ELDER LAW

ELDER LAW

I. INTRODUCTION

A careful examination of the change in population structure evidences an ever-increasing need for estate planning by the elderly population. Accordingly, many will find themselves in unfamiliar territory as they undertake the role of caregiver for their elderly loved ones. Many middle aged children will find themselves being pulled in different directions; having to care for two generations while trying to live their own lives. In some ways, these children face the most agonizing life crises: what to do when the parents who once cared for them can no longer care for themselves. It is essential that when faced with the challenges involved in providing care for elderly loved ones that an attorney is consulted who can provide guidance as to the issues of living longer and the necessary legal documentation for management and conservation of your loved one's property during the remainder of his/her life, as well as death.

II. COMMON QUESTIONS

There are many common concerns of the elderly and their caregivers. A few of the questions that often arise are as follows:

1. As I grow older, will I need a guardianship or can my financial resources be managed without a guardianship in the event of my incapacity?

2. Who will handle my financial resources when I am unable to hand them myself?

3. How can I ensure that financial resources are available to my surviving spouse that the his/her accustomed standard of living continues after my death?

4. Can an estate plan be prepared which is effective for managing my financial resources during my lifetime?

5. Will I have the financial resources to pay for long term health care, such as nursing home expenses?

6. What are my options in financially planning for subsequent long term health care?

7. At my death, can the last expenses be paid and the remaining assets be distributed to my family in a relatively quick manner?

III. PLANNING FOR PROPERTY MANAGEMENT IN CASE OF INCAPACITY

A. Advance Directives

Advance Directives are generally what is known as a "Living Will," although an Advanced Health Care Directive may be more comprehensive. Under an Advanced Health Care Directive, the party may designate whether a specified individual or individuals may direct the parties physician to withhold certain medical treatments or lifesaving devices.

B. Durable Power of Attorney and Power of Attorney for Healthcare

A Durable Power of Attorney is a general Power of Attorney which remains valid if the principal should become incompetent after its execution. The Power of Attorney will allow the named attorney-in -fact to handle all issues involved in the management of the person and estate of the incapacitated party. With advanced planning, the execution of a Durable Power of Attorney may allow the subsequently incapacitated person to never need to have a court appointed legal guardian.

If a Power of Attorney for Healthcare is executed, it can be utilized when a person subsequently becomes unable to make health care decisions for themselves and, the authority given the agent continues to exist until the time the person again becomes able to make health care decisions for themselves.

C. Guardianship

If the elder person is not competent to execute a Durable Power of Attorney, then a Guardian of the Person and Estate may be required. A Guardianship is used to promote and protect the well being of the person's property and should be defined so as to encourage the development of maximum self reliance and independence of the other person. The Guardianship should be ordered only to the extent necessary in consideration of the person's actual mental, physical and adaptive limitations.

D. Revocable Trusts

The Revocable Trust may appeal to an elderly person who is: (1) surviving spouse who is inexperienced in investment management; or (2) realized that at some future time he or she may be unavailable, incompetent or just too old to handle financial matters. Under these circumstances, the Revocable Trust may be exactly what the party needs to allow for competent professional management of the elderly client's property at a future date when he or she is incapable or unwilling to manage the assets personally.

In addition to solving incapacity problems, another reason the Revocable Trust may be recommended is that the trust assets are distributed without going through the court probate process. In other words the revocable trust may be used as a Will substitute. When it is determined that a Revocable Trust should be used in the estate plan of the elderly client a Will may also be drafted in the form of a "pour-over" Will. That is, upon the death of the Testator the Will leaves all of the assets of the decedent to his Revocable Trust.

E. Wills

Even if the assets of the elder person pass outside of probate by alternative means, such as a designated beneficiary statement, a Will should be used just in case the person somehow comes into ownership of an asset of value. The Will should be drafted according to the client's dispositive intention so that if an asset comes into the client's ownership it will be disposed according to their plan.

F. Joint Ownership Options

The elder person may want to consider using joint ownership options for distributing their assets. The joint ownership forum does not solve incapacity problems. The effect of such an ownership designation is that upon the death of the first party, the property passes by operation of law to the surviving joint owner.

