Legal Steps to Take with Alzheimer's
As the family member gradually, in tiny increments, loses their mental capabilities, the family is often so overwhelmed emotionally, as well as with medical and practical issues, such as housing and caregiving, that they may overlook the need to see a lawyer before capacity is lost. But seeing an elder law estate planning attorney is a crucial first step.
First, we want to make certain the person's wishes regarding who is to inherit from them are up-to-date. A review of their current estate plan, be it a will or a trust is a must. This is also the time to locate the client's bank accounts, investments and insurance policies, review the legal, financial and accounting team and obtain passwords for any online accounts.
Secondly, legal documents should be executed to allow for substitute decision-making. This way, the persons of their choosing will be able to make legal and financial decisions for them when they are no longer able to. Primarily, the Power of Attorney is used although joint checking accounts are useful as well. One or more persons may be chosen to act as the agent, and the principal may also choose whether they must act together or independently.
For medical decision-making, a Health Care Proxy is chosen who may, and often is, someone other than the legal and financial decider. While only one agent may act at a time for medical decisions, a successor agent may be appointed. For end of life decision-making, such as withdrawing life support, a Living Will is also recommended to make clear, if the patient so chooses, that they did not wish to be kept alive by artificial means such as feeding tubes. This addresses the potential situation where the patient has no meaningful existence, no hope of recovery and no ability to feed themselves.
The Power of Attorney and Health Care Proxy are essential first steps. Should the client lose capacity before putting their own plan into place, the state may get involved with the state's plan, namely guardianship proceedings. If you haven't made the arrangements described above, the state may appoint a legal guardian. Not only are guardianship proceedings expensive and time-consuming, the patient and their family lose control over who will be in charge. The court may, for example, appoint a local attorney, someone previously unknown to the family. Perhaps the greatest disadvantage of having the legal guardian appointed is that desirable asset protection strategies will be subject to judicial approval, which may not be granted.
In choosing an attorney to represent the client with Alzheimer's, expertise in elder law estate planning is key. An estate planning lawyer alone, not well versed in elder law, will be unable to address (1) how best to protect assets from the costs of long-term care, and (2) how to apply for Medicaid benefits as the disability progresses, including homecare and nursing facility care. Elder law attorneys will likely be members of the Elder Law Section of The New York State Bar Association and The National Academy of Elder Law Attorneys (NAELA).
Persons with Alzheimer's, Parkinson's or senile dementia often face the prospect of spending years in a nursing home, at a cost averaging over ten thousand dollars a month in many areas of New York State. Once a cognitive impairment is diagnosed, long-term care insurance is unavailable, so alternative asset protection methods need to be explored. The primary strategy used for the Alzheimer's patient is the Medicaid Asset Protection Trust (MAPT).
MAPT's usually involve naming one or more of the adult children as “trustee” or manager of the trust. Assets such as the home and non-IRA bank accounts and investments may be placed in the trust to protect those assets from the costs of long-term care and qualify the client for Medicaid benefits to pay for their care. The principal portion of IRA's and other “qualified” investments are exempt from the requirement that assets must be “spent down” in order to qualify for Medicaid.
Most people are aware that Medicaid can “look back” for up to five years from the date of an applicant's transfer of assets. It is imperative then to establish the MAPT as soon as possible once Alzheimer's is diagnosed. Fortunately, the five year look back is not an all or nothing proposition. If, say, three years pass and the senior needs nursing home care, the family would only have to privately pay for the two years left before Medicaid eligibility ensues. In other words, it always pays to get started.
Again, in establishing the MAPT, an experienced elder law attorney is vital. Properly drafted, these trusts should allow for (1) gifts to be made by the grantor (2) the ability to change the trustee and the beneficiaries, and (3) sale of the family home while preserving the exclusion from capital gains tax for the sale of a primary residence. There are numerous traps for the unwary in the creation and operation of the MAPT. Questions should be asked of the prospective elder law firm concerning their experience with these trusts as well as how many Medicaid applications they have filed. The filing by the firm of hundreds or, better yet, thousands of Medicaid applications is your best assurance that they will be on the mark in planning your affairs.
In conclusion, the keys to planning for the Alzheimer's patient are (1) becoming clear as to who will receive inheritances and in what amounts (2) chosen family members in control of legal, financial and medical decision-making, and (3) taking proper precautions to protect assets and make certain that a lifetime of earnings are not all lost to pay for long-term care.