PA "Assisted Living Residence" Regs Proposed

Proposed Assisted Living Residence Regulations for Pennsylvania have been submitted to the PA Bulletin for publication on August 9, 2008, according to a representative of the Pennsylvania Assisted Living Consumer Alliance.

The regulations were already submitted to the Pennsylvania Independent Regulatory Review Committee consistent with the regulatory review process in Pennsylvania.

Thus, although not yet published, the form of the proposed regulations regarding "Assisted Living Residences", along with ten pages of analysis required for the submission for review, can be viewed online or saved as a document here (PDF, 116 pages).

PALCA notes that "[i]nterested persons need not wait until publication in the PA Bulletin as the regs can be immediately downloaded for review from the IRRC website at this link."

Public comments on the proposed regulations will be due one month after publication, that is, by September 8, 2008.

According to the submission to the PA IRRC by the PA Department of Public Welfare, "the proposed Assisted Living Residence regulation establishes the minimum standards for building, equipment, operation, care, program and services, training, staffing and for the issuance of licenses for assisted living residences operated in Pennsylvania." The authority for issuance is the Public Welfare Code, Act of June 13, 1967, P.L. 31 No. 21 (62 P.S. §§211, 213 and 1001-1087).

PA DPW notes that "In enacting Act 56, the General Assembly found that it is in the best interests of all Pennsylvanians that a system of licensure and regulation be established for assisted living residences in order to ensure accountability and a balance of availability between institutional and home-based and community-based long-term care for adults who need such care."

In explaining "the compelling public interest that justifies the regulation," PA DPW states:

Currently, there is no regulation of assisted living residences in Pennsylvania.

However, assisted living residences are a significant long-term care alternative which combines housing and supportive services. They are designed to allow people to age in place, maintain their independence and exercise decisionmaking and personal choice.

This regulation establishes the minimum standards for licensure of assisted living residences to allow individuals to age in place.

The regulation protects consumers' health and safety, privacy and autonomy while at the same time balancing providers' concerns related to liability and individual choice.

The proposed regulations were developed with input from at least thirty-five "stakeholders", noted the submission:

The Department developed the proposed regulations in consultation with the Assisted Living Residence Regulation Workgroup that was comprised of industry stakeholders, consumers and other interested parties.

The Department held meetings with the workgroup on October 17, 2007, November 6, 2007, November 27, 2007, December 11, 2007, January 8, 2008, January 29, 2008, February 11, 2008, February 26, 2008 and April 1, 2008.

Over thirty-five stakeholders were invited to participate in the workgroup, which included disability advocates, advocates for older adults, consumers, union representatives, an elder law attorney, public housing agencies, trade associations for profit and nonprofit long-term care nursing facilities and many other interested parties.

Over the course of the meetings the Department provided the workgroup with several draft versions of the proposed regulations and solicited their comments and recommendations.

The proposed regulation was also discussed at the Long-Term Care Subcommittee of the Medical Assistance Advisory Committee (MAAC) on June 13, 2007, August 8, 2007 and April 9, 2008.

The Assisted Living Residence proposed regulation were also discussed at the Medical Assistance Advisory Committee (MAAC) on June 28, 2007 and at the Consumer Subcommittee of the MAAC on March 23, 2007.

The Assisted Living Residence regulation was also discussed at the Stakeholder Planning Team on April 9, 2007.

Nevertheless, PALCA intends for its member agencies to submit comments consistent with its mission to protect residents of assisted living facilities, and promises that such comments will be available on its website. For background about PALCA, See: PA EE&F Law posting New PALCA for Assisted Living Standards (07/22/08).

Many present facilities would be affected by new regulations; and many more new facilities would consult such regulations in their start up.

It is anticipated that 100 assisted living residences will be licensed in FY 2009-2010; 150 assisted living residences in FY 2010-2011; 200 assisted living residences in FY 2011-2012; and 250 assisted living residences in FY 2012-2013.

Other persons or organizations involved in this growing aspect of the long-term care industry, and affected by the proposed regulations, can submit comments until the deadline, September 8, 2008.

"Restricted Management Account" Discount Ignored

On July 21, 2008, in its Internal Revenue Bulletin 2008-29, the IRS issued Revenue Ruling 2008-35, which addressed "whether an interest in a restricted management account (RMA) will be valued for transfer tax purposes without any reduction or discount for the restrictions imposed by the RMA agreement."

The IRS answer: Yes -- that is, no discount.

On July 28, 2008, fellow practitioner Robert Wolf, Esq., of Pittsburgh, PA, drew this Ruling to the attention of the readers of his emailed P & T Hot Tips. He gave me permission to post his comments, which I have edited somewhat.

Bob puts Revenue Ruling 2008-35 into context, and speculates about its effects:

Over the years we have heard many ideas suggested by esteemed estate planners that seem a little too good to be true, such as the Family Limited Partnership, where the donor could keep control of the family business but effectively transfer most of the value out of her estate, and many others.

