There is rarely a week that goes by that a client does not call or come to my office to ask: “What do we need to do to keep from losing Momma’s home if she goes into the nursing home?”

No two families are exactly alike when trying to answer this question.  The conversation with the family must take into account many different factors when determining a plan for how to best preserve Momma’s assets.  In order to properly answer the question about Momma’s home, the conversation with the family must seek to find an understanding of the various levels of care that Momma will need for the remainder of her life and the resources available to pay for that care.  The resources that should be discussed before determining a plan include Momma’s income, savings, Medicare, Veteran’s benefits, Medicaid and the value of her home.

Most clients incorrectly believe that having Medicare, as a form of health insurance, provides them with long-term care insurance.  Unfortunately, Medicare Part A only pays for skilled care in a nursing home for a short period of time.  After that, the nursing home patient must use their savings, income, or long-term care insurance.  It is very rare for a client to have purchased long-term care insurance.  If the savings and income are not sufficient to pay for the nursing home, the family must pay for the nursing home care or apply for Medicaid.

Medicaid is a joint state and federal program that was originally designed to provide health care for low-income individuals.  Today, Tennessee’s Medicaid program is commonly referred to as TennCare. While not originally intended to serve the elderly long-term care population, this program has become the primary method of financing nursing home care for those individuals that cannot afford to pay for it.  In Tennessee, the process of qualifying for Medicaid requires the applicant to meet certain income and asset tests.  In most cases, Momma’s home is an exempt asset for Medicaid eligibility purposes.  In other words, her home is not counted as an asset so long as she intends to return home from the nursing home.  In Tennessee, the intent to return home is presumed.

While the home may not be considered an asset for eligibility purposes, you will be told by a counselor for Medicaid that the State of Tennessee has the ability to recover all sums paid for Momma’s nursing home care against her home after her death.  By now, most of us have heard of a family farm or home being auctioned to satisfy a lien from TennCare.  The number of estates where the home is liquidated just to satisfy the lien from Medicaid/TennCare has grown substantially in the past few years.

“Should we just get Momma to deed the home to her children?”  It depends.  This may not be the right answer in every situation.  Before you rush to a law office and get Momma to sign a quitclaim deed transferring the property to the children, there are several consequences that must be discussed with an attorney.  There are gift tax issues, loss of control, a Medicaid penalty period and possible liens by the children’s judgment creditors that must be considered in each case.  This attempt to meet the requirements of Medicaid combined with the fear of “losing Momma’s home” often results in the family making transfers without considering all of the consequences.  In some cases, the transfer of Momma’s home may only make matters worse.

Momma’s home cannot be transferred at just any time.   Medicaid law requires that the applicant reveal all gifts (transfers for less than fair market value) that occur in the five years preceding the Medicaid application.  If she has made a transfer during the sixty months preceding the application for Medicaid, the Medicaid agency will impose a Medicaid penalty.  The length of this article doesn’t provide a sufficient space to discuss how the penalty period is calculated.  Further, it would be as clear as mud without providing several examples of how this penalty period actually applies to the facts of different cases.  In general, during the penalty period, Momma’s nursing home care would have to be paid for by the family.  Further, the Medicaid penalty period will not begin to run until after Momma is “otherwise eligible” for Medicaid.  As such, it is important to understand that the penalty period may exceed the time remaining in the sixty month look-back period.

The rules are confusing to most individuals.  The date of a real estate transfer or the date an application is made for Medicaid could have substantial consequences.  Discussing estate planning with a parent is often difficult for the children.  However, failing to discuss an estate plan can directly impact the quality of care for your parent and the preservation of assets for the benefit of the family.   A proper estate plan could benefit most families dealing with this important issue.

– Eric Thornton is a partner with the law firm of Ramsey, Thornton & Barrett, PLC.

The foregoing article is not intended as, nor shall be used, relied upon, or otherwise construed as legal advice or an attorney-client relationship. You are advised to seek independent legal advice from an attorney licensed in the State of Tennessee.

