Caring for a loved one with Alzheimer’s, other dementia, or another type of chronic illness often presents many challenges. Along with medical issues, safety issues, and financial issues, families are likely to encounter a variety of legal issues. This resource is not intended to provide legal advice or replace the need for an experienced lawyer. Instead, it is intended to help you to become familiar with and understand some of the legal issues you may face and some potential approaches your lawyer may suggest for dealing with these issues if you or a loved one has been diagnosed with Alzheimer’s or another chronic illness. Hopefully, this article will be a resource that fosters discussion between you and your attorney as well as discussion amongst family members. Although many, many people have loved ones struggling with Alzheimer’s, every individual situation is different and laws and policies vary from state to state, particularly Medicaid rules and regulations. Therefore, there is no single plan or strategy for dealing with Alzheimer’s and the related legal issues that will work for everyone. However, there are basic legal tools and concepts you can familiarize yourself with in order to be better prepared to make decisions that will best serve your family based on your particular needs and circumstances.
When to Seek Help
Memory loss or forgetfulness is the best known early sign of Alzheimer’s disease. However, momentary memory lapses are common and can occur for many different reasons. As a result, early signs of Alzheimer’s or other dementia may be missed. Because the symptoms and the progression of the disease can vary greatly from one individual to another, it can often be hard to recognize at first, but if episodes of confusion and memory loss occur with greater and greater frequency, they may signal the onset of Alzheimer’s disease. Alzheimer’s disease is the most common type of dementia; more than 5 million Americans are living with the disease. Alzheimer’s causes problems with memory, thinking, and behavior and, because it is a progressive disease, symptoms usually develop gradually and get worse over time. If you or a loved one is suffering from Alzheimer’s, you will have to face issues you have not contemplated before. If you have begun seeing signs and symptoms of Alzheimer’s disease in yourself or a loved one, it is important not only to discuss these issues with a doctor, but also to begin thinking about the kind of planning you will need to do to ensure your or your loved one’s continued safety, security, and well-being. The earlier you can begin planning, the more options are likely to be available to you. Do not wait until you are facing a crisis to seek help.
How and When to Begin Planning
In some cases, individuals who have been diagnosed with Alzheimer’s disease are still able to execute legal documents and take other steps to prepare for their future needs. However, even if you are not able to execute legal documents, you should almost always be able to participate in the planning process in some way.
One of the first things you should do if you suspect or have confirmed that you are suffering from Alzheimer’s disease is to discuss things with your family. Although these conversations can be difficult and most people would rather avoid the issue, it is important to talk through the issues so that you can clarify for your family what you want them to do as your disease progresses. The earlier you are able to talk to your loved ones, the more you will be able to be involved in the planning process while you are still able to make rational decisions, execute legal documents, and otherwise make your wishes known.
Even as the disease progresses, those suffering from Alzheimer’s will likely still retain some decision-making abilities, so family members should continue to involve their loved one in life care and planning decisions as much as possible for as long as possible. The legal test for “capacity” required to execute valid and enforceable legal documents usually requires a person to have the mental ability to perceive and appreciate relevant facts and make rational decisions. When Alzheimer’s patients’ mental faculties are so impaired that they no longer meet this test, they can still often communicate preferences to family members. However, someone else will have to make decisions and execute legal documents for them.
If you discover you are suffering from Alzheimer’s disease, one of the first choices you should make with your family is who the decision-maker should be to make decisions and execute legal documents for you when you are no longer able, how the decision-maker will be appointed, and what authority the decision-maker will have. This is why it is so crucial that you and your family take the time to talk about your wishes regarding the decisions to be made (as well as the person you want to make them). If you act while in the early phases of Alzheimer’s disease, you can do much more to ensure that your wishes regarding financial and health care matters are followed if you later become unable to make decisions for yourself. In addition, knowing what a loved one wants will make it much easier for the chosen decision-maker to make choices that reflect the person’s wishes if an unforeseen issue should arise.
