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Legal Matters - Elder Law - Spring 2007
What a good long-term care policy should include
As nursing home and long-term care costs continue to rise, the Deficit Reduction Act of 2005 has made it more difficult to qualify for
Medicaid to pay for nursing home costs. Long-term care insurance can help cover expenses, but contracts for
such insurance are notoriously confusing.
How do you figure out what is right for you? Here are some tips to help you sort through the main options: Find a strong insurance company. The first step is to choose a solid insurer. Because it's likely you won't be using the policy for many years, you want to make sure the company will still be around when you need it. Make certain the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moody's, Standard & Poor's, or Weiss. What is covered? Policies may cover nursing home care, home health care, assisted living, hospice care, or adult day care, or some combination of these. The more comprehensive the policy, the better. A policy that covers multiple types of care will give you more flexibility in choosing the care that is right for you. Waiting period. Most long-term care insurance policies have a waiting period before benefits begin to kick in. This waiting period can be up to 90 days, or even longer. You will have to cover all expenses during the waiting period, so choose a time period that you think you can afford to cover. A longer waiting period can mean lower premiums. Look for a policy that bases the waiting period on calendar days. For some insurance companies, the waiting period is not based on calendar days, but on days of reimbursable service, which can be very complicated. Some policies may have different waiting periods for home health care and nursing home care, and some companies waive the waiting period for home health care altogether. Daily benefit. The daily benefit is the amount the insurance pays per day toward long-term care expenses. If your daily benefit doesn't cover your expenses, you will have to cover any additional costs. Purchasing the maximum daily benefit will assure you have the most coverage available. If you want to lower your premiums, you may consider covering a portion of the care yourself. You can then insure for the maximum daily benefit minus the amount you are covering. The lower daily benefit will mean a lower premium. It is important to determine how the daily benefit is calculated. It can be each day's actual charges (called daily reimbursement) or the daily average, calculated each month (called monthly reimbursement). The latter is better for home health care because a home care worker might come for a full day on one day, and then only part of the day on the next day. If the cost of the home care worker is averaged over the course of a month, it's more likely that the policy will cover the entire expense. Benefit period. When you purchase a policy, you need to choose how long you want your coverage to last. In general, you do not need to purchase a lifetime policy – three to five years' worth of coverage should be enough. In fact, a new study from the American Association of Long-Term Care Insurance shows that a three-year benefit policy is sufficient for most people. According to the study of in-force long-term care policies, only 8 percent of people needed coverage for more than three years. Unless you have a family history of a chronic illness, you aren't likely to need more coverage. If you are buying insurance as part of a Medicaid planning strategy, however, you will need to purchase at least enough insurance to cover the five-year look-back period. That way you can transfer assets to your children or grandchildren before you enter the nursing home, use the long-term care coverage to wait out Medicaid's new five-year look-back period, and after those five years have gone by apply for Medicaid to pay your nursing home costs (provided the assets remaining in your name do not exceed Medicaid's limits). If you do have a history of a chronic disease in your family, you may want to purchase more coverage. Coverage for 10 years may be enough and would still be less expensive than purchasing a lifetime policy. Inflation protection. As long-term care costs rise, your daily benefit will cover less and less of your expenses. Most insurance policies offer inflation protection. Although inflation protection can significantly increase your premium, it is strongly recommended. There are two main types of inflation protection: compound interest increases or simple interest increases. We are happy to discuss your options and help assess what's appropriate for you. New bargains available for life insurance
Have you owned the same life insurance policy for a number of years? If it's a whole life policy, or a term policy that can be converted to whole life, and the answer is "yes",it's time to have that policy reviewed.
Here are a few reasons why: New reverse mortgage products to hit market soon
Reverse mortgages are gaining in popularity, but if you are considering getting one, you might want to wait a little while. Better deals may soon be available as competition heats up between companies entering the market.
