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    Protecting the Family Business

    You have worked hard to create a successful business. While you may not be ready for retirement yet, you know there will be a day when you can no longer manage your business. Whether you would like for a family member to inherit the company, or to transfer ownership to a key employee, you likely will want to share and entrust your business legacy with someone loyal and special to you. Such a transfer would allow your business legacy to endure and would bestow the financial successes of your business upon a family member or key employee.

    Because of issues such as taxes and family discord, only about 30% of closely held or family held businesses survive into the next generation of ownership. Another 15% fail in the third generation. The common trend among business failures after transition is the lack of a business succession plan. Based on these statistics, it is not surprising that only about 33% of businesses have a written business succession plan. A well-drafted business succession plan will help anticipate and solve problems that commonly arise upon the transfer of a business.

    Choosing Your Successor

    One critical aspect of business succession planning is identifying a suitable future owner of the business. One common reason that businesses fail after succession is that the intended successors are either unwilling to take on the business or they are not viable successors. Careful and advanced planning can result in agreements that will ensure that only certain select and qualified persons will manage the business if the business owner becomes unable to do so for any reason.

    Continuity of Management

    In order to protect the longevity of the business, business owners must establish a clear plan as to how the company will be managed if the business owner is no longer able or willing to perform the business owner's duties. The business can suffer greatly during a business owner's absence due to period of sickness or disability if there is no clear management plan. The same is true if the business becomes tied up in the business owner's estate for an extended period of time. By forming a business succession plan, the business will continue to operate with proper management regardless of any extended period of absence of the business owner.

    Funding the Transfer of Ownership

    A business can also suffer financial harm from the lack of a succession plan. The buyout of the business owner's interest could drain the company of its liquidity if the company redeems the owner's interest in a cash transaction. Such a scenario could lead to the failure and dissolution of the business. This situation can be easily avoided if the business owner has implemented a business succession plan.

    There are many methods by which a business owner could structure the transfer of ownership. If the business owner is planning to retire in the future, a stock option plan, a restricted stock issuance which vests over time, or a long-term bonus arrangement may be used to buyout the original owner. If the business owner is planning for an unexpected event, such as death or disability, mechanisms such as life insurance policies, promissory notes, buy-sell agreements, and other options may be used to ensure that the successor will have the capability to buyout the original owners, without draining the company of its liquidity.

    Forming a Business Succession Plan

    We will work closely with you to form a business succession plan which matches your goals and desires, to help you avoid the pitfalls that cause the majority of family held businesses to fail in the second generation of ownership.


    Special Needs Trusts

    Supplemental needs trusts (also known as "special needs" trusts) are drafted so that the funds will not be considered to belong to the beneficiary in determining his or her eligibility for public benefits, such as Medicaid, Supplemental Security Income (SSI), or public housing. The trusts also protect a beneficiary from creditors or financial predators who would otherwise take advantage of the beneficiary. These trusts are not designed to provide basic support, but are instead to pay for comforts and luxuries that could not be paid for by public assistance funds-such as education, recreation, counseling-and medical attention beyond what is required simply to maintain an individual. Supplemental needs trusts must be drafted in accordance with the specific rules of the public benefits program of which the person is a recipient. While each program has its own rules, there are certain rules common to all trusts:

    • The beneficiary cannot have the authority to make or demand distributions, meaning they cannot be the trustee;
    • The trust should be discretionary. If the trustee is mandated to distribute income, the income will be considered available to the beneficiary and could impact their eligibility.
    • Typically, it is best to avoid a standard which refers to support.

    The interplay of the Medicaid and SSI rules on transfers and eligibility can cause considerable confusion. The following is a list of the various supplemental needs trust options and their uses:


     1.   Third Party Trusts 


    Third party trusts are created by one person, usually a parent, for the benefit of a disabled person. These trusts must be clearly discretionary in nature and not be a support trust. Additionally, the trust should name a remainder beneficiary other than the estate. The trust may be revocable or irrevocable.


    2.     Sole Benefit Trust


    This trust is also for the benefit of someone else, but used in situations where the grantor is seeking Medicaid eligibility his or herself. The beneficiary must be under age 65. The trust must only be for the benefit of the disabled beneficiary. In many states, at the beneficiary's death, the trust must be payable to his or her estate or to the state, to the extent of Medicaid payments on the beneficiary's behalf. This may make the trust countable with respect to the beneficiary's SSI benefits. This trust must be irrevocable.


