Jan Neal Law Firm, LLC

Alabama Estate, Elder and Special Needs Law


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Selling Life Estate Property

A life estate deed can be a great tool for passing property after death.  A couple might give the property to their children and reserve a life estate for themselves until the last of the two dies.  The couple retains their homestead exemption status for life, and at death the property will automatically belong to the children without the need to probate anyone’s will.  Also the child will have a stepped up tax basis in the property which is the fair market value on the date of death of the last life tenant.  An additional benefit is the fact that Medicaid will not count the life estate as a resource if the life estate deed was executed five years prior to Medicaid application, and the property would not be subject to Medicaid Estate Recovery since it will never be probate property.  That all sounds like a win, win situation, right?

It is, except for one thing.  If the couple decides to sell the property they will need the children to sign off on the sale because the children are now joint owners with the parents.  The parents own use of the property NOW, and the children, as remaindermen, own the FUTURE use of the property.

Often a life estate deed is given with the goal of keeping property in the family, but that is not always the case.  Sometimes the life tenants want to sell the property to obtain funds for any number of purposes. With this in mind, before signing a life estate deed it is important to make sure the remaindermen would be willing to relinquish their interest and sign off on any sale of the property.    


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Who Can Make a Will?

A person must be 18 years of age and of sound mind to make a valid will in Alabama.

Although a person does not reach the full age of majority in Alabama until he reaches the age of 19, he can execute a will at age 18.

To have testamentary capacity the person making the will, who is known as the testator, must understand the business and consequences of making a will.  He must be able to remember the property being given in the will, the persons who are his next of kin, and how the property will be disposed of in the will. 

Interestingly, case law in Alabama states that a person may have testamentary capacity while not having the ability to transact ordinary business of life.  This would lead to the conclusion that testamentary capacity is actually lower than capacity required to make a power of attorney.    

Alabama law presumes that all persons 18 and over have the capacity to make a will, but ethics would require an attorney to screen for capacity before preparing a will.  When a will is offered for probate and challenged for lack of capacity, the person challenging the will must prove that the testator lacked testamentary capacity at the time he or she signed the will. 


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Beware Medicare Advantage

Medicare Advantage plans flood the market with advertising leading consumers to believe that they are missing out on the best coverage possible without an Advantage plan as opposed to Original Medicare.

True, Medicare Advantage plans often look attractive because they offer the same basic coverage as original Medicare at a seemingly lower cost, plus some additional benefits and services like vision and dental care that traditional Medicare doesn’t offer. One reason Medicare Advantage plans can offer such enhanced services is because the federal government gives them additional payments compared to Original Medicare.

But, according to the Department of Health and Human Services’ Office of Inspector General, there is a downside to signing up for Medicare Advantage. In an alarming number of instances, private Medicare Advantage plans are denying coverage for medical services that would be covered under original Medicare, according to a federal investigation.  These denials are likely preventing or delaying medically necessary care for tens of thousands of Medicare Advantage beneficiaries each year.

The investigation by the inspector general found that 13 percent of Medicare Advantage plan denials should have been covered under Medicare.  The findings were based on a review by doctors and coding experts of service denials by 15 of the largest Medicare Advantage plans during the first week of June 2019.   Extrapolating from their findings, investigators estimate that nearly 85,000 beneficiary requests for medical care — everything from MRIs to skilled nursing facility care — could have been wrongly denied in 2019.

In an even higher proportion of cases, plans are incorrectly refusing to pay claims. Nearly one-fifth of claims that Medicare Advantage plans initially declined to pay were for services that met Medicare coverage and plan billing rules.  This translates to an estimated 1.5 million refused payments for all of 2019, which delayed or prevented payments for services that providers had already delivered.