The following article is Part One to a three part series related to Estate Planning.

The Living Will, commonly referred to as an “advanced directive”, was first created over fifty (50) years ago to enable people to provide direction to their families and health care providers regarding medical decisions and, in some instances, end-of-life decisions prior to reaching the point where they are unable to make those decisions for themselves.  One of the most common estate-planning questions asked is, “How can I ensure that I am able to die the way I want to?”  In many cases, people become so consumed with planning for the distribution of their land and personal belongings that they fail to properly plan for their own basic needs when faced with an unexpected illness or traumatic accident.

A Living Will allows a person to express and state their wishes related to healthcare decision-making, types of treatment they do or do not want in the event of a life-threatening or incurable disease or sickness, and who is given the power to make certain health care related decisions on their behalf.  In addition, the Living Will allows a person to dictate their wishes while they are competent and spare themselves unwanted suffering, medical treatment and expenses during periods of incompetency, unconsciousness or terminal illness for which there is no reasonable medical expectation of recovery.  A Living Will can remove much of the stress and emotional torment faced by your loved ones when they are faced with the very difficult task of making end-of-life decisions for you.

As the medical industry and technology continue to advance and prolong life, the importance of planning for end-of-life and debilitating illness decisions has become increasingly important.  One of the most widely known and best examples of the failure to have a Living Will is the Terri Schiavo case.  Terri Schiavo suffered full cardiac arrest and collapsed in her home in Florida in February of 1990.  As a result of the incident, Mrs. Schiavo suffered severe brain damage due to a prolonged lack of oxygen.  She spent two and a half months in a coma before her doctors determined that she would live the rest of her life in a vegetative state.  Her husband was appointed legal guardian by a Florida court, and after numerous failed efforts by Terri’s doctors over the next several years to rehabilitate her, her husband began an effort to remove her feeding tube; a decision he thought his wife would want.  However, after a very tumultuous and bitter dispute with Terri’s parents, a Court ruled in early 2000, ten years after the initial medical emergency causing Terri’s condition, to remove her feeding tube.  Despite that Court’s ruling, Terri’s husband and parents continued to fight through multiple state and federal court proceedings before Terri finally passed away in March of 2005.

The Terry Schiavo situation have prompted significant and far reaching legislative reform dealing with issues of end-of-life and terminal illness health care.  The amount of resources, time, expenses and emotional distress associated with Terri Schiavo’s fifteen (15) year end-of-life illness is staggering.  Had Terri executed a Living Will prior to her illness leading to death, she could have spared her family this bitter and expensive dispute.

The Living Will is but one mechanism that can help relieve the stress and worry which burdens your loved ones at a very difficult time.  The issues addressed in a Living Will are personal decisions which only you should have the right to make.  While the task may not be pleasant, the consequences of avoiding making a Living Will  can be significant.  It is important to note, Terri Schiavo was only twenty-six (26) years old when she unexpectedly collapsed in her home setting off the chain of events that followed.  It is never too early to plan for an inevitable truth we all must face.  When you begin the process of putting together an end-of-life plan for you and your family, make sure to discuss with your estate planning professional whether or not a Living Will is right for you.

When Does A Facebook Post Become A Crime?

Is it a crime to post a picture on Facebook or Twitter?  What about forwarding a text message or email with what some would consider a funny image attached?  Beginning July 1, 2011, according to Governor Bill Haslam and the Tennessee General Assembly, hitting the send button could be a Class A misdemeanor punishable by up to eleven months and twenty-nine days in jail and a fine up to $2,500 dollars.

The law at issue, codified as T.C.A. § 39-17-308, was amended this spring by House Bill 300 sponsored by Representative Charles Curtiss, a Democrat from Sparta.  The existing law against harassment already declares it illegal in Tennessee to make harassing or threatening phone calls, or to send similar emails or text messages.  The key language in the amendment adds “images” to the list of unlawful communications in Tennessee.