A reverse mortgage is exactly what it sounds like – instead of paying the bank money to build up equity, you use the equity in your home to take out a loan. You must be 62 years or older to qualify for a reverse mortgage, and the loan does not have to be paid back until you sell the house or die. The loan can be used for anything, including providing money for retirement or to paying nursing home expenses. Costs for reverse mortgages have traditionally been high, but more companies are beginning to offer reverse mortgages, and the competition is driving down prices. Companies are also offering more options, such as flexibility in payment and higher loan amounts. All the changes mean more options for consumers. If possible, experts suggest waiting until late 2007 or early 2008 before getting a reverse mortgage. But keep in mind that while reverse mortgages may look like no-lose propositions on the surface, they also have some significant downsides. If you are considering one, talk it over with your elder law attorney beforehand. Longer life spans alter estate planning
As the life expectancy for Americans lengthens and the country grows grayer, planning for retirement, long-term health
care needs and inheritance is changing as well.
The National Institute on Aging predicts the number of people at least 65 years old will double in the next 25 years to some 72 million people. Today, the fastest growing age group in the U.S. is what demographers call the "oldest old" – people 85 and older – and their numbers are also expected to double in the next 25 years, to about 10 million. The U.S. Census Bureau says about 70,000 centenarians now live in the U.S., and predicts that by 2040 there will be 580,000. Not long ago, the concept of living out the final years of one's life was a simple matter. At age 65, people would retire with the expectation that they'd die in a few years and leave an inheritance to their children. But for a growing number of older people the span of years after retirement is expanding. More and more people, as they reach retirement, see many healthy years ahead of them, and they're making decisions that are quite different than the ones that their parents and grandparents made. Many of them are visiting trusts and estates lawyers with a dual purpose in mind: planning for their parents and planning for themselves. Often an aging parent is facing a medical or mental health problem that needs legal attention. For example, a parent may have dementia, and an adult child doesn't want the parent making med- ical and financial decisions. This means estate planning documents need to be changed, with a focus on advance directives, health-care proxies, medical powers of attorney, financial powers of attorney, and living wills. At the same time, baby boomer children now reaching their 50s and 60s often begin to take a hard look at their own retirement planning – including asset protection and long-term care insurance. Another important issue to address relates to end-of-life decisions. Perhaps the single most important document to have is a durable power of attorney for both financial and health care matters. The durable power of attorney provides that when the individual can no longer make his or her own medical care and financial decisions, a designated loved one would make those decisions instead – including desired end-of-life decisions. Elder Law Q & A
Q. I am one of five children of a mother
who has been diagnosed with severe
dementia. Upon mother's release from the hospital
several years ago, a social worker gave the
child handling mother's medical care (claims,
billing, etc.) the forms for establishing power
of attorney for medical care. Three of the children are fine with giving the power of attorney to this child, but the
other two are adamantly opposed. So far, they insist that all five children
should be equally empowered. How can we resolve
this situation? — D.A
A. It sounds like it's too late for your mother to appoint anyone to represent her since she is no longer competent to do so. The only solution may be guardianship, which can be expensive and time-consuming if the children are in disagreement and end up fighting it out in court. Before seeking guardianship, it could be useful for all the children to sit down with an elder law attorney or family mediator in an effort to seek a solution. Legal Matters - Elder Law - December 2006
When should you take your social security retirement benefits?
As you approach retirement, you must decide when to begin taking your Social Security benefits.
You have three options. You may begin taking benefits between age 62 and your full retirement age; you can wait until your full retirement age; or you can delay benefits and take them anytime up until you reach age 70. More than two-thirds of people take their benefits early. Some of them don't have a choice... they need the money right away. But for others, it might make more sense to delay benefits, even past their full retirement age. Ultimately it depends on a number of factors, including whether you plan to keep working, your health and life expectancy, your spouse's needs, and the availability of other retirement plans. If you were born before 1937, your full retirement age for Social Security purposes is 65. For those born after 1937, the retirement age gradually increases until it reaches age 67 for people born in 1960 or later. If you take Social Security between age 62 and your full retirement age, your benefits will be reduced to account for the longer period you will be paid. If you delay taking retirement payments, depending on when you were born, your benefits will increase by 6 to 8 percent for every year that you delay, in addition to any cost of living increases. For example, suppose you are born in 1944 and are eligible for your full Social Security retirement benefit at age 66, but delay taking benefits until age 70. Your annual percentage increase in benefits will be 8 percent. By delaying your benefits by four years, the Social Security check you will receive will be 32 percent higher (4 years times 8 percent per year). If your monthly benefit would have been $1,000 had you taken it at age 66, the monthly benefit you will receive at age 70 will be $1,320 (not counting cost of living increases, which are currently around 4 percent a year). If you are lucky enough to have the choice of when to take your benefits, consider the following factors:
Caregiver contracts: When it makes sense to 'hire' your children to care for you
As people get older, they often hire people to perform services for them, such as housekeeping, cooking, driving, paying bills and personal care.