One of these is the restricted management account that locks the client's funds away for a number of years, partly to give the investment manager the freedom to invest long term with no worries about investor bailouts, but also to make the assets subject to a substantial discount for federal gift and estate and generation-skipping transfer tax purposes.

Well, we know what the IRS thinks of the Family Limited Partnership deals. The cases brought by the IRS and decided in its favor have made planning with them more difficult and less advantageous.

Nevertheless, esteemed estate planners such as Roy Adams and a number of others have suggested that restricted management accounts ought to work. The argument is that restrictions on liquidity and transfer make their fair market value less than the fair market value of the underlying assets.

Well the IRS doesn't think so, and has issued Revenue Ruling 2008-35 that says so. The IRS ruled that no discount is allowable to such transfers, loosely analogizing the accounts to an IRA account, and also citing Internal Revenue Code Sections 2036 and 2703 for reasons to disregard the restrictions.

The underlying tax policy is that a taxpayer should not be able to create restrictions to his or her own property, and then cite those restrictions as to why the property is less valuable for transfer tax purposes, where a motivating reason for the restrictions is to reduce the transfer tax value of the property.

I have not noticed any cases on this topic, but I guess if you are using an RMA and expect to get a discount on a transfer or for estate or GSTT tax, you will have to get the Tax Court to overturn this Revenue Ruling. You won't get any discount from the IRS without it.

Bob commented accurately about the past promotion of restricted management accounts as a device proposed to obtain a valuation discount on a federal tax return. For example, see "The Restricted Management Account – An FLP Alternative" by Andrew T. Wolfe, CPA, JD, LLM; and "Restrictive Management Accounts" by Nathaniel E. Clement, which includes examples posed by noted estate planning attorney Roy Adams, of Chicago.

Read the sections of Revenue Ruling 2008-35, per its Table of Contents, to see how the IRS dissected, then declined, the arguments claiming a valuation discount on the Form 706 (Federal Estate Tax Return) for a decedent's assets previously placed into an RMA:

• ISSUE
• FACTS
• LAW
• ANALYSIS
• HOLDINGS
• DRAFTING INFORMATION

This is the Ruling's holding:

The fair market value of an interest in an RMA for gift and estate tax purposes is determined based on the fair market value of the assets held in the RMA without any reduction or discount to reflect restrictions imposed by the RMA agreement on the transfer of any part or all of the RMA or on the use of the assets held in the RMA.

Accordingly [in the example provide in the Ruling], A’s gift to B in Year 2 is valued at $10X, the full fair market value of the assets transferred into B’s separate RMA. Similarly, the amount to be included in A’s gross estate for estate tax purposes with respect to the RMA is $55X, the full fair market value of the assets in the RMA at A’s death.

Revenue Ruling 2008-35 was the subject of an article posted online by the law firm McGuireWoods, entitled "IRS to Disallow Valuation Discounts for Restricted Management Accounts" (July 21, 2008).

Whether one agrees or disagrees with [the] Service, this Revenue Ruling makes the use of RMAs as a substitute for family limited partnerships or limited liability companies far less attractive to customers and clients because of the Service’s repudiation of RMAs as a technique to obtain valuation discounts.

Individuals who have been considering RMAs will now want to consider family limited partnerships and limited liability companies. Despite the attacks made by the Service on family limited partnerships and limited liability companies in the last several years, many family limited partnerships and limited liability companies have withstood attacks by the Service. Thus, family limited partnerships and limited liability companies continue to be viable techniques for obtaining valuation discounts if they are established and managed appropriately.

Individuals currently holding RMAs will now want to pursue other techniques. Of course, if the term of the RMA cannot be shortened, using the assets in the RMA in other techniques may be impossible before the end of the term.* * *

For a graphic display of the immediate effect of Revenue Ruling 2008-35, see "Restricted Management Account (RMA)", where the text explaining the pros and cons of this proposed wealth saving device now is greyed-out, under a heading now annotated in bold letters: "TECHNIQUE ON HOLD" [Source of graphic above].

"I knew I was going to take the wrong train, so I left early."

-- Yogi Berra, per Wikiquote

"Filial Support" in PA? Really?!?

On July 22, 2008, the Summer 2008 issue of Adventures in Law and Aging (PDF, 3 pages) -- the Newsletter of the Elder and Consumer Protection Clinic, of Penn State - Dickinson School of Law -- was posted online.

Published in that Newsletter was an important sidebar authored by the Director of the Clinic, Professor Katherine C. Pearson, about filial support obligations of adult children towards their destitute parents.

With express permission from Katherine, I reproduce her comments, published in the Newsletter, about this controversial issue:

“SO, WHAT IS THIS ‘FILIAL SUPPORT’ THING?”

In 2008, that’s the most frequent question I get from curious members of the public — and from attorneys who are handling cases where a claim is made under the Domestic Relations Code, 23 Pa.C.S.A. § 4603.

Since the 2005 “codification” of the Commonwealth’s musty old indigent support law, Pennsylvania has become the most active state in the country for lawsuits asserting that adult children should pay for the care of their parents, i.e., claims for “filial support.” The viability of each filial support claim turns on key facts and the statute deserves a careful reading.

