Bulletin: TX2013001

Dear Associates:

Although changes may occur in the near future because of changes in the US Tax Laws, current tax laws and similar provisions require a review of our Company position on elder law planning and related documents.

Definition: For the purpose of this bulletin only, an Elder is defined as a person 65 years or older or who has been judicially declared incapacitated physically so as to require living in a residential facility or incapacitated mentally so as to be incapable of handling their affairs and a guardian of the Elder’s estate has been appointed by a court of competent jurisdiction. Other situations such as age variations or housing accommodations may apply which will require individual approval by a Texas underwriter.

Various federal programs provide aid in the situation described above (and others) under rather strict limitations; especially on the assets of the Elder receiving benefits. Information about the various Medicaid programs can be obtained from www.dads.state.tx.us. Each program has a separate Handbook. Medicaid Assistance Program and Medicaid Assistance waiver programs are governmental programs that provide many benefits including medical care, housing, and rehabilitation, as well as durable goods for those persons who meet certain physical and financial guidelines. When an individual has few resources (assets), a small monthly income and a medical need, the individual may be eligible for a specific Medicaid program. The most commonly accessed benefit is the Long Term Care Medicaid nursing home benefit.

One reason that title companies and Elders and their families come into conflict is the fact that Federal law places income and asset limitations on those receiving benefits. For example, all non-exempt resources of both spouses are counted toward the resource limitation regardless whether the property is community or separate. One-half of the couple's resources will be set aside for the well spouse (referred to as the “community spouse”) with a minimum set aside amount of $22,728 and a maximum of $113,640 (for 2012). The institutionalized spouse can only keep $2,000 in countable assets to meet asset eligibility requirements. As a result of the $2,000 asset limit, the institutionalized spouse must transfer any countable assets out of his/her name to the community spouse. Failure to transfer assets from the institutionalized spouse to the community spouse will result in disqualification for Nursing Home Medicaid benefits.

Thus it is easy to see why the individuals need to make intra-family conveyances and are unhappy when title company restrictions stand in their way. At the same time, title companies have created safeguards because of the very real protections contained in the Texas Constitution and enforced by Texas Courts. The purpose of this bulletin is to strike a balance between the real needs of Elders and their families and the need of the title company to protect it against fraudulent transactions and the resulting losses and expenses.

While this bulletin does not purport to provide guidance for anyone’s estate or elder care management, it does set out the basic concepts that Stewart Title Guaranty Company will be looking for in underwriting Elder care transactions.

Powers of Attorney

Stewart Title Guaranty has expressed its preference for the Statutory Durable Power of Attorney form to be used in most situations. In an Elder care situation, we greatly prefer that language be included in the document that specifically recognizes the need for Elder care and authorizes certain intra-family transactions. Such language should be substantially in the following format:

1. A recognition that the Maker of the POA may need Elder care in the future; 

a. Such as Medicaid long-term nursing home care benefits or Community Based Alternative benefits or any related need-based governmental benefit; 

2. Grant the Agent the specific power to: 

a. Gift and transfer any assets without limitation to the Grantor's spouse to be characterized as the sole and separate property of such spouse. 

3. Provide that evidence of the agent's power shall be: 

a. A copy of the completed and filed application form necessary to apply for a need-based government benefit.

4. Provide assurance that filing of such application form combined with the transfer of property to the Grantor's spouse without necessity of any order of action shall be conclusive evidence of the change in character of property as such spouse's sole and separate property.

Stewart Title Guaranty Company has serious concerns when one spouse transfers title to the other for no apparent reason. Accordingly, so-called Lady Bird or deeds on death will likely be rejected unless they contain language that explains the situation as one involving Elder care. The State Bar of Texas form book contains suggested language to accomplish the goals of the parties while providing explanatory language. Such language would provide substantially as follows (note the following suggestion contains enhanced Elder Law language):

For Grantor and Grantor’s assigns, a reservation of the full possession, benefit, and use of the Property for the remainder of the life of Grantor, as a life estate.

Grantor further retains complete power, without the joinder of any person, to mortgage, sell, and convey the Property, in whole or in part, and to spend any proceeds; to exchange it for other property; to lease the surface and subsurface of the Property; to execute and deliver oil, gas, and other mineral leases for any term of years and for a term based on the continuing production of oil, gas, or other minerals from the Property, ending either before or after Grantors death; to grant any interest in the Property, by gift, sale or otherwise, so as to terminate the interests of Grantee, as Grantor in Grantor’s sole discretion shall decide; and to invest and reinvest all proceeds from the sale or other disposition of the Property; to possess and consume all proceeds from the sale or other disposition of the property to the exclusion of  Grantee. This life estate carries with it the right to possess and consume all bonuses, delay rentals, royalties, and other benefits payable on any mortgage, sale, or conveyance under oil, gas, and other mineral leases covering the Property at the inception of this life estate without any duty to the remainderman and without liability for waste.

Grantor further reserves the right to cancel this deed by further conveyance, even to Grantor, which may destroy any and all rights which Grantee may possess under this deed.

Grantee shall hold a remainder interest in the Property and upon the death of Grantor, if the Property has not been previously disposed of prior to Grantor’s death, all right, title and interest to the Property remaining shall fully vest in Grantee, subject to such liens and encumbrances existing at that time.

For more detailed analysis of Elder law issues, the reader is referred to a copyrighted paper on the subject presented to the 2012 Texas Land Title Institute by:

KRISTEN QUINNEY PORTER
Kiesling, Porter, Kiesling & Free, P.C.
Board Certified – Residential Real Estate
348 East San Antonio Street
New Braunfels, Texas 78130
830-625-7531

And

PATRICIA F. SITCHLER
Schoenbaum, Curphy & Scanlan, P.C.
Certified as an Elder Law Attorney,
as recognized by the Texas Board of Legal Specialization
112 East Pecan Street, Suite 3000
San Antonio, Texas 78205
210-224-4491

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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