Caretaker Child

Caretaker Child

For many seniors, owning a home is synonymous with the American Dream. The goal is to stay in the family home, and then pass it on to the next generation. The nightmare that plagues many older Americans is being forced to sell their homes to pay the expenses of long term care. For this reason, many seniors want to transfer their homes to their child or children especially if the child resides with them.

In most instances, transferring a home to a child or other family member may cause a penalty period in which Medicaid is not available to pay for care. In certain circumstances, the transfer can be considered exempt and the penalty can be avoided. One such exempt transfer is to a “Caretaker Child”.

The “Caretaker Child” is one who resides in the parent’s home providing care for at least two years prior to the parent moving into a long term care facility such as a nursing home or applying for assistance from a Home and Community Based Services (HCBS) waiver program, such as PASSPORT. Simply residing in the house is not enough. The Caretaker Child must provide needed care which otherwise would have required the parent to go to a nursing home or apply for a HCBS Medicaid program.

The Medicaid rules are quite specific as to what a Caretaker Child must do in order for the exemption to apply.

  • The Caretaker must be a natural or adopted child.
  • The child must actually reside in the parents’ home with them.
  • The parent must require help with activities of daily living or instrumental activities of daily living (See lists) to such an extent that he or she would require nursing home care if the child were not there to help
  • The child must continuously live in the home providing the care for at least two years immediately prior to the parent going into a nursing home or applying for HCBS Medicaid help.
  • The child must continue to live in the home until the transfer is made, even if the parent is placed in the nursing home or receiving HCBS Medicaid.

To prove herself, the Caretaker Child, must provide Medicaid with documentation that she meets the definition. For the transfer of the home to be exempt from penalty, Medicaid will require written proof from the parent’s doctor and the child providing care. Medicaid will scrutinize this documentation to determine if the exemption applies. It is the family’s responsibility to keep careful records as they go.

If you hope to protect the family home via a Caretaker Child exempt transfer, it is important to begin documenting your status as early as possible.

  • Be sure that you have a proper power of attorney in place in case you become too ill to sign the deed when the time comes
  • Talk to your doctor about the kind of care required and your child’s role in providing that care.
  • List the activities and actions that your child performs to keep you safe at home.
  • Your child should keep a journal or calendar of your activities, doctor’s visits, hospital stays and changes in your condition.
  • Keep a checklist of care and services provided on a regular basis.

Contemporaneous records can help you remember all your child has done and to assemble necessary proof when needed. That documentation must show the date that the child moved into the home, the parent’s condition that required the care to stay out of the nursing home, the extent and type of care that was provided, the amount of time the child devoted to the care, and other activities such as school and work, that the child was involved in during that period.

The Caretaker Child exclusion cannot be used for early planning. It is a crisis exemption as the status of Caretaker Child can only be determined at the time the parent enters the nursing home or applies for a HCBS Waiver Program. If the child moves out before the transfer is made, the exemption is lost.

There may be adverse consequences of transferring the home that should be considered.

  • The child may not qualify for certain real estate tax exemptions that the parent had
  • Transferring to the Caretaker Child may defeat the parent’s intention to divide his property equally among all of his children.
  • Transferring the house during the parent’s lifetime may create a capital gains tax problem when the child sells the house.
    • For example, if the parent purchased the house in 1950 for $30,000 and the house is now worth $230,000, the capital gain would be $200,000. A lifetime transfer gives the child the same basis ($30,000) as the parent. If the child received the house at the parents death, the child would get a “step up” in the basis to $230,000 and there would be no capital gains when the house is sold.

The laws surrounding Medicaid and the transfer of the house are complicated and constantly changing. Seek the help of a qualified elder law and estate planning attorney who can analyze your unique situation and create a plan most appropriate for you.

Activities of Daily Living (ADL)

            ADL’s are self-care activities that everyone must perform to lead a normal, independent life.