Hidden Barriers to Care

Some 26 million Medicare beneficiares were in Medicare Advantage plans as of 2021, more than double the figure a decade ago.  The Congressional Budget Office projects that by 2030 more than half of Medicare beneficiaries will be in a private Medicare plan. Unlike original Medicare, where the federal government is the insurer, Medicare Advantage plans are run by private insurance companies. The government pays the plans a fixed monthly fee to provide services to each Medicare beneficiary under their care. The less money the plans spend on patient care, the more they and their investors make. In this way, plans have an incentive to keep costs down.

For many beneficiaries, Medicare Advantage plans’ most disagreeable cost-cutting strategy is “preauthorization” — the common requirement that doctors and other medical providers obtain the plan’s approval before a beneficiary can receive certain medical services. If the plan administrators disagree that a procedure is medically necessary, the plan may refuse to pay for it.

“[B]eneficiaries enrolled in Medicare Advantage may not be aware that there may be greater barriers to accessing certain types of health care services in Medicare Advantage than in original Medicare,” the report states.

One example highlighted in the report tells of a Medicare Advantage plan that refused to approve a followup MRI to find out whether an adrenal lesion was malignant because the lesion was allegedly too small. In fact, Medicare’s rules do not restrict the use of followup MRIs based on the the size of a lesion. (The plan reversed its initial denial on appeal.)

Denial Appeals Can Work

The report identified two common causes of service denials. First, even though Medicare Advantage plans’ clinical criteria cannot be “more restrictive” than Medicare’s coverage rules, plans often used tighter clinical criteria, such as requiring an x-ray before approving more advanced imaging. Second, plans often claimed that the request for services lacked sufficient documentation, even though investigators who reviewed the denied claims found that the existing medical records were sufficient to support the request.

When a Medicare Advantage plan denies a preauthorization or payment request, the beneficiary can file an appeal with the plan.  The inspector general found that when a beneficiary or provider appealed or disputed the denial of a service that met Medicare’s coverage rules, plans sometimes reversed the denial.  And in certain cases, Medicare Advantage plans corrected their own errors.

The inspector general’s report offers several recommendations for the Centers for Medicare and Medicare Services, which oversees Medicare Advantage plans, including better auditing of plans.   

To read the inspector general’s report, “Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care,” click here.  


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The Importance of a Will in Second Marriages

If a person dies without a will, or if the will is not probated within five years of death, then property in his or her probate estate will be distributed by rules determined by the legislature, known as the law of intestacy. 

The law of intestacy in Alabama requires that the estate of a person having children by a previous marriage be divided one-half to the current spouse and one-half to the child or children by a previous marriage.  This can create some totally unforeseen consequences for a couple in a second marriage with children by that marriage.  The children of that union will take nothing under the law of intestacy while a child from a previous marriage will take one-half.

It is important to evaluate your individual situation to determine what is at risk if you die without a will and how you can structure your assets to assure your property passes in the manner you prefer.      


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When To Apply For Social Security

Deciding when to draw Social Security can be one of the most important decisions a person can make.  There are different views on the topic.  Some say take it as early as possible while others think full retirement age (age 66 for those born from 1943 to 1954) is best to avoid reduction in benefits.  A smaller group believes that waiting as long as possible is the best choice to maximize benefits.  Only 6.5 percent of Social Security recipients put off collecting their benefits until they reach age 70, the age at which they can collect the maximum benefit.

First recognize that drawing Social Security at age 62 comes at a high price – 30 percent of your benefit amount.  Also recognize that if you are still working, there is an offset of benefits for earnings over $19,560 in 2022 until you reach full retirement age.  You will lose $1 for every $2 you earn over $19,560.  In the year you reach full retirement age you will lose $1 for every $3 you earn above $19,560.  Many think what is the use of drawing and then losing some of those benefits due to work earnings? 

The decision of how long to wait to claim Social Security benefits depends on a number of factors. Besides other income sources in retirement many look at projected longevity.  But Social Security experts advise waiting as long as possible to start collecting benefits, up to age 70.  This is because if you delay taking retirement beyond your full retirement age, you amass “delayed retirement credits” that increase your benefit by 8 percent for every year that you wait, over and above annual inflation adjustments.  Your checks will be about 76 percent more than had you claimed at age 62, the earliest you can file. It’s tough to find a better and more reliable investment than that.

