Posts Tagged ‘joint bank accounts’

Unreachable Joint Account Makes Applicant Ineligible for Medicaid

NOVEMBER 14, 2016 VOLUME 23 NUMBER 43
Paul (that’s not his real name) needed long-term care. His health and his mental capability had both declined, and he could no longer handle his personal affairs nor take care of himself.

Paul’s assets included a car (titled in his and his daughter’s names) and three Bank of America (its real name) bank accounts. Those assets put him over the $2,000 eligibility limit for Arizona’s version of the federal/state Medicaid program, the Arizona Long Term Care System (ALTCS).

One problem: Paul’s daughter had her name on the bank accounts and on the car. She had the car in her possession, in fact — and she refused to turn it over.

Before he became incapacitated Paul had signed a power of attorney naming his sister as his agent. She went to Bank of America to get control of Paul’s accounts so she could use the money to pay for his care — and ultimately get him eligible for ALTCS coverage. That’s when she learned about a Bank of America rule: both signers on a joint account are permitted access the account, but an agent under a power of attorney may not exercise that authority on behalf of one owner without the other’s consent.

In other words, Paul’s sister could not close the account, remove Paul’s daughter’s name from the account, or even withdraw money to pay for his care — unless his daughter signed a form letting her do that. And Paul’s daughter refused to sign.

Paul’s sister applied for ALTCS coverage on his behalf. Even though he had assets over the $2,000 limit, she argued that those assets were actually unavailable. ALTCS regulations permit applicants to become eligible when assets are unavailable, and Paul’s sister argued that the situation with Paul’s bank accounts was no different from real estate owned jointly with an uncooperative family member, for instance.

ALTCS disagreed. The agency determined that Paul could get access to his own account if his sister just initiated a court proceeding — a conservatorship of his estate. Consequently, ALTCS declined to grant him eligibility.

Paul appealed (through his sister, of course). The court considering the agreed with her, and ordered ALTCS to cover Paul’s care costs. ALTCS appealed from that decision.

The Arizona Court of Appeals last week issued its opinion in the case. It agreed with the ALTCS agency, ruling that Paul could have access to the account by having his sister initiate a conservatorship. As conservator, reasoned the appellate court, she could then withdraw money from the account for Paul’s care — and that made the whole account a countable, available resource. Paul’s ALTCS eligibility was denied.

The Court of Appeals acknowledged that there would be some cost and difficulty getting access to Paul’s money. That, though, was not enough to prevent counting the asset as available. “Any practical inconvenience or accessibility difficulties are not relevant to determining whether assets are to be counted,” ruled the judges. McGovern v. AHCCCS, November 8, 2016.

The decision in Paul’s case simply fails to deal with the practical realities facing Paul and people in his circumstances. The opinion does not make clear how large the joint accounts might have been (except that they obviously exceed $2,000), but the practical reality is that a conservatorship proceeding might well cost thousands of dollars — and could cost even more if Paul’s daughter simply objected. She, after all, would have a higher priority for appointment as conservator than his sister, and her side of the story about the accounts is simply unmentioned in the appellate decision.

Even if Paul’s sister was appointed as conservator, that does not guarantee that she could get access to the accounts. Bank of America might well insist on getting the joint owners’ consent to close an account, or make other changes in the account structure. Paul’s daughter, when faced with the likelihood of losing the accounts, might actually close them out; she would not be hamstrung by the Bank of America rule about powers of attorney, after all.

And Paul’s vehicle? As joint owner, his daughter has absolute right to possess and use the vehicle. Getting it back for Paul, or forcing his daughter to buy out his interest, would almost certainly cost more than the value of the vehicle — and might not be successful even after significant expenditures.

The outcome is especially odd since ALTCS easily recognizes that joint ownership creates problems for other kinds of assets. Joint tenancy real estate, owned with a family member? No problem — eligibility can be granted (though it is described as “conditional” eligibility, requiring the ALTCS recipient to make efforts to sell their fractional interest). But bank accounts — even small accounts worth far less than a piece of real estate — are treated differently. Or at least the bank accounts in Paul’s case were treated differently.

Another irony: Paul had actually died before his case even got to the appellate level. The dispute was about whether ALTCS would have to pay for the care he had already received — and (though the opinion does not clarify this point) it is likely that his care facility is the one left without recourse, not his sister and not his daughter.