     3.    Self-Settled Supplemental Needs Trust


    Until January 1, 2000, an SSI beneficiary could create a supplemental needs trust for his or her own benefit without incurring a period of ineligibility. This is no longer true. However, an irrevocable, self-settled trust may be useful in some situations for clients receiving only specific benefits, such as subsidized housing.


    4.     "(d)(4)(A)" or "Pay-Back Trust"


    A self-settled trust under a "safe harbor" for purposes of Medicaid eligibility. It must be "created" by a court, guardian, parent or grandparent and can provide discretionary income and principal to the recipient. The beneficiary must be under age 65 and permanently disabled when the trust is created and funded. The trust must provide that the remaining trust funds at the individual's death first be applied toward reimbursing the state for its Medicaid expenditures. Notably, only Medicaid will be reimbursed under a (d)(4)(A) trust. The trust need not provide for reimbursement of SSI. Thus, if there are no substantial Medicaid expenditures, the remaining trust funds may pass to whomever the client designates, just as before the new law


    5.     "(d)(4)(C)" Trust


    A (d)(4)(C) trust is a pooled trust for disabled individuals that is established and managed by a non-profit association. Separate accounts are managed for each beneficiary and the account may be established by the client or by a parent, grandparent, legal guardian or court. In contrast to a (d)(4)(A) trust, funds remaining at the death the beneficiary may stay in the pooled trust for the benefit of other trust beneficiaries rather than being paid to the state. To the extent amounts remaining in the individual's account at death are not retained by the trust, the trust must reimburse the state for all medical assistance paid. Although a (d)(4)(C) trust is an option for a disabled individual over age 65 who is receiving Medicaid, the new law only permits SSI recipients under age 65 to make transfers to the trust without incurring a transfer penalty.


    If you have any questions about supplemental needs trusts, please contact me directly at


    The Massachusetts Uniform Probate Code

    I.  Summary

    On April 1, 2012 the “Uniform Probate Code”, an extensive and important piece of legislation which has been decades in the making, finally became effective. The law is referred to as “Uniform” because it makes Massachusetts law, at least on the surface, look more like the laws of other states in areas of probate and trust administration, guardianships and conservatorships. The provisions for guardianships and conservatorships went into effect on July 1, 2009 and the rest of the act was so extensive that it’s effective date was extended for two and one-half years to permit the judges, administrators and other court personnel as well as practicing lawyers to ready themselves. Most of the changes are embodied in a new Chapter 190B of the Massachusetts General laws. However, this new law contains in excess of three dozen sections repealing all or portions of existing Chapters of the General Laws. Because only portions of many chapters are repealed, it is still not possible to find all the applicable statutes in one convenient location even after this massive overhaul. Although one purpose of the law is to make estate administration quicker and easier for uncontested cases, the new law is still rife with possibilities for conflict and litigation.


    Among many other things, this new law effects the requirements for wills, the ability to disinherit children, spousal rights, how intestate shares are calculated and distributed where there is no will, as well as the laws concerning durable powers of attorney.  It is interesting to note that conspicuous by its absence from this extensive legislation was an update on the law concerning spousal rights where one spouse attempts to disinherit the other. That piece of legislation somehow got sidetracked from the Uniform Probate Code process and bogged down. As it stands, the old law in that area applies except as to wills existing at the time of the marriage. Given the importance of the issue to Medicaid planning and the ability of the State to seek estate recovery for benefits paid, we expect this will be enacted sometime soon.  Additional details on some of the more important changes follow.




    II. New Uniform Probate Code Increases Inheritance Rights of Surviving Spouses  

    Beginning with dates of death after March 31, 2012, the inheritance rights of surviving spouses in Massachusetts increased substantially. Under the old law the rights of the surviving spouse to inherit where there is no will were dependent upon the size of the probate estate and whether or not the decedent left issue (children, grandchildren, great grandchildren, etc) or other kin. Where the probate estate was less than $200,000 and the decedent left no issue, the spouse inherited it all, but if there were surviving issue, the spouse inherited only one-half of the estate. If the probate estate exceeded  $200,000 and there were no kin besides the spouse (highly unlikely), he or she inherited the entire estate, but if there are issue surviving, one-half the estate, or if there are no issue but are other kin surviving, inherited the first $200,000 plus one-half of the excess over $200,000. 