Eating: Do you have the physical ability to swallow or chew food? Do you have trouble moving food from the plate to the mouth?

Bathing & Hygiene: Can you bathe yourself and brush your own teeth?

Dressing: Are you physically able to dress yourself and make appropriate clothing decisions?

Grooming: Can you comb your hair and trim your toenails and fingernails? Can you properly apply makeup or shave yourself?

Mobility: Can you move around without the assistance of a walker, wheelchair, or cane? Can you successfully get out of bed, get onto and off of the toilet, go up and down the stairs and sit or rise from the couch or other furniture on your own?

Toileting & Continence: Are you able to use the restroom without any assistance or handle your own ostomy bag?

Instrumental Activities of Daily Living (IADL)

IADL’s are activities a person must perform in order to live independently in a community setting during the course of a normal day.

Some examples of IADL’s include:

  • Shopping
  • Cooking
  • Washing laundry
  • Housecleaning
  • Managing medications
  • Using a telephone
  • Managing money
  • Driving
  • Handling mail
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Financial Advisor

Financial Advisor’s New Fiduciary Duty

On June 9, 2017, the Department of Labor ruled that financial advisors must now act as a fiduciary for their clients. As always, with changes in the law, you may have questions as to what this means.

A fiduciary is a person (or organization) that owes the principal the highest legal duty of good faith and trust. They are legally and ethically bound to act in the principal’s best interest. Simply put, it means that financial advisors need to act in the best interest of the client. This means:

  • Fiduciaries must charge no more than a “reasonable” fee for his or her services.
  • A fiduciary should disclose all material facts, and must avoid lying to, or misleading, the client about the products they’re recommending.
  • They must act with the skill, due diligence and knowledge expected of someone familiar with the responsibilities of being a financial advisor.
  • Conflicts of interest must be avoided.

The results of this rule are that Financial Advisors may need to restructure fees or how they operate their investments to comply with the new rules. The question of what exactly a reasonable fee is, remains unclear and most companies will set their own internal practices.

While the fiduciary rule currently applies only to retirement accounts (including 401(k)s and IRAs), it may expand in the future. Until then, it is wise to ask if your advisor is a fiduciary regarding your other accounts.

To make sure that Financial Advisors are complying with new rules, it is most important to remember who your client is. In situations where financial advisors are looking at family plans between husband and wife or between parents and children, this can cause conflicts of interest if the advisor does not know who they are advising. While it seems like a simple concept on its face, the implications of having a fiduciary duty can be nuanced and complicated.

The Fiduciary rule may be new to financial advisors, but many people serve in a fiduciary for others.  Attorneys are always held to a fiduciary standard for their client. Powers of Attorney for Financial and Health Care decisions are held to the same standard. Guardians are fiduciaries and are overseen by the court to make sure they are acting in the best interest of their wards.

Like all new rules, it may require a period of adjustment, but it is another example of how we all need to work together in our individual fields to continue to improve upon protecting the best interests of our clients.

Medicaid and the Family Home (REDUX)

MEDICAID AND THE FAMILY HOME (REDUX)

Preserving the family home is one of the biggest concerns of Medicaid applicants and their families. In addition to being the largest single asset for most, it holds deep sentimental value and provides shelter and security to close family members.

To qualify for Medicaid in Ohio, an individual can have no more than $2,000 in countable resources. If property is owned by the Medicaid applicant, his spouse or their revocable trust, Medicaid considers it a resource. The individual’s home is excluded (not countable as a resource) so long as the individual or a recognized dependent resides there.

What classifies as a home?

A person’s home is his principal residence whether it is a house, mobile home, or houseboat. It includes all the land and buildings of the property. If multiple properties are owned, the Medicaid applicant must designate in a signed writing which one is considered “home”.