Decisions and Decision-Making Authority
As discussed above, once you no longer have the capacity to make decisions for yourself, someone else must step in and make decisions on your behalf. Although there are many types of legal documents that grant decision-making power to another, the most important documents to put in place are durable powers of attorney for financial matters and for health care decisions. A power of attorney is a document that allows you to grant another person the authority to act on your behalf. The person who grants the authority and signs the document is called the “principal.” The person who is given the authority is called the “agent” or “attorney in fact.” A person with Alzheimer’s should create durable powers of attorney. A non-durable power of attorney will become ineffective if the person granting the authority becomes incapacitated. Making a power of attorney “durable” allows your agent to have continuing authority to act or make decisions on your behalf even if you become incapacitated. Obviously, this is crucial if you are granting powers of attorney in anticipation of future incapacity. If you do not grant someone power of attorney before becoming incapacitated, your family may later have to go to court to appoint a conservator to handle your financial affairs and/or to manage your personal and health care needs. Not only can this process be expensive and time-consuming, and potentially result in additional supervision requirements by the court, but you will have no power to designate the person who the court names to act on your behalf.
Depending on how broad the language in the document is, an agent can take almost any action on behalf of the principal. This is why it is so important to choose someone you can trust to be your agent. Typically, family members act as agents, although some people may ask non-family members, such as a close friend or a trusted neighbor. It does not matter who the agent is, as long as he or she is trustworthy and willing and able to take on the responsibility of acting in this capacity. Think about whether a proposed agent is knowledgeable, responsible, and whether they will act with your best interests in mind. Talk with the person and make sure they know what is important to you and what you would want him or her to do in certain situations.
You may choose one or more people to act as an agent. For instance, you could ask your son to act as agent for both financial and health care matters, or you could ask your son to act as agent for financial matters and your daughter to act as agent for personal and health care decisions. While it is possible to appoint multiple agents to make the same types of decisions, this is usually not ideal. You can appoint multiple agents severally, which means that each agent can act independently from the other agents. You can also appoint agents jointly, which means that all agents must agree and act together when making decisions. In either case, though, if there is disagreement between agents complications can arise. For this reason,it may be best to pick one person to make the final decisions. Your agent can (and you can encourage your agent to) consult and discuss issues with family members, health care professionals, or other advisors before making a decision, but it is usually best to choose one person who will be responsible for making the final call to avoid confusion and conflict.
If it is decided that one person will act as the financial power of attorney and another will act as the health care power of attorney, it is important that everyone involved understand their roles and are able to cooperate to get things done. For example, if you have a doctor’s appointment, your health care power of attorney may make the appointment and go with you to see the doctor, but your financial power of attorney may need to pay the bill. Defining responsibilities and working together will help things go more smoothly.
Sometimes, a person may become unable, unavailable, or unwilling to continue to serve as an agent. For this reason, you may want to ask your lawyer to draft your power of attorney with alternate agents. This is different than appointing multiple agents. You may be reluctant or afraid to sign a power of attorney that allows another person this level of authority over your life. Understand that a power of attorney does not remove your ability to continue to make decisions or do things such as write checks as long as you are able. The power of attorney simply lets another person do these things as well. In addition, putting a plan in place and communicating your wishes gives you a chance to ensure things will be done the way you want them to be done, even when you are no longer able to communicate your wishes. Also, a power of attorney may be cancelled at any time by sending a letter to the agent saying that the agent’s authority is revoked.
Although you should always pick someone you trust to act as your agent, there are additional legal duties requiring the agent to act according to your best interests. When you grant a power of attorney, this creates a “fiduciary duty.” A fiduciary duty means that your agent must always act with good faith and honesty, solely to uphold your interests, and always according to the authority he or she was granted in the power of attorney document. Your agent must keep accurate records and receipts for all actions taken on your behalf as your agent. If your agent mishandles your affairs with willful misconduct or gross negligence, a court can require the agent to repay any money you have lost as a result. The court also has the authority to terminate the power of attorney.
Power of Attorney for Financial Decisions
A financial power of attorney allows an agent to handle financial and business matters on your behalf. The amount of authority you give to the agent can vary. Some power of attorney documents include specific duties, such as paying bills. Others are more general and all-encompassing, allowing the agent to take actions such as cashing checks, withdrawing funds from bank accounts, and buying or selling property. If you are suffering from Alzheimer’s, it is advisable to create a power of attorney that is all-encompassing, as long as you have an agent you can trust. It is especially important that a financial agent for someone with Alzheimer’s disease has the authority to do the following things:
- Apply for public benefit programs such as Medicaid
- Make gifts on the principal’s behalf and do Medicaid planning
- Remove and/or add assets to a trust, if the principal has one
We have discussed the need for a power of attorney to be durable, which means it will continue to be valid even after the principal becomes incapacitated. There are two other variations of a financial power of attorney that you may encounter: immediate and springing. An immediate power of attorney takes effect immediately upon signing. By contrast, a springing power of attorney takes effect only if and when the principal becomes incapacitated. While a springing power of attorney may seem like an attractive choice if you do not want to give up control of your affairs, it is usually not a good choice for someone with Alzheimer’s disease. A person with Alzheimer’s disease may have periods of lucidity mixed with periods of confusion. You may fluctuate between having the ability to conduct your affairs for yourself and needing someone else to take over for you. Variations in cognitive ability from day to day may make it difficult to determine when a springing power of attorney actually becomes effective. Also, a court may not allow a springing power of attorney to substitute for conservatorship court proceedings to determine when the principal has become incapacitated. This means that a springing power of attorney may not prevent your family from having to go through the burdensome conservatorship process. In most states, a durable power of attorney will become effective immediately upon signing unless stated otherwise in the document.