But what's new is that a lot of seniors are hiring their own children. They're signing contracts with the children specifying what services will be performed and how much the children will be paid. It's not that children don't love their parents and wouldn't help them anyway but these caregiver contracts (also called personal service or personal care agreements) can have significant estate planning benefits. It rewards the family member doing the work. It reduces the elder's taxable estate. It can help alleviate tension between family members by making sure the work is fairly compensated. In addition, it can be a be a key part of Medicaid planning, helping to spend down savings so that the elder might more easily be able to qualify for Medicaid longterm care coverage, if necessary. The following are some things to keep in mindwhen drafting a caregiver contract. Meet with an attorney. It is important to get an attorney's help in drafting the contract, especially if qualifying for Medicaid is a goal. Caregiver's duties. The contract should set out the caregiver's duties, which can be anything from driving to doctor's appointments and attending doctor's meetings to grocery shopping to help with paying bills. The contract length is usually for the elder's lifetime, making it important to cover all possibilities, even if they are not currently needed. The contract can continue even if the elder enters a nursing home, with the caregiver acting as the elder's advocate to ensure the best possible care. Payment. Payment to the caregiver can either be made with a lump-sum payment or in weekly or monthly installments. For Medicaid purposes, it is very important that the pay not be excessive because it could be viewed as a gift for Medicaid eligibility purposes. The pay should be similar to what other caregivers in the area are making, or less. To calculate a lump-sum payment, take the monthly rate and multiply it by the elder's life expectancy. (Note that some states, such as Georgia, do not allow a lump-sum contract based upon life expectancy.) Taxes. Keep in mind that there are tax consequences. The caregiver will have to pay taxes on the income he or she receives. Other sources for payment. If the elder does not have enough money to pay his or her caregiver, there may be other sources of payment. A long-term care insurance policy may cover family caregivers, for example. Also, there may be state or federal government programs that compensate family caregivers. Check with your local Agency on Aging to get more information.
Lump-sum payment under caregiver contract allowed
A recent case shows that in order for a caregiver contract between family members to be effective, it must meet the formalities required by law and clearly spell out what's required of the caregiver and how the caregiver is to be paid.
In February 2004, Louise Carpenter, then 92, moved from the home of her daughter, Sheryl Bergeron, into a Louisiana nursing home. The Louisiana Department of Health and Hospitals denied the mother's application for Medicaid long-term care benefits after learning she had recently transferred a lump sum of $29,340 to her daughter. The daughter explained to the agency the money was given to her to fulfill a written care agreement she and her mother signed in 1989 when the mother moved in with her. The contract provided for payment of $1,000 a month for the daughter's services in caring for her mother until she required nursing home care. The agreement was dated March 1, 1989, and signed by the mother and daughter and two witnesses. But the agency determined the payment was not a "fair market" value for the 15 years of care provided by the daughter, and the payment was made only to qualify for long-term care Medicaid benefits. A judge upheld the state agency's denial of the mother's Medicaid benefits on the basis that the care agreement was of questionable authenticity and that the witnesses were unconvincing. The judge noted the agreement was not notarized and did not state when it was actually signed. The mother appealed, and the Court of Appeal of Louisiana reversed the judge's decision, ruling the caregiver agreement was valid and the mother was entitled to Medicaid benefits. The appeals court said the agreement was authentic and that it clearly expressed the intentions of the mother and daughter. The daughter fully expected to be compensated with a lump-sum payment, rather than being paid on a regular basis, the court said. It was also unnecessary to notarize the agreement to make it binding, according to the court. Legal Matters - Elder Law
Cohabiting Seniors Should Protect Their Rights
More and more senior citizens are living together without getting married. According to U.S. census data, the number of cohabiting seniors nearly doubled between 1989 and 2000.