In response to questions about filial support suits, I’ve written a 2008 supplement “Filial Support Obligation in Pennsylvania: Adult Children, Parents, and Spouses,” for Jeffrey Marshall’s treatise, Elder Law in Pennsylvania, available from PBI in July.

Also, copies of past short articles I have written about this law are available on my personal Web page, along with the text of the statute itself and a table of similar laws in other states.

Katherine provides resources online about "filial responsibility" at her Professorial Webpage under the heading Recent Articles and Materials on Filial Responsibility and Support Laws:

• Invited article: A Midnight Tale of Filial Support [PDF, 2 pages], from the Pennsylvania Family Lawyer, Volume 26, Issue No. 4, December 2007 at pages 146-7.
• Invited Essay: Finances, Families and Filial Laws, From the NCFR Report, December 2006, Volume 51:4, Copyright 2006; National Council on Family Relations. Used by permission.
• Re-Thinking Filial Support Laws in a Time of Medicaid Cutbacks — Effect of Pennsylvania's Recodification of Colonial-Era Poor Laws, 76 Pa. Bar Q. 162 (No. 4, 2005)
• Pennsylvania's Filial Support Law, Adopted by Pennsylvania Legislature in July 2005
• Filial Responsibility and Support Statutes and Cases in the U.S. (with hyperlinks to statutes)
• Over, Under or Inconclusive? Using Filial and Family Support Laws to Combat Elder Exploitation — Presentation at the 32nd Annual Gerontology Conference hosted by Oregon State University on April 3-4, 2008.
  

What is the public policy behind this Commonwealth's law that requires adult children, who reside in Pennsylvania, to support their indigent parents if they also reside in Pennsylvania? Furthermore, is such an obligation expected, and is it fair?

In her thoughtful December 2007 article, Katherine speculated about a reason for the renewed filial support law in Pennsylvania, but also identified its broader effects.

The state fears drowning in red ink as well, and the state sees filial support laws as a means of requiring the care-facility to go after a child who has manipulated a parent or a parent's finances to benefit personally. That's the message of the most recent published appellate decision, Presbyterian Medical Center v. Budd [PDF, 19 pages], 832 A. 2d 1066 (Pa. Super. 2003).

However, Pennsylvania's law is not limited to claims against such "bad" children, who may have breached fiduciary duties under a power of attorney or committed outright fraud. * * *

The queries posed at the conclusion of her article remain pertinent, since there has been little debate, and no progress, in resolving the effects of the broad legislation readopted by the Pennsylvania Legislature hastily in 2005 and signed by the Governor as that year's Act 43:

Is a "filial support" law the way right direction to go in seeking payment sources for long-term care? Should the moral obligation that many people feel to provide financial assistance for long-term care for family members be backed by a legal support obligation?

If this is a good law, perhaps the public needs to understand it exists so that it stops operating primarily as a retroactive collection tool, a "gotcha law."

And if it isn't the right law for Pennsylvania in modern times, perhaps the hour has come to seek open debate and action by the legislature.

Update: 08/05/08:

Patti Spencer, Esq., of Lancaster, PA, noted this posting in an article posted July 28, 2008, on her Pennsylvania Fiduciary Litigation blog, entitled "Am I My Mother's Keeper?":

Neil Hendershot has an excellent post today on Pennsylvania's Filial Support Statute. He quotes Professor Katherine Pearson's sidebar in the Summer 2008 issue of Adventures in Law and Aging, "“SO, WHAT IS THIS ‘FILIAL SUPPORT’ THING?” and provides many citations to useful resources. * * *

Patti provided a history of "filial support" laws in Pennsylvania and adds her comments. I recommend reading her article.

Update: 08/07/08:

For a more generic consideration of childrens' responsibilities for their parents debts, and for suggestions how children might address the problem with their parents before the obligations become overwhelming, read "Should you worry about your parents' debts?" by Liz Pulliam Weston, posted on MSN Money:

With finances more complicated, the credit easier and the scammers relentless, more and more members of a frugal generation are deep in debt. Here's how you're affected -- and how to help.

Update: 07/16/09:

Two articles were published by national media in one week that focused on Pennsylvania's "filial responsibility" law and provided personal examples of their recent selective enforcement. See: PA EE&F Law Blog post PA's "Filial Responsibility" Law in the News (07/16/09).

Hedge Funds as an Investment, Pt. II

Fiduciaries investigating hedge funds as an investment should read the Press Release, dated April 15, 2008, issued by the United States Treasury entitled "PWG Private-Sector Committees Release Best Practices for Hedge Fund Participants" (HP-927).

It announced release of a report, which should become "required reading" for any fiduciary contemplating hedge fund investments: the "Report of the Investors' Committee to the President's Working Group on Financial Markets" (PDF format, 205 KB, 63 pages).

I asked in yesterday's posting Hedge Funds as an Investment, Pt. I, "What should a fiduciary know about hedge funds?" This Report contains the answers.