Power of Attorney for Health Care Decisions
The power of attorney for health care decisions may not be what comes to mind when you think about a power of attorney (many people think first about a financial power of attorney). Yet having an agent who can make personal and health care decisions on your behalf is extremely important for people with Alzheimer’s disease. Unlike a financial power of attorney, a power of attorney for health care decisions (or Appointment of Health Care Representative) is usually springing. Therefore, it will become effective only if you cannot express your wishes or lack the capacity to make informed and reasonable decisions. If you are competent and able to communicate your wishes to your caregivers, your wishes will be honored. If you cannot communicate your wishes, your agent will make health care decisions on your behalf, such as deciding which doctors you see and what treatment you receive. You want to make sure that your health care power of attorney specifically grants all the necessary authority to your agent. For example, if you need to reside in an assisted living community or nursing home, your agent needs to be able to select an appropriate facility and make decisions for you throughout the process. An experienced attorney will know what language you need to use to ensure you grant your agent the proper authority.
Conservatorships
If you become incapacitated without putting powers of attorney in place, you may have to have a conservator or a guardian appointed for you through a court proceeding. A conservator of the estate is appointed to make financial and business decisions and a conservator of the person is appointed to make decisions about health care and personal needs. As the person under conservatorship, you will be called the ward. Instead of choosing the person you wish to act on your behalf, a judge will make the decision.
Court procedures for appointing a conservator can be costly, while legal fees for drafting powers of attorney are relatively inexpensive. In addition to the financial disadvantages, conservatorships are not ideal because the court ends up becoming involved with your private life. Appointments of a conservator require a finding of legal incompetence, so you and your family will likely have to participate in a competency hearing that could potentially be embarrassing or upsetting. Detailed reporting required of the conservator may become part of the public record. In addition, the judge could allow the conservator to take actions that you would not have wanted.
If you ever need nursing home care and have to apply for Medicaid, the process will be complicated if you are under a conservatorship. In some states, a conservator can do Medicaid planning on behalf of the ward. However, Connecticut has a law that prevents the conservator from doing Medicaid planning. For this reason, having an appointed conservator rather than a power of attorney will greatly diminish your ability to protect some of your assets while still qualifying for Medicaid.
Connecticut is somewhat different from most states because it does allow you to make an advance designation of conservator. This is a legal document that indicates the person you would wish to serve as conservator if it were to become necessary to appoint one. If you complete an advance designation of conservator, the court will consider your wishes when choosing who to appoint as conservator. However, if the court finds that appointing the person you chose is not in your best interests or the person is unable to serve, the judge can choose to appoint someone else.9
Additional Decision-Making Documents
There are also other types of legal documents you may wish to put in place that you can use to state your wishes concerning the future should you lose the ability to communicate your wishes. For example, you may wish to execute a living will, a legal document you can use to state your wishes concerning artificial life support, artificial nutrition and hydration, or what kind of pain management you would prefer in the event of terminal illness. Speak with an elder law attorney about what additional documents and planning tools may be appropriate in your family’s situation.
Care Planning and Long-Term Care Options
At some point, most people with Alzheimer’s will need some sort of long-term care services. Long-term care does not always refer to nursing home care. The need for long-term care arises when a person can no longer independently and safely perform everyday activities of daily living (ADLs) and needs assistance with some of these activities, such as bathing, dressing, and eating. Depending on the amount of help a person needs, long-term care services can often be provided in the home by family members, or by health care professionals from a home health care agency.