    Under the new law the surviving spouse is entitled to the entire estate if (i) no descendant or parent of the decedent survives the decedent; or (ii) all of the decedent's surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent. The spouse is entitled to the first $200,000, plus ¾ of any balance of the intestate estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent. If all of the decedent's surviving descendants are also descendants of the surviving spouse and the surviving spouse has one or more surviving descendants who are not descendants of the decedent or if one or more of the decedent's surviving descendants are not descendants of the surviving spouse, the amount is the first $100,000 plus ½ of any balance of the intestate estate.

    In other words, if all the surviving issue of the decedent are also issue of the surviving spouse (issue of the marriage), the surviving spouse inherits it all. If either the decedent or the surviving spouse has issue from other marriages or relationships (e.g. stepchildren), the amount is the first $100,000 and one half the balance.  If there are no descendants of the deceased spouse, the surviving spouse also inherits all, unless there is a parent of the deceased spouse, in which case the amount is the first $200,000 plus ¾ of the balance of the estate.

    This law has been so long in coming about, and is viewed as a victory for those seeking the goal of providing 100% inheritance in the case where the spouses had only children of their one marriage. However, over time that goal has been outstripped by the changes in marital patterns where more people now have children by multiple marriages or non marital relationships or are not even legally married. In the case of either spouse having a child by another marriage or relationship, the marital share is cut in half. The old law provided no such reduction if the surviving spouse had such a child. A well drawn will takes the estate out of the operation this law. The Uniform Probate Code does not touch upon the law regarding a spouse’s right to take a share of the estate contrary to the provisions of the decedent’s will, with the sole exception of provisions dealing with wills existing before the marriage takes place. Under the old law, the marriage revoked the will. Under these new provisions the surviving spouse is entitled to her normal intestate share of any portion of the estate not going under the will to issue of the decedent born before the marriage UNLESS 1) it appears from the will that it was made in contemplation of the marriage to the spouse; or 2) the will contains a general provision that it remain in effect notwithstanding any subsequent marriage; or 3) the testator provided for the spouse by transfer outside the will and an intent that the transfer be in lieu of a testamentary provision is shown by the testator's statements or is reasonably inferred from the amount of the transfer or other evidence.  The implications of this for prenuptial planning should not go unnoticed. In many instances a new will may be more important than a prenuptial agreement.

    What if there is a will, but the decedent has attempted to disinherit the spouse by leaving the spouse nothing or a token bequest? Many people assume incorrectly that they can disinherit their spouse simply by drawing a will that excludes them and may even try to draft their own will to do so.

    In Massachusetts the spouse has the right to waive the will and elect to inherit what is often called the statutory forced share.  However, the statutory forced share is significantly less than the amount that the spouse would be entitled to by inheritance if there were no will. If there are surviving issue, the amount is one-third but only $25,000 outright and an income or life interest in the balance of the third over $25,000. If there are no issue surviving but other kin, the amount is the first $25,000 outright plus an income or life interest in one-half of the balance. If there are no issue or other kin surviving, the spouse gets the first $25,000 and one-half of the balance of the estate outright. The spousal waiver of the will must be properly exercised within 6 months of the probating of the will. If the waiver is elected, and the spouse will receive an income interest in a portion of the estate, those who would inherit under the will receive nothing until after the death of the surviving spouse. It is not unusual for such cases to be settled along other lines.


    It is possible to escape the operation of all of these statutes by successfully avoiding probate. However, in Massachusetts it has been held that assets held in a revocable trust are included as part of the probate estate in determining the rights of a surviving spouse. It is also quite likely that new legislation affecting the statutory forced share will redefine the “probate” estate for purposes of determining the surviving spouse’s rights. These rights are also prime subjects of negotiation in prenuptial agreements. We probably see far less of the statutory forced share in practice today because of the prevalence of divorce ending unsuccessful marriages before death and an increase in prenuptial agreements prior to subsequent marriages. We are likely to see even less of it in view of the new provisions that apply where a will is executed before the marriage, except perhaps in medicaid cases. If a divorce is pending and not final at the time of death, it abates and the surviving spouse has all statutory rights unless they have been bargained away by a valid contract (such as a prenuptial agreement or separation agreement) that can be enforced against the surviving spouse.




