Maine Elder Law Updates
Major Legislative Changes Affecting Maine Elder Law and Estate Planning, August 2011
The First Session of the 125th Maine Legislature adjourned on June 29, 2011. Most non-emergency legislation will therefore become effective on September 28, 2011. Emergency legislation takes effect when signed by the Governor or on its otherwise-stated effective date.
We have highlighted below the legislation that is of particular interest to our clients in the areas of Elder Law and Estate Planning.
• Department of Health and Human Services Directed to Re-Institute
Penalty Rules for Maine Care Eligibility for Residential Care The Legislature, as part of the Governor's Budget, has directed the Department of Health and Human Services to adopt rules that will once again impose transfer penalties on individuals seeking MaineCare eligibility for Residential Care/Assisted Living expenses when those individuals have transferred assets within the 5 years prior to seeking eligibility. The new rules have not yet been proposed, and there are a number of issues that will need to be addressed, including the effective date of the rules and the interaction between transfer penalties for nursing home and residential care applications. We expect that there may be a double penalty imposed on asset transfers if a person applies for MaineCare for residential care, and then applies for MaineCare for nursing home care within 5 years of transferring assets. Although the new rules have not yet been proposed, those with loved ones who may need to access MaineCare for Residential Care in the foreseeable future should ensure that they are well informed as the rule works its way through the rulemaking process.
• Maine Estate Tax Exemption Raised to $2 Million, Effective January 1, 2013
Passed as part of the Governor's budget, the Maine estate tax exemption will increase from $1 Million to $2 Million beginning January 1, 2013. This is a significant increase, and will result in fewer Maine decedents being subject to State estate tax. In addition, Maine's punitive "cliff tax" has been repealed, and estate tax rates will begin at 8% for estates of up to $5 Million, 10% for estates of $5 Million up to $8 Million, and 12% for estates of $8 Million or higher. Because individuals will each be able to protect up to $2 Million once the new tax goes into effect, a married couple that engages in appropriate tax planning can protect up to $4 Million from Maine estate tax. The current federal estate tax exemption is $5 Million per individual, but the federal tax laws are expected to be revisited in 2012. Individuals and couples with substantial estates should review their estate plans to ensure that they are minimizing the impact of federal and State estate tax.
• Long Term Care Insurance Companies Required to Reissue Partnership Policies
Maine's Long Term Care Partnership Program is a program enabled by the federal Deficit Reduction Act of 2005 that permits purchasers of "approved" long term care insurance policies to protect from long term care costs an amount of assets equal to the amount of the long term care insurance used if the purchaser relies on MaineCare after exhaustion of the long term care insurance. The Maine Legislature voted to adopt the Long Term Care Partnership Program in 2009 and the federal Centers for Medicare and Medicaid Services (CMS) approved this addition to Maine's MaineCare eligibility rules. Maine's Partnership Program has a retroactive effective date of July 1, 2009. Under the Partnership Program, all assets disregarded for purposes of MaineCare eligibility (generally an amount equal to the insurance benefits received from a Partnership Policy) will also be disregarded for purposes of estate recovery.
Unfortunately, individuals who had purchased long term care insurance prior to adoption of the Partnership program were finding that insurers were refusing to issue endorsements certifying that those prior policies qualified as Partnership policies, even if the policies met the terms of the Program. During this session, legislation was passed requiring insurers that actively market long term care insurance in Maine to notify policyholders who purchased policies on or after July 1, 2004 that their policies may qualify as Partnership policies, and requiring the insurer to identify whether a policy meets the Program requirements. If it does, then the insurer must notify the policyholder and modify the policy's effective date to reflect Partnership status. Owners of policies issued prior to July 1, 2004 can request certification that a policy meets Partnership requirements, but they must do so within one year of the effective date of the legislation, or by September 28, 2012. Owners of long term insurance care policies should be proactive and contact their insurance companies to request that their policies be reviewed pursuant to the new law, which is codified at P.L. 2011, Chapter 198.
• Seniors Authorized to Designate Individual to Receive Notice of Cancellation of Insurance Policy
In an effort to avoid the loss of insurance to elderly Mainers who are unaware that they have failed to pay premiums or take other actions to preserve their life, health, or Medigap policies, the Legislature has passed legislation authorizing a person to designate a third party to receive notice if their policy is going to be cancelled. This situation is unfortunately not a rare occurrence with the elderly or those with mental impairments. The law will apply to policies issued or renewed after January 1, 2012. The law also authorizes the reinstatement of these policies within 90 days if cancellation, termination or lapse of coverage results from failure to pay premiums by a policyholder who is cognitively or functionally impaired. Those with parents or other loved ones who may be at risk of failing to pay premiums or otherwise allowing a policy to lapse should take advantage of this new law to ensure that they are notified before a policy is cancelled or terminated.
• Department Directed to Develop Standard Contract for Personal Care Services Provided by a Relative
The Elder Law Section of the Maine State Bar Association sought to have the Department of Health and Human Services repeal the provisions in the MaineCare rules that impose additional requirements, including the requirement to have a written, signed contract, to avoid having the Department consider payments made to a relative for personal care services be considered a transfer of assets that could subject the elder to penalties should he or she later need care in a nursing home or residential care facility. The Department opposed the bill, but agreed to develop a standard form contract and to post that contract on its website to help educate consumers about this little known requirement. Family members who provide care to relatives and are paid for that care should ensure that they are aware of all of the Department's requirements in order to avoid the potential for substantial penalties being imposed in the event the elder later needs to enter a long term care facility and seek eligibility for MaineCare.
• Maine Uniform Trust Code Amended
The Maine Trust Code was amended to make various changes, including adding a definition of "current beneficiary" of a trust, which is defined to mean a person who is a permissible distributee of income or principal from the trust. The revisions allow trusts to specify that only current trust beneficiaries, rather than more remote trust beneficiaries, are entitled to receive information about the trust.
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The Law Office of Patricia A. Nelson-Reade has extensive experience in advising clients on estate tax planning, and can assist in determining a plan that best meets the individual needs of its clients and their families. Please contact us at 207-828-1597 if you would like to set up an appointment to review how the changes in Maine law may affect your estate planning needs.