Ideally, you will be able to take the time to analyze your loved one’s personal and financial situation and plan for long-term care before such care becomes necessary. Early planning will help to maximize your options for providing appropriate care and protecting assets. Even if you do not have much time to plan ahead, you should still be able to take some steps to ensure your loved one receives appropriate and affordable care. For example, you can still identify what government benefit programs may be available to help pay for long-term care services. See “A Guide to Long-term Care: Planning for Aging Parents (and for Yourself)” and “How You Can Get Help Paying for Alzheimer’s Care” for more information on long-term care options and how to pay for them.
Caregiving Responsibilities
In the United States, approximately 70% of people with Alzheimer’s remain in their homes throughout the course of their illness. These people are able to stay in their homes with help from a spouse or from other family members. However, as the disease progresses, more assistance will be needed and it will become increasingly difficult for loved ones to provide all of the care needed on their own.
If you are a caregiver, it is normal to struggle with the challenges and demands of this growing responsibility. Many caregivers experience anger, resentment, guilt, and burnout. There are services that you can take advantage of to help. For example, respite care, adult daycare, or home health care services might help with the day-to-day care responsibilities that they don’t become too much to handle. Also, support groups are a good resource for information, helpful tips, and encouragement from others in similar situations.
You can find support groups for families dealing with Alzheimer’s by contacting your local chapter of the Alzheimer’s Association or going online to www.alz.org/ct/in_my_community_support.asp. The Connecticut Chapter of the Alzheimer’s Association is located in Southington and can be contacted at (860) 828-2828.
Respite Care
There are respite care programs that provide short-term relief to caregivers who are providing care to a loved one at home. Usually, respite caregivers come into the home and provide care and supervision for a short amount of time. Respite services may be provided for several hours so caregivers can run errands, see to other responsibilities, or just take time for themselves. Sometimes extended respite services may be required for several days, for example if caregivers need to go out of town. Nursing homes or assisted living communities may also provide short-term respite services if a caregiver has to take some time away.
Adult Day Care
Adult day care is a great way to provide supervision and socialization for those suffering from Alzheimer’s, as well as allowing caregivers who work to take care of their loved one at night while still going to work during the day. Adult day care schedules may vary, with programs offering periods of care from one half-day per week to five full days per week. Programs will also vary in their activities and the level of care they can provide. You can find adult day care centers in your area by asking your local Alzheimer’s Association chapter, a hospital social worker, or a nursing home in the area. You can also call your local Area Agency on Aging for a referral (there are five offices serving Connecticut, and contact information for each can be found at www.ct.gov/agingservices).
When evaluating an adult day care program, be sure to visit and see if the environment appears friendly, safe, and welcoming. Ask about staffing levels: for people with Alzheimer’s disease, a ratio of one staff member to four adults in care is good. Look at the activities they offer. Some programs are exclusively for people with dementia and these programs are more likely to have staff experienced with dementia care and activities designed specifically for people with dementia. If your loved one needs medical care during the day, such as an IV, ask what medical care the program can provide. Also, confirm that the program is licensed by the state.
Assisted Living and Nursing Homes
If a person’s needs are more comprehensive or complex, he or she may need to receive care in an assisted living community or nursing home setting. If skilled nursing is not yet necessary, an assisted living community may be a good choice. Some assisted living facilities specialize in dementia care. Make sure the facilities you are considering have an appropriate physical layout, provide additional staff training in dementia care, and design activities specifically for patients with dementia. Ask if the facility has a special Alzheimer’s unit that provides dementia-specific care. Also ask about the staffing ratio. A good staffing ratio would be two certified nurse’s aides (CNAs) for every ten residents during the day and one CNA for every ten residents at night. Be aware that there are few federal standards for specialized assisted living units. Some assisted living facilities may just add a locked door to a wing of a facility for patients with dementia. Make sure that the facility you choose is not only secure but also provides a comfortable, enriching environment.
While an assisted living environment may be appropriate, these facilities can be extremely expensive and their costs are not covered by Medicare or Medicaid. Some long term care insurance policies may pay for all or part of the cost, but most assisted living residents pay the costs out of pocket. Contracts for assisted living facilities generally look similar to apartment lease agreements. They may be structured as month-to-month or annual agreements. If a facility asks for a year-long commitment, make sure there is an escape clause that will release a resident from the contract with reasonable notice if their care needs change and the environment is no longer appropriate. 12
If it is decided that you or a loved one requires a higher level of care than can be provided at home or in an assisted living facility, there will be many factors to consider. If possible, take the time to visit several nursing home facilities and make multiple visits to the places you like the best. See “Finding the Right Nursing Home” for more information about how to choose an appropriate long-term care provider for yourself or a loved one.