Excluding the House as a Resource

  • The Individual – The home is excluded as a resource so long as the Medicaid applicant resides there receiving services from a home Medicaid program such as PASSPORT. It continues to be excluded if there is a temporary absence such as a hospitalization or nursing home so long as the applicant submits a signed written statement of his intent to return home. It is no longer excluded if the individual moves into another residence such as an assisted living facility or a relative’s home without the intent to return home.
  • The Spouse – Even if the applicant is “institutionalized” in a nursing home or an assisted living facility, the home is excluded if the spouse resides there. In these situations, transferring the house into the spouse’s name alone may avoid future problems on the sale of the house or upon death of either spouse. It will also make it easier for the spouse to secure an equity loan or reverse mortgage if needed.
  • Dependent Relatives – The house may also be “excluded” for Medicaid purposes if other relatives who are dependent on the applicant reside there. “Relatives” can mean a child, stepchild, grandchild, parent, stepparent, grandparent, aunt, uncle, niece, nephew, brother, sister, stepbrother, stepsister, half-brother, half-sister, cousin or in-law. “Dependent” is not clearly defined. It can include financial, medical, etc. A signed written statement explaining the relationship and the reason for dependency should be submitted.
  • Co-Owners – If the property is co-owned by a person it would be excluded as a resource of the Medicaid applicant if it is the principal residence of the co-owner and he would be left homeless if forced to sell.

 

Transferring the Medicaid Applicant’s Interest in the Home

  • Spouse – The Medicaid Applicant may transfer his interest in the home to his spouse. This transfer is exempt (not penalized) so long as the spouse does not later transfer the house for less than fair market value. Once the house is transferred to the spouse, she may want to change her Estate Plan to exclude the Medicaid Applicant. If the home is held jointly and the healthy spouse dies first, the entire value of the house could become countable resources for the ill spouse again. Even with a change, the Medicaid Applicant may still be entitled to a portion of the estate if he survives the spouse.
  • Disabled Child – The home may be transferred to a disabled child with no penalty. It will be necessary to document the disability to Medicaid.
  • Sibling with an Equity Interest – The home may be transferred to a sibling who holds equity interest without penalty so long as the sibling has resided in the home for at least a year prior to the individual’s nursing home admission.
  • Caretaker Child – A caretaker child is one who has resided in the home and cared for the Medicaid Applicant for at least two years. A doctor must certify that without the caretaker, the individual would have required nursing home care two years earlier. Caretaker child transfers are exempt. They should be made as soon as possible and before the Medicaid Applicant’s death.
  • Penalized Transfers – If the home is given to someone whose status is not exempt less than 60 months before the Medicaid Application, the transfer may create a penalty preventing the individual from qualifying for Medicaid for some period of time. Situations must be examined individually to determine the length of the penalty, if any.

Special Situations

  • Home Equity – High value homes (with equity in excess of $500,000) may be subject to special rules. If necessary, equity may be reduced by taking a loan on the property.
  • Income Producing Property – A home that produces income for the owner, such as a duplex, apartment building or farm is also subject to special rules.
  • Medicaid Recovery – If the individual who received Medicaid passes away, any interest he holds in the home may be subject to Medicaid Recovery. If dependents reside in the home at the time of his death, Medicaid Recovery may place a lien on the home to be collected when dependents no longer reside there.
  • Sale of the Home – The appraised value on the county property tax bill will be considered the “fair market value” of the home unless other evidence in the form of a private appraisal is presented. If the home is sold to a relative or friend for less than the fair market value, Medicaid may consider it a gift. Former rules indicated that 90% of the fair market value would not be considered a gift. The present rules do not indicate how much of a discount would be allowed without being considered a gift. Once sold, the proceeds from the house are considered countable resources and, to the extent they exceed $2,000, will disqualify the individual from Medicaid.

Baby Steps

Baby Steps

If you stopped by to see us in 2016, no doubt you met Dominic, our legal assistant Laura’s son and Williger Legal Group’s resident baby. Dominic has been bringing smiles and fun to our office since March when Laura came back to work. It’s been amazing to watch him grow and even more astounding to see Laura hold him in one arm while typing with the other. But Dominic is now on his feet, hands free to explore, and no longer content to sit and watch.

