Estate Planning

Medicare changed things up a bit this year by scheduling open enrollment early.  Because Medicare is in the news, I’ve been getting a lot of calls from clients to ask me about Medicare. While most people understand that they can become eligible for Medicare when they turn 65, they wonder about the types of Medicare plans available, and what plan they should choose.  Today, we’ll talk a little bit about the basics of Medicare, and about how to choose a Medicare Part D prescription drug plan.

Here is the basic Medicare alphabet:

Medicare Part A covers hospital insurance that can help pay for inpatient care at hospitals, skilled nursing facilities, hospice, and home health care.

 If the last few years have taught us anything, it is that life is not predictable.   The economic crash seemed to come out of nowhere.  The weather appears to be totally weird and unpredictable, with tornadoes and floods occurring with fierce and dangerous intensity.

So, too, our health and physical wellbeing are not entirely predictable.  Despite our best efforts to eat healthy food and exercise regularly, we can have a car accident or suffer a bad reaction to medication and become ill or disabled.

For some of us, our financial resources and health insurance may not be enough to cover our care needs.  When that happens, we sometimes have to seek governmental assistance to provide for our healthcare.

Many of my clients had no idea they would end up depending on Supplemental Security Insurance (SSI) or Medicaid for assistance, but those progams can be a lifeline for those with disabilities and longterm care needs.

How can we plan for our loved ones and family members who are on governmental assistance programs?  How can we provide for their needs without jeopardizing their public benefits programs?

One way is to establish a special needs trust for the benefit of the person with a disability.  A special – or supplemental needs trust, as I’ll call it- is an entity established to hold assets so that those assets are available for  the needs of the person with a disability that are not provided by the governmental benefit.  The person with the disability is not the trustee, does not own the assets, and cannot control the assets, so the assets aren’t counted for purposes of qualifying for benefits.

SSI and Medicaid generally restrict the recipient of those programs from having more than about $2,000 in assets, but the assets in the trust aren’t calculated in that $2,000.  Most of the time, the trust is established by a parent or grandparent, but If the assets did not belong to the person with a disability to begin with, anyone can establish the supplemental needs trust and anyone can contribute assets to that trust.  The trust can be the recipient of gifts or inheritance.

We’ve discussed how to choose a trustee in previous blogposts,

http://bit.ly/rfPKWc  but for a supplemental needs trust I usually recommend appointing a professional trustee to manage the assets in the trust.  The intricacies of public benefits programs can be daunting for most people, so even though they charge for the management,  professionals with experience with supplemental needs trusts can save money in the long run.

So, even though life seems unpredictable, you can at least plan for some of the supplemental needs of your loved one with a disability.

 When Bridget came to visit, she wanted to take my blue and white teacups home with her.  They were shiny and pretty, and fit in her hand just perfectly.  Dick promised they would go to the mall and buy some teacups just like them.

Bridget was in the mid to late stages of Alzheimer’s disease when she and Dick first visited my office.  Dick, a wonderful, patient husband and caregiver to Bridget, was determined to be prepared for whatever legal and financial zingers might hit the couple.  Years before, after Bridget was first diagnosed with Cognitive Memory Impairment, Dick and Bridget had prepared living trusts, powers of attorneys, and healthcare directives.  They came to me to make a few changes to Dick’s living trust and financial power of attorney.   I always recommend that clients update advance directives and powers of attorney to avoid having someone decide that the documents are “stale” and, therefore, not valid.  We prepared new advance directives for Bridget and Dick.  On the day Bridget came to sign, she could not remember that the children whom she had nominated as agents were adults.  In fact, I’m really not sure she could remember who her children were.

With sadness, I told Dick that Bridget could not sign any documents that day.  We agreed to try another day, since those with dementia often have times when they are very alert, and other times when they are not.  Bridget never was able to sign her new advance directive, and soon went to stay in a wonderful memory care facility.   The health care and financial proxies she had already signed worked fine for her, and Dick was able to make her healthcare and financial decisions without any challenges.

Susan, on the other hand, had never executed advance directives for healthcare, financial powers of attorney, or any wills or trusts.  She didn’t think she needed to, since her husband made most of the financial decisions for the couple.  Her family did not push her to do any planning, since they thought it would upset her.  When I visited Susan at the nursing home after her husband died, she told me the nurses were stealing her underwear, she no longer recognized her family members, and she wondered why I was visiting her at work.   Susan swore like a sailor, and insisted that she would not sign “any g. . d. . . papers”, believing that I was trying to steal from her, too.

As a result, her family had to spend months and thousands of dollars to seek guardianship and conservatorship of Susan, a court proceeding which is expensive financially and emotionally for all involved. 

Many folks with Alzheimer’s and other dementias become paranoid and distrustful.  When they hit that stage, it is extremely difficult to get them to agree to do advance directives, financial powers of attorney, or wills.  Why would they agree to sign something that they believe allows folks to steal from them?

As an attorney, I preach that every adult needs to have an advance directive for healthcare, a financial power of attorney, and at least a basic will.   In Susan’s case, her fear of planning led to heartache and hardship for her family.   Could all of this expense and difficulty have been avoided by visiting an attorney’s office while Susan was able to plan for her and her family’s future?

As a footnote, I want to tell you all about Dick, Richard J. Farrell, whom I mentioned above.  Dick has written a book Alzheimer’s Caregiving about his life with Bridget, joys and trials of caregiving, and about his grief when Bridget died after living with Alzheimer’s for nearly 20 years.  Check out his website at www.alzheimerscaregivingbook.com to see how you can order a copy.

Sometimes bad things happen right under our noses, and we don’t want to – or can’t – see.  Elder abuse is like that – we can’t – or don’t want to admit that we see it.

June 15^th was Elder Abuse Day, a day intended to draw our attention to a problem that is often ignored. The term “elder abuse” is often in the news, but what exactly is elder abuse?

The World Health Organization defines elder abuse as “a single, or repeated act, or lack of appropriate action, occurring within any relationship where there is an expectation of trust which causes harm or distress to an older person.”

Elder abuse is not confined to the poor.

Once I convinced my client, Mary, that a trust is a safe, and not so scary, way to protect herself and her stuff during any incapacity, she wanted to know who could possibly serve as a backup trustee?   According to Mary, her daughter was a kind and loving person who would do everything she could to support her mother, but her daughter’s financial skills were somewhat suspect.  Mary’s son is a busy family man with a great job, but he seems too busy to help Mary now.

Who could she choose? 

First, what does a trustee do exactly?  A trustee is a fiduciary, which means that he or she has a legal or ethical duty regarding the management of property for another.  Although a trustee may have either the duty to manage the trust assets or the duty to distribute those assets, many trustees both manage and distribute.  A trustee is usually responsible for investing the assets in the trust, distributing those assets to the beneficiaries according to the trust terms, and making sure any required accountings are prepared and that taxes are paid when necessary.

THE PROS AND CONS OF A POWER OF ATTORNEY

So, if you’re telling me not to put my daughter on my accounts, what are the alternatives?  How can I be sure I will have someone to take care of my financial affairs if I’m not able to?

In my last post, I told the story of Mary and her daughter, Nancy.  I pointed out the pitfalls to having adult children – or other people- as joint owners on real estate and bank accounts.  I promised I would share some alternatives to joint accounts.

One alternative is to appoint someone as an agent under a financial power of attorney.  The agent is authorized to make financial decisions for you if you are not able to make decisions – or if you just don’t want to make those decisions any more.