Under the amended law it is now a crime to “communicate with or about another person or transmit or display an “image” by various forms of electronic media “without a legitimate purpose.”  The term “image” is defined as “…a visual depiction, video clip or photograph of another person.”  If the image transmitted is intended to “frighten, intimidate, or cause emotional distress”, or if the sender knows or “reasonably should know” that the image is likely to cause such a reaction, it violates the law.

Interestingly, as the law is written the victim of this crime is not necessarily limited to the individual depicted in the image or the intended recipient.  You do not have to communicate “with” the person or transmit the image directly to the victim.  Rather, by merely transmitting an image “about another person” that may cause “emotional distress” you may subject yourself to criminal prosecution.

In this day and age of viral emails and YouTube videos, every human being on the planet is a potential victim of this crime, regardless of whether you intended for them to receive it or not.  And this is not limited to images that we would ordinarily consider offensive, such as racially charged images, political or religious images, or pornography.  If a court simply finds that you “should have known” that an image you posted would be upsetting to somebody somewhere in the cyber universe, you could be sentenced to time in jail.

No doubt the legislature had its sights set on cyber-bullying when House Bill 300 was drafted, proposed and passed through committee.  Since January 2010 state lawmakers across the country have taken numerous steps to curb the problem of cyber-bullying among teens and young adults.  That is when Phoebe Prince, a fifteen year girl from South Hadley, Massachusetts, committed suicide after suffering months of bullying from school classmates, including numerous instances of intimidating and harmful comments and images posted to her Facebook page and spread throughout the student body via electronic communications.

The question that continues to be debated among state lawmakers and legal scholars alike is whether or not the Tennessee law runs afoul of the rights to free speech as protected by the 1^st Amendment of the U.S. Constitution.  In an interview with Fox News Memphis, State Senator Brian Kelsey, a Republican from Germantown, said “the second part of the bill has some 1^st Amendment problems with it.”  Senator Kelsey commented, “It says if you display an image that could cause emotional distress to someone, that all of a sudden now it could be a crime.”

Eugene Volokh, constitutional law professor at UCLA School of Law and author of The Volokh Conspiracy website, posted on his blog that in his opinion the law is “pretty clearly unconstitutional.”  Volokh points out that a wide variety of images, including “pictures of Mohammed, or blasphemous jokes about Jesus Christ, or harsh cartoon insults of some political group” could “cause emotional distress to a similarly situated person of reasonable sensibilities.”  Volokh states, “Likewise, if you post an image intended to distress some religious, political, ethnic, racial, etc. group, you too can be sent to jail if a government decision maker thinks your purpose wasn’t legitimate.”

With more than 400 million registered users claimed by Facebook, along with the hundreds of millions of others viewing Twitter feeds and YouTube videos, it is easy to understand why some have expressed concern over the extremely broad language contained in Tennessee’s new law.  Certainly, protecting our children from cyber-bullies and the emotional distress that can be caused from these kinds of attacks is a worthy and noble goal.  However, we also must protect our children from the potential for government prosecution for simply posting pictures from their summer pool party on their Facebook page or uploading a video from the skating rink on YouTube.  There is a balance that must be struck between freedom and protection.  Sometimes that balance proves to be quite elusive.

– Jody Barrett is a partner with the law firm of Ramsey, Thornton & Barrett, PLC.

The foregoing article is not intended as, nor shall be used, relied upon, or otherwise construed as legal advice or an attorney-client relationship. You are advised to seek independent legal advice from an attorney licensed in the State of Tennessee.

The most frequently asked question by parties involved in a legal dispute is, “Can I recover my attorney’s fees if I win this lawsuit?” Tennessee, like most jurisdictions, adheres to the American rule for award of attorney fees. Generally speaking, each party to a lawsuit is responsible for their respective attorney’s fees. As a general principle, the American rule reflects the idea that public policy is best served by litigants being responsible for their own legal fees regardless of the outcome of the case. The notion that the loser in litigation pays the other side’s expenses, including attorney fees, is generally known as the British rule. With the exception of Alaska, the entire United States follows the American rule. Texas, however, currently has pending in its legislature a bill that follows a loser-pay system. Proponents of the loser-pay system justify its value by indicating the system reduces frivolous lawsuit while encouraging parties to settle.