A new child brings many new responsibilities. One of these responsibilities is making sure the child is protected in the event something happens to the parents. Here are a few tips for young families to consider when creating or updating their estate plan:

Who will raise your child if you can’t?

  • Nominate a guardian for your minor children in your will. Also, name a back-up in case that person is unwilling or unable to serve. The guardian will have legal custody of your child. Choose someone who is willing to take on the responsibility and has a similar child rearing philosophy. Also consider the age, health and location of the guardian as well as his or her stability and family situation.

What will the child’s financial needs will be?

  • Young families should consider life insurance to supplement inheritance and social security death benefits. Level term premiums are usually the least expensive option.
  • Consider using a trust to name someone responsible to manage the money while your child is young. The trustee can use the money for the child’s health, education, maintenance and support. You can designate how you would like the money to be used as well as the age at which the child should receive the money. Some families feel that 25 is a more appropriate age to receive a lump sum than 18.

Do you need to change your beneficiary designations?

  • Not all assets pass by your will or trust. Make sure the beneficiaries named on your life insurance policies, retirement accounts, annuities, and other assets match the intent of your will or trust. If properly titled, your beneficiaries may be able to “stretch” IRA’s to continue to enjoy deferred tax benefits.
  • How would you care for your child if you couldn’t care for yourself?
  • Create Health Care and Financial Powers of Attorney. If you become incapacitated your powers of attorney give your agent the ability to help you with medical decisions and make sure your bills get paid. Without these documents, the only alternative may be a court appointed guardian.

How will your family find information?

  • Keep an Inventory of your assets and key documents as well as contact information for your attorney, doctor, insurance agent, broker, and other trusted advisors. Make it easy for your agent, executor or trustee to determine what you have and what you owe. Don’t forget to include digital assets, and those precious digital photos, keep a master list of accounts, insurance policies, important legal documents and passwords.

How can you make sure the plan will work?

  • Review your plan every year to be sure it is kept up to date. Update your plan as your life changes. Are there any new family members? Is anyone named in the document no longer appropriate to serve in the role you have given them? Has your net worth changed?
  • Consult an attorney. Each state has specific requirements as to how a will and other legal documents must be executed. Be sure that yours comply.

Pooled Trusts & Medicaid Planning

Pooled Trusts & Medicaid Planning

A powerful tool for Medicaid planning that we are seeing more use from is a Pooled Trust. A Pooled Trust (sometimes referred to as a (d)(4)(C) trust) is a very specific type of trust used to help disabled individuals qualify for the government benefits they need while maintaining some funds set aside for things they may want to preserve the quality of life they are used to. A pooled trust is one of many tools an elder law attorney can use to help a person qualify for Medicaid. There are many different types of trust, and it is important to make sure you have the right trust for your situation. If used in the wrong way, a trust can actually cause more harm than good.

Basics of Medicaid

Medicaid is a needs-based governmental program to help people who cannot afford to pay for their medical care. In order to qualify for Medicaid, one must have less than $2,000 in assets. Once qualified for Medicaid, a person gets to keep $50 per month for personal spending. The rest of their income goes to pay the initial cost of the nursing home. Medicaid then picks up the tab for whatever that income does not cover that month. With the average monthly nursing home cost ranging between $7,000 – $8,000 a month, Medicaid is often the only choice for senior citizens in need of care.

Basics of Pooled Trusts

One thing all trusts have in common is that there are at least three parties to a trust; the Settlor, the Trustee, and the Beneficiary. The Settlor is the person who funds the trust. The Trustee is the person who manages the trust. The Beneficiary is the person who benefits from the trust. Often there is a primary beneficiary and then contingent beneficiaries named for after the primary has passed away.

The purpose of a Pooled Trust is to pay for items or services not provided by Medicaid. These items and services are not meant to replace SSI or Medicaid benefits but rather enhance the life of the beneficiary by supplementing them.