However, keep in mind that if you are collecting benefits based on the work record of a current or ex-spouse, there is no point in waiting until 70 because you will not accrue delayed retirement credits beyond your full retirement age.

Don’t Wait Any Longer Than 70 to Draw Benefits

Delayed retirement credits stop at age 70, so there is no advantage to putting off starting benefits any longer.  Not only won’t your credits increase by claiming after age 70, but if you wait longer than half a year, you’ll start losing monthly benefits you would have otherwise received.  The Social Security Administration (SSA) will pay you retroactively for benefits accrued up to six months after your 70th birthday, but that’s it.  If you wait any longer, benefits you would have received are permanently forfeited.

Realize that the SSA won’t automatically start sending you checks once you turn 70 or any age. You need to apply for benefits. You can do this starting four months before the date that you want your benefits to begin.  To get the maximum amount, you’ll want the benefits to start the month you turn 70.  There is, however, one scenario where benefits will automatically kick in at 70: those who took benefits after reaching their full retirement age and then suspended their benefits to earn delayed credits until age 70.  For them, the SSA should automatically restart benefits at 70.

You can apply online — click here.  If you can’t submit your application online, you can call 1-800-772-1213 (TTY 1-800-325-0778). As of April 7, 2022, SS offices reopened, but going online can save you wait times to file an application.

When will you get your first check?  The SSA issues checks a month behind, so your benefits should start arriving the month after the month you turned 70.  For example, if you were born July 17, you should ask that your benefits start in July and your first check will come in August.  However, those born on the first day of the month get a small bonus: the SSA treats them as if they were born the previous month and starts paying benefits in their birth month.  So, for example, if you were born July 1, you’d request benefits to start in June and the payments would begin in July.

What If You’re Still Working at 70?

Working past age 70 (or any time past your full retirement age, in fact) won’t affect your benefits.  And while you won’t increase your monthly benefit by waiting past age 70 to claim, you could boost it by working in addition to collecting Social Security. This is because the SSA recalculates your benefits each December based on your 35 highest-earning years of work. If your earnings plus your Social Security benefits allow you to replace a lower-earning year, your overall benefit could increase in the annual calculation. But Social Security benefits are taxable, so if you’re earning more money your tax rate may be higher.

In most cases, your Medicare premiums will be deducted from your Social Security check. If you happen to be retiring at age 70 and you’ve been paying Medicare’s high-earner surcharges, keep in mind that you can reverse these surcharges if your income drops far enough. The Social Security Administration uses income reported two years ago to determine a beneficiary’s premiums. If your income decreases significantly due to certain circumstances, including retirement, you can request that the SSA recalculate your benefits and your premium surcharges could be eliminated or reduced. 

For the SSA’s Retirement Benefits page, click here.


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A Return to Normal

We are back in the conference room after a year of meeting clients in the lobby for more space and ventilation. What a wonderful thing to return to some of the normal practices around the office. I love this room because it reminds me of so many wonderful people I have met and worked with at this table.


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Information About Filing For Medicaid

Medicaid can be very complicated and confusing, but it is a critical benefit for persons in need of long-term care. I prepared this presentation for a recent educational seminar for professionals and caregivers. Feel free to download or read online to learn more about applying for institutional Medicaid.


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Long-term Care Costs Increased in 2020

All long-term care costs rose sharply in 2020, but assisted living facility costs increased the most, according to Genworth’s latest annual Cost of Care Survey. The across-the-board rises were due in part to increased costs brought on by the coronavirus pandemic. 

