, however, tends to be complicated. Please get good legal, financial and investment advice before you decide what you should do.

Support Can Be Awarded After Child’s Majority In Some Cases

APRIL 12, 2010  VOLUME 17, NUMBER 12

Most people are familiar with modern concepts of child support. It can be awarded to the custodial parent in a divorce proceeding. The amount of support is usually calculated by reference to standardized computations promulgated by the courts. A support award usually includes an automatic assignment of wages to help ensure the payments get made. It ends when the child reaches age 18. Wait — that last one is not necessarily correct.

Most states (Arizona included) permit courts to order continued child support for an adult child with a serious mental or physical disability. The rules vary from state to state, but Arizona’s approach is not particularly unusual. If you are concerned about this issue because you know about an adult child with a disability living in another state, be sure to check that state’s laws before assuming the Arizona rules are identical.

In Arizona, child support can be awarded to an adult child with a disability if:

  • The child is severely disabled, either mentally or physically, and is “unable to live independently and be self-supporting,”
  • The disability began before the child turned eighteen, and
  • The court considers the financial resources and needs of the child and both parents, along with the effect of the disability on those needs.

[There are actually two circumstances in which child support can extend past age 18 under Arizona law. The court can also continue child support until age 19 if the child is still in high school.]

See Arizona Revised Statutes section 25-320(E) for the precise language of Arizona law. Note that the law does not require the parents to be divorced, separated or even pending divorce or separation. A court proceeding can be initiated solely for the purposes of establishing support requirements, and the resulting order can be directed against either or both parents — including against a parent with whom the adult child lives. Note also that the support request does not have to be filed before the child reaches age 18, though the disability itself must begin before that age.

A recent Arizona Court of Appeals case dealt with the issue of support for an adult disabled child. In Gersten v. Gersten, decided November 17, 2009, the appellate court dealt with a trial court decision denying support payments to the father of an adult child with a disability only because the father had not been appointed as his son’s guardian or conservator. The Court of Appeals directed that the matter be returned to the trial court, and the son’s interests considered either by having a guardian or conservator appointed or by joining him as an actual party to the divorce proceedings.

One common problem when support is ordered paid to an adult child with a disability (or to the parent with whom the child lives): the support will be treated as income for Supplemental Security Income (SSI) eligibility purposes. See, for example, the Social Security Administration’s POMS section SI 00830.420(C), which sets out the procedure an SSI eligibility worker must follow when assessing child support payments for an adult child with a disability.

That may mean that the support order reduces the beneficiary’s check by almost as much as the support order, and it might even result in elimination of SSI. That, in turn, might lead to the loss of Medicaid benefits paid for through the Arizona Health Care Cost Containment System (AHCCCS).

In some cases it might be possible to maintain eligibility for public benefits and still seek an award of support for the benefit of an adult child with a disability. A special needs trust for the benefit of the child support recipient can be set up (perhaps even by the court ordering the support) and the monthly payments assigned to the trust. The process is not always simple or straightforward, and an experienced attorney should be consulted.

Deductions for Taxpayers and Families With Special Needs

APRIL 5, 2010  VOLUME 17, NUMBER 11

Tax time is upon us yet again — just like last year and the year before. Funny how it rolls around every twelve months. OK — “funny” might not be the best word.

There is a certain irony in describing the tax deductions available to families raising or caring for a child with special needs. What families usually need is help (both financial and otherwise), and tax deductions may not provide much help for the family with income limited by the need to provide care for their child. Still, some deductions may be useful and many often go unclaimed; perhaps we can alert you to one or more you should consider while preparing or filing your own tax returns.

Claiming a dependent. Are you providing more than half the financial support for a person with a disability? You may be able to claim them as a dependent on your tax return. Of course, that means no one else can claim them as a dependent — including themselves.

Medical deductions. Remember that medical deductions are only useful on your federal income tax return to the extent that they exceed 7.5% of your adjusted gross income. Let’s use real numbers: if your income is about the national median this year, you will report something like $45,000 to $50,000 of income. In that case the first $3,500 (or so) of medical expenses you incur will not affect your tax return at all.

With that in mind, there are still expenses you should track. You might find that the 7.5% limit is easier to reach than you thought. You might also live in a state that does not apply the limitation (Arizona, for instance), so that medical expenses should be tracked.

What medical deductions most often get overlooked? Expenses for special schools might be deductible as a medical expense — if a medical professional has signed a recommendation. Tutoring, specialized books and software, evaluations and transportation might also be includible. Sometimes even special summer programs, residential schools — even disability-focused conferences — may be deductible as a medical expense.

Child and Dependent Care Credit. This one is not a deduction, but a credit — and that makes it valuable even for those who might not have enough medical expenses to deduct them. The credit is available to parents who have to pay caretakers in order to work (and earn income). The amount of the credit: up to 35% of the care costs incurred. See IRS Publication 503 for more information.

There are also other deductions and credits you might be overlooking. We were recently interviewed for a television report that indicated up to 30% of families with special needs children may failed to claim tax benefits due to them.

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