    II. The New Uniform Probate Code Changes Intestate Shares of Descendants

    Under the new law the intestate shares of descendants will be calculated differently where there has been a death in the nearest generation of survivors. Under the old law, if a person dies unmarried but with children surviving, the estate will be split equally between the children. If a child has predeceased leaving children surviving, those children would take in equal shares the share their parent would have inherited had he or she survived. This is called a per stirpes distribution scheme. Under the new law, the share of the deceased child would be divided among and distributed to all of the grandchildren, including children of living parents who are inheriting a share in their own right. This is referred to as distribution per capita at each generation. Supposedly this new default distribution scheme for intestate estates was put into the law because the individuals who worked on the law felt that this is what most people prefer, although no scientific poll or survey was conducted to arrive at this conclusion. In comments written in some of the literature generated to support this bill, estate planning lawyers were criticized for never discussing the matter in detail with their clients and using the old per stirpes scheme in most of their wills and trusts. We have always explained and discussed with clients the intestate distribution scheme and other alternatives including the new default as well as class gifts and other more sophisticated plans. Our experience over many years has been that well over 90% of clients preferred the per stirpes scheme contained in the law which has expired. If you are unhappy with this new scheme, the solution is to have a will (or a trust) in place that leaves your estate the way you want it and not the way a few well intentioned lawyers and politicians felt they knew you most likely would prefer it. If you have a will, perhaps it is time to take it out and review it to reassure yourself that it makes the provision you desire. If it does not, or if you do not have a will and do not like the default scheme of distribution provided by this new law, you need to have a will (or trust) done that carries out your wishes.

    III. Limitation on a Parent’s Right to Disinherit Child

    Also under the new law the right of a parent to disinherit a child will be limited by the provisions of section 2 -403 to be found in the new Chapter 190B of the Massachusetts General Laws. This is certainly bad news and additional consternation for anyone dealing with the pain of having raised a child who has thoroughly earned and richly deserves the distinction of being disinherited by their parent. This law creates a new class of “exempt” assets from a decedent’s personal property and provides an entitlement of the surviving spouse, if there is one, otherwise of all children jointly, to the tangible personal property up to a value of $10,000, and if the tangible personal property is insufficient in value to rise to that level, other assets (such as cash, etc.) to that value.

    The new law provides:  “The decedent's surviving spouse is entitled from the estate to a value at date of death, not exceeding $10,000 in excess of any security interests therein, in household furniture, automobiles, furnishings, appliances, and personal effects. If there is no surviving spouse, the decedent's children are entitled jointly to the same value. If encumbered chattels are selected and the value in excess of security interests, plus that of other exempt property, is less than $10,000, or if there is not $10,000 worth of exempt property in the estate, the spouse or children are entitled to other assets of the estate, if any, to the extent necessary to make up the $10,000 value.” So far no one involved in the passage of this new law has taken credit for being the source of this truly awful idea of piling another layer of hurt upon people suffering with one of life’s more painful tribulations and another layer of difficulty on the administration of their estates.  

    Until the passage of this law, hailed by many as a great triumph in bringing Massachusetts probate laws into the twenty-first century, a person with a properly worded and executed will could totally disinherit a child from any interest in the estate, and at least could rest assured that they would have neither any claim to their personal affects which would be left to safer caring hands, nor any opportunity to cause contention and aggravation over the distribution of such items. Under this new law, not only will such children have to be notified, but will actually have to be located so as to sign off on their receipt of their due share of the exempt assets in some cases before the property can be distributed and in all cases before the estate can be closed. In situations where children have literally disappeared and are of parts unknown, this is going to put an additional burden on the executor or administrator to locate these children and delay the distribution of this property and the closing of the estate. How twenty-first century that is!

    As far as the other side of the coin where children are disinherited undeservedly, the new law gives them nothing but an opportunity to get some personal effects and maybe a little revenge while they are at it.

    This new law is going to apply to wills signed before the law goes into effect. It is the date of death that controls. There are some things a lawyer can do to either minimize or avoid the burdens created by this law such as getting creative about avoiding probate with tangible personal property. Anyone with a will that intentionally excludes a child should see their attorney to be updated on this problem before considering changing their domicile. 


    IV. Regarding Instructions on Last Wishes 

    The Uniform Probate Code provides that executors may carry out written instructions of the decedent relating to the decedent's body, funeral and burial arrangements before they are even appointed by a probate court. This is a significant change from prior law and will result in some changes in practice when the law goes into effect. We have always advised that a will was usually a poor choice of place to outline such instructions because for the most part, no one would get around to sitting down to go over the will until after the funeral. Moreover, there was never any provision in the law to authorize someone who is merely a named but as yet unappointed executor to carry out such instructions. In cases of dispute, the law came down to issues of ownership of the decedent’s remains and standing as heirs and next of kin. From a practical standpoint, prepaid funeral arrangements have always been and will continue to be effective ways to have one’s wishes carried out and serve other purposes as well for Medicaid long term care eligibility. Nevertheless, this new provision does open up an opportunity for those who have unusually specific or controversial plans or whose plans may otherwise be expected to run into serious opposition from family members.