The Press Release summarized the importance of the Report:

Two blue-ribbon private-sector committees established by the President's Working Group released separate yet complementary sets of best practices for hedge fund investors and asset managers today, in the most comprehensive public-private effort to increase accountability for participants in this industry. * * *

The Press Release (also available in PDF format here) noted the fast-paced, high-level, top-priority nature of the study that led to the Report's issuance:

The PWG tasked the committees, selected in September 2007 and comprised of well-respected asset managers and investors, with collaborating on industry issues and developing a set of best practices for their respective groups of stakeholders. Their work was based on the PWG's Principles and Guidelines Regarding Private Pools of Capital issued in February 2007, which sought to enhance investor protections and systemic risk safeguards. The best practices may be viewed at the committees' websites, www.amaicmte.org.

The PWG includes the heads of the U.S. Treasury Department, the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission.

The best practices for the asset managers call on hedge funds to adopt comprehensive best practices in all aspects of their business, including the critical areas of disclosure, valuation of assets, risk management, business operations, compliance and conflicts of interest. * * *

During that process, on September 17, 2007, a Pennsylvanian, Blaine F. Aikin (managing partner and chief knowledge officer of fi360, of Sewickley, PA), published an article in the "international newspaper of money management", Pensions & Investments, also posted online, entitled "Hedge funds present fiduciary hurdles"?

His excellent article began with a caution to fiduciaries regarding hedge funds:

While it might be true that no investment is inherently imprudent, some start with a presumption of guilt until proven innocent.

Hedge funds fit into this category because of the inherent hurdles they present to fulfilling a fiduciary’s duties to their client. * * *

He then proposed a five-part inquiry by any fiduciary who contemplated a hedge fund investment:

1. Are you permitted to hold this type of investment?

2. Do you believe financial markets are inefficient and that such inefficiencies are exploitable?

3. Can you adequately evaluate the positions held in the hedge fund investment and the associated risks of those positions?

4. Are the fees and expenses of hedge funds fair and reasonable?

5. What recourse do you have if something goes wrong?

After explaining the risks underlying, and reasons for, each inquiry, he offered this advice:

Only after you have considered these questions and conclusively proven that your fiduciary duties are being met can you feel comfortable in selecting hedge fund investments.

Fiduciaries operate in a special relationship of trust and legal and ethical responsibility for managing the money of others. When it comes to hedge fund investing, the obligations attendant to the fiduciary role point directly to the line of inquiry presented above.

In my view, the hurdles that must be cleared to justify making hedge fund investments are too high for most fiduciaries. Those that do decide to proceed down the hedge fund path should be prepared to demonstrate that they did so properly by having a compelling case for their conduct prepared in advance.

When, on April 15, 2008, U.S. Treasury Secretary Henry M. Paulson, Jr. made remarks upon the issuance of the Report, reproduced in a Press Release, entitled "Secretary Paulson Opening Remarks at Release of Best Practice Recommendations by PWG Private Sector Committees" (HP-926), he mirrored the need for accountability regarding private pooled investments, including hedge funds:

Last September, experienced industry professionals from some of the most respected institutions agreed to serve on two new committees to address market issues and develop "best practices" for private pools of capital – one from the perspective of investors and one from the perspective of asset managers.

The President's Working Group encouraged the committees to use the PWG principles and guidelines as the foundation for their best practices, and they have done so. As we said when announcing these committees --- we want the world's highest investor protection standards; we want to guard against systemic risk and keep the United States the most competitive financial marketplace in the world. * * *

The Press Release (HP-926) noted key components of the Report:

The best practices for investors include a Fiduciary's Guide and an Investor's Guide.

The Fiduciary's Guide provides recommendations to individuals charged with evaluating the appropriateness of hedge funds as a component of an investment portfolio.

The Investor's Guide provides recommendations to those charged with executing and administering a hedge fund program once a hedge fund has been added to the investment portfolio. * * *

Both best practices documents recommend innovative and far-reaching practices that exceed existing industry standards. The recommendations complement each other by encouraging both types of market participants to hold the other more accountable.* * *

The Executive Summary of the Report, reproduced (along with the Report's "Table of Contents") by Asiaing online, noted its importance to private investors, institutional investors, and fiduciary investors:

Thousands of institutional and individual investors meet the legal requirements to invest in hedge funds, but it is not always appropriate for them to do so.

Prudent evaluation and management of hedge fund investments may require specific knowledge of a range of investment strategies, relevant risks, legal and regulatory constraints, taxation, accounting, valuation, liquidity, and reporting considerations.

Fiduciaries must take appropriate steps to determine whether an allocation of assets to hedge funds contributes to an institution’s investment objectives, and whether internal staff or agents of the institution have sufficient resources and expertise to effectively manage a hedge fund component of an investment portfolio. * * *

Are you an investor or a fiduciary who is considering a hedge fund investment, or do you advise one about such an investment? Then you must read the Report.