Another non-testamentary form for distributing a decedent's assets is the "Transfer on death" statement for investment accounts. Basically, the client owns the investment account in his own name but upon death the statement directs its disposition to anther party. There is also the "Pay on Death" account at banks. Again, the POD account is similar to the TOD account. The client owns the checking account in his own name but upon death the account is paid to the named person.

IV. FINANCING LONG TERM HEALTH CARE

There are three primary resources for payment of long term care: personal savings and income, long term care insurance, and Medicaid.

A. Personal Savings and Income

Of course, if persons have adequate personal savings and income for the foreseeable costs of long term case, neither Medicaid planning nor long-term care insurance will be necessary. A financial analysis should be completed to determine whether or not the party has the financial strength to pay for the most expensive foreseeable long term care. Until this is done, there is no way to make a responsible decision as to whether Medicaid planning is a necessity or a major mistake. The average cost of nursing home care and the persons life expectancy should be taken into consideration. The Department of Human Services has determined that an average cost of ordinary nursing home care is $2,498.00 per month. However, if the party wishes to provide for 24-hour home care, or for care in one of the more luxurious facilities then it may cost up to $5,000.00 per month. It may be necessary to retain the services of a financial planner to determine if adequate resources exist for the long term care of the elderly person.

B. Long Term Care Insurance

In the event personal assets and income are insufficient to manage the expenses of long term care, long term care insurance may be a viable option. A person who has already been diagnosed with a condition likely to lead to a need for long term care (such as Alzheimer's or Parkinson's) will not pass the insurance company's underwriting requirements. Therefore, long term care insurance should be applied for early, before any disqualifying condition appears. The reasons for buying long term care insurance is to insure against impoverishment, to insure against having to use assets, and to insure against loss of inheritance.

C. Medicaid

For many people, the time that they can postpone Medicaid eligibility by paying privately is at best very short, and the cost is their entire savings. Especially when there is a spouse at home, accelerating Medicaid eligibility can be imperative. In order to qualify for Medicaid an applicant must meet the financial eligibility requirement and medical necessity requirements. Set out below is a brief analysis of the requirement and rules for Medicaid eligibility.

NON-FINANCIAL ELIGIBILITY REQUIREMENTS

Residency: Must be a Texas resident and U.S. citizen or qualified alien.

Living Arrangement: Must reside in a Medicaid-contracted nursing facility (NF), skilled nursing facility (SNF), or ICF-MR or IMD facility for 30 consecutive days before being certified for Medicaid. Medicaid coverage may be retroactive to the date of entry, if all requirements were met.

Medical Need: Must meet the medical necessity (MN) or level of care (LOC) criteria for either nursing facility or ICF-MR/RC care. MN/LOC is based on the degree of services required, and establishes a daily rate at which the facility is paid for providing care. Medicaid pays the difference between this rate and any contribution required from the client. The rate may change based upon the client's condition.

FINANCIAL ELIGIBILITY REQUIREMENTS

The main concern for most persons is whether the elder person will meet the financial eligibility requirements. The financial eligibility requirements are set out below.

Income:

Sources of countable income:

Social Security benefits
Civil service annuities
Earnings/wages
Railroad retirement benefits
Retirement/pension benefits
Veterans benefits
Interest/dividends
Royalty/rental payments
Gifts/contributions

Resources:

Sources of countable resources:

Bank accounts
Cash
Time deposits
Real property
Life insurance
Burial spaces/funds
Stocks/bonds
Oil/gas/mineral rights
Jewelry/antiques
Cars/other vehicles

Certain items may be excluded from countable resources including:

A homestead to which the client intends to return or where the spouse/dependent relative lives.
Life insurance with face value not exceeding $1,500 per insured.
Burial funds of $1,500 (less the amount of excluded life insurance/irrevocable burial arrangements).
Autos valued at no more than $4,500, or more if needed for medical transportation or specially equipped for handicapped.

Other resources that are excluded when Community Spouse Exists:

Term insurance (no cash value): All of this type of insurance is excluded, regardless of the amount of the death benefit.
Cash Value Insurance (whole life, universal life): The cash value (not including dividend additions) is counted as a resource; provided, if the total face value of policies owned is $1,500.00 or less, the cash value is excluded.
In addition to the above-named excluded resources the community spouse is also protected by spousal impoverishment rules. I have set out below the resources protected by spousal impoverishment.