    V. Estate Administration Procedures Totally Overhauled


    Under the new law there will be an entirely new set of procedures for probating estates, both for cases with wills and intestate cases. There will be informal administration available, quicker and easier. There will also be formal administration for disputed cases involving will contests and disagreement over who should serve as the “personal representative” (executor or administrator). There will also be supervised or unsupervised administration in an effort to speed up administration except where there a complications and/or disagreements. Virtually all of the court forms have been undergoing revision and are now available. The jurisdictional amount for a summary “voluntary” probate or administration has been increased from $15,000 to $25,000. In addition, non Massachusetts residents may now serve as voluntary administrators.


    Trusts: From A to Z


    First, what is a trust? Simply put, a trust is one type of a legal entity. Other examples of legal entities include corporations or partnerships. A trust has one or more persons (the "trustee") who holds the property for the benefit of another (the "beneficiary"). The property contained in a trust can be either real estate, investments, or a combination of both. The person who gives the property to a trust is known as a "donor" or "grantor." A trustee's responsibilities include managing, investing and distributing the property of the trust. Although a beneficiary does not legally own the trust property directly, he holds a beneficial or equitable interest in the trust, and has rights to the trust assets that vary depending on the purpose and language of the trust. Trusts can be written in many ways to accomplish different goals. For example, a trust can be written so that the trustee is required to pay to the beneficiary all income earned on trust property or it can be written to give to the trustee discretion over how to use the trust property for the beneficiary. In addition, a trust can include a "standard" that guides the trustee in making decisions regarding trust distributions such as limiting distributions for educational purposes or for the general support of the beneficiary. A trust can and should be tailored to meet the specific goals of each client; however, too often, there appears to be significant confusion as to why a trust was initially established.

    Attorneys are to blame for much of the confusion relating to trusts. Attorneys often use different names for trusts that are more of a marketing gimmick than a way to identify the trust purpose. For example, in describing trusts, attorneys sometimes use the terms "Loving Trust" or "Living Trust" even though the trust is neither loving nor alive. While these "Loving" or "Living" trusts are usually created and funded while the client is alive and used to benefit a loved one, these terms are otherwise meaningless.

    Types of Trusts

    Medicaid Irrevocable Asset Protection Trust

    Many of our clients are worried about protecting their assets should they or a spouse need nursing home care. Under the Medicaid regulations, assets held in an irrevocable trust are not counted as being owned by the applicant or his spouse as long as the trust principal cannot, under any circumstance, be paid to the applicant or his spouse. Funding an irrevocable trust will make the donor ineligible for nursing home Medicaid benefits for five years from the date of the transfer to the trust. Keep in mind that when a trust is irrevocable it means, for the most part, that it cannot be changed once it has been created, and once funded, the assets cannot be returned to the donor.

    Supplemental Needs Trust

    Generally, the purpose of a supplemental needs trust (also known as special needs trust) is to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted supplemental needs trust has no direct access to the trust assets. However, the trustee has full discretion to provide for the beneficiary while keeping in mind the trust's purpose of not impacting the beneficiary's eligibility for public benefit programs.

    In determining which kind of supplemental needs trust is most appropriate, it is imperative to assess the beneficiary's situation. The type of supplemental needs trust to use is dependent, in part, on whether the trust is being created by the disabled person himself with his own funds (a so-called "self-settled trust"), or by a third-party (for example, a parent to take care of a disabled child). In addition, which trust to use is also dependent upon the specific benefit the beneficiary is receiving, or may receive in the future. For example, the public benefit program known as Supplemental Security Income (SSI) requires that a self-settled supplemental needs trust contain a "pay-back provision" that states, upon the recipient's death, the Commonwealth be reimbursed for benefits provided to the beneficiary. Other types of supplemental needs trusts, however, allow the remaining trust assets, upon the beneficiary's death, to be paid out to other family members instead of reimbursing the Commonwealth.