Update: 07/29/08:

On July 29, 2008, The Wall Street Journal's "Wealth Report", noted in a posting entitled "Wealthy Investors Cling to Hedge Funds" that "[d]espite all the bad press about hedge-fund performance recently, a Bank of America survey found that hedge funds are still popular with the rich."

The survey, of 400 clients with $3 million or more in investible assets, found that more than half of those with hedge-fund investments were “satisfied” with the funds’ performance.

That compares with an approval rating of just 30% for traditional investments such as stocks and bonds. Other alternatives also fared better than stocks and bonds: a 41% approval rating for venture capital, 41% for real-estate, and 35% for private equity. * * *

So the poor performance of hedge funds beats the horrid performance of stocks. The survey also found that investors who had held hedge funds the longest were the most satisfied. Those who had been investing in hedge funds for 10 years or more were twice as likely as those with less experience to be “extremely satisfied” — probably because they had all those heady days of double-digit returns to factor in to their assessment.

The critical question is whether the rich will keep putting money into hedge funds. Funding for new funds is drying up: In the U.S. the number of new funds has dropped by half. It’s about the same in Europe. * * *

Update: 09/06/08:

NBC News broadcast a Dateline NBC segment by correspondent Dennis Murphy on Friday, September 5, 2008, at 10:00 p.m., entitled "Mystery of the missing millionaire."

A wealthy hedge fund manager whom the rich and powerful trusted with their fortunes suddenly disappears – and the money was gone too. Turns out, all along he'd been playing a dangerous game with very high stakes. Dennis Murphy reports.

The description of the investigative report explores "hedge funds" and their managers, and reinforces some of the concerns expressed in recent years:

This giddy era, before the market’s recent swan dive, was dubbed “the new gilded age” and some of the young men becoming as rich as any Rockefeller or Andrew Carnegie of days past were masters of something known on Wall Street as a "hedge fund."

Top hedge fund managers have been reported to make anywhere from $100 million to a billion dollars a year. They do it by making already wealthy people and institutions even richer.

Someone who wanted in on the hedge fund action in the worst way was Samuel Israel III. He was a Wall Street guy who’d worked his way up here and there in the ‘80s and ‘90s as a trader. * * *

A hedge fund, like the one Sam Israel was starting up, is like a private club for wealthy investors. It usually takes a million dollars to get in the door.

And the very best hedge fund managers are a high priesthood of brilliant traders. They place complex bets that can pay off handsomely, even when others are losing their shirts. * * *

The website for the recent broadcast segment referenced a previous helpful MSNBC commentary, "What is the deal with hedge funds?" (08/27/07), by John W. Schoen, Senior Producer.

Hedge Funds as an Investment, Pt. I

On July 22, 2008, Bankaholic posted an article entitled "4 Reasons Why Investors Should Avoid Hedge Funds at All Costs" by John Wu, who warns investors that "four curious characteristics of hedge funds make them different than many standard investments."

Investopedia introduces the concept of a "hedge fund" as follows:

An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). * * *

Wikipedia begins its extensive description of a "hedge fund" as follows:

A hedge fund is a private, largely unregulated pool of capital whose managers can buy or sell any assets, bet on falling as well as rising assets, and participate substantially in profits from money invested. It charges both a performance fee and a management fee.

Typically open only to qualified investors, hedge fund activity in the public securities markets has grown substantially, accounting for approximately 10% of all U.S. fixed-income security transactions, 35% of U.S. activity in derivatives with investment-grade ratings, 55% of the trading volume for emerging-market bonds, and 30% of equity trades.

Hedge Funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and distressed debt. * * *

Mr. Wu, in his article, acknowledges the high profile and wide availability of hedge funds as private investments promoted as attractive to wealthy investors.

He then cautions: "But if anything in this description of hedge funds surprises you or makes you the least bit uncomfortable, then it might be best to stick with what you know."

With copyright permission granted today from a representative of Bankaholic for reproduction on this Blog, I now post the four "curious characteristics" of hedge funds described by John Wu. For his cautionary introductory comments, read the full article .

1. Lack of oversight:

The SEC does not require a private investment fund to register with them or any other regulatory body if it is comprised of fewer than 100 investors. Combine this with these funds’ tendency to lean heavily on offshore investments and hedge funds are operating in a virtual vacuum.

While too much government oversight can hamper the performance of an investment vehicle, too little means that the people handling your money aren’t accountable to anyone, including you.

2. Managers with little to lose:

When investors are invited to contribute to a hedge fund, the manager sets a high-water mark for returns. If your manager meets this goal, he will retain a full 20 percent of your returns, in addition to the couple of points in assets that he is already collecting on an annual basis. And what happens if your fine manager doesn’t meet this lofty goal? With all that he has to gain, failure must destroy him, right?

In fact, you and your fellow investors will eat all of the losses and your manager will merely move on and set up shop somewhere else, none the worse for wear.

3. Totalitarian mindset:

When you invest in a hedge fund, you are putting your assets entirely in the hands of one single person, and that is a dicey proposition any time that that person isn’t yourself. The manager of the fund makes all of the investment decisions that determine the success or downfall of the fund, and even a manager with a great track record is fallible.