SPOUSAL IMPOVERISHMENT/PROTECTED RESOURCES

When one member of a couple enters an institution on or after Sept. 30, 1989, with the intention of remaining for 30 consecutive days, the couple may request an assessment of their combined resources to determine a protected resource amount. This amount represents the portion of the couple's combined resources that is reserved for the community spouse. This assessment may be completed at any time from the date of nursing home entry to the date of Medicaid application, even if there are no immediate plans to apply for Medicaid. The protected resource amount is calculated only once, at of the beginning of the first continuous period of institutionalization.

Resource Provisions

The couples' combined resources, without regard to community/separate property laws or the spouses' respective ownership interests, are evaluated as of the month of institutionalization. In determining total resources, the following assets are excluded regardless of value: home, household goods, and one automobile. The protected resource amount will be the greater of the following:

• the state minimum resource standard, which currently is $16,824.00; or
• one-half of the couple's combined countable resources not to exceed the maximum resource standard, which currently is $84,120.00.

A copy of the assessment, showing the protected resource amount and attendant documentation, is provided to you. The protected resource amount determined at assessment is constant, and will not change during the initial eligibility period (certification date to first annual review), unless it is based on incomplete or inaccurate information. A fair hearing may not be requested at assessment, but the protected resource amount may be appealed when a Medicaid application is filed.

Personal needs allowance and contribution toward care:

All persons eligible for nursing facility coverage retain $45 of their monthly income for personal needs. Income in excess of $45 is applied toward the cost of care. Certain other allowable expenses may reduce your mother's contribution, including medical expenses not covered by Medicaid, guardianship fees, and certain home maintenance expenses during the first six months of facility residency (if a return home can be expected).

A spousal needs and/or dependent allowance may apply. Your father's income is used to determine how much, if any, of your mother's income may be diverted to him. Currently, the spousal allowance is set at $2,019.00. If your father's income is set at less than this amount then, he may be able to divert some of your mother's income, if any.

Disposal/transfer of assets:

Penalty

Nursing facility patients may incur a penalty for disposing of (transferring) assets for less than market value. Nursing facility patients who are subject to a transfer-of-assets penalty, but who are otherwise eligible for Medicaid, continue to receive other services during this period. The basic rule is that a person making a transfer for less than fair market value is ineligible for medicaid for one month for every $2,498.00 gifted.

Lookback Period

Only transfers within the "Lookback Period" are subject to penalty. Medicaid will lookback from the date of the Medicaid application or entry into the nursing home. The Lookback period for transfers is 3 years, unless it involves a trust, then the lookback period is 5 years.

Transfers Excluded from Penalty

Home can be transferred to the community spouse;

Any transfers can be made to the community spouse, as long as it is for the sole benefit of the community spouse;

Any transfers from your father to another for your father's sole benefit (such as trusts and annuities);

Any transfers of income to a Miller Trust (Qualifying Income Trust); and,

Transfers made for purposes other than to qualify for medicaid.

V. CONCLUSION AND SOURCES OF INFORMATION

The elderly population is continuing to grow as a whole and living longer. Likewise, legal issues unique to older persons are increasing and encompassing topics as diverse as healthcare, age discrimination, guardianship, financial, physical, and mental abuse of the elderly, retirement planning, and estate planning. By consulting an attorney regarding elder law issues early on, many of the complications and pitfalls involved can be avoided. Listed below are resources where additional information regarding elder law issues can be found:

National Academy of Elder Law Attorneys, Inc.
www.naela.com

Arkansas Division of Aging and Adult Services
www.state.ar.us/dhs/aging

Texas Department of Human Services
www.dhs.state.tx.us

Center for Medicare Advocacy, Inc.
1-860-456-7790
www.medicareadvocacy.org/advocacy.htm

Adult Protective Services
1-800-252-5400

American Association of Retired Persons
1-800-424-3410

Texas Department on Aging
1-800-252-9240

Attorney General of Texas
Elder Law/Nursing Home Complaints
1-800-458-9858

Senior Law: Elder Law & Legal Resources on the Web
www.seniorlaw.com
(This web site provides a direct link to numerous other sites relating to elder law issues)