Creating Your Trust: Dealing With Specific Assets

DECEMBER 28, 2015 VOLUME 22 NUMBER 48

When our clients establish revocable living trusts, we help them transfer assets to the trust’s name. That’s not unique — most law firms help clients through the process. This is often referred to as “funding” the trust, and it can be more complicated than it seems like it might be.

Some asset transfers are relatively straightforward. A deed can transfer your home and any other Arizona real estate into the trust. A trip to the bank and another to your stockbroker can complete those transfers (we can’t make those changes directly from our office, but can give you help and directions). There are a number of assets, though, that will often require some special considerations. Depending on your circumstances, those might include:

IRAs and other retirement accounts. These are often the most challenging. Depending on your family situation and the terms of your trust, it might be important to name the trust as a beneficiary (or maybe an alternate beneficiary) on your retirement accounts. For the next person in similar circumstances, it might be a mistake to name the trust as beneficiary. There are specific rules that have to be addressed, and this one requires some individualized attention.

Out of state real estate. This is often the most important item to transfer into the trust’s name and, unfortunately, we usually can’t help you with that transfer. We aren’t familiar with deed practices in other states, and aren’t qualified to practice law in those states, either. Unfortunately, your (or we) will need to make arrangements with a law firm in the other state to complete the transfer. We’ll take care of the details, but it will add another cost to the establishment of the trust.

Your home. Normally we want your home transferred into the trust’s name, but not in every circumstance. For people with special property tax breaks, for instance, it might be important to keep the home in the owner’s individual name. We might be talking about creating a “beneficiary deed,” an option Arizona permits for transfer of real estate to another person — or to a trust — automatically on your death.

Life insurance. Often we counsel that you should name the trust as beneficiary on your life insurance policies, but not in every instance. One difference: if the life insurance goes straight to beneficiaries, it clearly is not liable to claims made against your estate or trust. If you name your trust, or your estate, as beneficiary, you could be subjecting the life insurance to those claims. This is normally not a big issue, but we do need to think about it for a few moments before naming beneficiaries.

Vehicles. We usually do not push clients to transfer their cars into the trust, partly because the difficulty and cost are greater for this transfer than for many others. Besides, under Arizona law we can collect up to $75,000 of your assets even if they are outside the trust at your death, and few clients have vehicles worth that much. We do suggest that you think about the trust next time you buy a car, and ask about titling it to the trust. Make sure your insurance agent knows about the title to the car, and that your insurance is not affected (it shouldn’t be, but double check). Arizona permits a “transfer on death” designation for car titles, and sometimes we like to employ that approach to ensuring that the vehicle transfer is not a problem when you die.

Some vehicles are more valuable, or more problematic for other reasons. We have transferred airplanes, recreational vehicles and commercial trucks to trusts; the importance of accomplishing the transfer is clearer when the value of the vehicle is larger.

Let us also mention another problem that comes up frequently with vehicles. Suppose you intend to leave your house and all its contents to one beneficiary. Is the car parked in the garage included? You get to decide, but simply saying “house and its contents” might leave a significant asset unresolved.

Annuities. The choice of owner and beneficiary for annuities will vary depending on income tax issues, purpose of the annuity and its change in value over time. As with retirement accounts, it can be hard to generalize about annuities. We’ll need to discuss this asset class.

Operating bank account. What about the bank account you use for direct deposit of your Social Security and retirement payments? Should it be titled to the trust, or kept in your individual name? We generally prefer that you transfer even that account to the trust’s name, but that will usually mean a new account, new checks (they can still carry your individual name) and new debit cards. Another option: keep one small operating account outside the trust, but name the trust as “payable on death” beneficiary.

Clients frequently establish a living trust, transfer all of their assets to the trust, then worry about making sure there’s money available for emergencies “in case something happens” (by that they usually mean “when I die,” but that’s hard to say). There’s no need for an emergency account — the trust authority automatically transfers to your successor trustee on death, and the delay in getting access to the accounts will normally be very short.

Are you worried about having money immediately available? You might think about naming the daughter who will be your successor trustee as co-trustee instead. Give her immediate authority to manage trust assets, and she won’t have to prove your death in order to take over responsibility that she already has. Besides, creating even a small account with her as a joint owner invites family disputes about whether that account was supposed to be inside the trust or separate.

Our takeaway: “funding” your trust is more complicated than it looks like it might be. Talk to us about the best way to handle your various asset types. We can help figure this out.

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