    Revocable Trust

    A revocable trust is sometimes referred to as a "living" or "inter vivos" trust. Such trusts are created during the life of the donor rather than through a will. The donor of a revocable trust maintains complete control over the trust and may amend, revoke or terminate the trust at any time. The donor is able to reap the benefits of the trust arrangement while maintaining the ability to change the trust at any time prior to death. The disadvantage of a revocable trust is that the trust assets are fully countable to the donor for purposes of determining Medicaid eligibility. Revocable trusts are sometimes used to avoid probate at the donor's death, as the trust assets pass through the trust rather than through a will. Revocable trusts can continue after the donor's death. For example, the trust can continue to manage assets for minor children. Keep in mind that a revocable trust becomes irrevocable after the death of the donor.

    Testamentary Trust

    A testamentary trust is a trust created by a will. A testamentary trust has no power or effect until the will of the donor is probated. Although a testamentary trust must be probated and thus, become a public document (as it is part of the will), it can be useful in accomplishing other estate planning goals. For example, a testamentary trust funded through the estate of a spouse is treated as a protected, noncountable asset if the surviving spouse applies for nursing home Medicaid benefits.

    Trusts for Estate Taxes

    Trusts can also be used to minimize estate taxes. However, this is somewhat less of a critical issue for wealthy clients as the federal estate tax limit has increased over approximately the last five years. In addition, under federal law, an individual's estate tax credit can be utilized by his spouse without a trust. However, the Massachusetts estate tax threshold remains at only one million dollars. In addition, if a spouse does not utilize his credit either while alive or at death, the credit disappears. Consequently, so called, credit shelter trusts are still useful to minimize Massachusetts estate taxes. In order to reduce any tax liability, roughly half of the assets are held in a credit shelter trust of the first spouse to die. These trust assets are available to the surviving spouse should he need them; however, the trust assets are at least partially excluded from the estate of the second spouse to die when the IRS and the Department of Revenue (the Massachusetts tax authority) calculates the amount of estate taxes owed.

    Trusts can also be utilized to own life insurance as a means of minimizing estate taxes. If a trust purchases the life insurance policy and pays the premiums directly, the death benefit will not be counted as part of the taxable estate at the death of the insured individual.

    Pet Trusts

    Since 2010, Massachusetts pet owners can create a trust for a pet's benefit. The trust can nominate a person to care for the pet in the event of the owner's death or incapacity and also specify how the funds set aside for the pet's care and maintenance will be managed. Unlike prior trust law which did not impose any legal obligation on the estate to honor trust provisions relating to pets, the new law requires the named trustee to create an account and use the funds throughout the animal's lifetime.


    As you can see, there are several different types of trusts that serve many different purposes. Keep in mind that not everyone needs a trust. Don't assume that just because you know someone that has a trust that you also need one. As always, it is important to consult with your attorney to get help in clarifying your goals so that you can then determine the most effective and cost efficient means of achieving those goals.


    CLASS Act Abandoned / Long Term Care Remains in Crisis

    The Community Living Assistance Services and Support Act (CLASS Act) established the first national, government run long-term care insurance program to be a consumer financed insurance pool overseen by a government trust. A primary goal of CLASS was to reduce to the role of Medicaid, which currently spends one-third of its entire budget – more than $100 billion a year – on long-term care, and that number is only set to increase as the population ages.

    What effect the CLASS Act had on long-term care needs


    The CLASS Act provisions would have created a government administrative structure, under which participants would pay a monthly premium and be eligible for modest benefits for their long-term care needs after five years of paying the premiums. This would have been significantly different from any other government program because the Act required that benefits would be paid by premiums collected from voluntary participants and not by the taxpayers.

    Although the CLASS Act had laudable goals, commentators from the start have questioned how it would be financed. Not surprisingly, the CLASS Act was cancelled in mid-October, 2011 and the Obama administration stated it could not be sustained without using taxpayer money as the program had originally intended. Because participation in the program is voluntary, Health and Human Services Secretary Kathleen Sebelius concluded that there was no way to keep it solvent. It was determined that few healthy people would feel the need to pay a premium for care they might never need, and without healthy people paying into the system, there would be no way to keep the premiums affordable for those who did want to participate.

    Still a great need for federal programs that would make long-term care more affordable.


    The failure of the CLASS Act doesn’t change the need for a federal program that would make long-term care more affordable or create incentives so that people can pay privately for their care. Our population is aging rapidly and we do not have a plan about how to afford to pay for that care. Hopefully, despite the current political climate, there will be a chance for a reasoned discussion of how we can achieve this goal.