The Truth About Medicaid
Unfortunately, most people are not financially prepared to pay out of pocket for long-term care. Many people assume that Medicare will pay for long-term care. However, Medicare only covers acute care services. Acute care is short-term treatment for a severe or urgent injury or illness from which you are expected to get well. Medicare does not cover services for chronic conditions such as Alzheimer’s disease.
Since Medicare does not pay for long-term care services, most people have to pay for these services out of pocket until they spend enough assets that they become impoverished. According to Connecticut’s Medicaid rules, impoverishment means your assets are reduced to $1,600 or less. There are ways to protect yourself or a loved one from becoming totally impoverished by the Medicaid rules, but this requires comprehensive and early planning. This planning is important, because there are few alternatives to Medicaid for financing long-term care services. See “How You Can Get Help Paying for Alzheimer’s Care” for more information.
Paying for Nursing Home Care
Few families can afford the private pay rates charged by nursing homes. For 2015, the average cost of nursing home care in Connecticut is $12,170 per month, according to the State. This is over $146,040 per year. Although nursing home care is expensive to pay for out of pocket, it is covered by Medicaid. Many people will pay privately for nursing home care at first, but will eventually exhaust their savings and turn to Medicaid to continue to pay for their care.
Paying for Home Health Care
Although Medicare may pay for skilled services provided in the home on a short-term basis, Medicare does not cover home health aides who provide custodial care, which includes things like assistance with bathing, dressing, and housekeeping. Therefore, home health care services are generally paid for out of pocket. Although Medicaid programs traditionally did not cover home health care services, most states, including Connecticut, now have community-based programs that cover some amount of custodial care provided in the home, allowing people to avoid moving into nursing homes. Connecticut’s program is called the Connecticut Home Care Program for Elders. Applicants to this program must be 65 or older and at risk of nursing home placement. Some categories of this program are for elders with lesser care needs and assets somewhat above the Medicaid limits. These categories have lower maximum benefits available and thus provide fewer hours of assistance. The most extensive category of this program is targeted at those whose assets meet Medicaid asset limits and who need significant care. Applicants for this level must need assistance with at least three “critical needs,” which include bathing, dressing, toileting, transferring, eating/feeding, meal preparation, and medical administration. Services covered include adult day care; homemaker, companion, and chore services; home-delivered meals; emergency response systems; case management; mental health counseling; home health aides and additional home health services; and nursing and therapist services.
If your loved one requiring home care services is a veteran or the spouse of a veteran, he or she may also qualify for a long-term care benefit known as the VA Aid and Attendance Benefit. This program can provide veterans and their spouses with up to $25,448 per year tax-free to pay for long-term care services, including home care services. In order to qualify, the veteran must not have been dishonorably discharged, must have served at least 90 days active duty with at least one day served during a declared state of war, and must be either disabled or over age 65. The benefit is based on financial need, but does not use the same income and asset limits as Medicaid. For more information see “How You Can Get Help Paying for Alzheimer’s Care” and “Understanding the VA Aid and Attendance Benefit.”
Medicaid Planning
You may be reluctant to apply for Medicaid either because you are afraid you cannot qualify for the program without spending all of your assets or because you do not want to become dependent on the government. Still, most families are simply not financially able to pay for the long-term care costs associated with Alzheimer’s disease. Therefore, you want to plan for what happens if you eventually exhaust your personal resources.
The Medicaid program bases eligibility on the applicant’s medical condition and on the person’s assets and income. To apply for Medicaid to cover residential long-term care costs, the applicant must live in a nursing home or have a medical need that requires nursing home care. To establish medical eligibility, the applicant must undergo a medical assessment to identify what the person’s long-term care needs will be. This assessment is almost always coordinated by hospital discharge planners or nursing home admissions staff. In addition, applicants must be citizens of the United States or fall within certain categories of aliens who have been lawfully admitted for permanent residence in the United States. Applicants must also live in the state where they apply for Medicaid.
Counting Your Assets
Medicaid places strict limits on the assets you can own. Each state has its own limit on this amount and its own guidelines for which assets count toward the total. In Connecticut that limit is $1,600 for a single individual and $2,400 for a married couple if both are receiving benefits. In general, the following assets are considered “exempt” and will not count towards your asset total:
- Your home- your principal place of residence is usually an exempt asset. In some cases, the nursing home resident may be required to show some intent to return home, even if that never actually happens.