Proponents, opponents

Opponents of the loser-pay system take the position that such a system essentially limits access to the courts to large corporations. For most middle class Americans and small to medium sized businesses, the prospect of having to pay significant attorney fees for the other side’s expenses could be devastating. However, those in support of the loser-pay system point to the 2007 lawsuit against a Washington area dry cleaner alleging that it had lost a pair of pants. That case was remarkable not only for the astronomical damages claim totaling $54 million dollars, but also the nearly $100,000 in legal fees incurred by the dry cleaner owner in successfully defending this absurd case. Proponents of the loser-pay system suggest the system would reduce the number of low-merit lawsuits and encourage potential parties to comply with the law while promoting good-faith settlement opportunities.

American rule

Under the American rule, which Tennessee has expressly adopted, a party in a civil action may recover their attorney’s fees only if: (1) a contractual or statutory provision creates a right to recover attorney fees; or (2) some other recognized exception to the American rule applies, allowing for recovery of such fees in a particular case. Adherence to the American rule is based on several public policy considerations: first, since litigation is inherently uncertain, a party should not be penalized for merely bringing or defending a lawsuit; second, the poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included paying the fees of their opponent’s lawyer; third, requiring each party to be responsible for their own legal fees promotes settlement; and fourth, the time, expense, and difficulty inherent in litigating the appropriate amount of attorney fees to award would add another layer to the litigation and burden the courts and the parties with ancillary proceedings. Examples of specific exceptions from applicable statutory and decisional law where an award of attorney fees could be obtained include, but are not limited to: contractual provisions agreed upon by both parties, divorce actions, Tennessee Consumer Protection Act violations, fraudulent, reckless, intentional and willful conduct, contemptuous conduct, and implied indemnities.

In the context of contract interpretation, an exception to the American rule is allowed only when a contract specifically or expressly provides for the recovery of attorney fees. If a contract does not specifically or expressly provide for attorney fees, the recovery of fees is generally not permitted. This is the case in most real estate disputes as most real estate transactions are based upon a written agreement or contract. As one can imagine, the facts of every lawsuit are different and dictate what, if any, opportunity exists to recover attorney fees.

With the backdrop of today’s economic climate and individual states re-examining their consumer protections, as well as tort liability and medical malpractice reform, it should come as no surprise that states are also beginning to re-examine their American rule heritage. Under the American rule system in Tennessee, I’m reminded of the statement made by Rosie Perez in the 1992 movie “White Men Can’t Jump.” In a scene from inside the bus, Rosie tells Billy, her boyfriend played by Woody Harrelson, “…sometimes when you win, you really lose.” With tort reform being proposed in most states including Tennessee, I’m certain that the debate over a loser-pay system will soon follow.

– Eric Thornton is a partner with the law firm of Ramsey, Thornton & Barrett, PLC.

The foregoing article is not intended as, nor shall be used, relied upon, or otherwise construed as legal advice or an attorney-client relationship. You are advised to seek independent legal advice from an attorney licensed in the State of Tennessee.

The Attorney General for the State of Tennessee issued an opinion in 2010 that left many real estate investors and home owners in Middle Tennessee wondering whether or not they could legally offer owner financing terms to a potential buyer.  Prior to the Attorney General publishing this opinion, Tennessee law has allowed a seller of real property to offer owner finance terms to their purchaser.  In the wake of the economic crisis impacting the housing and banking industries, it has become more difficult for purchasers to obtain financing through traditional lending institutions.  As a result seller financing has become increasingly more attractive to prospective buyers and owners who are highly motivated to sell.

