PRESENTED BY

Who Decides/Planning Ahead: Legal and Financial Issues

for Dementia Caregivers

PLANNING DYNAMICS FOR ELDERS

Part of the Greatest Generation Family is key support system Want to make own decisions (independence) Want to trust others to have integrity Simple, positive messages resonate

Family Faith Friendship Financial security

Family, others, messages may be harmful

PLANNING DYNAMICS FOR ELDERS

Aging may bring chronic health problems Need help with tasks, self-care

May be too proud, embarrassed to get help May resist loss of independence in making decisions Caregivers may push to take over decisions

Confused or unable to make financial or health decisions May let difficulty prevent good decision-making May rely too much on others to make decisions

THREE THINGS TO AVOID

Change

Conflict

Loss of Control

ELDERS’ CONCERNS

Control over their own decisions about Living arrangements Finances Health-care

Financial security and asset protection “Saving my assets from the nursing home”

Disposition of assets to family Probate avoidance Family Dynamics (disputes; dysfunctional

children; disparate needs)

DECISION-MAKING - HEALTHCARE

Older Types - Voluntary

“Living Will” – limited purpose (no life support if terminal illness); repealed in 1998, but still valid for limited purpose

Durable Power of Attorney for Healthcare – repealed in 1998, but still valid if valid when done

DECISION-MAKING – HEALTHCARE

Newer Types - Voluntary

Advance Healthcare Directive (AHCD) – Four sections Section 1: Names agents; immediate or “springing” Section 2: End-of-life, other directions Section 3: Doctor contact info (optional) Section 4: Organ donation (research or transplant)

Download at www.ElderLawMS.com Forms page

DECISION-MAKING – HEALTHCARE

Newer Types - Voluntary

HIPAA Authorization (April 2005) Privacy Rule (45 CFR §164.502(a)) requires “covered

entity” to disclose Personal Health Information (PHI) to individual on request

§164.502(g) requires covered entity to treat “personal representative” same as individual if designated by “written authorization”

§164.508(c) states requirements for written authorization Should be drafted by knowledgeable attorney

Separate document for access by another to medical information; include in AHCD

DECISION-MAKING – HEALTHCARE

Healthcare Surrogate – if NO written authorization, another can make medical decisions if (in priority): Spouse, if not legally separated Adult child (or majority of children) Parent Sibling A person who shows care and concern and is willing to

make decisions based on values of incapacitated person

Provider can require written evidence of authority We have “Declaration of Healthcare Surrogate” No liability for refusal to honor decision

DECISION-MAKING – HEALTHCARE

Family Communication about healthcare desires essential Healthcare document alone not enough Terry Schiavo – no conversations

We have tools to help clients select best agent communicate personal values help agent make decisions

DECISION-MAKING – FINANCIAL MATTERS

Durable General Power of Attorney – Voluntary

Maintain control even after incapacity (“second set of keys”)

Select own decision-maker(s) Checks and balances on agent

Prior consent of others to gifting, sale of property Right of third party to receive & review accounts,

statements Name your own conservator (if one required later)

Should be personalized, not “cookie cutter” forms Institutions likely to refuse unless POA contains express

authority Must name non-spouse agent for homestead transactions

DECISION-MAKING – INVOLUNTARY

Conservatorship – Involuntary

Test is “inability to manage” personal or financial affairs

Petition filed, 5 days notice to incapacitated person, notice to another family member, hearing in court (“rush to court”)

Insurance bond for conservator OR prior court approval of disbursements, moving ward

Must file inventory of ward’s assets, annual accountings Conservator has priority over POA agent, can revoke POA

May be used to transfer joint assets of incapacitated person to spouse for asset preservation

Spouse does estate planning for both

DISPOSITION OF ASSETS

Gifting Pros:

Asset to intended recipient Asset removed from giver’s estate for tax purposes

Cons: Giver loses control of asset Assets subject to debts, liabilities of recipient Gifts cause Medicaid ineligibility if file w/in 5 years Recipient gets giver’s tax basis (capital gain on sale)

Outright Gift vs. Irrevocable Trust

DISPOSITION OF ASSETS

Joint Ownership Pros:

Asset passes automatically to surviving owner Avoids probate Joint owner can control if elder becomes incapacitated Survivor gets “stepped-up” tax basis (less capital gain when

sell)

Cons: Any joint owner may be able to withdraw asset Subject to debts, liabilities of each joint owner Asset passes to survivor with no requirement to share All owners must sign to sell or mortgage (problem if one

incapacitated) Medicaid still counts FULL value of asset for either owner

DISPOSITION OF ASSETS

Last Will and Testament - Voluntary Written instructions about what happens with

your stuff when you die Must have “testamentary capacity” to execute Can designate persons to receive assets at death Can leave assets in Trust for minor, spendthrift or

incapacitated beneficiaries Create “special needs trust” for incapacitated

spouse that will not disqualify for nursing home Medicaid

Requires probate to pass clear title to assets Authorized signer + Probate may solve joint

ownership with one child

DISPOSITION OF ASSETS

Revocable Living Trust A “Will substitute” that holds assets while

Grantor living, states how they will pass at death Must re-title assets into Trust name as owner No probate for assets in trust (but will have

probate for assets left out of trust) Useful if own land in different states (avoid

probate in each state) All trust assets are countable for Medicaid

purposes (including residence) Can name successor Trustee to take over if

Grantor becomes incapacitated

DISPOSITION OF ASSETS

Irrevocable Trust Trust owns assets while Grantor living, provides

for family or others at death No probate for assets in trust Removes assets from Grantor’s estate for estate

tax, VA benefits, Medicaid recovery purposes Funding of trust is transfer for VA, Medicaid

purposes Should name independent trustee Can pay income to Grantor (“income-only”

trust)

DISPOSITION OF ASSETS

Special Needs Trust (SNT)

Holds assets for benefit of disabled spouse, child or grandchild

Trust not countable by SSI or Medicaid if properly drafted Spouse or child can get Medicaid benefits and SNT

pays other needs SNT can avoid conservatorship for incapacitated spouse No Medicaid recovery claim against SNT funded by

parent, spouse, third party But, Medicaid recovery claim against SNT funded by

beneficiary’s own assets (inheritance, lawsuit settlement, guardianship assets)

FUNDING SPECIAL NEEDS TRUSTS

THIRD PARTY TRUST Gifts from family, others Fund-raisers Bequests in wills and living trusts Life insurance Retirement accounts (as beneficiary)

SELF-SETTLED TRUST Litigation settlement (lump sum, structured

annuities) Inheritance Life insurance benefit Personal assets Guardianship/conservatorship assets

MEDICAID COVERAGE GROUPS

Qualified Medicare Beneficiary (QMB) “Medicaid as Medicare Supplement” Eligible for Medicare Part A Income < $1,008 ($958 FPL + $50 disregard) or $1,343 for

couple No resource limit Pays Medicare Part B premium ($104.90 in 2013),

deductibles and co-payments

Specified Low-Income Medicare Beneficiary (SLMB) Same as above, but $1,343 single/$1,795 couple income

limit, and only pays Part B premium

MEDICAID HCBS WAIVER GROUPS

Elderly and Disabled (respite, adult day care, meals, homemaker)

Independent Living (personal care attendant) Intellectually Disabled/Developmental

Disability (respite, attendant care, day-habilitation, speech/PT/OT)

Assisted Living (homemaker, attendant care, Rx supervision, transportation)

TBI/SCI (attendant care, nursing care, respite) Same financial eligibility as LTC group

LONG-TERM CARE MEDICAID

Single Person eligible if: Countable income < $2,130 (but more if use

income trust) Countable resources < $4,000

Married Person eligible if: Applicant spouse eligible as single person Community spouse countable resources <

$115,920 CS keeps IS income to reach $2,898 income

MEDICAID TRANSFER PENALTY

Deficit Reduction Act of 2005 changed the rules

Now 5 year “look-back” period from date of application

Transfer penalty = total amount of gifts during look-back period ÷ $5,700 monthly divisor ($4,600 pre-2011) $46,000 gift 8/1/10 – apply for M/C 8/1/2014 =

10 months not eligible for M/C payment to NH

No Transfer Penalty for Disabled Child at Home, Poverty-level programs, DHS programs

