Who Decides/Planning Ahead: Legal and Financial Issues for Dementia Caregivers

1. Who Decides/Planning Ahead: Legal and Financial Issues for Dementia Caregivers PRESENTED BY

2. 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

3. 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

4. THREE THINGS TO AVOID • Change • Conflict • Loss of Control

5. 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)

6. 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- Healthcare Older Types - Voluntary • “Living Will” – limited purpose (no life support if terminal illness); repealed in 1998, but still valid for limited purpose • Durable Power of Attorney for Healthcare – repealed in 1998, but still valid if valid when done

7. 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 atwww.ElderLawMS.com Forms page

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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)

18. 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)

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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)

25. 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

26. 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

27. 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.

28. 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)

29. 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.

30. 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

31. 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)

32. THANK YOU 4400 Old Canton Road ▪ Suite 220 ▪ Jackson, MS 39211 Tel: 601-987-3000 ▪ Fax-601-987-3001 www.ElderLawMS.com