Pooled Trusts must be irrevocable, which means once they are set up and funded, there is no way a person can demand their money back. If they could, the trust would not qualify for Medicaid purposes.

Who can be the Settlor?

Pooled Trusts are unique in that the trust itself is already set up. An individual opts to join into an already established trust. Pooled Trusts get their name from fact that the funds in the trust are “pooled” with funds of other disabled individuals into one main trust and each individual gets their own account when they opt in. The account must be set up solely for one disabled individual’s benefit and must be funded with the individual’s assets. The person who sets up the account can be the disabled individual herself, or her power of attorney, parent, grandparent, legal guardian, or the court.

Who can be the Trustee?

The trust must be managed by a nonprofit organization. Currently in Ohio there are three companies that specialize in pooled trusts to choose from:

  • The Community Fund Management Foundation (CFMF) in Cleveland
  • The Disability Foundation in Dayton
  • The Ohio McGivney Pooled Special Needs Trust in Columbus

Separate from the trustee, who manages the funds, is the Designated Advocate, often a spouse or power of attorney, who represents the beneficiary and submits requests for money on behalf of the beneficiary.

Who can be the Beneficiary?

The primary beneficiary must be the disabled individual. “Disabled” is defined in rules adopted by ODJFS. There is currently no age limit in the state of Ohio on who can be a beneficiary. There can be no other primary beneficiaries named on the account, including the spouse or children.

Once the primary beneficiary has died, the pooled trust must contain an express provision for reimbursement to the state of Ohio for Medicaid services provided. If there are still excess funds remaining in the account once Medicaid has been paid back, those remaining funds may go to the spouse or other named remainder beneficiaries.

Funding the Pooled Trust

The trust is funded exclusively with the individual’s assets. The trust cannot receive funds from people other than the individual. A pooled trust is funded exclusively with cash. You would not put a house or personal property in a pooled trust. Assets that would otherwise be countable for Medicaid can be transferred into the pooled trust penalty free. Excess funds can later be added as they become available such as an inheritance or a lawsuit settlement. The individual can fund the trust with assets or irrevocably assign his or her income to the pooled trust. Generally there is a required minimum initial deposit of at least $5,000 to set up a pooled trust, however there is a method to fund pooled trusts with less.

Getting Money out of the Pooled Trust

Once the trust is set up and the Beneficiary is on Medicaid, the Designated Advocate represents the Beneficiary and submits forms (including receipts) to the pooled trust to request money from the trust account for the Beneficiary’s supplemental services. Once a request is approved, the Trustee releases the money from the trust account for payment to the vendor, service provider, or Designated Advocate. Cash can never be distributed directly to the Beneficiary.

Distribution requests can be submitted at any time and there is no limit on the number of distribution requests that can be submitted. The entire process may take three to four weeks from the date the request is issued. If there is an emergency, an emergency distribution request can be made at any time, but there is a fee. Reoccurring payments can be set up if the amount of the item or service remains the same, for example, a distribution request can be made for cable TV or other such common expenditure each month.

Money distributed from a trust account must be used for supplemental services for the sole benefit of the Beneficiary. The trust cannot provide for other people in the beneficiary’s life, such as for example, tuition for a child. A request may be denied if the Trustee feels it would interfere with the beneficiary’s governmental benefits, if they do not have proper documents and receipts, or if they feel the request is unreasonable.