- Household and personal belongings- Furniture, appliances, jewelry, and clothing.
- One car- Some states may limit the car’s value.
- Burial plot/prepaid funeral plan- some states may limit the value of the plot or plan.
- In Connecticut up to $1,800 of a prepaid burial fund is exempt and up to $5,400 of an irrevocable burial contract.
- Cash value of permanent life insurance policies up to $1,500 - In most states this asset is exempt only if the face value of all policies added together does not exceed $1,500.
Term life insurance is not counted.
All other assets not included in the above list are considered countable assets,including checking accounts, savings accounts, certificates of deposit, money market accounts, stocks, mutual funds, bonds, individual retirement accounts (IRAs), pensions, 401(k)accounts, 403(b) accounts, second cars, vacation homes, and any other items that can be valued and turned into cash.
Once you become eligible for Medicaid, you can generally keep around $30 to $60 in income per month as a personal needs allowance. A veteran receiving Aid and Attendance benefits is allowed to retain a slightly higher personal needs allowance.
The Community Spouse
For married couples, the spouse who lives at home (called the “community spouse”) is able to keep a certain amount of assets while still allowing the institutionalized spouse to qualify for Medicaid. Most states require a division of assets between the community spouse and the institutionalized spouse. The community spouse can then keep a portion of the couple’s assets, called the Community Spouse Protected Amount (CSPA) or Community Spouse Resource Allowance (CSRA). The maximum and minimum amounts are set by Federal law.In Connecticut, as of January 1, 2015, the protected amount is the lesser of $119,220 or one half of the couple’s combined assets computed “as of the first day of a continuous 30-day period of institutionalization” (which usually means hospital or nursing home care). The minimum CSRA is $23,844. Sometimes an increased CSRA can be permitted after an administrative hearing if there are extenuating circumstances, such as if the community spouse has total income below the Minimum Monthly Needs Allowance (MMNA).
The community spouse can also use some of the institutionalized person’s income for their needs if their income does not meet the MMNA, which is calculated according to a formula that uses the spouse’s actual monthly shelter costs, including an allowance to cover monthly utility costs. The minimum and maximum MMNA amounts are set by federal law. As of July 1, 2015, the minimum MMNA is $1,991.25 and the maximum MMNA is $2,980.50 per month. This extra amount that may be available is called a Community Spouse Allowance (CSA). It is determined by subtracting the community spouse’s monthly gross income from the community spouse’s Minimum Monthly Needs Allowance (MMNA). If the income of the institutionalized spouse is not necessary to be paid over to the community spouse so he or she can meet the MMNA, it must go to the nursing home as “applied income” to be paid toward the cost of the person’s care.
There are also some ways that a community spouse can use annuities to supplement his or her income, but there are certain criteria an annuity must meet to be considered Medicaid compliant.
Pooled Trusts
A “pooled trust” is a type of Special Needs Trust that gives people an alternative to spending down or transferring assets to qualify for Medicaid. First provided for in a 1993 federal law, a pooled trust allows disabled people of any age to put assets into a trust with a non-profit association as trustee. A pooled trust is sometimes referred to as a “(d)(4)(C) trust” because the section of the U.S. Code that provides for these types of trusts is 42 U.S.C. §1396(d)(4)(C).
A pooled trust is designed to allow individuals to fund a trust account with their own assets, retain a lifetime benefit from those assets, and still meet Medicaid eligibility criteria. The assets in the trust are then considered non-countable for purposes of asset limitations for Medicaid, as well as for some other benefit programs, such as Supplemental Security Income (SSI). Once an individual qualifies for Medicaid, the trust funds can be used to purchase items and services not covered by Medicaid.
However, there are some limitations to pooled trusts. The beneficiary and his or her family must be comfortable with giving up control of their money to a nonprofit organization who will act as trustee. The funds in the trust must be used for the sole benefit of the beneficiary. The trustee can refuse to make payments that appear questionable. For example, money from the trust cannot be used to pay for gifts to grandchildren. In addition, any funds that are left in the trust after a person dies will be used to pay back the State or kept by the nonprofit organization running the trust, to be used for their general charitable purposes.
Pooled trusts are only available in about a dozen states. In Connecticut, there is only one pooled trust that can be used by individuals over the age of 65. This trust is run by the Planned Lifetime Assistance Network (PLAN) of CT. If you live in a state where pooled trust are available, such a trust can be a useful Medicaid planning tool. However, signing up for and funding a pooled trust requires a lot of paperwork and can be complicated. For this reason, many elderly individuals will need to rely on an advisor for help as they go through the process.