For some seniors, marriage isn't financially worth it because they don't want to lose their former spouses' military, pension, or Social Security benefits. Others don't want to have to pay their partners' medical expenses or get entangled with the objections of children worried about their inheritance.
But there are risks to cohabiting without marriage, as well. For instance, you have no rights concerning your partner's health care decisions. In addition, you may be considered married at common law by a court after you die - possibly causing a dispute between your partner and your children. If you and your partner plan to live together without getting married, you can take a number of steps to ensure that you are protected and your wishes are followed. We are available to help you assess your situation and prepare the necessary legal documents to protect your rights. Sign a cohabitation agreement. This type of agreement can state your intentions not to be considered legally married at common law, or to make any legal claims against each other or be responsible for each other's debts. It can also specify the division of household expenses and what will happen to your house in the event of death or breakup. Provide access to health care decision making. If you are not married, you have no right to participate in your partner's health care decisions, or even in some circumstances to visit your partner at the hospital. To avoid this, you need several documents. You can sign a medical release under a federal law (the Health Insurance Portability and Accountability Act, also known as HIPAA) to allow each other access to medical information. In addition, you should have a health care proxy or a durable power of attorney for health care designating your partner as your agent to make health care decisions. Sign a durable power of attorney. A power of attorney allows your partner to make financial decisions for you if you become incapacitated. Without a power of attorney, a court will have to appoint a conservator or guardian to make those decisions and the judge might not choose the person you would prefer. Update your will. Your will should be clear about what happens to your possessions when you die, including your house and its contents. It is particularly important to specify what will happen to your house if you don't own it jointly with your partner. Think about the tax consequences of gifts. Married couples can leave each other as much as they want without paying estate taxes, but unmarried couples cannot. If you want to leave money to your partner, you can speak with us to find ways to limit estate taxes. Look into registering as domestic partners. Some cities and states have domestic partnership laws, which may allow unmarried couples to take advantage of their partners' health insurance or to participate in health care decisions.
Can an Employer Cut Retiree Health Benefits?
Some fortunate workers belong to employer provided health care plans that carry over to retirement. But how secure are those benefits after retirement? Under what circumstances
may the company reduce or terminate them?
In fact, nothing in federal law prevents employers who offer retiree health benefits from cutting or eliminating them - unless they have made a specific promise to maintain the benefits. The key to understanding your particular rights lies in the so-called Summary Plan Description (SPD), which employers are required to provide within 90 days after you become a participant in the plan, or other plan documents. If your employer has reserved the right to change the terms of the plan, you may lose coverage at any time during your retirement. But if your employer makes a clear promise that you will have specific health care benefits for a definite period of time or for life, and did not reserve the right to change the plan, you should be covered. But benefit plan documents are often difficult to interpret. To help employees and retirees evaluate their documents, the U.S. Department of Labor has a website that explains, among other things, what to look for in these documents, the implications of conflicting or ambiguous language, and special cautions for early retirees. The Department's advice can be found at http://www.dol.gov/esba/publications/retiree_health_benefits.html. We are also available to help you assess your rights under these plans.
Case Highlights Need To Use an Estate Planning Expert
A recent case in Washington, D.C. is a reminder that it pays to use an attorney specializing in estate planning when creating a will and estate plan. In the case, an attorney drafted a will as a favor to friends, even though he had no prior estate planning experience.
A man who was a relative and caretaker of an elderly woman asked the attorney to draft a will for the woman. He told the attorney that the will should give the woman's entire estate to him. The attorney, who was a family friend, slightly modified a "form will" and gave it to the woman for her signature. He did not ask her whether any other relatives might object to the will. At the time, the attorney was also helping the caretaker respond to a government agency's investigation into whether the elderly woman was being exploited and neglected. The lawyer drafted a power of attorney for the woman to sign giving the caretaker full control of her assets. Following the woman's death, several of her nieces and nephews contested the will. The case eventually settled, with the caretaker receiving 40 percent of the estate and the other heirs receiving the rest. Will disputes can be costly and emotionally draining. It's very important that your wishes on inheritance be spelled out clearly and correctly. Also, to avoid a possible will contest, it's important that you make your will now, in the event you become incapacitated later on.