If your manager gets in a fight at home or catches a flu bug, your portfolio could suffer. Worse yet, if your manager steps down and hands the reigns to someone completely new, you and your fellow investors could be in serious trouble.

4. Short life spans:

The average life of a hedge fund is only three years, which means that employing this vehicle is unwise if you have a long-term strategy in place. One out of every ten hedge funds collapses each year, making this industry as volatile as almost any other venture out there.

An investment with such a short shelf life might not be the way to go if you are a typical investor who has the long haul in mind.

Mr. Wu's comments are directed towards individual investors. But, for me, his last statement invokes images of fiduciary investors who are responsible over a "long haul" for the benefit of others and who are liable under legal standards of conduct.

What should a fiduciary know about hedge funds?

In tomorrow's posting, I will reference a recent, detailed, authoritative resource that can provide guidance and standards to fiduciaries in dealing with hedge funds.

Graphic source: Article, "Hedge funds and dirty tricks" (03/24/08)
posted by Sox First
a management & compliance company based in the United Kingdom.

Update: 07/25/08:

For the second part of this series, see: EE&F Law Blog posting "Hedge Funds as an Investment, Pt. II" (07/25/08).

Update: 07/28/08:

For an article with a different viewpoint, see: "Ignore the Press: Hedge Funds Still a Viable Investment" (07/24/08) posted by Greg Boop on the Seeking Alpha website.

In that article, he mentions Hedge Fund Info posted by HingeFire, which contains explanations & some industry reference links.

Update: 09/06/08:

NBC News broadcast a Dateline NBC segment by correspondent Dennis Murphy on Friday, September 5, 2008, at 10:00 p.m., entitled "Mystery of the missing millionaire."

A wealthy hedge fund manager whom the rich and powerful trusted with their fortunes suddenly disappears – and the money was gone too. Turns out, all along he'd been playing a dangerous game with very high stakes. Dennis Murphy reports.

The description of the investigative report explores "hedge funds" and their managers, and reinforces some of the concerns expressed in recent years:

This giddy era, before the market’s recent swan dive, was dubbed “the new gilded age” and some of the young men becoming as rich as any Rockefeller or Andrew Carnegie of days past were masters of something known on Wall Street as a "hedge fund."

Top hedge fund managers have been reported to make anywhere from $100 million to a billion dollars a year. They do it by making already wealthy people and institutions even richer.

Someone who wanted in on the hedge fund action in the worst way was Samuel Israel III. He was a Wall Street guy who’d worked his way up here and there in the ‘80s and ‘90s as a trader. * * *

A hedge fund, like the one Sam Israel was starting up, is like a private club for wealthy investors. It usually takes a million dollars to get in the door.

And the very best hedge fund managers are a high priesthood of brilliant traders. They place complex bets that can pay off handsomely, even when others are losing their shirts. * * *

The website for the recent broadcast segment referenced a previous helpful MSNBC commentary, "What is the deal with hedge funds?" (08/27/07), by John W. Schoen, Senior Producer.

New Social Security Benefits Calculator

On July 23, 2008, the Social Security Administration unveiled its new Retirement Estimator which "produces estimates that are based on your actual Social Security earnings record." A link to it is featured on SSA's Home Page.

According to the SSA's description, this new Benefits Calculator:

• Provides an estimate of your retirement benefits comparable to the estimate you receive on your Social Security Statement each year, and

• Lets you create additional "what if" retirement scenarios based on current law.

In the past, SSA offered some form of online benefit projection calculators since at least Spring, 2000. See: "SSA Unveils Online Social Security Benefits Calculator" (04/12/2000) by Karen Stevenson posted by ElderWeb. Previously, three versions were offered:

A "Quick" version computes future benefits from current earnings, by making an assumption that earnings will stay at that level long enough to qualify for benefits.

An "Online" version allows the user to input actual historical salary amounts for each year for a more accurate estimate.

A "Detailed" version allows the user to download a program which can make the most accurate predictions, including disability and death benefits.

Because of privacy concerns, those prior SSA planners were not linked to the active SSA databases, and therefore required users to input their own salary information used for calculations. For many, the effort to input data crippled the usefulness of the calculator, or made its use just too much trouble.

For "hip shot" calculations, vendors also have provided online calculators for generic social security benefit projections. See, for example, the Social Security Benefits Financial Calculator still offered online by Commerce Clearinghouse.

Now, the new SSA Retirement Estimator will perform its calculations based on SSA's data drawn from an actual earnings history, without a need for numerical input.

To utilize the new SSA Retirement Estimator, first you must authenticate yourself online as a social security member with an earnings history. And you must not block the website's interaction with your computer, that is, JavaScript must be enabled to interact with the SSA website.

Before you enter data, you are met with a stern warning:

Acknowledgement For Online Services

IMPORTANT: You can use this website to gain access to your personal information. If you are acting on behalf of another person, or if you are a Representative Payee, you cannot use this online service and should contact a Social Security representative.