A pooled trust can be used only to pay for supplemental services. It cannot be used for food and shelter. Supplemental services are those items or services that will not be paid for by insurance or a government program, but supplement and can enhance the quality of life of an individual with a disability. Examples include:

  • Dental Care
  • Plastic, cosmetic surgery or non-necessary medical procedures
  • Psychological support services
  • Recreation and transportation
  • Differentials in cost between housing and shelter
  • Supplemental nursing care and similar care which public assistance programs may not otherwise provide, including payments to those providing services in the home
  • Telephone and television services
  • Electric wheelchair and other mobility aids
  • Mechanical bed
  • Periodic outings and vacations, including costs incurred by caretaker companions
  • Hair and nail care
  • Stamps and writing supplies
  • More sophisticated medical, dental or diagnostic treatment, including experimental treatment, for which there are not funds otherwise available
  • Private rehabilitative training
  • Payments to bring in family and friends for visitation if the trustee deems that appropriate and reasonable
  • Private case management to assist the primary beneficiary, or to aid the trustee in the trustee’s duties
  • Medication or drugs prescribed by a physician
  • Drug and/or alcohol treatment
  • Prepay funeral and burial expenses
  • Companions for reading, driving and cultural experiences

A Pooled Trust is one of many tools that can help a person qualify for Medicaid while maintaining some funds that enhance the beneficiary’s life. It can be a powerful tool in your long term care plan. Because all types of trusts are complex, consult your attorney if you feel a Pooled Trust would be advantageous to you or someone you love.

The Split Gift & Annuity Plan (Creating and then Curing Penalties

 The Split Gift & Annuity Plan
(Creating and then Curing Penalties)

Long Term Care Medicaid is a welfare based program. This means that in order to qualify for Medicaid a person must not only have a medical need, but they must also financially qualify by having less than $2,000 in countable assets. A person, who has more than $2,000 in assets, can expect to pay privately until the money runs out and they qualify financially for Medicaid.

Many seniors are distressed by the idea of their life savings being drained to pay for final expensive days in a nursing home. They worry about how they will get by with only $50 in income once they are on Medicaid, and they wanted to leave behind an inheritance for their children. In some cases it may be possible to do emergency plans that can protect a portion of the assets from being spent down for Medicaid. We call this strategy a Split Gift & Annuity Plan.

Reducing assets to $2,000 can be accomplished by either giving away the assets or turning the assets into income for the Medicaid Applicant. The Split Gift Annuity Plan uses a combination of both techniques to shelter some of the assets while still providing payment for the applicant’s care.

Who This Plan is Good For

  • Single clients about to receive nursing home care with children, or others who they trust and want to inherit.
  • Clients who do not have other penalty free transfers available to them.
  • Clients who have already pre-purchased funerals, spent down assets, and still have assets left over.
  • Clients with at least $100,000 in assets half of which are liquid.

Making the Gift

The government does not want to encourage people who could pay for their care to give away their assets, so they penalize gifts.  Making gifts is not illegal, but is discouraged through the rules of Medicaid. Any gifts made within five years of your Medicaid application (the “look back” period) will cause a period of Medicaid ineligibility. Gifts made more than 60 months before your application need not be reported and will not be penalized. Once the gift is made, it will be penalized unless it is returned in full. A partial return of the gift will not shorten the penalty period.

Gifts made within this “look back” period will cause you to be ineligible for Medicaid for one month for every $6,327 transferred.  In other words, if you were to transfer $63,270, you would be ineligible for full Medicaid for 10 months ($63,270 divided by $6,327= 10 months).

During this penalty period when you are on Restrictive Medicaid, Medicaid does not pay for your nursing home care. This means you need to find another way to pay for your nursing home bill. However, the clock on the penalty period does not start until you are otherwise qualified for Medicaid (remember you must have less than $2,000 to qualify). With less than $2,000 in assets, there must be another way to pay for care during the penalty period without returning the gift. To accomplish this, we use a Medicaid Qualified Annuity.

Paying During the Penalty Period

During the penalty period, you will be required to come up with the funds for this nursing home bill elsewhere. Your regular income from Social Security or pensions will presumably cover part of the costs, but presumably you will still need some other way to supplement your income to afford your nursing home bill. To accomplish this, you use a portion of your assets not gifted away to purchase a Medicaid Qualified Annuity to pay for your care during the penalty period. Each month, the annuity will provide a guaranteed payment. Once the penalty period has passed, your annuity will run out and Medicaid will kick in and pay for all your care. The gifted assets will then be in your children’s hands, and Medicaid will not be able to come back for them.