In the past year, assisted living facility rates grew 6.15 percent for a median cost of $51,600 per year or $4,300 per month. Genworth also reports that the median annual cost of home health aides rose 4.35 percent to $54,912, while the median cost of a private nursing home room rose 3.57 percent to $105,850 and the median cost of a semi-private room in a nursing home is now $93,075, up 3.24 percent from 2019. The national median annual rate for the services of a homemaker also climbed 4.44 percent to $53,768. 

In response to this year’s price increases, Genworth conducted a follow-up study to understand how COVID-19 is impacting the cost of care. Genworth found that labor shortages, personal protective equipment costs, regulatory changes, employee recruitment and retention, wage pressure, and supply and demand were contributing to rate rises.

The only care setting where costs did not increase was adult day care, which provides support services in a protective setting during part of the day. Costs for adult day care actually fell from $75 to $74 a day, a 1.33 percent decrease, perhaps because many adult day care sites have been forced to close due to the pandemic.

Monthly care costs for Alabama in 2020 were:

Homemaker services, $3432; homemaker health aide, $3432; adult day health care, $655; assisted living private one bedroom, $3150; nursing home semi-private room, $6540; and nursing home private room, $6911.                                                                                                                                                 

Alaska continues to be the costliest state for nursing home care by far, with the median annual cost of a private nursing home room totaling $436,540 per year (yes, that is not a typo – it really is that expensive). Missouri was the most affordable state, with a median annual cost of a private room of $68,985 per year. 

The 2020 survey, conducted by CareScout for the seventeenth straight year, was based on responses from 14,326 nursing homes, assisted living facilities, adult day health facilities and home care providers. Survey respondents were contacted by phone during July and August 2020.

As the survey indicates, long-term care is growing ever more expensive making planning for long-term care essential.


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Titling Property: Why Your Lawyer Needs To See Your Deed

Title to real property defines legal ownership of the property, and that ownership is usually identified by language in the deed showing who owns the property and how it is owned.  Rights associated with property is also a matter of state law and can be altered by marital status. 

There may be multiple times when you will need to decide how to title property – such as when you purchase property or when you give property to others during your lifetime or through your estate when you die.  It is important to understand the different ways property can be owned before you make decisions on how to title it or whether a will may need to be probated.      

The most common ways to hold title are:

  • Sole Ownership
  • Joint Tenancy with or without Right of Survivorship
  • Tenants by the Entirety
  • Tenants in Common
  • Life Estate Tenant
  • Heirship
  • Community Property

Sole Ownership 

Sole ownership is ownership by one individual or entity.  The most common sole ownership is one held by a single person or a married person who wants to hold property apart from his or her spouse.  Sole ownership might also be ownership by a business or trust. 

It is important to realize that even if you are a sole owner, if you are married and the property is your homestead in Alabama, you will not be able to transfer the property without your spouse’s signature on the deed.  It is also important to have your will in place to transfer the property at death since there is no right of survivorship with sole ownership. If you own property alone and die without a will your next of kin will inherit the property through the laws of intestacy (laws defining how property passes without a will).

Joint Tenancy with or without Right of Survivorship

Joint tenancy means that two or more people hold title to real estate jointly, and each has the right to occupy the full property during his or her lifetime.

If one of the owners die, his or her rights of ownership pass to the heirs unless the deed specifically states that the owners are joint tenants with right of survivorship, means that the property will automatically pass to the surviving owner.  This is how many married couples own property in Alabama. 

The primary advantage to joint tenancy with right of survivorship is that the death of the first of the joint owners does not require probate of his or her will.  The property passes outside probate (outside the will) to the survivor.  Expenses of upkeep, taxes, insurance, etc., are shared between the joint tenants. 

You do not often see it, but property owned by joint tenants with right of survivorship can be severed (an owner’s share sold) resulting in the property thereafter being held as tenants in common.

A creditor who obtains a legal judgment against one of the owners can come after the property, requiring it to be divided, to have the debt satisfied. 