Any person who knowingly and willingly makes any representation

1. that is false to obtain information from Social Security records, and/or
2. that is intended to deceive the Social Security Administration as to the true identity of the individual,

could be punished by a fine or imprisonment, or both. The OMB control number for this form is 0960-0596; expiration date 09/30/2009.

I have read and agreed to the above statement. I am the individual whose personal information I am requesting.

Once you agree, then you can enter the required data for authentication:

• Your full name (first name, middle initial, & last name, plus suffix if any, and any other last name used)
• Your Social Security Number
• Your date of birth
• Your place of birth (state, territory, or foreign country)
• Your mother's maiden name

Once authenticated, you can enter your last year's earnings, so that projections can be calculated based on your earnings record and contributions.

SSA cautions about the projections, however:

Retirement estimates are just that, estimates. They will vary slightly from the actual benefit you may receive in the future because:

• Your Social Security earnings record is constantly being updated;
• Our calculators use different parameters and assumptions (e.g., different stop work ages, future earnings projections, etc.); and
• Your actual future benefit will be adjusted for inflation.

This benefits calculator is not intended for use by those who are already covered by Medicare, or currently receive benefits based on earnings.

This benefits calculator is intended for use by future social security recipients if:

• You are not currently receiving benefits on your own Social Security record;
• You are not a Medicare beneficiary;
• You have enough Social Security credits at this time to qualify for benefits; and
• You are not eligible for a Pension Based on Work Not Covered By Social Security.

I used the calculator, which then determined a monthly benefit level for me if I "stop working and start receiving Social Security benefits" at three different ages:

• At age 62 (early retirement)
• At age 66 (full retirement)
• At age 70

The results were based upon certain standard assumptions:

• We estimate your benefits using your average earnings over your working lifetime.
  
• We also assume that as you continue to work you will make about the same as you entered for last year's earnings.

Then there was a disclaimer about the estimates, which "are similar to the estimates you receive in your annual Social Security Statement: "These estimates do not include Medicare premiums or other amounts that may be deducted from your benefit."

The Retirement Estimator is a useful planning tool that allows immediate, personalized projections for potential Social Security retirement benefits.

Again, the new online calculator is available at: www.socialsecurity.gov/estimator.

New PALCA for Assisted Living Standards

On July 7, 2008, a coalition organized in 2008 -- the Pennsylvania Assisted Living Consumer Alliance -- issued a press release, entitled "New Coalition Presses for Quality Standards", announcing that its membership "is pushing for quality standards in Pennsylvania state regulations covering assisted living facilities."

According to its website, PALCA is "a collaboration of consumers, family members, and local and statewide organizations that have united to advocate for safety, freedom of choice and high legal standards for residents in assisted living facilities in the state."

In January 2008, the Pennsylvania Health Law Project announced the formation of PALCA with the generous support of The Pew Charitable Trusts. [Links added.]

PALCA is working to ensure that the consumer voice is heard and considered in the development of assisted living licensure requirements for Pennsylvania.

PALCA is advocating for the establishment of standards that define and regulate assisted living facilities – in particular those relating to questions of residents’ rights, staff qualifications, training and resident ration requirements, physical site design, fire and safety codes, aging in place considerations, consumer choice, control, autonomy and an enforcement system.

Additionally, at present, there are no national standards or consistent definition or regulation for assisted living, nor any clear best practice standards. * * *

PALCA now seeks input towards new licensing rules in Pennsylvania consistent with its mission of protecting elderly and disabled residents. Its website notes that "about 50,000 people in Pennsylvania currently live in facilities that may call themselves assisted living facilities."

PALCA lists and describes its statewide and local "Participating Organizations" on its website; and the list is impressive and broad-based:

• The Pennsylvania Health Law Project
• The Center for Advocacy for the Rights and Interests of the Elderly
• The Disability Rights Network of Pennsylvania
• Mental Health Association in Pennsylvania
• Mental Health Association of Southeastern PA
• The National MS Society—PA chapters
• Liberty Resources
• Pennsylvania Statewide Independent Living Council
• Pennsylvania Association of Area Agencies on Aging
• SEIU Healthcare Pennsylvania
• Elder Law Section of the Pennsylvania Bar Association
• Community Legal Services Elderly Law Project
• PA Brain Injury Network
  
• Pennsylvania Council on Independent Living
  
• Pennsylvania HomeCare Association
• PA Statewide Independent Living Council
• United Cerebral Palsy
• Speaking for Ourselves
• Southwestern Pennsylvania Partnership for Aging
• Vision for Equality
  

The press release noted the need for regulatory guidance in Pennsylvania following the enactment of a new assisted living law last year.

The Pennsylvania General Assembly last year passed a bill to license the fast-growing assisted living industry. The regulations are expected to be released this month, and the public will have a chance to comment on them before they are finalized. Until now, state regulations have lumped assisted living facilities together with a wide range of homes for the elderly and disabled.