The Attorney General said in his opinion dated August 24, 2010 that an individual investment property owner who provides a purchaser with financing that qualifies as a residential mortgage loan must be licensed under the Tennessee Residential Lending, Brokerage and Servicing Act as found in T.C.A. § 45-13-101, et seq.   The Act requires that before certain property owners in Tennessee may offer financing terms to a potential buyer they must first obtain a license through the Tennessee Department of Financial Institutions.  This opinion left many in the real estate industry to believe that the traditional models for owner financing in Tennessee were no longer permissible.  Further, obtaining a license through the Tennessee Department of Financial Institutions for most sellers to conduct a single loan transaction would be cost prohibitive.  The Act has traditionally been applied only to individuals and companies in the business of offering loans to Tennessee consumers, not individuals who purchase real estate as an investment with the intent to sell it or individuals seeking to sell a piece of real estate to a potential buyer who may not be able to obtain traditional financing from a bank or other lending institution.

Under the Tennessee Act, only a handful of exceptions exist to the licensing requirement.  Among the exceptions are the following:
•    an individual who makes a residential mortgage loan with or on behalf of an immediate family member of the individual, and
•    an individual who makes a residential mortgage loan, or simply offers or negotiates terms of a residential mortgage loan, when the loan is secured by a dwelling that served as the seller’s residence.

The Tennessee Act is intended to carry out the purposes of and be compliant with the requirements of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (known as the SAFE Act) which was enacted by Congress to enhance consumer protection and reduce fraud in the residential lending industry by establishing uniform minimum standards for licensing and registration of state-licensed mortgage loan originators.    The primary concern of lawmakers was to protect homebuyers in Tennessee from being taken advantage of by unscrupulous lenders who were not subject to the same oversight and guidelines as mortgage loan originators properly licensed with the State to do business in Tennessee.  The Commissioner of the Tennessee Department of Financial Institutions is authorized under the Act to interpret and enforce the Act.

Fortunately, in response to an overwhelming number of questions and concerns related to the Attorney General’s Opinion, the Commissioner of Financial Institutions has published a Bulletin which interprets and creates an additional exception from the licensing requirements set forth in the Act.  You can view this bulletin by visiting our Resources on our website at www.dicksontnlaw.com.

The Commissioner has taken the position that the “formality and commercial context” is absent where an individual does the rare and occasional seller financing.  As a result, effective December 20, 2010, with the publishing of the Commissioner’s Bulletin, it is appropriate to exempt an individual, as seller of his or her own real property, who makes five (5) or fewer residential mortgage loans within any twelve (12) month period from all licensing requirements of the Act according to the Commissioner.  This exemption applies strictly to individuals and is not applicable to business entities.

As a result, owner financing is alive and well in Tennessee.  For almost every resident in Dickson County, you may still owner finance the sale of your home or investment property.  However, the Commissioner’s Bulletin only delays a determination of whether individuals must be licensed with the Department of Financial Institutions until HUD publishes it’s final interpretation of the licensing provisions of the SAFE Act.  When, and if, HUD issues a final rule, interpretation, or regulation contrary to Tennessee’s limited exception, the Commissioner and Department of Financial Institutions will rescind this current exception and enforce the final rule published by HUD.  Conclusively determining whether a license is required and what exceptions may apply is a process which cannot be determined solely from this article.  There is no ability to predict what HUD’s position will be with respect to Tennessee’s exceptions, but, until such time, seller financing will continue to be a legal and safe option for financing the purchase of real estate in Tennessee.  Of course, both sellers and purchasers involved in a seller-financed transaction should consult legal counsel to ensure that all documents in the transaction are proper and all parties are adequately protected.

Mr. Eric Thornton is a partner with the law firm of Ramsey, Thornton & Barrett, PLC.  He can be reached via email at leah@dicksontnlaw.com or by visiting www.dicksontnlaw.com.

The foregoing article is not intended as, nor shall be used, relied upon, or otherwise construed as legal advice or an attorney-client relationship.  You are advised to seek independent legal advice from an attorney licensed in the State of Tennessee