Tenants by the Entirety

This method of ownership can only be used when owners are legally married.  This type of ownership is generally not seen in Alabama, but it is mentioned in the code indicating at Code of Alabama § 43-7-4. There it states that:

Where there is no sufficient evidence that two joint tenants or tenants by the entirety have died otherwise than simultaneously, the property so held shall be distributed one half as if one had survived and one half as if the other had survived. If there are more than two joint tenants and all of them have so died, the property thus distributed shall be in the proportion that one bears to the whole number of joint tenants.

Property owned as tenants by the entirety cannot be severed, or one spouse cannot sell his or her share.

You will not own Alabama property in this manner, but you may see it in other jurisdictions such as Arkansas, Delaware, Florida, Hawaii, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming.

Tenants In Common

With tenancy in common two or more persons hold title to real estate jointly.  They may own it equally or in unequal percentages.  For example one may own 30 percent of the property while the other owns 70 percent, but despite those ultimate ownership shares, each owner has the right to occupy and use all of the property while the ownership percentages define the financial ownership of the real estate.  If the property is sold, each will get his or her ownership percentage.  Either owner may sell or give away his or her share of the property, and at death his or her share will pass to those named in a will or next of kin through inheritance.  Each owner is responsible for all debts against the property (for instance both or all parties are responsible for all taxes due on the property). 

Life Estate Tenant

You may have the right to occupy property during your lifetime through a life estate, and when you die people called the remaindermen instantly become the owners.  Often in second marriages a spouse will leave a life estate to the widow and the remainder interest to his or her children.  Another situation where life estate interests are seen is when a parent gives the property to children and retains a life estate in the deed.

Heirship

While title is usually determined by the deed, that is not always true.  In the case of heir property you may be living on property that was last deeded to your grandparents whose estates were never legally settled, and there is no deed in your name.  In that event determining how your grandparent’s property passed by operation of law is necessary.  Often this requires tracing family relationships and deaths over the course of several generations to land on who actually owns the property today.  

Community Property

There are nine community property states in the U.S.:  Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.  Alaska is an opt-in community property state that gives both parties the option to make their property community property.  Alabama is not a community property state. 

Community property is a form of ownership by a married couple during marriage that they intend to own together.  Each spouse owns the property equally, and owes any debt against the property equally regardless to who earned the money to purchase the property or incurred debt for which the creditor seeks to satisfy from the property value.  In the event of divorce each spouse will gets an equal division of the property.  In the event of death there is no survivorship unless the couple lives in a state that permits survivorship (Arizona, California, Nevada, Texas, Wisconsin). Outside those community property survivorship states the couple must have a Community Property Survivorship Agreement.  Without living in a community property survivorship state or having a Community Property Agreement each partner’s share will pass through his or her estate.

The take away:

How you own property is just as important as the fact that you own it.  What you can do with property – your rights and obligations – and how you can leave property to your heirs can only be determined by knowing how the title is currently held.  If you are planning on any property acquisitions, transfers or estate distributions, it is critical that you understand how you already own or want to own or have your heirs own property.          


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Medicare Coverage for COVID-19 Vaccine

While Medicare would cover a coronavirus vaccine approved through normal channels, there was concern that because the Food and Drug Administration approves the vaccine through an emergency use authorization (EUA), Medicare might not cover it. Governmental action was needed to assure that Medicare beneficiaries could receive the vaccine without charge.

Fortunately, The Centers for Medicare and Medicaid Services released an interim final rule Oct. 28 saying that Medicare would cover vaccines that receive U.S. Food and Drug Administration authorization — including those available through emergency use authorization — at no cost to beneficiaries. This will remove any concern or barriers to Medicare beneficiaries receiving the COVID-19 vaccine.

CMS will pay about $28 to administer single-dose vaccines. For vaccines that require two or more doses, it will pay around $17 for the first dose or the first few doses and $28 for the final dose in the series. According to CMS, the cost to vaccinate the roughly 67 million seniors enrolled in Medicare will be about $2.6 billion.