MEDICAID TRANSFER EXCEPTIONS

No Penalty for transfer of residence to: Spouse; child under 21; blind or disabled child

of any age; sibling with equity interest who lived there 1 year prior to NH entry; child who lived there and provided care at least 2 years prior to NH entry

No Penalty for transfer of other assets to: Spouse; child under 21; blind or disabled child;

third party for sole benefit of spouse or self; trust for sole benefit of a minor, blind or disabled child; trust for benefit of a disabled person under 65; “payback” trusts established per 42 USC § 1396p(d)(4)

MEDICAID AND ANNUITIES

Annuities purchased by applicant = transfer unless:

Purchased with assets of qualified retirement account and State is named first beneficiary (or can name community spouse or blind/disabled child as primary), OR

“Medicaid-qualified” annuity (fixed, immediate, irrevocable, non-transferable, actuarially sound) and names State as first beneficiary

Annuity purchase by Community Spouse = transfer unless State is named first beneficiary for payments to CS’ nursing home

MEDICAID PLANNING

Transfer countable resources to exempt trust Irrevocable and actuarially sound “sole

benefit” trust for spouse, disabled child or disabled “person” under age 65

Self-settled “special needs trust” for Medicaid applicant under age 65

Purchase “Medicaid-qualified” annuity – creates income from resources

SCENARIO – DISABLED SPOUSE

Harry Smith’s wife, Martha, has progressive dementia, and Mr. Smith is uncertain whether he can continue to care for his wife at home due to his own health condition. He is worried about having enough money to pay her nursing home costs, his living expenses, and pass some inheritance to his children. Through some elder law planning, including putting all non-home assets in Harry’s sole ownership, it will be possible to qualify Martha for Medicaid to help pay her nursing home costs. They own their home and 150 acre farm as joint tenants with rights of survivorship.

SCENARIO – BAD OPTIONS

Option 1: Leave the home in joint ownership. If Harry dies first: Pros: Home not a “countable resource” for Martha’ s Medicaid. Home can be sold to pay for Martha’s care if necessary. Cons: Medicaid’s claim against the home and farm at her death for repayment of all nursing home costs paid by Medicaid, and could cause the sale of the residence.

Option 2: Harry’s will leaves everything to Martha at his death Pros: Financial assets can be sold to pay for Martha’s care

Cons: Financial assets left to Martha disqualify her for nursing home Medicaid until all spent on her care; Court-supervised conservatorship may be required if she lacks capacity to manage those assets (Medicaid counts assets in a conservatorship)

SCENARIO – SOLUTION

Option 3: Get home ownership in Harry’s name only; Harry does new will with Special Needs Trust for Martha: Pros: Home is not a “countable resource” for Martha’ s Medicaid. Home can be sold or mortgaged by Harry if he needs to move or get money. Pros: Harry can name capable trustee in his Will to manage home and other assets after his death for Martha’s needs, avoiding need for conservator for her. Pros: The testamentary special needs trust will not be a countable Medicaid asset for Martha, so she can get nursing home benefits paid.

Pros: The trust will not be an asset of Martha’s estate at her death, so Medicaid will not have any claim against the home and farm at her death for repayment of nursing home costs paid by Medicaid. The trust remainder can be distributed to the kids or named remainder beneficiaries.

RETROACTIVE BENEFITS

Medicaid benefits will be paid for up to 3 months prior to month of application if the applicant was eligible in those monthsIn a nursing home or disabled at homeIncome within limitCountable resources within limits

Medicaid will allow up to 90 days to re-allocate resources between spouses

MEDICAID ESTATE RECOVERY

Per MCA § 43-13-317 Medicaid must seek recovery from “estate” of deceased recipient of LTC or HCBS services after age 55

“Estate” = probate estate (non-probate assets not subject to claim)

Medicaid must be noticed as creditor of estate Claim waived if surviving spouse, minor, blind or

disabled child MS Medicaid waives if caregiver family member

lived in home 1 year, or family income source No claim against homestead valued <$75k, will pass

to surviving spouse/child/grandchild(ren) (Darby case)

THANK YOU

4400 Old Canton Road ▪ Suite 220 ▪ Jackson, MS 39211Tel: 601-987-3000 ▪ Fax-601-987-3001

www.ElderLawMS.com