Dealing with High Income

Medicaid has income limits that do not allow people to qualify for Medicaid without a special type of trust. If a person’s income is over $2,199, in order to qualify for Medicaid they will need to place their excess income in a Qualified Income Trust (QIT). Because the annuity will raise the applicant’s income over the limit, a QIT will need to be set up during the penalty period. Many people do not need the QIT after the penalty period has passed. For more information, please ask your attorney.

Possible Problems

While the Split-Gift Annuity Plan can work very well when used appropriately, there are some risks involved. There can be tax consequences. The people who receive the gift may run into issues while holding onto it. Sometimes a change in the applicant’s health or a death can interfere with the plan.

Because assets need to be liquid in order for this type of plan to work, you may be required to cash out assets. This may cause unfavorable income tax consequences. If IRA or 401K assets are liquidated, every dollar is taxable.  Withdrawing a large sum may also put you into a higher tax bracket. Accumulated income on deferred annuities and savings bonds are taxable. You may also have capital gains if you liquidate appreciated assets.  Depending on your circumstances, the cost of medical care may be deducted from your taxes.

Once the applicant gives away their assets, they lose all control over them. A gift to your children means that the funds transferred belong to them, no matter what promises they may make to hold them for you. The funds are vulnerable in the event of a child’s death, divorce, a lawsuit, bankruptcy, or the child’s decision to simply use the funds for herself. If these issues are a concern, a special type of trust can protect against some of these possibilities.

Another thing to consider is the applicant’s health. If an annuity is calculated for 10 months, but the applicant goes into the hospital for a month, they don’t need the money to cover nursing home costs during that time and will have too many assets to continue to qualify for Medicaid. Sixty-eight percent of nursing home stays last less than three months, however many last significantly longer than this. Sometimes if the applicant is in very poor health and may pass away before the penalty period would pass, it may make more sense to pay privately to avoid tax burdens and administrative costs.

It is important to remember Medicaid law is complex and dynamic. Not every plan will work for every situation. There may be better options available to you and your family. You should always consult a qualified elder law attorney before attempting any Medicaid transfer plan.

Hypothetical Example

Claire needs long term care. Her nursing home costs $7,500 a month. She has $126,540 in assets. She receives $1,250 in income each month. She has two children, Annie and Bobby. Under the supervision of her attorney, Claire splits her assets in half and gifts half ($63,270) to her two children, and uses the other half to purchase herself a Medicaid Qualified Annuity that pays her an income of $6,250 a month guaranteed for ten months.

She then applies for Medicaid, and is put on Restrictive Medicaid for ten months (due to the gift). During the penalty period she uses the annuity and her income to pay privately for her care for ten months. Because her income is high, she will need a Qualified Income Trust during this period.

At the end of the ten months the annuity is all used up. Her income drops back down to $1,250 a month and Medicaid pays for her care. The children have a bank account in their names with $63,270 in it. They use this to pay for any extra things Claire may need during her life time. When Claire dies, they divide the bank account as an inheritance.

 

Power’s of Attorney – Stepping Up & Stepping In

Powers of Attorney
Stepping Up & Stepping In

            It is a great honor to be named Agent for another person in a Power of Attorney. It means that that person (the Principal) trusts you enough to make decisions for her in the most important areas of her life – her health or her wealth. With great power comes great responsibility. How do you know when to Step Up to the job and when to Step In to make decisions?

Ohio law provides for two types of power of attorney: Power of Attorney for Health Care and Power of Attorney for Finances.

A Health Care Power of Attorney names the person or persons who can make decisions about medical treatment. This includes choice of doctors, placement in a rehab or nursing home, specific procedures and medications, as well as, do not resuscitate orders and other end of life decisions. The Agent under a Power of Attorney for Health Care can only act, however, if the Principal is incapacitated to the point where she is unable to make decisions for herself.