Estate Planning Basics
Wills
A will is a legal document that allows you to pass your property to whomever you choose in the event of your death. You can select people, organizations, or charities to receive your assets. Many couples leave all of their property to each other. This is often called a “sweetheart will.” Unfortunately, sweetheart wills can cause problems if one spouse is suffering from Alzheimer’s disease. If the spouse without Alzheimer’s disease dies first, the spouse with Alzheimer’s disease may have difficulty handling the inherited funds. In addition, any inherited funds might affect the spouse’s eligibility for Medicaid and force the spouse to spend down most or all of the inherited assets, leaving little or nothing for children to inherit. Simply naming a beneficiary other than a spouse does not solve the problem when a community spouse dies before an institutionalized spouse. Some states will not let one spouse disinherit the other spouse in an attempt to qualify for Medicaid.
Wills can cause additional problems due to the probate process. When a person dies, his or her property does not automatically go to any persons or organizations named in the will. Instead, the will must go through a judicial process called probate, where a judge will determine whether the will is valid. If the judge decides the will is valid, the court will oversee the process of transferring the person’s property to any heirs. Probate can be a time-consuming process and can be expensive. There are some ways that people can avoid probate, such as putting another’s name on a bank account with you. Then, if you’ve set it up properly, the bank account will simply pass to the person you have named on the account and the assets will not have to go through probate. Sometimes, however, there may be unintended consequences of putting others’ names on someone’s accounts. Putting children’s names on parents’ accounts, for example, may have negative consequences if the children encounter legal issues such as divorce, IRS liens, or lawsuits. Be aware too that in Connecticut, you cannot entirely avoid probate court no matter how your assets are titled, because of a state law requiring the filing of a Connecticut estate tax return with the probate court.
For the above reasons, many lawyers will advise their clients to establish a revocable living trust. However, while that is often a good idea, living trusts still pose some planning dangers that may affect Medicaid eligibility for someone with Alzheimer’s.
Trusts
A trust is a legal entity that owns property, real estate, or investments. Almost anything you can own can be put into a trust. The trust entity is created by a legal document and provides for three roles: (1) The grantor, also sometimes called the settlor or the trust maker, who transfers assets into the trust by retitling them so that the trust owns the assets instead of the grantor; (2) the trustee, the person who manages the assets; and (3) the beneficiary, the person who benefits from the assets. There may be more than one trustee or beneficiary to a trust.
The most popular type of trust is a revocable living trust, which is established during the grantor’s lifetime and may be changed or discontinued (revoked) at any time. If the trust is not changed or discontinued, it remains in effect even if the grantor loses capacity. In the event of the grantor’s death, the trust will either continue or be paid out according to the terms of the trust document. In a revocable living trust, the grantor, trustee, and beneficiary may be the same person. In addition, the trust document can specify which assets are to be transferred to which beneficiary but the trust assets do not have to go through probate. This is part of what makes the revocable living trust such a popular planning tool.
However, while there are no income tax consequences from establishing a revocable living trust, there can be serious consequences for Medicaid planning. First of all, assets in a trust are still considered to belong to the applicant under Medicaid rules. Therefore, transferring assets to a revocable trust does not protect them for Medicaid purposes. In addition, in some states assets owned by a trust are countable for eligibility purposes when they would be exempt if owned by an individual. For example, a house worth $100,000 in a trust may be counted by Medicaid as $100,000 of assets while, if it were owned by the individual, it would not be counted at all. Also, if the trust requires both spouses to make changes to the trust, the couple may encounter problems if a spouse with Alzheimer’s loses the capacity to deal with financial affairs.
Lastly, gifts made by a trust have a look-back period of five years for Medicaid purposes, just as gifts made by individuals do. One key Connecticut case illustrates how a revocable trust can fail at protecting assets for Medicaid eligibility purposes. In that case, Bezzini v. DSS, the plaintiff’s husband had a revocable living trust and left all of the assets in the trust to his sons upon his death. When his wife applied for Medicaid, this gift to the sons was considered a transfer that rendered the wife ineligible for Medicaid benefits. The result was that the institutionalized spouse was ineligible for Medicaid for a penalty period that began upon the death of the community spouse. This case illustrates how a trust cannot help couples who are trying to give gifts to their family members while avoiding delays in Medicaid eligibility.
