Transcript Welcome [www.alz.org]

Who Decides/Planning Ahead:
Legal and Financial Issues
for Dementia Caregivers
PRESENTED BY
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
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Family
Faith
Friendship
Financial security
Family, others, messages may be harmful
PLANNING DYNAMICS FOR ELDERS
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Aging may bring chronic health problems
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Need help with tasks, self-care
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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
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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terminal illness); repealed in 1998, but still valid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repealed in 1998, but still valid if valid when done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
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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)
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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):
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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
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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”)
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Select own decision-maker(s)
Checks and balances on agent
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Prior consent of others to gifting, sale of property
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Right of third party to receive & review accounts, statements
Name your own conservator (if one required later)
Should be personalized, not “cookie cutter” forms
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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
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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
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Spouse does estate planning for both
DISPOSITION OF ASSETS
 Gifting
 Pros:
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Asset to intended recipient
Asset removed from giver’s estate for tax purposes
Cons:
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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
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Pros:
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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:
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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
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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
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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
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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)
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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,
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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 pre2011)
 $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:
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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:
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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:
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Pros: Home not a “countable resource” for Martha’ s Medicaid. Home can be sold to
pay for Martha’s care if necessary.
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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
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Pros: Financial assets can be sold to pay for Martha’s care
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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:
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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.
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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.
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Pros: The testamentary special needs trust will not be a countable Medicaid asset for
Martha, so she can get nursing home benefits paid.
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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 months
 In a nursing home or disabled at home
 Income within limit
 Countable 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 39211
Tel: 601-987-3000 ▪ Fax-601-987-3001
www.ElderLawMS.com