“The passage of Act 56 was a great first step for consumers,” said [Alissa] Halperin, [Senior Attorney and Deputy Director of Policy Advocacy at the Pennsylvania Health Law Project,] “but now we need to make sure that the law isn’t window dressing. We need regulations that will protect the residents’ rights to access their own doctors and caregivers, to have adequate living space and to be served by appropriately trained staff.”

Assisted living has emerged in the past generation to house people who are not so sick that they require a nursing home. But they generally need more help with bathing, dressing, medication management and other basic care needs than may be provided in personal care homes.

Assisted living has been a marketplace phenomenon for consumers who want independence, privacy, and choice, but who also want the ability to "age in place" -- meaning they will not have to move when their care needs increase. In the past, however, state regulations have been so minimal and enforcement has been so lax that numerous reports of bad outcomes and, even, tragic results for residents have been published.* * *

[Diane Menio of the Center for Advocacy for the Rights and Interests of the Elderly said:] “Thus far, the quality of care has varied immensely from facility to facility, with the differences depending far more on the intent of the facility owner than on meaningful standards for ensuring good care. We need solid requirements coupled with meaningful enforcement to ensure that quality care is available.” * * *

For background about Act 56 of 2007, and the environment of its enactment, see: PA EE&F Law Blog posts, "PA's Act No. 56 on Assisted Living Facilities" (07/26/07), and "PA's "Assisted Living Facility" Bill (likely, Law)" (07/16/07).

I applaud the formation of PALCA and encourage its work on behalf of consumers.

I offer one suggestion for its organizers: Invite participation by medical and psychology organizations, like the Pennsylvania Medical Society, the Pennsylvania Psychiatric Association, the Pennsylvania Psychological Association, the Pennsylvania Chapter of the American Psychiatric Nurses Association, and other membership organizations of medical personnel or mental health service providers.

As a new paradigm develops for "at home aging", providers of medical and mental health services need to examine their delivery practices and systems to be available and effective in an assisted living, or even a personal care home, setting. Why not offer these other affected membership organizations an opportunity to brainstorm their future too?

“Your paradigm is so intrinsic to your mental process that you are hardly aware of its existence,
until you try to communicate with someone with a different paradigm.”
-- Donella Meadows
American organic farmer, journalist, and systems analyst
(1941- 2001)
quoted at ThinkExist

Read Blog Posts Quickly

On July 18, 2008, c/net sent its AnchorDesk Newsletter with a posting asking "Are you suffering from information overload?", by Holly Jackson.

The Information Overload Research Group held its first conference in New York this week.

Dedicated to researching and solving problems caused by the constant flow of information, the nonprofit consortium calls information overload "the world's greatest challenge to productivity." [Links added.]

The newsletter referenced an online editorial posted by BNet entitled "Coping with Information Overload":

You know it all too well: The amount of information available to us wherever we go is increasing rapidly and perpetually.

As a result, we’re all expected to absorb and respond to more information than ever before. The reasons are very familiar:

• New technology making information available at all times everywhere;
• Expectations for instant gratification for virtually every need;
• Fewer people in the workplace to deal with all the work;
• More work being done by outside firms — increasing the burdens of communication (and the likelihood of miscommunication).

But most of us have had to deal with this tremendous influx of information and distractions without any preparation, training, or time. Often, we find it difficult to process the flood of information — we feel as though we’re drowning, struggling to find time for more important tasks.

The good news is that there are steps you can take to keep your head above the information torrent. * * *

That excellent article concluded with a brief list of online articles offering advice, mainly related to email, however:

• “Overcoming information overload” (01/07/00), posted by Infoworld

• “Five Simple Techniques for Surviving Information Overload” posted by Marlborough Business Association

• “Dealing with Information Overload” posted by IntranetJournal
  

• "Tips for Overcoming Email Overload" by Kaitlin Duck Sherwood, posted by Overload.com

See also: Information Overload Resource Center's listing on this topic.

If you work as an estate planner, fiduciary, trust & estate lawyer, or related professional, you likely experience "information overload" everyday, from various sources.

The Internet contributes to the overload. One comment in response Holly Jackson's question, "Is information overload a hindrance?", posted on July 18, 2008, said:

I think it's both a blessing and a curse. You can find out almost anything, you can contact people halfway across the world. * * *

But because of all the information out there, I always feel like there is more I can read, more I should read, than I have time for. It's sometimes hard to pick and choose the best from all that's out there.

Blogs -- if you read them -- contribute to the overload, but also provide beneficial information; and so you may wish to be aware about their periodic postings.

As alternatives to an RSS Feed from individual blogs or to your personal, periodic checks at a blog's site, you could consult a compiled list of blog postings on focused topics.

Various online services now provide updated summaries of recent blog postings on the topics of elder law, trusts & estates, and related matters.

Check out these selective lists of recent blog postings:

• Blawg: Latest Posts from Elder Law Blawgs

• Justia: Elder Law Blog Posts

• LexMonitor: Articles in Channel: Probate & Estate Planning

• Topix: Estate Planning News

• USLaw: Elder Law Blog Posts