There is one type of trust that may be useful for community spouses of those with Alzheimer’s disease. This type of trust is called a testamentary special needs trust, which his created under a will and lets a community spouse leave assets for the benefit of an institutionalized spouse to cover supplemental needs not covered by Medicaid, such as dental procedures or cost differentials between private and shared nursing home rooms. When the institutionalized spouse dies, some states allow the balance of the trust to go to the person’s heirs, while in other states it might be subject to estate recovery.
Who Can Help? Finding an Attorney
If you or a loved one has been diagnosed with Alzheimer’s disease, consulting an elder law attorney can help you to be sure important legal documents are in place so your family is better able to fulfill your or your loved one’s wishes. However, not all attorneys are familiar with elder law issues and it is important to find an attorney who is experienced in this area. Taking the time to find an attorney with experience with the legal issues you will be facing will be well worth the time and effort it takes. Not only will you be better able to protect your assets, but you will be better able to create a plan so that you or your loved one will receive the right kind of care.
Ways to find an elder law attorney in your area:
- Contact your state’s chapter of the National Academy of Elder Law Attorneys (NAELA). Visit the website of the Connecticut chapter of NAELA at www.ctnaela.org and click on “Find an Elder Law Attorney in Connecticut.”
- Go to the Alzheimer’s Association’s Community Resource Finder at www.communityresourcefinder.org and select the category “Elder Law Attorneys.”
This is also a great way to locate other resources in your area. When you meet with an elder law attorney, you will want to be able to discuss why you are seeking assistance. Be prepared to talk about your situation, including family dynamics and discuss such matters as:
- Are you married or single?
- Do you have children or other family members who are very involved in providing care or other assistance?
- Are there certain family members that you want to be involved in any planning?
- Are there certain family members that you do not want to be involved in any planning?
What to Bring to the Appointment
Assets:
Pension or individual retirement account balances
Bank account balances
Certificates of Deposit
Values of stocks and mutual funds
Value of US Savings Bonds or other bonds
Life Insurance Policies (face value, beneficiaries, cash value
Any other financial assets
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When you meet for an initial consultation with an attorney, don’t be afraid to ask how fees and expenses are calculated and whether a retainer is required. Attorney fees may be calculated in two ways or a combination of both. The first method is an hourly billing rate, which may vary for work done by paralegals or secretaries. There may also be different rates for different types of work, for example, one rate for wills and another for nursing home issues. The second method is called value billing, where the attorney charges a flat fee for one or more specific services based on the value of the service no matter how long it takes to perform. When you find a lawyer you like, make sure to get a contract that lays out the services the attorney will provide, how fees and expenses will be calculated, and how often you will be billed. If you don’t like the first attorney you meet with, remember that you are under no obligation to hire that attorney. Make an appointment for a consultation with someone else until you find someone who makes you feel comfortable.
YOUR PARTNER IN CREATING A BETTER FUTURE
For over 20 years, the attorneys at Weatherby & Associates, PC have helped Connecticut families set goals and turn them into reality, creating a better, more secure future. From estate planning and asset protection strategies to business succession planning, administering probate estates and ensuring the best health care possible for loved ones in need, Weatherby & Associates, PC takes a close look at the unique needs of every individual, family or business to develop a truly individualized strategy that is sure to achieve their objectives.
YOUR FAMILY IS OUR FAMILY
We understand how important your family is to you, how well you want them to be cared for, and the important role your hard-earned assets or business play in the future of your family. As a firm, Weatherby & Associates, PC is committed to caring for your assets, business, health care needs and plans for the future as if they were our very own. Every step we take is designed to give you peace of mind and security, right down to our unique approach for ensuring your plan and documents stay current with our exclusive LifeBridge™ program.
Honoring parents and aging loved ones with the best of care and a home they can enjoy for the remainder of their days is a desire that simply comes naturally. Unfortunately, many families put off planning for the potential needs of aging members until illness or disability compels them to action, often forcing them to accept less than optimal solutions and burdening them with sudden financial strains they are not prepared for. Onset of illness or disability shouldn’t mean surrendering to a lifestyle of dreary environments, loneliness and hardship. The Weatherby &Associates, PC Life Care Planning team can help with a wide variety of services and solutions to give your loved ones a better life in their aging years. Get started on a plan to ensure the best possible care and living opportunities for your parent or other aging loved one. Call our Life Care Planning attorneys today to schedule an initial consultation: 888-822-8778 (Toll Free)