How to Prepare When Elderly Parents Move In
As the costs of nursing homes and other long-term care facilities continue to climb, some adult children and their elderly parents are finding that living together is a better arrangement, both financially and emotionally. But having a parent move in is a big adjustment for everyone, and it's important to be prepared - from making physical adjustments to the house to figuring out finances. Below are some more issues to think about. To avoid fostering resentment and guilt among family members, try to resolve as many of these issues as you can before the big move. Work out the financial details first. If the adult children have siblings, the question of whether the siblings are going to contribute to the parents' room and board can be sensitive. Even if there are no siblings, there is still the question of how much the parents can or should contribute to the household. It can get costly if you need to do major renovations or hire a home health care worker. Many considerations can have tax or other consequences. Should the parents have a contract in which they pay the children for caring for them? If the parents contribute to remodeling the house, do. they gift their portion of the house to the children, retain an interest, or put it in a trust? These and other decisions can affect the parents' eligibility for Medicaid if it becomes necessary for the parents to enter a nursing home at some point. An elder law attorney can help your family create a plan that takes all the various contingencies into account. Look into a tax deduction. When considering the financial details of this new arrangement, keep in mind the children may be able to claim the parents as dependents and get a tax deduction if they provide more than half of the parents' support during the year. Know where to go for help. If family members are serving as caregivers, they don't need to feel like they are doing this all alone. There a number of services designed to help caregivers. From home health care workers to meals programs and transportation services to adult day care centers and respite services, there are a number of different sources of help. Contact your local Area Agency on Aging program to locate services in your area. Legal News for Older Americans and their Families Feature Article: Protect Family Money from Divorce and Creditors Money left to children can disappear for a host of reasons: divorce, bankruptcy, litigation, or bad investments, just to name a few. One way to protect family money is to set up a special trust, sometimes referred to as a Family Protection Trust.[1] For years, wealthy families have established similar trusts, sometimes called "generation-skipping" or "dynasty" trusts. But even if you don't live in a mansion and are not trying to create a dynasty, you can achieve the same goals of protecting assets for future generations. Here's how such a trust would work, using the fictitious example of Mary and John and their four children, Dennis, Judy, Paula and Frank. Mary and John's children have varying degrees of financial and personal success. Dennis, the oldest and most successful financially, has no need for financial support from his parents. Judy, next in line, unfortunately has been through a bruising divorce and is struggling to raise her son on her own. Paula and Frank are both married, but their marriages have had their ups and downs. Paula's husband has been known to sink their limited resources into failed get-rich-quick schemes. And Frank has just borrowed a lot of money to start his own dentistry practice. Parents never stop worrying about their children, and Mary and John are no exception. They are worried about more divorces, about whether Judy will have enough money, whether Frank's business will flourish, or whether a patient may sue him. They're also worried about there being enough money for their grandchildren. Mary and John can help their children as needed while they're alive. But whatever they leave them in their estate could go up in smoke if bad luck strikes or poor decisions are made. This is even true in the case of money left to Dennis, whose estate may be eaten up by taxes before it passes to the grandchildren. Limiting access provides protection What can Mary and John do to make sure that what they leave actually helps their children and grandchildren? The answer is a special trust that continues after the parents' death through the life of the children and, if the trust grantor chooses, during the life of the grandchildren as well. The funds are left for the benefit of the children and grandchildren, but limits are placed on access to the trust funds. They're there if needed, but cannot be spend down on a whim. This restriction provides the necessary protection. Here are some of the benefits of such trusts: Creditors: The funds are protected from creditors in the event of bankruptcy. Litigation: Like creditors, plaintiffs in lawsuits cannot invade such trusts. Funds left to Frank will not be subject to claim if he is ever sued for alleged dental malpractice. Divorce: While everything is generally on the table in the event of divorce, a Family Protection Trust will be treated differently from property in the name of a divorcing spouse. It will not be considered a marital asset. Bad judgment: An independent trustee can protect a trust beneficiary (or their spouses) from bad choices, whether they be risky investments or foolhardy spending. Bad luck: While parents can't protect their children from bad luck, they can create a cushion for them if it occurs. If a child becomes disabled or loses insurance and incurs large medical bills, he or she can qualify for Medicaid coverage without having to spend down all the trust funds, as would be necessary if the funds were in the child's name. Taxes: While fewer and fewer people are paying estate taxes with the increase in the threshold, which will be $2 million (federally) in 2006, there's no reason to pay if you don't have to. A trust can keep funds out of a child's estate so they can pass to the grandchildren tax-free. What's the downside? With all of these benefits, what are the drawbacks of such trusts? Costs: Mary and John will have to pay their attorney a few to set up the trusts, but it will be quite minimal compared to the potential savings. In addition, there will be continuing administrative costs after they die. Restrictions: Some trust beneficiaries will object to not having complete control and access to their trust funds. This is a trade-off. Choice of trustee: The hardest decision in any trust is choosing the appropriate trustee. The best answer for this kind of trust is an independent, professional trustee, such as a bank, trust company, or law firm. Alternatively, another family member, a family friend or each child themselves can be a trustee, but this means more risk and less certain protection. Distribution rules: Mary and John also need to decide the rules for distributing trust income and principal to their children. So, after Mary and John have set up a trust for their children, they can rest assured that what they've worked long and hard to accumulate will be there for the children over the long term. But do they stop worrying about them? No. That's just what parents do.
Elder Law Fact: How Much Nursing Home Care Can the Elderly Pay for Themselves? 3 or more years: 19% 1-3 years: 16% Less than 1 year: 65% Two-thirds of elderly people living in the community could not pay for more than one year of nursing home care ($70,000), and more than half of the people in this range have less than $5000 in assets.
Elder Law Case: Unclear Estate Planning Creates Family Turmoil Roy Ayers and his wife, Lorayne, wanted to protect their money from nursing home costs, but instead of consulting an elder law professional, they decided to take matters into their own hands. They ended up causing bigger problems for themselves and their family. Ayers v. Mitchell (The Ayers deposited $48,000 in a bank account, and added two of their children to the account. Their daughter, Gail Mitchell, claimed that her parents did this in order to create a trust. According to her, they asked her to take charge of their life savings to shelter it from being counted by Medicaid and provide for their future needs. However, because they didn't consult with a professional or put anything is writing, it wasn't clear what they intended to do. Eventually, Mrs. Ayers passed away, Mr. Ayers's health began to deteriorate, and Gail and her siblings began fighting about the proper way to care for their father. In an effort to keep the money from her siblings, Gail moved it into an account where she had sole control. Mr. Ayers, who was being cared for by Gail's brother, demanded that his daughter return the funds, but she refused. So, Mr. Ayers sued her, claiming she did not have the right to move the funds. Gail argued that when her father deposited the money in the account, he created an irrevocable trust, and she was sole trustee. The case wound its way through the judicial system until it reached the Texas Court of Appeals. The court ruled that Mr. Ayers did not create a trust when he deposited the money in the account because his name was still on the bank account and he still had control of the money. The court also noted that even if a valid trust had been created, the trust was revocable and Mr. Ayers had revoked it. Based on this ruling, Gail had to return the money to Mr. Ayers. The Ayers could have avoided this trouble by using appropriate estate planning techniques. A trust, created properly, could have ensured the Ayers were financially cared for and may have shielded their money from being counted as an asset for Medicaid purposes. The full text of this decision can be found at http://www.6thcoa.courts.state.tx.us/opinions/HTMLopinion.asp?OpinionID=7773
Elder Law Fact: Public has Dim View of Nursing Homes A recent Kaiser Health Poll Report survey of the public's view of long-term care found that 46% of respondents had a family member or close friend in a nursing home in the past year, but nursing homes have a negative image. Only 35% of people say that nursing homes are doing a "good job" serving consumers - far fewer than report the same about nurses (84%), doctors (69%) and hospitals (64%). Twice as many adults say being in a nursing home makes people "worse off" than they were before (41%) as say that nursing homes make people "better off" (19%). Meanwhile, 74% of the public agrees that nursing homes don't have enough staff. The public also believes the staff is poorly trained (60%) and that there is too much waste, fraud and abuse by nursing home managers (58%). |
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