An Agent under a Financial Power of Attorney (sometimes simply called a “Durable Power of Attorney”) may be authorized to handle bank and brokerage accounts, IRA’s, contracts, sale or purchase of cars or real estate, life insurance and other financial matters. The agent is limited to only those matters specified in the document. The Financial Power of Attorney generally allows the Agent to handle these matters even if the Principal is still capable of doing it herself.

An Agent is bound to do what the Principal reasonably expects, to act in good faith and always in the Principal’s best interest. When acting as the Agent, you should disclose your identity as well as the Principal’s signing (“Principal’s Name”) by (“Agent’s Signature”) POA.

Stepping Up

How will you know when the Principal needs you to start acting and what you will need to do?

When you receive your paperwork, talk to the Principal about her health and/or wealth and expectations. Go through documents together, the bills she pays, the medications she takes, the names of her doctors, bankers, stockbrokers, insurance agents, etc. Let family, friends, and neighbors know to call you in an emergency.

If you are named as Health Care Agent, consider visiting doctors with your Principal and have her sign a HIPAA release so that you can ask the doctor questions and look at medical records even if your Principal is still able to make decisions for herself.

If you are named as Financial Agent, you might help your Principal sign up for automatic deposits and automatic payments of utilities and other regular bills. This will reduce the burden on her and allow her to continue managing her own business longer. Meet periodically to review statements and balance the checkbook or consider signing up to monitor her accounts electronically.

Stepping In

          You must keep contact with your Principal regularly to know when her capacity is diminished and it is time to Step In and make decisions. You may notice confusion, physical disability, or changes in mood, housekeeping habits, or hygiene. Missed appointments, unpaid bills, unfilled or untaken medication, weight loss, unexplained damage to the car, and falls are all signs that your Principal may need your help.

Check the refrigerator to be sure there is fresh food. You may need to help with the shopping or arrange for meals to be brought in. If your Principal can no longer use a stove safely, you may need to disable it.

When your Principal can no longer drive safely, you may need to talk with her doctor about having her license revoked or disabling or selling the vehicle. A Principal will often accept these restrictions more easily coming from her doctor rather than a relative or friend. If she continues to drive while impaired it is possible her insurance company will deny claims because of recklessness.

If your Principal is unable to drive, assist in arranging transportation. Isolation may become an issue. Regular phone communication, home health services and adult day care can help your Principal remain at home longer. If health care or other workers are in the home, check frequently to be sure your Principal is getting proper care and no items or money is missing. Be sure the workers are properly screened, bonded and insured.

When care at home is no longer possible, you will need to arrange placement in an Assisted Living Facility or Nursing Home. Visit facilities with your Principal if possible on multiple occasions and at different times of the day. Talk to residents and their families. Stay for a meal and a tour or consider a short respite stay to try it out.

If your Principal is resistant to a move, but unsafe at home, talk to the doctor. It is far easier to move to a facility upon doctor’s orders from a hospital or the doctor’s office than to attempt a direct placement from home by force or deceit. Later, when your Principal asks to go home, you can say with conviction that she can return home when her doctor says she can.

As Financial Agent, you will need to see that your Principal’s bills are paid and that her estate plan is followed if you know what that plan is. You must see that taxes are paid and that required minimum distributions are taken on IRA’s. You may need to make a claim on long term care insurance or Medicaid if necessary. Keep careful records of everything that you do on the Principal’s behalf.

Stepping In as agent can be a difficult and thankless job. If the Principal is unhappy with what you are doing – right or wrong – she can remove you since the power came from her in the first place. If this should happen and you feel your Principal is incapacitated and unsafe, your only resort may be to seek authority from the court in a guardianship proceeding. If you are in doubt as to your responsibilities or need assistance in understanding any of your duties as agent, seek the advice of a qualified elder law attorney.